PRICING AND DISTRIBUTION STRATEGY

INTERNATIONAL MARKETING

ROLE OF PRICING STRATEGIES AND DISTRIBUTION CHANNEL NETWORK IN REALTING BRAND SUCCESS FOR MC DONALDS AND NIKE IN

INDIA

2012-15

ABHINAV GOEL

SARTHAK MEHTA

ANURAG GAUR

SRISHTI PUNHANI

VIDISHA AGARWAL

AKSHAY CHAUHAN

CHAPTER: 1

IMPORTANCE OF PRICING AND DISTRIBUTION

STRATEGY IN BUILDING UP THE BRAND

IMPORTANCE OF PRICING IN BUILDING A BRAND

The fundamental rule of pricing tells us that the price charged for a product must match the value consumers perceive that they get when they purchase that product. Thats where effective branding can allow premium branded products to sell at a premium price. The market will bear that price and consumers willingly pay it because they perceive the value the high-end brand delivers to be worth the high price tag.

In other words, if all brands were new and they all launched new products on the same day, all of those products would have the same value perception in consumers minds. There hasnt been time to build brand value perceptions. Of course, each brand has its own unique tangible differentiators, but the intangible differentiators that lead consumers to become emotionally

connected to brands take time to communicate and demonstrate consistently and persistently.

With that said, its easy for brands to price products according to tangible differentiators. For example, a high-definition television will have a higher price tag than a television without HD capabilities. These types of tangible differentiators can cause price differences across different brands in the same category as well as across different products under the same brand umbrella if that brand has launched extensions within the same category. For example, an iPad with wi-fi and 4G connectivity costs more than an iPad with just wi-fi connectivity.

Think of pricing strategy as it pertains to brand value in terms of consumer reference prices. Each consumer views a brand and its associated price tag in comparison to other brands and

products available to them. Those other brands and products create a frame of reference for the consumer, and the consumer tries to fit each brand into a comfortable position in his mind based on that frame of reference. Brands and products with pricing that doesnt fit well into that frame of reference are typically not even considered when it comes time for the consumer to make a purchase because they dont make sense.

When creating a frame of reference for brands in a specific category, consumers consider a variety of factors to fit each brand into a position such as competitor prices, past experiences with brands in the category, past pricing experiences in the category, tangible differentiators (i.e., features), and perceptions. Its the perceptions part of reference prices that gives brands the opportunities to set prices based on intangible differentiators. In other words, consumer perceptions enable brands to compete on more than price alone. Lets face it. If price were the

only factor that mattered in consumer purchase decisions, everything we buy would be a lot cheaper and everyone would buy the same brands and products. Price is just one part of brand value and purchase decisions. The challenge for marketers is finding the right price point to achieve maximum sales without damaging consumers perceptions of the brands overall value. Any brand can compete on price. Successful brands dont rely on pricing alone, but that doesnt mean pricing strategy isnt important. On the

contrary, striking the right balance between profits, brand value, and consumer perceptions of the

brand is an ongoing process.

IMPORTANCE OF DISTRIBUTION NETWORK IN BUILDING A BRAND

Cost Savings in Specialization Members of the distribution channel are specialists in what they do and can often perform tasks better and at lower cost than companies who do not have distribution experience. Marketers attempting to handle too many aspects of distribution may end up exhausting company resources as they learn how to distribute, resulting in the company being a jack of all trades but master of none.

Reduce Exchange Time Not only are channel members able to reduce distribution costs by being experienced at what they do, they often perform their job more rapidly resulting in faster product delivery. For instance, consider what would happen if a grocery store received direct shipment from EVERY manufacturer that sells products in the store. This delivery system would be chaotic as hundreds of trucks line up each day to make deliveries, many of which would consist of only a few boxes. On a busy day a truck may sit for hours waiting for space so they can unload their products. Instead, a better distribution scheme may have the grocery store purchasing its supplies from a grocery wholesaler that has its own warehouse for handling simultaneous shipments from a large number of suppliers. The wholesaler will distributes to the store in the quantities the store needs, on a schedule that works for the store, and often in a single truck, all of which speeds up the time it takes to get the product on the stores shelves.

