India’s Leading Fast Food Chain –McDonalds Restaurants

Footwear Design Development Institute

PROJECT ONIndia’s Leading Fast Food Chain

‘McDonalds’

Submitted

In Partial Fulfilment of the requirements

for the Award of the Post Graduate Diploma of

Footwear Technology

By

Mukul Srivastava

PROJECT GUIDE

“Mrs. Prachi Sharma”

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India’s Leading Fast Food Chain –McDonalds Restaurants

Declaration

I, Mukul Srivastava, student of PGDM(ft) – Semester III (2011) hereby declare that I have completed this project India’s Leading Fast Food Chain‘McDonalds’ on. The information submitted is true & original to the best of my knowledge.

Student’s Signature

(MUKUL SRIVASTAVA)

C E R T I F I C A T E

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India’s Leading Fast Food Chain –McDonalds Restaurants

This is to certify that Mr. MUKUL SRIVASTAVA of

PGDM(ft) has successfully completed the project on INDIA’S LEADING FAST

FOOD CHAIN McDonalds in the academic year 2011-20012. The information

submitted is true and original to the best of my knowledge.

Project Guide and

Course Co-ordinator

“Mrs Prachi sharma”

ACKNOWLEDGEMENT

I am deeply indebted to Mrs. Prachi sharma who gave me the full support and co oper-

ation to complete this project. He not only served as my supervisor but also encouraged,

stimulated suggestions and helped me in all the time of research for and writing of this

project.

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India’s Leading Fast Food Chain –McDonalds Restaurants

I would also like to express my gratitude to my classmates who helped me in giving in-

sights about the project.

I would also like to be grateful to my parents, associates and acquaintance who were

indirectly involved in the completion of this project.

INDEX

Sr.No TOPIC Page No.

1. Chapter I

History. 5-6

2. Chapter II

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India’s Leading Fast Food Chain –McDonalds Restaurants

Introduction

7-8

3 Chapter III

Marketing conceptMarketing in IndiaMarketing Strategy 8-10

4 Chapter IV

Marketing Mix 4Ps pf McDonalds 10-20

5 Chapter V

Competitor Analysis 21

6 Conclusion and bibliography 22

History of M cDonald’s.

The business began in 1940, with a restaurant opened by brothers Richard and Maurice McDonald in San Bernardino, California. Their introduction of the "Speedee Service System" in 1948 furthered the principles of the modern fast-food restaurant that the White Castle hamburger chain had already put into practice more than two decades earlier. The original mascot of McDonald's was a man with a chef's hat on top of a hamburger shaped head whose name was "Speedee." Speedee was eventually replaced with Ronald McDonald by 1967 when the company first filed a U.S. trademark on a clown shaped man having puffed out costume

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India’s Leading Fast Food Chain –McDonalds Restaurants

legs.

McDonald's has come a long way ever since it’s beginning in 1955. Here are a few milestones of the McDonald's journey ...

1955 Ray Kroc opens his first restaurant in Des Plaines, Illinois and the McDonald's

Corporation is created.

1957 Quality, Service, Cleanliness and Value (QSC& V) becomes the company motto.

1959 The 100th McDonald's opens in Chicago.

1961 Hamburger University opens in Elk Grove, near Chicago.

1963 One billion hamburgers sold. Ronald McDonald makes his debut.

1964 Filet-O-Fish sandwich is introduced.

1965 McDonald's Corporation goes public.

1967 The first restaurants outside of the USA open in Canada and Puerto Rico.

1968 The Big Mac is introduced. The 1,000th restaurant opens in Des

Plaines, Illinois.

1972 A new McDonald's restaurant opens every day.

The Quarter Pounder is introduced.

1973 Egg McMuffin is introduced.

1974 The first Ronald McDonald House opens in Philadelphia.

The Happy Meal is launched.

1983 Chicken McNuggets is intro-duced.

New Hamburger University cam-pus opens in Oak Brook, Illinois. Set in 80 wooded acres. Training is provided for every level of Mc-

Donald's management world-wide.

1984 50 billionth hamburger sold. Ronald McDonald Children's Charities is founded in Ray

Kroc’s memory to raise funds in support of child welfare.

1989 McDonald's is listed on the Frankfurt, Munich, Paris and

Tokyo stock exchanges.

