It Was a Busy Day at the Mumbai Central Station in India

7/31/2019 It Was a Busy Day at the Mumbai Central Station in India

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It was a busy day at the Mumbai Central Station in India, marked with the usual rush of

passengers. A large group of passengers was ready and anxiously awaiting to board their

respective trains. Porters in their red uniforms were seen carrying baggage to help the

travellers. Food vendors, bookstalls, newspaper sellers... It was a mini marketplace. A

family with two kids arrived in an air conditioned car two hours earlier then their scheduled

departure. After they entered the train station, the humid weather, the typical odour at therailway station and the crowd made them uncomfortable. With a bored look, the children

looked around and suddenly shrieked with joy. Excited, they indicated a sign to their

parents. It was the Golden Arch of McDonalds. Smiling, the family entered Ronalds place,

McDonalds, for a great time before they boarded the train. They were sure that that the

experience would be wonderful like the ones they had during their earlier visits to

McDonalds at other locations in India and abroad.

In the Indian Railways Food Plaza at Mumbai Central, McDonalds stood apart from its

other competitors. It promised and delivered the customers an entirely different experience.

This experience was way different from that of other fast food chains serving in Mumbai

and other parts of India. The perceived value of the customers about McDonalds was high

as the evidence of cleanliness, quality and sophistication of service made a lasting

impression on their minds. They were Indian customers who considered McDonalds as a

symbol of the American culture. Availability of McDonalds in their country reflected the

beginning of globalization which had brought in western brand influences into the Indian

markets. The impressive aspect was that the intangibles of the fast food service had made the

maximum impact on the customers. The Indian customers had always seen the kitchen doors of

the other restaurants with a sign Restricted Area or For Employees only. Now in

McDonalds, they were able to see the operations and hence the conviction in the QSC

Quality, Service and Cleanliness was quick and lasting.

McDonalds represented America world wide and was an American icon like basketball and

Coca cola. The Indian market welcomed western brands. Irrespective of the diversities,Indian culture had always embraced newer cultures and absorbed them within itself.

McDonalds initiative to adopt the burger to meet the Indian taste was widely appreciated.

In this case, one could visualize the transformation of Big Mac to Maharaja Mac.

Introduction

McDonalds restaurant in Delhi

In 1996, McDonald's opened in India for the first time, a country where the majority of the

population was Hindu and vegetarian, and the cow was sacred. Many saw it as just another

example of the relentless spread of Western corporations into every nation, creating a global

system in which wealth was drained out of local economies into the hands of a very few, very

rich elite. McDonalds opened its doors in India in October 1996, demonstrating what theMcDonalds experience was all about. McDonalds in India was a 50-50 joint venture

partnership between McDonalds Corporation (U.S.A.) and two Indianbusinessmen. Amit Jatias

company, Hardcastle Restaurants Pvt. Ltd., owned and operated McDonalds restaurants in

Western India, while Connaught Plaza Restaurants

Pvt. Ltd., headed by Vikram Bakshi, owned and operated the North Indian operationsi.


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These companies signed their joint-venture agreements with McDonald's in April 1995 and

along with their Indian management team trained in McDonald's restaurants in Indonesia and

the U.S.A. before opening the first McDonalds restaurant in India.

The entry of McDonalds in India was perfectly timed. The market had begun to open up.

The economy of the country was growing stronger. The customer markets were eager to

acquire newer products and use newer forms of services. Foreign brands were valued andperceived to be superior in quality. According to a report of AC Neilson, among the worlds

consumers, Latin Americans and Asians were the biggest supporters of globalisation and the

value that it added to the various aspects of their lives. It was a favourable situation for

McDonalds because at the time when they entered, India, the Asian Tiger was awakening to

the global call. The Indian customer was enthusiastic about the market situation which

provided them with numerous choices to choose and pick.

In a way McDonalds revolutionized the food retailing business in India. It introduced the Indian

customers to service standards which were available in the western world for years.

These service standards were visible and noteworthy and hence triggered quick acceptance

within the customers. McDonalds positioning in India as a family restaurant further fuelled its

success.

India as a market was a unique example of diversity. Divided into 28 states and 7 union

territories, the vegetation, climate, religion, language, clothing, and food varied from one state

to another. With the combination of spices in a unique way, food of these states reflected their

traditions and culture. Hence the biggest challenge to any food business in India definitely was

about balancing the diversity and the product offerings. McDonalds got clearance from Foreign

Investment Promotion Board (FIPB) of India in 1991. But it was only after five years of

preparation, that the first restaurant became operational in 1996. It worked on developing local

relationships with local partners to facilitate the raw material.

