Section – 3: Positioning strategy of McDonald’s India
and suggestions and foresights …………………………………………….. 25-29
Conclusion …………………………………………………………………………………….. 30
References …………………………………………………………………………………….. 32
Exhibit-1 …………………………………………………………………………………….. 33-35
SECTION – 1
SWOT Analysis
and
PEST Analysis
Count of words: 1197
Section – 1
About the company:
McDonald's, world's leading food service retailer with more than 33,000 restaurants in 118 countries serving more than 67 million customers each day, opened its first restaurant in 1996 in India. In India, it works on franchise model and is managed by Hardcastle Restaurants Pvt Ltd (HRPL) in West and South India and by Joint Venture of Connaught Plaza Restaurants Private Limited and McDonald’s Corporation in North and East India. It has a network of over 250 restaurants across the country. It is the only fast-food chain in India with drive-thru facility and it has accustomed itself according to Indian culture by excluding beef and pork items from its menu.
SWOT Analysis of McDonald’s India:
Strengths:
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McDonald’s, one of the first international fast-food chains to enter Indian market, got first mover advantage and captured a greater mindshare of consumers and brand recognition.
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McDonald’s has been proactive in regularly innovating and adapting itself to India. Regularly introducing new menu items by company is major cause for its success.
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McDonald’s works on franchise model in India. More than 75% of its outlets in India are based on this model which has ensured high returns on low investments for the company.
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McDonald’s focuses on customers of all age-groups and is known for its quick service and reasonably priced delicious food. Also, its strong network of cold chain across India enables it to serve freshly cooked food to its customers.
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Its various marketing techniques such as special-price menus and tie ups with Coca Cola and with Disney and Hasbro to promote their movies provide McDonald’s an edge above its competitors.
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McDonald’s has wide distribution network and has come up with 24X7 outlets at busy locations such as ISBTs, railway stations and highways to tap the demand for fast-food at odd hours (at night).
Weaknesses:
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McDonald’s biggest weakness in India is lack of variety in menu. It comes up with new recipes of meals and side orders from time to time yet its main offerings have not improved much.
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People are becoming more health conscious and moving away from the high-fat high-salt meals. McDonald’s inability to come up with low fat and healthy recipes is its weaknesses.
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McDonald’s another weakness is lack of proper dine-in experience due to small tables and congested seating plan. Also, McDonald’s quick service philosophy fails at majority of outlets which face long queues at peak hours.
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Variance in quality and taste at different food outlets is another weakness of McDonald’s and highly perishable nature of its offerings seriously affects the home delivery customers.
Opportunities:
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With increase of disposable incomes of mid-income families, McDonald’s can gain from introduction of restaurants in Tier-2 and Tier-3 cities as here people would like to dine out but certainly look for a cheaper option.
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McDonald’s can introduce a new range of healthier products, to capture the segment of health conscious customers. This will enable it to compete with healthy fast-food chains like Subway.
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McDonald’s can foray into new areas beyond burgers to capture a higher market share. Also, introduction of variety in beverages, a more regionalized menu and an option of “customize your recipes” can do wonders in both, new & existing markets.
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McDonald’s can introduce speciality restaurants for better dine-in experience. Also, it can open up more outlets near colleges and offices and provide additional services like Wi-Fi connectivity to take benefit from the rising young population inclined towards westernisation.
Threats:
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The megatrend of health consciousness is a threat for McDonald’s as its offerings are not considered healthy. Competitors like Subway offering healthy meals on similar lines as McDonald’s are biggest threat to McDonald’s.
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Competition is another threat for growth of McDonald’s. New entrants in industry such as Burger King add to the already highly competitive market with existing players like KFC and Subway. Also, the local players and unorganized sector are making the market more competitive.
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Political factors such as Food Safety Act and social factors like protests by animal right activists and groups against westernization are threats for McDonald’s in Indian markets.
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High inflation rate in India pressurises the “value for money” philosophy of McDonald’s as it is compelled to raise prices hampering its relative price competitiveness.