Customers Want to Conveniently Shop for Variety Marketers have to understand what customers want in their shopping experience. Referring back to our grocery store example, consider a world without grocery stores and instead each marketer of grocery products sells through their own stores. As it is now, shopping is time consuming, but consider what would happen if customers had to visit multiple retailers each week to satisfy their grocery needs. Hence, resellers within the channel of distribution serve two very important needs:

1.) They give customers the products they want by purchasing from many suppliers (termed accumulating and assortment services), and

2.) They make it convenient to purchase by making products available in single location.

Resellers Sell Smaller Quantities Not only do resellers allow customers to purchase products from a variety of suppliers, they also allow customers to purchase in quantities that work for them. Suppliers though like to ship products they produce in large quantities since this is more cost effective than shipping smaller amounts. For instance, consider what it costs to drive a truck a long distance. In terms of operational expenses for the truck (e.g., fuel, truck drivers cost) lets assume it costs (US) $1,000 to go from point A to point B. Yet in most cases, with the exception of a little decrease in fuel efficiency, it does not cost that much more to drive the truck whether it is filled with 1000 boxes containing the product or whether

CHAPTER: 2

COMPANY PROFILE OF NIKE (DISTRIBUTION STRATEGY) AND MC DONALDS (PRICING

STRATEGY)

1) NIKE

Nike, Inc. is an American multinational corporation that is engaged in the design,

development, manufacturing and worldwide marketing and selling of footwear, apparel,

equipment, accessories and services. The company is headquartered

near Beaverton, Oregon, in the Portland metropolitan area. It is one of the world's

largest suppliers of athletic shoes and appareland a major manufacturer of sports

equipment, with revenue in excess of US$24.1 billion in its fiscal year 2012 (ending May

31, 2012). As of 2012, it employed more than 44,000 people worldwide. In 2014 the

brand alone was valued at $19 billion, making it the most valuable brand among sports

businesses.

The company was founded on January 25, 1964, as Blue Ribbon Sports, by Bill

Bowerman and Phil Knight, and officially became Nike, Inc. on May 30, 1971. The

company takes its name from Nike pronounced the Greek goddess of victory. Nike

markets its products under its own brand, as well as Nike Golf, Nike Pro, Nike+, Air

Jordan, Nike Blazers, Air Force 1, Nike Dunk, Air Max, Foamposite, Nike Skateboarding,

and subsidiaries including Brand Jordan, Hurley International and Converse.

Nike also owned Bauer Hockey (later renamed Nike Bauer) between 1995 and 2008, and

previously owned Cole Haan and Umbro. In addition to manufacturing sportswear and

equipment, the company operates retail stores under the Niketown name. Nike

sponsors many high-profile athletes and sports teams around the world, with the highly

recognized trademarks of "Just Do It" and the Swoosh logo.

Marketing Strategy Nike promotes its products by sponsorship agreements with celebrity athletes,

professional teams and college athletic teams.

Advertising

In 1982, Nike aired its first national television ads, created by newly formed ad

agency Wieden+Kennedy (W+K), during the broadcast of the New York

Marathon. The Cannes Advertising Festival has named Nike its Advertiser of the

Year in 1994 and 2003, making it the first company to receive that honor twice.

Nike also has earned the Emmy Award for best commercial twice since the award

was first created in the 1990s. The first was for "The Morning After," a satirical

look at what a runner might face on the morning of January 1, 2000 if every dire

prediction about the Y2K problem came to fruition. The second was for a 2002

spot called "Move," which featured a series of famous and everyday athletes in a

variety of athletic pursuits.

Beatles song

Nike was criticized for its use of the Beatles song "Revolution" in a 1987

commercial against the wishes of Apple Records, the Beatles' recording company.

Nike paid US$250,000 to Capitol Records Inc., which held the North American

licensing rights to the recordings, for the right to use the Beatles' rendition for a

year.