Indian companies for their operational convenience had divided the Indian subcontinent into

four zones, the progressive West, the powerful North, the traditional and culturally rich, Southand East. McDonalds opened their first restaurant in the capital of India which is

Delhi. The second restaurant was opened in the financial capital of India, Mumbai.

McDonald initially concentrated in the West and North regions. Later the company exhibited

ambitious plans for expansion in Eastern and Southern regions.

History

McDonald's expansion worldwide was mind boggling. It operated over 31,000 restaurants

worldwide and employed more than 1.5 million people. With their presence in more than

119 countries in six continents a global traveler saw them everywhere3iii. This perception was

the result of the most extensive, expensive and systematic mass marketing strategy of recent

times. The first store opened near Chicago on April 15, 1955. McDonalds since then hasexpanded phenomenally.

McDonald's real influence had been in establishing organizational systems of complete control

at every stage from raw product to factory, from worker to consumer - backed by incessant

media hype. McDonald's had been a successful global food corporation at refining, co-

coordinating, standardizing and developing such processes into a total system.

It had set up these practices in every country it had moved into, and many other companies

followed their suit. What Ford Motor Company did for cars, travel and the urban environment;


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McDonald's had done for food and eating habits. McDonald's expansion was criticized and

resisted by trade unionists, local residents, nutritionists and many others in almost every town

and country where they planned a new store - despite their highly developed and expensive

marketing effort about being a benefit for the community. They were resisted for what they

represented, and remained a focus of controversy.

Challenges for McDonalds in India:

Vegetarianism:

The major issue was beef. Cow being sacred and worshipped, beef could not be served.

Muslims did not eat pork. The challenge was to change the form of the worldwide popular

Hamburger to make an entry into India. With 25-30% of the population being lacto vegetarian

and a large majority eating meat, an alternative to beef and pork was necessary. The

population of a billion was undoubtedly a promising opportunity for an international company.

McDonalds accepted the challenge and created the Aloo Tikki Burger known as McAloo Tikki

especially for the Indian vegetarian customers. Aloo- Tikki was a potato patty with spices. It also

made a chicken and fish option available for the non vegetarians.

McDonalds even separated the non vegetarian cooking process and the vegetarian cooking

process to convince the customers of the Shudh Shakahari Experience which means pure

vegetarian experience. In addition, the crews cooking vegetarian food were asked to wear

green aprons. McDonalds in India was one of its kinds as it did not offer beef at al l. In order to

convince and change the perception of the customers about the burgers they offered,

McDonalds made attempts to clarify their stand about beef in India.

So the world famous hamburger was without meat. This was indeed a classic case of product

adaptation, to gain foothold in a new market.

Competition from Local Food Retailers:

The competition from the local food retailers was intense. The food retailers had been doing

business for years. Their familiarity with the market and the understanding of the local taste

gave them a competitive edge. There were numerous eating joints which offered snacks and

meals with affordable price tags.

Organized food retailing was dominated by the north Indian style and the south Indian style

restaurant chains. The metropolitan cities and some developed urban areas offered superior

dining experience through the existence of some fine, classic restaurants. But the price was

expensive and only a select group of customers could afford to make visits there. On the other

hand, the size of the unorganized food retailing was larger and comprised of roadside food

vendors, dhabas (the eateries on the highways) and on the outskirts of the cities and a plethoraof small eateries. Local food in a large assortment was widely available within acceptable price

ranges. It was observed that food choices made by consumers were impulsive. Aroma, taste,

habits and visibility worked on the subconscious level and played a major role in affective

decision making. The local food business exactly understood the psychology of the customers

and operated accordingly. The mass markets in India had their own set of preferences.

Target Marketing:


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Value propositions had to be directed to the right target market to establish a new product.

An interesting question was who would eat at McDonalds? In order to develop the marketing

strategy, it was important for any company to understand the consumer market.

The more one knew and understood about consumers, the more effectively one could

communicate and market to themv.

Four aspects of consumer behaviour which needed to be examined to understand a consumermarket were the ability of the people to buy, consumer needs, buying motives and the buying

processvi. The initial attempt of McDonalds was to induce trials and get the customers into the

restaurants. Word of mouth and advertising was expected to reveal the experience of eating at

McDonalds.