1990 McDonald's opens in Pushkin Square and Gorky Street,

Moscow.

1993 The first McDonald's at sea opens aboard the Silja Europa, the world's largest ferry sailing

between Stockholm and Helsinki.

1994 Restaurants open in Bahrain, Bulgaria, Egypt, Kuwait, Latvia, Oman, New Caledonia, Trinidad

and United Arab Emirates, bringing the total to over 15,000 in 79 countries on 6 continents.

1996 McDonald's opens in India – the

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India’s Leading Fast Food Chain –McDonalds Restaurants

95th country.

Introduction

McDonald's Corporation is the world's largest chain of hamburger fast food restaurants, serving around 64 million customers daily. Headquartered in the United States, the corporation was founded

by businessman Ray Kroc in 1955 after he purchased the rights to a small hamburger chain operated by the eponymous Richard and Maurice McDonald. A McDonald's restaurant is operated by either a franchisee, an affiliate, or the corporation itself. The corporation's revenues come from the rent, royalties and fees paid by the franchisees, as well as sales in company-operated restaurants. McDonald's revenues grew 27 percent over the three years ending in 2007 to $22.8 billion, and 9 percent growth in operating income to $3.9 billion.

McDonald's primarily sells hamburgers, cheeseburgers, chicken, French fries, breakfast items, soft drinks, shakes and desserts. In response to changing consumer tastes, the company has expanded its menu to include salads, wraps, smoothies and fruit.

McDonald's first filed for a U.S. trademark on the name McDonald's on May 4, 1961, with the description "Drive-In Restaurant Services," which continues to be renewed through the end of December 2009. In the same year, on September 13, 1961, the company filed a logo trademark on an overlapping, double arched "M" symbol. The overlapping double arched "M" symbol logo was temporarily disfavoured by September 6, 1962, when a trademark was filed for a single arch, shaped over many of the early McDonald's restaurants in the early years. The famous double arched "M" symbol in use today did not appear until November 18, 1968, when the company filed a U.S. trademark.

McDonald's –In IndiaMcDonald's opened its doors in India in October 1996. Ever since then, our family restaurants in Mumbai, Delhi, Pune, Ahmedabad, Vadodara, Ludhiana, Jaipur, Noida Faridabad, Doraha, Manesar and Gurgaon have proceeded to demonstrate, much to the delight of all our customers, what the McDonald's experience is all about.

Their first restaurant opened on 15th April 1955 in Des Plaines, Illinois, U.S.A. Almost 50 years down the line, we are the world's largest food service system with more than 30,000 restaurants in 100 countries, serving more than 46 million customers every day.

Locally Owned.

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India’s Leading Fast Food Chain –McDonalds Restaurants

McDonald’s in India is a 50-50 joint venture partnership between McDonald’s Corporation [USA] and two Indian businessmen. Amit Jatia’s company Hardcastle Restaurants Pvt. Ltd. owns and operates McDonald's restaurants in Western India. While Connaught Plaza Restaurants Pvt. Ltd headed by Vikram Bakshi owns and operates the Northern operations.

Amit Jatia and Vikram Bakshi are like-minded visionaries who share McDonald's complete commitment to Quality, Service, Cleanliness and Value (QSC&V). Having signed their joint-venture agreements with McDonald's in April 1995, they trained extensively, along with their Indian management team, in McDonald's restaurants in Indonesia and the U.S.A. before opening the first McDonald’s restaurant in India.

Respect for local culture.McDonald's India has developed a special menu with vegetarian selections to suit Indian tastes and preferences. McDonald's does not offer any beef or pork items in India. Only the freshest chicken, fish and vegetable products find their way into our Indian restaurants.

In addition, we've re-formulated some of our products using spices favoured by Indians. Among these are McVeggie burger, McAloo Tikki burger, Veg. Pizza McPuff and Chicken McGrill burger. We've also created eggless sandwich sauces for our vegetarian customers. Even our soft serves and McShakes are egg-less, offering a larger variety to our vegetarian consumers.

International Standards.McDonald's India's local suppliers provide us with the highest quality, freshest ingredients. Complete adherence to the Indian Government regulations on food, health and hygiene is ensured, while maintaining

Their own recognized international standards. Fast, friendly service - the hallmark of McDonald's restaurants the world over is the mantra we abide by Stringent cleaning standards ensure that all tables, chairs, highchairs and trays are sanitised several times each hour. Such meticulous attention to cleanliness extends beyond the lobby and kitchen to even the pavement and immediate areas outside the restaurant.