Apple sued Nike Inc., Capitol Records Inc., EMI Records Inc. and Wieden+Kennedy

for $15 million. Capitol-EMI countered by saying the lawsuit was "groundless"

because Capitol had licensed the use of "Revolution" with the "active support

and encouragement of Yoko Ono, a shareholder and director of Apple."

Nike discontinued airing ads featuring "Revolution" in March 1988. Yoko Ono

later gave permission to Nike to use John Lennon's "Instant Karma" in another

advertisement.

New media marketing

Nike was an early adopter of internet marketing, email

management technologies, and using broadcast and narrowcast communication

technologies to create multimedia marketing campaigns.

2) MC DONALDS

The McDonald's Corporation is the world's largest chain of hamburger fast food

restaurants, serving around 68 million customers daily in 119 countries across 35,000

outlets, headquartered in the United States, the company began in 1940 as a barbecue

restaurant operated by Richard and Maurice McDonald. In 1948, they reorganized their

business as a hamburger stand using production line principles. Businessman Ray

Kroc joined the company as a franchise agent in 1955. He subsequently purchased the

chain from the McDonald brothers and oversaw its worldwide growth.

A McDonald's restaurant is operated by either a franchisee, an affiliate, or the actual

corporation itself. The McDonald's Corporation revenues come from the rent, royalties,

and fees paid by the franchisees, as well as sales in company-operated restaurants. In

2012, the company had annual revenues of $27.5 billion and profits of $5.5

billion. According to a 2012 BBC report, McDonald's is the world's second largest private

employerbehind Walmartwith 1.9 million employees, 1.5 million of whom work for

franchises.

McDonald's primarily sells hamburgers, cheeseburgers, chicken, french

fries, breakfast items, soft drinks, milkshakes, and desserts. In response to changing

consumer tastes, the company has expanded its menu to include salads, fish, wraps,

smoothies, fruit, and seasoned fries.

McDonalds roots go back to the early 1940s when two brothers opened a burger

restaurant that relied on standardized preparation to maintain quality-the Speedy

Service System. So impressed was Ray Kroc with the brothers approach that he became

their national franchise agent, relying on the companys proven operating system to

maintain quality and consistency. McDonald entry in India dates back to 1993 where in

it incorporated its wholly owned Subsidiary -MacDonalds India Private Ltd. In October

1996, it first opened its first Fast food Center in Vasant Vihar, New Delhi. Later it

entered into 50:50 Joint Ventures with Connaught Plaza Restaurants owners who were

Vikram Bakshi of North & Hard castle Restaurants and Amit Jatia of West. Before the

launch the Indian Management team was trained extensively in McDonalds Indonesia

and US.

CHAPTER: 3

DISTRIBUTION STRATEGY OF NIKE

NIKE AND ITS HISTORY

Nike, Inc. is a majorly publicly traded sportswear and equipment supplier based in the United States. The company is headquartered in the Portland metropolitan area of Oregan , near Beaverton . It is the worlds leading supplier of athletic shoes and apparel and a major manufacturer of sports equipment with revenue in excess of $16billion USD in 2007. It employs 44,000 employees worldwide. The company was founded as Blue ribbon sports by Philip Knight and Bill Bowerman. It officially became Nike, Inc. in 1978. The company takes its name from Nike, the greek goddess of victory. Nike markets its products under its own name as well as Nike Golf, Nike Pro, Nike plus, Nike Skateboarding and subsidiaries including Cole Haan , Hurley international , Converse and Umbro. Nike also owned Bauer Hockey (later renamed Nike Bauer) between 1995 and 2008. In addition to manufacturing sportswear and equipment, the company operates retail stores under the name Niketown . Nike sponsors many high profile athletes and sports teams around the world, with highly recognized trademarks of Just do it and the Swoosh logo. The Just do it campaign is still regarded as one of the most successful ad campaigns and the swoosh logo rightly projects its athletic inclined products.

MISSION

To bring inspiration and innovation to every athlete in the world

VISION

Innovate for better world.