McDonalds Value Meal addressed the price sensitivity of the Indian consumer market.

However, irrespective of this effort, McDonalds was affordable to select customers only.

These were the ambitious middle, upper middle and affluent classes who were keen to

combine eating with fun. Children were the major influencers. McDonalds advertisement put

forth an attractive proposition to the children segment that played a major role in the decision

making as regards the choice of a restaurant. Happy MealTM was used to reflect the fun element

of the experience at McDonalds. Happy MealsTM were all about the simple pleasures of

childhood, a time of excitement, joy, and being treated special. Each Happy Meal was themed

and had on offer, a set of collectible toys from that particular theme. One theme typically was

used for duration of 4 6 weeksvii. In this deal the customer got a choice of a burger, a drink

and a toy. Happy MealsTM were a huge success.

The rising income levels in India increased the disposable income. Fun and entertainment

assumed importance in the financially stable families. McDonalds was perceived to be a fun

place with special areas marked for kids, toy gifts and of all the attraction of a burger.

Subsequently, McDonald introduced newer menus appealing to the India taste. Children in

India preferred a burger over pizza and McDonald, the king of burgers was announced as the

number one in a survey titled Indias most respected companies by Business Week in India forFood retailing in 2006viii. Youngsters valued McDonalds for the trendy environment and the

joint acted as an interesting meeting place.

In United States, two thirds of the business of McDonalds was done at the drive through

windowsix. In India, because of unavailability of space and lack of proper infrastructure, the

company could not do so. However, home delivery was an area of consideration. In March

2007, McDonalds announced that it would invest about Rs 3 crore (US $0.75 million) over

the next three years to strengthen its home delivery services. It launched an all-India single

home delivery number 66-000-666 to facilitate this service. In March 2007, the

company's Managing Director Mr.Vikram Bakshi said Mc Delivery currently accounts for

almost 5 per cent of the overall sales and with the introduction of the new system; thecompany is looking at a substantial share of 7.5 per cent in the turnover by next yearx.

Pricing

Food pricing was a sensitive issue in India. An ideal strategy was to focus on customers

ability to pay and tap the rich and upper middleclass population in India. Although

McDonalds strategy was to increase sales volumes by making products available at

affordable price, its products were perceived to be expensive. The company outlets in Delhi

and Mumbai initially were opened due to the increased affordability of people with western


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exposure and brand recognition factors in metros. Additionally, people in the metros were

open to experiment with variety of foods. Absorption of newer cultures was faster in the

Metros than other areas.

The mass markets in India were price sensitive.The positive factors were the growth in

consumer markets with rapid growth in disposable incomes, development of modern urban

lifestyles and the demand for valuexi.Eating Habits

Eating out was a special occasion to many Indian families. Meals had been an essential

medium for social sharing and relationshipxii.Whenever families decided to eat out, the

choices available were abundant. The trend in metropolitan cities was however changing.

With more nuclear families and dual income households, the demand for fast and

readymade food was growing. The needs of the growing working population stimulated the

need for new products and services. Indian culture was relatively new to the use of

technology and streamlined process in food service. McDonalds needed to find ways and

methods to motivate the customers opt for initial trials and acceptance. The conventional

eating pattern of Indians involved breakfast, lunch and dinner. Lunch and dinner menus were

complete meals providing the right balance in terms of nutrition. Breakfast was conventional as

per the family culture and upbringing. Burgers were likely to be slotted in the category of

snacks. But globally burgers and beverage brands were linked with poor eating habits. The

market situation called for focus on the environment within the restaurant and western

association.

Issues

McDonalds had been accused of destruction of vast areas of the rainforest for the production

of cattle to produce beef, promoting unhealthy food with a risk of cancer and heart disease,

taking advantage of children with its advertising and marketing, and cruelty to animals. There

had been complaints as regards the nutrition, hygiene etc.

Animals

Vegetarians and animal welfare campaigners were not too wholehearted about McDonald's -

for obvious reasons. As the world's largest user of beef, they were responsible for the slaughter

of countless cows every year. In Europe alone they used half a million chickens every week, all

from windowless factory farms. This meant that these animals suffered great cruelty during

their unnatural, painful and short lives, many being kept inside with no access to fresh air and

sunshine, and no freedom of movement.