Marketing concept:

McDonald’s is one of the best known brands worldwide. At McDonald’s this is represented by its famil-iar logo – the Golden Arches. In all its markets, McDonald’s faces competition from other businesses. Additionally, economic, legal and technological changes, social factors, the retail environment and

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India’s Leading Fast Food Chain –McDonalds Restaurants

many other elements affect McDonald’s success in the market. Marketing involves identifying cus-tomer needs and requirements and meeting these needs in a better way than competitors. In this way a company creates loyal customers. The starting point is to find out who potential customers are – not everyone will want what McDonald’s has to offer.

The people McDonald’s identifies as likely customers are known as key audiences.

McDonald's evolved its marketing in India

When McDonald's India launched in 1996, urban Indians in Mumbai and Delhi typically ate out three to fives times a month, according to AT Kearney, the management consultancy. In the 12 years since then, that average frequency has doubled and analysts forecast that by 2011 the Indian quick service restaurant market will be worth 30,000 crore (about $6.3bn at October 2008 exchange rates). But from their earliest investments in India, multinational company (MNC) owners of restaurant chains have struggled to adapt to the needs of India's many markets. Some pulled out of the country after failed ventures. At the time, consolidation of the hugely fragmented Indian retail sector had also barely begun, and there was scepticism that Indians would prefer burgers and fast food to local food offerings. However, in the intervening decade, McDonald's has continued to open new outlets in the country, evolving its marketing strategy through several phases.

Twelve years of McDonald's India

McDonald's India was set up as a 50:50 joint-venture between McDonald's at a global level and Regional Indian partners such as Hardcastle Restaurants Private Limited in western India, and Connaught Plaza Restaurants Private Limited in northern India. The first Indian McDonald's outlet opened in Mumbai in 1996. Since then, outlets have begun trading in metropolitan and Tier II towns across the country. By September 2008, it had premises in Mumbai, Bangalore, Baroda, Pune, Indore, Nasik, Chennai, Hyderabad, Surat and Ahmedabad. Amit Jatia, Managing Director, McDonalds India, said: "The past decade has witnessed a marked change in Indian consumption patterns, especially in terms of food. Households in middle, upper, and high-income categories now have higher disposable income per member and a propensity to spend more."

Launching the brand

The starting point for McDonald's India was to change Indian consumers' perceptions, which associated it with being 'foreign', 'American', 'not knowing what to expect' and 'discomfort with the new or different'. McDonald's wanted to position itself as 'Indian' and a promoter of 'family values and culture', as well as being 'comfortable and easy'. Simultaneously, the brand wanted to communicate that, operationally, it was committed to maintaining a quality service, cleanliness and offering value for

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money. Says Arvind Singhal, Head of Marketing at McDonald's India: "From a marketing communications standpoint, we chose to focus on familiarizing the customer with the brand. The brand was built on establishing functional benefits as well as experiential marketing." Until 2000, McDonald's India did not have enough reach to use mass media such as television advertising. Instead, most of its marketing effort focused on outlet design, new store openings and PR about its attempts to tailor a menu to Indian tastes. Amit Jatia said: "Products like McAloo Tikki burger, Veg Pizza McPuff and Chicken McGrill burger were formulated and introduced using spices favored by Indians. The menu development team has been responsible for special sauces which use local spices do not contain beef and pork. Other products do not contain eggs and are 100% vegetarian. The Indianized products have been so well received that we even export McAloo TikkiTM burger and Veg. Pizza McPuff to the Middle East." However the company did not escape food criticism in the country. For instance, it hurt the religious sentiments of Indians by using beef flavoring for its "Vegetarian" French Fries. Says Sridhar, National Creative Director, Leo Burnett: "When McDonald's launched we took a conscious call of not introducing any beef or pork in our products. Thus, when controversies around McDonald's products started during the early and growth stages of the Indian business, we reacted quickly. "We educated our customers about the build of our products and did extensive kitchen tours for our customers. We showed them how we use separate vegetarian and non-vegetarian platforms for cooking – a first in any market for McDonald's."