NIKES PRESENCE IN INDIA

Nike has been present in India from 1996 and headquartered in Bengaluru. India is a cricket crazy nation; NIKE understood the importance of cricket and in December 2005, it tied up with coaching schools like the BCCIs National Cricket Academy. Now Nike became official kit sponsor for BCCI Indian cricket team. By paying Rs. 196 crores to BCCI, NIKE wrested the rights to become the kit sponsor. The first Just do it cricket ad also made its appearance during the champions trophy. SSIPL is the largest manufacturer of NIKE footwear in India. It also has the credibility to have manufactured the first pair of shoes for NIKE India in the year 1996. SSPILs head corporate office is in Bangalore. In 2005, SSIPL became the first company in the industry to disclose the factory list, providing a complete list of contracted factories for NIKE brand. When it comes to footwear NIKEs market share in the world is 41% clearly a leader but in India its market share is 15%. The biggest hurdles for NIKE in India were its entry model and its lack of aggression. When the global sports major entered the Indian market in 1995-96, government policy dictated that they had to have a local partner. Nike agreed to an exclusive distribution agreement with a Delhi based trading firm, Sierra, in early 1996. Reebok had the luxury of entering Indian market as a subsidiary with a 20% equity stake by Phoenix , a distribution and trading firm and Reeboks distribution partner.

HIERARCHY OF NIKE INDIA

Nike follows a matrix organizational structure which has become a must for all the global companies. While the Regional Managers report to country head, and trade and distribution manager reports to Regional managers, and the sales force (sales reps reporting to sales executive or sales managers) , it may seem like line reporting but more or less NIKE India follows a line and staff reporting. It helps NIKE India in closing deals with enterprises and institutional buyers like schools and colleges and also helps in empowering the sales reps with the adequate power to satisfy the needs of the afore mentioned buyers. During training of new sales reps also NIKE India follows a line and staff reporting structure where in sales reps trainees report directly to Training managers instead of having to report to sales managers thereby saving time of sales managers and ensuring the training managers to focus on sales reps and develop sales force accordingly.

DISTRIBUTION NETWORK BACKBONE IN INDIA

Multi brand Outlets, shop in shops and institutional organizations like schools and

colleges are covered by the regional distributors. Exclusive brand outlets are either

company owned or SSIPL owned. There are 378 exclusive Nike stores across India. NIKE

also has joined the e retail bandwagon supplying directly from the company to E-retail

websites like flipkart.

The products either directly flow from the manufacturer to retailer via warehouse or

flows directly to e retailer via warehouse. Nike also follows a distribution network

wherein Distributor takes the role of carrying products forward from warehouse and

delivering it to either retailer or customer(schools or colleges or enterprises) through

the manufacturers reps or sales agents.

NIKE TOWN - MORE THAN A RETAIL STORE

Nike India's 7-year contract with Sports Station India Private Limited having come to an end in2004, Nike India is now a subsidiary of Nike Inc. The Indian market is growing in terms of retail consumer awareness and spending. Nike India can cash in on these opportunities as early as possible by establishing Nike town - Nike's independent retail outlet in the country. The Nike town experience is highly rated by customers. Nike town offers more services than just being the base for retailing Nike products. Nike Town services like individual and group audio visual programs broadcasting the benefits of the Nike technology (Presentations have help in conveying the customer, Nike's Position as the technically advanced brand in the sportswear industry), instant customization of customer designed shoes and fusing of names and chest numbers of customers choice on their jerseys and sweat shirts are not made available in other retail outlets. Running clubs organized in Nike town outlets have turned out into valuable social gathering of Nike users and moreover an additional every day involvement with the brand and its services. Customer involvements with Nike town showrooms in Europe and America have created long lasting relationships and customers have often stated that Nike towns collections and services as superior to other retailers. During the first