PEST Analysis of McDonald’s India:
Political Factors:
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In India, there are no restrictions for investment in food businesses. 100% FDI is permitted in the Hotel and Tourism under various approvals. Under automatic route, FDI is allowed only up to 51% in this industry.
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VAT is levied on restaurants in India but the rate of VAT is not high. However, it is not imposed on unorganised sector of the industry giving them undue advantage over organised restaurants.
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Violation of religious laws pertaining to food containing beef and/or pork has been considered very seriously by Indian political leaders.
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Companies have to deal with the issues related to employment procedures as per Indian laws. Hiring and termination of employees becomes difficult with large number of labour laws in India.
Economic Factors:
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India has high inflation rate and the price rise puts pressure on restaurants to either increase their prices or bear losses as they cannot change menu frequently.
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India has high growth rate which means rising disposable income of consumers. Increase in disposable income in-turn results in increased demand of food items and processed food.
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Differing growth rates of states leads to variance in disposable incomes of consumers there. This compels restaurants to charge different prices in different states, leading to non-uniformity of prices.
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India is facing exchange rate fluctuations which affect companies procuring raw materials from abroad.
Socio-Cultural Factors:
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India has more than 50% population below 25 yrs. of age. This young population and its inclination towards westernisation results in high demand for fast-food.
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Indian societies have huge number of food lovers who indulge in consuming food from restaurants. Also, increase in young working couples with busy schedules affects the demand for fast-foods positively.
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In India, there is a rising concern for health consciousness and awareness about obesity and its harmful effects has negative impact on demand for consumption of unhealthy (i.e. high fat) foods.
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With rising animal rights activism and increasing controversies related to beef/pork in food affecting the religious sentiments of Indians, more consumers are now inclined towards vegetarian food and moving away from non-vegetarian food.
Technological Factors:
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With technological advancement, the cold storage systems have become easily available. Restaurants will benefit from this as they can easily store their inventory and decrease the wastage of perishable raw materials.
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Better transportation options being available now, restaurants can easily transport the raw materials and inventory from cold storage to their outlets.
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With increased scope of television, radio and internet, companies have greater reach to customers which can be utilized by more efficient advertisements and marketing.
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Technological advancement have enabled companies to take orders online from customers and procure raw materials through e-procurement portals leading to lower costs of supply chain. Also, higher standard of technological factors will be beneficial for maintenance of higher quality levels.
SECTION – 2
Porter’s Five Forces Model
and
Consumer Behaviour Analysis
Count of words: 903
Section – 2
Porter’s Five Forces Model:
Competition:
Restaurant industry in India is highly competitive. There are a number of restaurants in India and the competition for fast-food segment is higher than rest of the industry. There is a threat from entry of new fast-food chains like Burger King in this market which already has cut-throat competition from existing players.
Although there is a substantial unorganized sector in the industry but the main competition is from the organized sector which has large corporations that run a number of brands at multiple locations. The local players give competition but only in one locality but these large corporations with their pan-India presence and high level of marketing are leading to severe competition within the industry.
Threat of new entrants:
Fast-food industry works on the concept of convenience and it will be fairly easy for any local player to enter the industry. Also, with no restriction on entry in food industry in India, any foreign player can also enter the market through FDI route.
However, one barrier is scaling the business to multiple locations so as to compete with larger predominant fast-food chains. If a firm is capable of doing so then it will have large economies of scale and scope to compete. The new entrants will also face the barriers due to large capital investment required and severe price competition within the industry.
Also, there is low customer loyalty in the industry due to low switching costs but the existing players have positioned their brand successfully as a result of their product differentiation. The new players have to consider this before entering the industry.
Threat of substitute products:
Convenience and availability are the key drivers for choosing fast-food. There is wide variety of foods available to customers from burgers to pizzas to sandwiches to beverages. Customers also have an option to go for traditional meals instead of fast-food leading to a high threat of substitutes in the market. The only advantage with the brands is their product differentiation but low switching costs and preference for best value products have led to increase in number of substitutes in the industry.