McDonald's Marketing Strategy

In 1948, the first McDonald’s restaurant opened in San Bernardino, California.

Today, it’s the world’s leading food service organization with over $40 billion in sales from over 30,000 restaurants.

But McDonald’s didn’t grow rapidly because of luck. It grew because of hard work and smart business ideas.

One of McDonald’s greatest successes was the introduction of the Happy Meal.

By the late 1970s, McDonald’s was looking for new ways to attract customers. Research indicated that children were strong influencers in the restaurant decision-making process.

This resulted in the world’s first Happy Meal – a combo meal for children featuring a free toy that put McDonald’s restaurants smack-dab in the sites of children across the globe.

4Ps of McDonalds

Having identified its key audiences, a company has to ensure a marketing mix is created that appeals specifically to those people. The marketing mix is a term used to describe the four main marketing tools – the 4Ps.

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The Marketing Mix

India’s Leading Fast Food Chain –McDonalds Restaurants

By analysing detailed information about their customers, as derived from ongoing market research, the McDonald’s marketing department can ascertain information key toDetermining the correct marketing mix. 1) Which products are well received?2) What prices consumers are willing to pay?3) What TV programmes, newspapers and advertisingConsumers read and view 4) Which restaurants are visited?Accurate research is essential in creating the right marketing mix which will help to win customer loy-alty and increase sales. As the economy and social attitudes change, so do buying patterns. McDon-ald’s needs to identify whether the number of target customers is growing or shrinking and whether their buying habits will change in the future.

Marketing ConstructionMarketing at McDonald’s

Marketing ObjectivesA marketing strategy must be created in order to determine the means by which a set of clear object-ives may be met. Objectives communicate what marketers want to achieve, guide marketing actions and are used to measure how well a plan is working. They can be related to market share, sales, reaching the target audience and creating awareness in the marketplace. Long-term objectives are broken down into shorter-termmeasurable targets, which McDonald’s uses as milestones along the way. Results can be analysed regularly to see whether objectives are being met. This type of feedback allows the company to change plans and allows flexibility. Once marketing objectives have been established, the next stage is to define how they will be achieved. The marketing strategy is the statement of how objectives will be delivered. It explains what marketing actions and resources will be used and how they will work to-gether.

The 4PsAt this point the marketing mix is put together.i. ProductThe important thing to remember when offering menu items to potential customers is thatthere is a huge amount of choice available to those potential customers with regard to howand where they spend their money. Therefore McDonald’s places considerable emphasis on develop-ing a menu which customers want. Market research establishes exactly what this is. However, cus-tomers’ requirements change over time. What is fashionable and attractive today may be discarded

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Product Price Promotion Place

India’s Leading Fast Food Chain –McDonalds Restaurants

tomorrow. Marketing continuously monitors customers’ preferences. The type of marketing under-taken and the resources invested will be different depending on the stage a product has reached. For example, the launch of a new product will typically involve television and other advertising support. At any time a company will have a portfolio of products, each in a different stage of its cycle. Some of McDonald’s options are growing in popularity while arguably the Big Mac is at the ‘maturity’ stage

McVeggie:

The McVeggie sandwich starts with the oh-so-familiar sesame seed bun. In between the bread, you'll find a vegetarian patty that is made from peas, carrots, green beans, red bell pepper, potatoes, onions, rice, and seasoning. This vegetarian burger is garnished with lettuce, and has mayonnaise made without eggs spread thickly on the bread.

- McAloo Tikki

Potatoes (aloo in Hindi) are a popular filling food item in India. McDonald's in India's McAloo Tikki sandwich includes a patty made out of potatoes, peas, and spices. It also includes tomato slices, onions, and vegetarian mayonnaise.

- Paneer Salsa Wrap:

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India’s Leading Fast Food Chain –McDonalds Restaurants

Paneer is referred to as cottage cheese in India. McDonald's Paneer Salsa Wrap starts with a small slab of paneer that has been dredged in a coating that is a cross between Mexican and Cajun in flavour. It is fried and the paneer patty is wrapped in flatbread and topped with a salad mixture that includes lettuce, red cabbage and celery and then is finished off with vegetarian mayonnaise, salsa and cheddar cheese.

- Crispy Chinese:

McDonald's in India's Crispy Chinese sandwich is crispy, but very China. It's more an Indianized Chinese. Nevertheless, this vegetarian patty is topped with a creamy Schezwan sauce and lettuce which makes it a nice addition to the Indian vegetarian menu.