A major consideration for the fast food industry was whether it was acceptable for the food

industry to exploit animals at all. McDonald's argued that it stuck to the letter of the law and ifthere were any problems, it would be a matter concerned with the government.

Although meat eating had a long history, it was only in recent decades that factory farming and

intensive methods had been applied on a vast scale. This mass production process was

primarily to benefit the food companies' drive for greater profits, backed by their promotional

campaigns. McDonalds corporation was the world's largest promoter of meatbased products,

the largest user of beef and the second largest user of chicken.


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Environment

Conservationists had often focused on McDonald's as an industry leader promoting business

practices detrimental to the environment. But the company spent a fortune promoting itself as

environmentally friendly. They annually produced over a million ton of packaging, used for just

a few minutes before being discarded. The environmental effect of the production and disposal

of all this needed to be taken into account. Multinational companies operating on such a scalecontributed to global warming, ozone destruction, depletion of mineral resources and the

destruction of natural habitats.

The modern industrial system, with transnational corporations in particular, had callously taken

advantage of the natural resources globally, damaging forests and other eco systems, reducing

biodiversity, adding to land, and sea and air pollution while adversely affecting the global

climate. McDonald's contribution to these were mainly through the

effects of cattle ranching (as the world's foremost promoter of a beef-based diet), through

the growing and transportation of cash crops, and through the production and disposal of

thousands of tons of packaging material.

Nutrition and Health

One of the most fundamental and enjoyable aspects of the day-to-day lives of people had

been eating food of their choice and the circumstances in which it was eaten. For most

people this generally meant eating the healthiest possible food (bearing in mind constraints

of time and poverty), usually cooked on site and then eaten communally - either in a family

or home setting, or with others while at work or in school. But there were rapid changes as

the pace and nature of society had shifted. An industrial or service infrastructure

increasingly dominated the local neighborhoods and people's lives, undermining existing

patterns of human interaction, whether among families, friends, neighbors or in the

community in general.

Mass-produced, processed food gradually and increasingly replaced fresh and healthy

foods in people's diets over the course of the twentieth century. In recent decades,McDonalds capitalized on this situation by promoting quick meals to be eaten outside the

home. This change in eating habits brought serious consequences to human relations and

health. These consequences sparked a debate about healthy food. They also brought out

a whole range of new campaigns and movements dedicated to encouraging healthy eating

and healthy lifestyles. Macro environmental factors affected McDonalds, forced it to

become defensive, and they had to resort to lip service to try and deflect public criticism.

In the health debate, food industry was heavily criticized for creating products that are high

in fat, sugar and saltxvii. Health consciousness was rising amongst people with the obesity

crisis hitting the world. The concern was serious as it was children who were the most

affected. Nutrition and exercise issues which were important and needed to be reviewedearlier, now were considered, discussed, and debated only after witnessing the frightening

consequences. Many critics blamed McDonalds like businesses for public health concerns,

contending that fast food menus and portion sizes contribute to obesity, diabetes and heart

disease and a variety of other diet related problemsxviii. But at the same time, it was

worthwhile to note that the type of demand exhibited by the market initiated the processes

within the companies. As long as the demand for fast food continued, nutritional issues

would continue to be argued and deliberated upon. India also had its own set of so called


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nutritious and non-nutritious food. People in India appeared to prefer food for its taste. Bhel

Puri, Samosas and Potato Wada which were some of the very popular Indian snacks were

weak in terms of nutrition. However, a large level of population savored them for the spicy

taste ignoring the hygiene and the value in terms of nutrition.

Trans- fats and their use in food also had been a major controversial issue. It had been

established scientifically that artificial trans- fats were bad for human health. In UnitedStates, New York City was the first city to announce a ban on all restaurants from using

artificial Trans fats with the deadline on July 1, 2007. When the legal system imposed bansand

developed a regulatory framework, the food industry was compelled to respond. In January

2007, McDonalds picked new Trans fat free oil for cooking its famous French fries after years of

testing.

In view of the health risks and dangers, it was important that food service did not just

confine to respond to the basic need of hunger. Food industry was required to innovate

and work on introducing healthy eating options and making them available. This would

create a situation where the final choice would then be made by the consumers. A healthy

lifestyle only would help overcome the health problems gripping the society. Awareness about

health needed to be built up and somewhere the responsibility definitely lay with companies

which were into the food business. Health concern was a global call and

responding to this was the need of the hour.

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It Was a Busy Day at the Mumbai Central Station in India