phase of establishment, Nike town's can be setup in Tier 1 Metropolitan cities of Mumbai, Bangalore, Chennai, Delhi and Kolkata where Nike India has achieved 70% of sales in the country. Nike distributes most of its sneaker products to large chain retailers like Foot Locker. Nike, the shoe company, has to deliver its products to the retailers like Foot Locker. This is major task for Nike because a large majority of their sales is made at these retail locations, so getting product to them is vital to their survival as a company. In order to accomplish this, Nike makes sure it has several distribution centers and computer systems that track inventory, deliveries, and orders in their respected retail stores. From experience, Nike makes use of a POS computer program (point-of-sale) that is integrated into the cash registers and this allows sales to be monitored at the various retail locations. Retailers like Foot Locker and Lady Foot Locker can also order particular products from another retail location for a customer if they are out of their size in a certain product and have it sent directly to their home. Retailers place orders with the shoe companies in order to receive products to sell in the retail stores, usually found in malls most often, the type of channel Nike uses is a producer (Nike), then the producer sells to the retailer (Foot Locker), then the retailer sells to the consumer. Nike Shox can also be classified as utilizing selective distribution because they are found in places that match their target markets and positioning. They are found in retail stores that cater to athletic wear, including clothing and shoes. These retail stores are found in shopping malls or freestanding stores where consumers in this market can obtain them when they want to purchase a Nike Shox athletic shoe. It is selective distribution because the NikeShox are not available everywhere, but they are not exclusive either. They can be found at major retailers catering to the target market of consumers needing athletic footwear but are not exclusive by any means (Armstrong and Kotler). They meet in the middle as far as distribution goes.

Distribution through E-commerce

Nike has taken the lead in e-commerce by being the first to market with its e-commerce web-site. Nike launched its e-commerce site in April 1999 by offering 65 styles of shoes to the U.S. market for purchase. Nike increased its e-commerce presence by launching NIKE iD in November 1999. NIKE iD enables online consumers to design key elements of the shoes they purchase. The program represents the first time a company has offered mass of customization of footwear. Nikes future plans include opening an online shop for the Japanese market next year followed by global rollout. By being the first to market, Nike enables itself to become established while competitors rush to join us.

Personal selling

Nike utilizes a personal selling method in every one of their retail stores. The sales associates in these stores have direct contact and interaction with the buyers of Nike products. Because they are the individuals that directly communicate with the consumers who are interested in Nike products, they must be able to aid in the process of a successful sale. They are knowledgeable of the brand and should be trained in asking customers the 'right' questions in order to figure out what they are looking for. To ensure optimal performance from the sales teams, Nike will often send Nike representatives to retail stores that sell their sneakers to give little presentations to keep the sales associates up-to-date on the products and the technology behind them. Nike representative gives a mini training session on the Nike running shoes and then they discuss what the customers in our store looked for most of the time and then gave feedback on the Nike running shoes as well as some competitor brands. Personal selling allows sales associates to create a relationship with the customer, though it may be brief. From the time a customer walks in a store until they leave, it is the sales associate's job to try to establish a relationship with that customer and figure out what he or she is looking to purchase. The sales force acts as a bridge between the customers and the company. The company looks for feedback from the sales associates about their customers, and the customers look to the sales associates to relay relevant and useful information about the product (Armstrong and Kotler). Nike does a good job at their personal selling because they are the only company I have seen so far that has had representatives travel to retail store locations to hold training sessions on their products. Also, often times Nike places a small insert in the running shoe boxes that gives some information on the particular product as well.

LEO SALES CORPORATION

It is headquartered in Agra and it has regional offices at Jaipur and Dehradun. It covers 400 MBOs across Rajastha, Uttarakhand , Eastern and Western UP. It also covers SIS and schools like Doon Dehradun , Mayo Ajmer , DPS Jaipur , in this area. NIKE follows a selective distribution wherein they have control over their distribution network .This also prevents any intra brand competition between different retail formats selling NIKE products. Schools are provided with subsidized prices. This also facilitates legacy

forming as NIKE follows a strategy that if the students or the young athletes are made to wear NIKE shoes and accessories at a young age representing in different sports, they will carry on this tradition further increasing sales for the rest of their lives.SIS are provided with extra discounts as compared to MBOs as they drive extra sales to the shops and also because of more visibility and exclusivity in a more organized manner. SIS does have to follow more rules and regulations as compared to MBOs .They have to submit daily sales reports and stock on hand reports on monthly basis.