Supplier power:
The main beverages in food industry are soft drinks, the market for which is dominated by few companies – Coca Cola and Pepsi. With only these players having the capacity to match the needs of large fast-food chains and their domination in market, these suppliers have high bargaining power. Most of the larger fast-food companies have realised the importance of these suppliers, and entered into strategic alliances with the suppliers to make the dependence mutual.
The suppliers of raw materials like vegetables and food-grains are smaller players and thus have less bargaining power due to big players in fast-food industry as the switching cost of suppliers is low.
Buyer power:
Buyers have relatively high power in this industry. Due to severe competition and low switching cost the fast-food restaurants have to give-in to buyers’ power and charge competitive prices so as to keep customers coming back to them. The players in the industry have to keep on innovating and adding value to their menus and changing according to customers’ tastes. In this industry, customer is the ‘real king’.
Consumer Behaviour Analysis:
We conducted a survey (Exhibit-1) to analyse the consumer behaviour, their decision-making process and kind of purchase behaviour. Below are the findings of the survey-
- Two-third of the respondents can relate McDonald’s as a brand to its business i.e. fast-food.
- The main reason for customers to choose McDonald’s is its value for money offerings.
- Customers are willing to go to McDonald’s mainly due to its value for money offerings. The Extra Value Combos and Happy Price meals which are reasonably priced offerings are preferred by majority (60%) of the customers. Another one-fourth of customers are attracted towards the innovative offerings by McDonald’s i.e. Spicy Delights range of meals.
- Two-third (68%) of the customers will be delighted if they can get an option to customize their burgers.
- Most customers are highly satisfied with the service of McDonald’s.
- McDonald’s has lived up to its business model as the main philosophy of fast-food i.e. quick service is one of the main reason for customers to rate McDonald’s high in providing service to its customers. Also, customers are not very happy with the dine-in experience at McDonald’s.
- Customers consider KFC (Zinger burger) the biggest competitor of McDonald’s but the competition is also from other players which sell sandwiches and pizzas confirming that McDonald’s is competing in fast-food category and not just burger category.
- McDonald’s marketing strategy is good. Two-third of its brand awareness is through TV commercials and one-third through “word of mouth” publicity. Most of the people are aware of McDonald’s and its offerings.
- Due to the quickly perishable nature of its offerings, most of the customers choose to dine-in at McDonald’s and not many prefer home delivery. Customers like the freshly cooked food from McDonald’s.
- Most of the customers believe that McDonald’s has been able to adapt itself to the Indian society and hence, they have rated it high on scale of acceptability in India.
- Most of the customers want McDonald’s to open its outlets in their locality. Decision-making of most customers depend on the distance they need to travel to consume a meal.
- Overall, most customers are highly satisfied with McDonald’s and its offerings.
SECTION – 3
Positioning strategy
and
Suggestions
Section – 3
Positioning Strategy of McDonald’s:
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McDonald’s started its Indian operations with positioning as a family restaurant with focus on kids. It penetrated in the market through Happy Meal which offers a toy for kids.
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Later on, McDonald’s changed its focus from kids to family and presented McDonald’s as a family restaurant for people of all ages.
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Due to emerging competition, McDonald’s started positioning itself as a value for money meals providing restaurant through its reasonably priced offerings. (Aap ke zamaane mein, baap ke zamane ke daam)
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Continuing with its ‘family restaurant offering value for money meals’ positioning, McDonald’s is now focusing on youngsters and celebrating happiness.
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McDonald’s is also focusing on distribution and is opening up outlets at busy locations and malls and shopping centres making itself easily available to customers.
- The marketing mix of McDonald’s is in line with its positioning strategy-
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Price – McDonald’s has reasonable prices as its offerings are value for money.
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Promotion – Marketing campaigns showcasing McDonald’s as family restaurant. Also, McDonald’s is focusing on youngsters and its low prices.