- Veg McCurry Pan:

If you are in the mood for something similar to pizza, but don't want a tomato-based sauce, McDonald's Veg McCurry Pan is a good choice. It starts with a rectangular shaped crust that is topped with a creamy sauce (made without eggs), and vegetables including broccoli, baby corn, mushrooms and red bell pepper. It is then baked until the crust is crisp and the toppings

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are hot and bubbly.

- Pizza McPuff:

The vegetarian Pizza McPuff also starts with a rectangular shaped crust, but instead of a creamy sauce is flavored with a tomato-based sauce and then is topped with carrots, beans, bell peppers, onions, peas and mozzarella cheese.

The Non-Vegetarian Fare at McDonalds India:

- Chicken Maharaja Mac:The Indian version of the Big Mac at McDonalds in India, is the Chicken Maharaja Mac sandwich which is made with 2 grilled chicken patties and is topped with onions, tomatoes, cheese and a spicy mayonnaise.

- McChicken:The McChicken in India is almost the same as its cousin by the same name in other McDonalds around the world. It contains one breaded and fried chicken patty and is topped with lettuce and vegetarian mayonnaise. It is similar in size (but not taste) to the spicy chicken sandwich on the dollar menu at McDonalds restaurants in the U.S.

- Filet-O-Fish: The Filet-O-Fish sandwich at McDonalds in India is the only sandwich item on the menu that is exactly the same as the Filet-O-Fish sandwich you might eat at a McDonalds in the U.S.

- Chicken McGrill:The Chicken McGrill sandwich starts off with a thin grilled chicken patty that is embellished with cilantro mayonnaise, onions and tomatoes and is served on a toasted bun.

- Chicken McCurry Pan: Chicken McCurry Pan is the same as its vegetarian version. It starts off with a rectangle of

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India’s Leading Fast Food Chain –McDonalds Restaurants

dough and is topped with a tomato-curry sauce, spiced with thyme, basil, and oregano. It is finished off with chicken, bell peppers, and cheese and is baked till crisp and bubbly.

Price

The customer’s perception of value is an important determinant of the price charged. Customers draw their own mental picture of what a product is worth. A product is more than a physical item; it also has psychological connotations for the customer. The danger of using low price as a marketing tool is that the customer may feel that a low price is indicative of compromised quality. It is important when decid-ing on the price to be fully aware of the brand and its integrity. A further potentially adverse con-sequence of price reduction is that competitors match the lower prices resulting in no extra demand. This means the profit margin has been reduced without increasing the sales.McDonald’s

Vegetarian burgers are priced between Rs 20 and Rs 48.

Wrap paneer salsa is priced at Rs 45-50.

The non vegetarian burgers are priced between Rs 30 and Rs 60.

Wrap chicken Mexican is priced at Rs 55.

Medium French fries are priced at Rs 28,

Potato wedges at Rs 20,

Soft serves at Rs 35,

Mc swirls at Rs 12,

Medium soft drinks at Rs 20 and

Medium shakes at Rs 45.

Promotion:

The customer’s perception of value is an important determinant of the price charged. Customers draw their own mental picture of what a product is worth. A product is more than a physical item; it also has psychological connotations for the customer. The danger of using low price as a marketing tool is that the customer may feel that a low price is indicative of compromised quality. It is important when decid-ing on the price to be fully aware of the brand and its integrity. A further potentially adverse con-sequence of price reduction is that competitors match the lower prices resulting in no extra demand. This means the profit margin has been reduced without increasing the sales.The promotions aspect of the marketing mix covers all types of marketing communications. One of the methods employed is advertising, sometimes known as ‘above the line’ activity. Advertising is conduc-ted on TV, radio, in cinema, online, using poster sites and in the press for example in newspapers and magazines. What distinguishes advertising from other marketing communications is that media own-ers are paid before the advertiser can take space in the medium. Other promotional methods include sales promotions, point of sale display, merchandising, direct mail, telemarketing, exhibitions, sem-inars, loyalty schemes, door drops, demonstrations, etc. The skill in marketing communications is to develop a campaign which uses several of these methods in a way that provides the most effective

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India’s Leading Fast Food Chain –McDonalds Restaurants

results. For example, TV advertising makes people aware of a food item and press advertising provides more detail. This may be upported by in-store promotions to get people to try the product and a collectable promotional device to encourage them to keep on buying the item.