MANUFACTURING AND BUYING

Nike shoes are manufactured in Dehradun ,Bhagini , Chennai , Sonepat , Jalandhar . Apparels are mainly manufactured in Bengaluru. All the shoes are shipped to distributors from Bengaluru whether they are manufactured in India or imported from china and Vietnam. Merchandise buying is done on the basis of seasons (SPRING ,SUMMER, FALLandHOLIDAY ). Every quarter new collection is launched. Orders are placed 9-10 months in advance. In between active and inactive orders can also be placed. In active orders, certain fast moving itemscatalogues along with sizes and designs are sent to various retailers and distributors who can fastly move the items and depending on their choice, products are shipped. In inactive orders, they are restricted to the availability of the articles and their respective sizes as only cut sizes are provided during this.

SALESFORCE

Nike follows a geographical based sales force structure which means different sales territories are assigned to different sales persons/executives. The sales people familiar with a particular area is assigned to that particular territory. In a diverse country like India geographical based sales force structure works best. They have around 30 employees in each territory. The sales managers look after sales person and sets quotas accordingly for each sales person party wise or store wise. Around 3 sales agents are responsible for each state. All employees are paid on a monthly basis. From a soccer specialty store in Italy to Macys and Footlocker - Nike Sales is the team that partners with retailers to deliver the stories, services and products that make Nike the preeminent sports brand. It all starts with the best sales team in the business. Nike sales reps excel at understanding consumers, the marketplace, and the Nike product. They focus all of this knowledge on developing sustainable and mutually profitable relationships with Nikes retail partners. The key to their success is thinking like a retailer, and by being a

true business and profitability consultant. Leo Sales follows a fixed pay for its sales force compensation. They also employ sales agents while dealing with institutional selling where in the contacts of sales agents comes into play. Sales managers get 35,000 40,000 Rs. Operations manager 20,000 25,000 Rs., and Sales person Rs. 15,000 25,000. Another reason for selecting sales agents for institutional selling is that it will cost less to NIKE as quantities less than the level of indifference is best served by third party sales agents.

Sales to wholesalers are the largest revenue category. However, this categorys

contribution in the sales mix contracted from 83.3% in fiscal year 2012 to 79.2% of

revenues in fiscal year 2014. DTC sales, on the other hand, increased from 16.2% to

20.3% over the same period. This is significantly lower than the ratio of DTC revenues

for NIKEs rivals in the space. In the most recent quarter, the respective ratios of DTC

revenue to total revenue for Under Armour Inc. (UA), VF Corporation (VFC), and Adidas

AG (ADDYY) were 25.3%, 23%, and 25.4%. NIKE is focusing on direct selling to the

consumer with its DTC initiative. Comparing NIKEs distribution channels, direct sales to

the consumer provide higher margins than do sales to wholesalers. In fiscal year 2014,

DTC revenues accounted for ~20% of total NIKE Brand revenues as compared to 18% in

fiscal year 2013. On a currency neutral basis, DTC revenues grew 22% in fiscal year 2014

and 30% in 1Q15, year-over-year. The company is attempting to grow the DTC category

to $8 billion in sales by fiscal year 2017, up from $5.3 billion in fiscal year 2014. Thats an

annual growth rate of 14.7%, compounded.

SALES INFORMATION SYSTEMS

They use EDI (electronic data interchange) in their warehouse for flow of goods from manufacturer to warehouses for the smooth flow and ordering/reordering of the products. SAP is used for billing and inventory purposes. The new Business Intelligence and Data Warehouse system with a code name ARIS (Analytical and Reporting Information System) provides NIKE with complex information. On the sales of Nikes products by providing links to retailer data, covering the fields of reporting, score carding, ad hoc analysis and budgeting. Business Benefits The project brings the benefits of implemented system that enables the staff of Nike to:

Respond adequately to the market situation on an operational and strategic basis Optimize and better coordinate work with Nikes business partners

Unify and simplify the process of reporting and ad hoc analysis

Enable information exchange between local Nike office, Nike headquarters and its business partners