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Product – McDonald’s offerings are fast-food products that are delicious and hunger satisfying and at the same time easily consumable on-the-go owing to the small size and appropriate packaging.
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Place – McDonald’s has come up with outlets at many locations in a city. By focusing on its distribution, McDonald’s is making itself easily available to customers and complying with the concept of fast-food i.e. food on-the-go – convenient for customers to purchase and consume.
For families and youngsters, McDonald’s is a brand of fast-food restaurants that has value for money meals and is a place to celebrate togetherness and happiness.
Suggestions and foresights for McDonald’s marketing strategy:
- McDonald’s should come up with a better seating arrangement in its restaurants so as to avoid congestion and provide more comfort to the customers.
- A better variety of offerings especially in vegetarian category is the need of the hour for McDonald’s. Customers are satisfied with the price, quality and taste of McDonald’s but they need more variety in the menu.
- McDonald’s offerings are reasonably priced; hence, it can leverage its value for money proposition by introducing its outlets is smaller cities.
- As per PEST analysis, McDonald’s has favourable environment for growth in India. Hence, it should plan to expand its distribution network with a better variety.
- The ‘home delivery’ segment is not flourishing for McDonald’s due to highly perishable nature of its offerings; hence, it should come out with special recipes for home deliveries that stay fresh for at least 45 minutes so that the food is in edible state at the time of delivery.
- McDonald’s should come out with more variety in menu and bring out products other than burgers as well. The customers are looking for more vegetarian offerings from McDonald’s so it would be great that these new products have more vegetarian variants. McDonald’s should open ‘vegetarian only’ outlets at locations where demand for non-vegetarian is not much.
- In this emerging health conscious Indian society, McDonald’s should come up with healthy offerings such as baked patties for burgers, shallow fried French fries, low-fat sauces etc. for this segment of customers.
- McDonald’s current marketing and positioning strategy is working successfully except for some improvements required on Product and Place of the marketing mix. In all, McDonald’s has to increase its number of outlets to Tier-2 and Tier-3 cities and release a more varied menu so as to keep its customers delighted.
Conclusion
In this study, we have analysed the marketing strategy of McDonald’s India. The study comprises of SWOT analysis, PEST analysis, Porter’s five forces analysis, analysis of consumer behaviour through survey and analysis of McDonald’s positioning strategy.
The results of SWOT analysis showed McDonald’s as a strong company with more strengths than weaknesses and a greater number of opportunities as compared to threats. With the strong position in market, McDonald’s has been able to tackle competition, its biggest threat, very well. Large number of opportunities reflects McDonald’s great scope of growth which it can achieve due to its strengths.
PEST analysis showed that the environment for McDonald’s India has been really favourable and it continues to be so. With no restriction on investment and increasing disposable income of consumers the path for McDonald’s growth has become clearer though there are some road-bumps like changing to the societal tastes and preferences like health consciousness and vegetarianism.
Porter’s five forces analysis indicated that owing to severe competition, there is high threat of substitutes and new entrants in food industry. Though McDonald’s has brand recognition and differentiated offerings and no other large competitor in burger category, but still the high buyers’ power forces it to be innovative and to meet customer expectations. McDonald’s can exercise its power on its suppliers and can easily adapt itself to changing social and technological environment.
Consumer behaviour is in favour of McDonald’s and more customers can relate to the brand McDonald’s and hence, they prefer its products. They have few expectations from McDonald’s and for meeting these we have provide few suggestions to the company in this report.
McDonald’s has well positioned itself in the market. It has communicated its philosophies very well through its marketing strategy and also through delivery of service. It is a very distinct fast-food chain that provides food for which the purchase and consumption both are fast. High standards of quality and taste have complemented its marketing techniques to position itself as a great and real fast-food company.
References
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– The official site of McDonald’s India
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Restaurant Industry in India - Trends and Opportunities : A research report by HVS International (India)
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- McDonald’s outlet manager
Exhibit-1
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