Brand advertising

By 2000, McDonald's India was ready to begin TV advertising. Arvind Singhal said: "The first Indian TV commercial, Stage Fright, attempted to establish an emotional connection between the (Indian) family and the brand. Over the years advertising has reinforced this positioning, supported by promotions." The Stage Fright campaign aimed to establish McDonald's as a familiar, comfortable place. It featured a child who suffers stage fright and is unable to recite a poem. On entering McDonald's, he easily recites it in the store's familiar environment.

A second campaign featured a child and his family moving into a new place. He misses his previous surroundings – until McDonald's provides something familiar. A still from the Leo Burnett/McDonald's campaign featuring a family moving home these storylines were supported by other initiatives. The company's one-minute service guarantee attempted to reinforce its reputation for fast, friendly and accurate service and it also ran in-store events for mothers and children.

Mr Singhal says: "To kids sitting on the Ronald McDonald bench, pumping sauce from the sauce machine became brand rituals."K.V. Sridhar, National Creative Director, Leo Burnett, the company's agency in India, adds: "In the launch phase the communication focused solely on building brand and product relevance. The brand's scores on relevance to families and kids were very high." Later, McDonald's realized there was untapped potential in the youth audience who considered McDonald's expensive and mainly for children. Sridhar says: "In 2004, we launched the Happy Price Menu with a value message for a younger audience. For the first time McDonald's India saw a surge of younger consumers and people from socio-economic class B walk into our stores.

"We had realized that the Indian consumer was price sensitive and even though the organization managed to establish a sense of familiarity, Indian consumers continued to perceive McDonald's as an expensive eating out option."

McDonald's "Happy Price" campaign

Appealing to both ends of the age spectrum

In 2008, the latest campaign from the McDonalds-Leo Burnett stable uses father-son duos from the Indian film industry to reiterate the theme of "Yesteryear's Prices". It features Bollywood stars from past decades together with their sons and a message that prices have not risen in line with the passage of time. The Happy Price campaign has also been promoted via virals. Outdoor has also promoted a home delivery option in a country where home delivery is common in urban areas. McDonald's has also been exploring strategic tie-ups with Indian sports properties such as the IPL cricket tournament, where it was one of the event's food providers. Amit Jatia, however, says: "The eating out market in India is very large and has huge potential fuelled by rising disposable incomes. There are many Indian and international players who have entered in the market since the last decade and unbranded food chains have also grown significantly. "The Indian consumer has seen value in

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what we have to offer at our restaurants which is a testament to our model."

Current campaign

I’m lovin' it is an international branding campaign by McDonald's Corporation . It was created by Heye & Partner, a longtime McDonald's agency based in Unterhaching , Germany , near Munich, and a member of the DDB Worldwide Communications Group, Inc. It was the company's first global adver-tising campaign and was launched in Munich , Germany on September 2, 2003, under the German title ich liebe es. The English part of the campaign was launched in Australia on September 21, 2003, the UK on September 17, 2003, and in the USA on September 29, 2003 with the music of Tom Batoy and Franco Tortora (Mona Davis Music) and vocals by Justin Timberlake , in which the slogan ap-pears. In 2007, after a public casting call which received 15,000 submissions, McDonald's selected 24 people to appear as part of the campaign.[7] Images of those chosen, who had submitted a story and digital photograph which "captured ... themes of inspiration, passion and fun," appeared on Mc-Donald's paper bags and cups worldwide.

In Spring 2008, McDonald's underwent the first phase of their new image and slogan: 'What we're made of.' This was to promote how McDonald's products are made. Packaging was tweaked a little to feature this new slogan. In Fall 2008, McDonald's introduced new packaging, eliminating the previous design stated above with new, inspirational messages, the "i'm lovin it" slogan. (appearing only once on most packages). McDonald's also updated their menu boards with darker, yet warmer colors, more realistic photos of the products featured on plates and the drinks in glasses. In 2009, McDonald's ex-pects to have all of this nationwide

Place

Place, as an element of the marketing mix, is not just about the physical location or distribution points for products. It encompasses the management of a range of processesinvolved in bringing products to the end consumer.