Calendarize source data (divide weekly aggregations into days based on weights)

Provide information access via various channels (intranet, MS Excel, email)

Automate retrieval and cleansing of source data

Use a strategic and secure technological platform that would enable the deployment of the Solution to other Nikes offices in the CEMEA region

CHAPTER: 3

PRICING STRATEGY OF MC DONALD

HISTORY

McDonalds roots go back to the early 1940s when two brothers opened a burger

restaurant that relied on standardized preparation to maintain quality-the Speedy

Service System. So impressed was Ray Kroc with the brothers approach that he became

their national franchise agent, relying on the companys proven operating system to

maintain quality and consistency. McDonald entry in India dates back to 1993 where in

it incorporated its wholly owned Subsidiary -MacDonalds India Private Ltd. In October

1996, it first opened its first Fast food Center in Vasant Vihar, New Delhi. Later it

entered into 50:50 Joint Ventures with Connaught Plaza Restaurants owners who were

Vikram Bakshi of North & Hard castle Restaurants and Amit Jatia of West. Before the

launch the Indian Management team was trained extensively in McDonalds Indonesia

and US.

McDonalds positioning in India

1) PRODUCT ADAPTION FOR INDIA

McDonalds has the policy of adopting the product adaption to local taste of the

country. While it moved to other countries of South East Asia it introduced products like

Burgers with Thai Basil in Thailand, Teriyaki Burgers in Japan and Rice Dishes in

Indonesia. For India as well company adopted the similar strategy where in it came out

with various products customized to the local flavors. Moreover adaptation was

required at higher level as different regions in India have different taste for food.

Moreover McDonalds had to introduce a complete vegetarian section as 40% of the

population was vegetarian. Working on these lines, McDonald made amendments to it

current product line to suit Indian conditions like Maharaja Mac replaced Big Mac (used

in US) and Chicken Patty was used instead of Beef.

2) McDonald AS FAMILY RESTRAUNT

McDonalds success in India can be owed to its positioning as family Restaurant. In order

to position itself effectively McDonald has stringent cleaning standards and keeps its

trays sanitized several times a hour. Further meticulous attention to cleaning is paid

beyond lobby, kitchen to the pavement & area outside. To give it a home like look,

McDonalds came out with high chair concepts and the whole ambience is designed

to give bright, casual, comfortable and contemporary look. Special attention is given to

children and their various gift vouchers and meals designed for the kids.

PRICING STRATEGY

1) Value pricing

McDonalds came with the concept of value pricing for Indian consumers where in it

came out with various combos in form of

Happy Meals comprising of small burgers, fries, coke + toy.

Medium meal combo that consisted of burger, fries and Coke with the price of Rs

75.

Maharaja Mac Meal - Rs 94

Family Dines under Rs 300

The prices for the meals were economical as compared to the offerings in Pakistan and

Srilanka and are 50% less than United States.

2) Product line pricing

McDonalds has a unique price strategy which falls solely on many of their product lines. Their Value

Meals fall into the category of Product Line Pricing. Where there is a range of product or

services the pricing reflect the benefits of parts of the range. For example, you can order a Two

Cheeseburger Value meal that comes with a medium drink and fries for around Rs 75

(prices may vary). You can Super Size this meal to get a large drink and large fries for a little

more money or you can go with another value meal that might include different items for

different price.

3) Promotional pricing

If you have driven past a McDonalds, you will notice that somewhere on their property, whether it is a

banner on their building or spelled out on their sign, they are always offering some sort of promotional

pricing. This promotion can be seen as a large banner draped across the building on many

restaurants. This promotion changes weekly and may consist of different menu items packaged

together.

4) Penetration pricing

When McDonalds first began to break into the coffee market, they ran a

large marketing campaign in order to gain some market share in the industry.

For a limited time frame, you could get a free small coffee every morning from 4-

7am. This was to promote their new coffee partnership with Green Mountain Coffee and helped

spread the word that McDonalds was now offering coffee.

MC DONALDS PRICING VS COMPETITION