Supply Chain

Overview

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Supply Chain

Overview Cold Chain LocalSourcing Suppliers

India’s Leading Fast Food Chain –McDonalds Restaurants

Did you know that every year, Rs. 50,000 crore worth of food produce is wasted in India? This is mainly because of the lack of proper infrastructure for storage and transportation under controlled conditions. McDonald's is committed to providing quality products while supporting other Indian businesses. And so, we spent a few years setting up a unique Supply Chain, even before we opened our first restaurant in India.

A Supply Chain is a network of facilities including - material flow from suppliers and their "upstream" suppliers at all levels, transformation of materials into semi-finished and finished products, and distribution of products to customers and their "downstream" customers at all levels. So, raw material flows as follows: supplier - manufacturer – distributor – retailer – consumer. Information and money flows in the reverse direction. The balance between these 3 flows is what a Supply Chain is all about.

When there is a balance in the finished product ordering, the Supply Chain operates at its best. Any major fluctuation in the product ordering pattern causes excess / fluctuating inventories, shortages / stock outs, longer lead times, higher transportation and manufacturing costs, and mistrust between supply chain partners. This is called the Bullwhip Effect.

Depending on the situation, the Supply Chain may include major product elements, various suppliers, geographically dispersed activities, and both upstream and downstream activities. It is critical to go beyond one’s immediate suppliers and customers to encompass the entire chain, since hidden value often emerges once the entire chain is visualized. For example, a diesel engine manufacturer may be able to integrate a GPS locator system into its engine control system. Its immediate customer, a heavy truck manufacturer, may see no need for this functionality. However, the downstream customer, a trucking company with a large fleet, may be very interested in a locator system. Understanding the value to the downstream customer is part of the supply chain management process.

Cold Chain

The Cold Chain is necessary to maintain the integrity of food products and retain their freshness and nutritional value. The Cold Chain is an integral part of the Supply Chain

Setting up the Cold Chain has involved the transfer of state-of-the-art food processing technology by McDonald's and its international suppliers to pioneering Indian entrepreneurs, who have now become an integral part of the Cold Chain.

The term Cold Chain describes the network for the procurement, warehousing, transportation and retailing of food products under controlled temperatures. McDonald’s restaurants store products to be used on a daily basis, within a temperature range of –18ºC to 4ºC. About 52% of our food products need to be stored under these conditions before they are used.

Local Sourcing

McDonald's has always been committed to sourcing its requirements from local suppliers and farmers. This assurance is rooted in the philosophy of our company's founder, Ray Kroc. He firmly believed in

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mutual benefits arising from a partnership between McDonald's and the local businesses, thus ensur-ing that McDonald's commitment to growth was mirrored by that of its partners.

In keeping with this belief, we have carefully identified local Indian businesses that take pride in satis-fying customers by presenting them with the highest quality products. Adherence to Indian Govern-ment regulations on food, health and hygiene were a top priority.

McDonald's India today purchases more than 96% of its products and supplies from Indian suppliers. Even our restaurants are constructed using local architects, contractors, labour and maximum local content in materials.

The relationship between McDonald's and its Indian suppliers is mutually beneficial. As McDonald's expands in India, the supplier gets the opportunity to expand his business, have access to the latest in food technology, get exposure to advanced agricultural practices and the ability to grow or to export. There are many cases of local suppliers operating out of small towns who have benefited from their association with McDonald's India.

Vital Links in our Cold Chain

All suppliers adhere to Indian government regulations on food, health and hygiene while continuously maintaining McDonald's recognised standards. As the ingredients move from farms to processing plants to the restaurant, McDonald's Quality Inspection Programme (QIP) carries out quality checks at over 20 different points in the Cold Chain system. Setting up of the Cold Chain has also enabled us to cut down on operational wastage

Hazard Analysis Critical Control Point (HACCP) is a systematic approach to food safety that empha-sizes prevention of illness or presence of microbiological data within our suppliers' facilities and our restaurants rather than its detection through inspection. Based on HACCP guidelines, control points and critical control points for all McDonald's major food processing plants and restaurants in India have been identified. The HACCP verification is done at least twice in a year and certified.

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Suppliers

Trikaya Agriculture - Supplier of Iceberg Lettuce.successfully grows speciality crops like iceberg lettuce, special herbs and many oriental vegetables. Farm infrastructure features:

A specialized nursery with a team of agricultural experts. Drip and sprinkler irrigation in raised farm beds with fertilizer mixing plant. Pre-cooling room and a large cold room for post harvest handling. A large cold room and a refrigerated van for transportation where the temperature and the rel-

ative humidity of this crop is maintained between 1º C and 4º C and 95% respectively.

Vista Processed Foods Pvt. Ltd. - Supplier of Chicken and Veg-etable range of products.A joint venture with OSI Industries Inc., USA, and McDonald's India Pvt. Ltd. Vista Processed Foods Pvt. Ltd. produces a range of frozen chicken and vegetable foods. A world class infrastructure at its plant at Taloja, Maharashtra, has:

Separate processing lines for chicken and vegetable foods.

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Capability to produce frozen foods at temperature as low as -35 Degree Celsius to retain total freshness.

International standards, procedures and support services.

Dynamix Diary - Supplier of Cheese.

Dynamix has brought immense benefits to farmers in Baramati, Maha-rashtra by setting up a network of milk collection centres equipped with bulk coolers. Easy accessibility has enabled farmers augment their in-come by finding a new market for surplus milk. The factory has:

Fully automatic international standard processing facility. Capability to convert milk into cheese, butter/ghee, skimmed

milk powder, lactose, casein & whey protein and humanised baby food.

Stringent quality control measures and continuous Research & Development.

Amrit Food - Supplier of long life UHT Milk and Milk Products for Frozen Desserts.Amrit Food, an ISO 9000 company, manufactures widely popular brands - Gagan Milk and Nandan Ghee at its factory at Ghaziabad, Uttar Pradesh. Its plant has:

State-of-the-art fully automatic machinery requiring no human contact with product, for total hygiene.

Installed capacity of 6000 litres / hour for producing homogenised UHT (Ultra High Temper-ature) processed milk and milk products.

Strict quality control supported by a fully equipped quality control laboratory.

Radhakrishna Foodland - Distribution Centre.An integral part of the Radhakrishna Group, Foodland specialises in han-dling large volumes, providing the entire range of services including pro-curement, quality inspection, storage, inventory management, deliveries, data collection, recording and reporting. Salient strengths are:

A one-stop shop for all distribution management services.

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India’s Leading Fast Food Chain –McDonalds Restaurants

Dry and cold storage facility to store and transport perishable products at temperatures up to - 22 Degrees Celsius.

Effective process control for minimum distribution cost.

ConclusionOnce the marketing strategy is in place, various responsibilities are given to different individuals so that the plan can be implemented. Systems are put in place to obtain market feedback which measure success against short-term targets. McDonald’s has to ensure that this is done within the confines of a tightly controlled, finite marketing budget.

Competitors Analysis

McDonald’s has been a leading fast-foods outlet in Vile Parle. But the outlet understudy has other competitors eating away into its market share. In addition to its traditional rivals—KFC, Dominos, Pizza Hut—the firm encounters new challenges. Jumbo King competes using a back-to-basics approach of quickly serving up burgers for time-pressed consumers. On the higher end, the KFC has become potent competitor in the quick service field, taking away customers from McDonald’s. Perhaps in the new environment, fast, convenient service is no longer enough to distinguish the firm.

At this time, a new critical success factor may be emerging: the need to create a rich, satisfying experience for consumers. This brings us to service and experience based competition which McDonald’s can use for competitive advantage against Jumbo King. Keeping in mind the demographics of the area, McDonald’s has Wi-Fi enabled the outlet to cater to the student community. It is for this overall “Food, Fun & Folks” experience that customers pay a premium over the other competitors.Competition also reduces product lifecycle; inducing firms to revise their products portfolios and to revisit their product market to understand changing needs, expectations and perception of different market segments. The new McBreakfast would be introduced between 6 to 11 am as a pilot project. This would open up a whole new revenue stream for McDonald’s by tapping into the student and working population by providing a healthy and wholesome breakfast. This shows how demographic shift can affect the demand for products and services. McDonald’s has anticipated these changes to maintain its competitive edge.

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India’s Leading Fast Food Chain –McDonalds Restaurants

Bibliography:

Google search Engine Official website of Amul Wikipedia Philip Kotler’s Marketing mix

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