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SYNOPSIS

Can you guess the name of the company which: Is the ninth most valuable brand in the world? Has replaced the US army as the Nations largest job training organization? Controls the market share of more than 3 food chains taken together in America? Its none other than McDonalds Corporation USA. Looking at the above statistics makes one wonder that what is the driving force behind all these achievements? How is it that the chicken burger available in San Francisco is same as the one available in Delhi? Many of these questions have been answered in the book McDonalds: Behind the Golden Arches written by John Love. But are these standards being carried out in India as well? The golden arches of McDonalds are slowly becoming an integral part of the Indian landscapes. Everyone knows McDonalds is big, but very few know just how significant its impact on Indian business really is. The inside of McDonalds remains a mystery. McDonald's India is a joint venture of McDonalds Corporation with Amit Jatia and Vikram Bakshi. Amit Jatia handles the operations in western region whereas Vikram Bakshi in the northern region. McDonald's India is an employer of opportunity, providing quality employment and long-term careers to the Indian people. The average McDonald's restaurant employs more than 100 people in 25 different positions from cashier to restaurant manager. McDonald's world class-training inputs to its employees can be seen in the present close to 2000 employees currently in Mumbai and Delhi.

But the most overlooked fact of McDonalds India is its contribution to the food processing industry. Six years prior to the opening of the first McDonald's restaurant in India, McDonald's and its international supplier partners worked together with local Indian Companies to develop products that meet McDonald's rigorous quality standards. Part of this development involves the transfer of state-of-the-art food processing technology, which has enabled Indian businesses to grow by improving their ability to compete in todays international markets. McDonalds dedication to its suppliers has lead to their growth, beyond the boundaries of the India. These aspects of McDonalds do not get covered and highlighted by the news hungry press. But when the false news of using beef tallow in the french fries hit the market, the press did not leave a chance to exaggerate it. Despite the fact that right form the beginning; no beef ingredients have been used in any of the products in India. The marketing agency of McDonalds, Mudra comes to its rescue in such times. The advertisements created by Mudra are a rage all over the nation, especially amongst the children. Who can forget the little kid who gets nervous in the school competition, but becomes happy again when his father takes him to McDonalds? McDonalds India has tried not to leave any stone un-turned in its objective to satisfy the Indian customer. But in Amit Jatias words, Customers are generally not forgiving. According to the survey conducted, customers demand low prices, more seating space, more variety, home delivery, and the list is endless. The fundamental secret to McDonalds success is the way it achieves uniformity and allegiance to an operating regimen. McDonalds India has to adhere to many rules and regulations laid down by the parent company, and it still has to cater to the Indian customer and his needs. McDonalds India is a case study on how to mix conformity with creativity.

1. HISTORY OF MCDONALDS
In 1954, a fifty-two-year-old milk-shake machine salesman saw a hamburger stand in San Bernardino, California, and envisioned a massive new industry: fast food. In what should have been his golden years, Raymond Kroc, the founder and builder of McDonald's Corporation, proved himself an industrial pioneer no less capable than Henry Ford. He revolutionized the American restaurant industry by imposing discipline on the production of hamburgers, french fries, and milk shakes. By developing a sophisticated operating and delivery system, he insured that the french fries customers bought in Topeka would be the same as the ones purchased in New York City. Such consistency made McDonald's the brand name that defined American fast food.

How it all began?

As a milk-shake machine salesman, Raymond Kroc routinely paid visits to clients. But when the fifty-two-year-old salesman traveled from his home near Chicago to southern California to meet two of his biggest clients, the result was anything but routine. While most restaurants bought one or two Prince Castle Multimixers, which could mix five shakes at once, the McDonalds had purchased eight. And Kroc was curious to see what kind of operation needed the capacity to churn forty milk shakes at one time. So he trekked to San Bernardino, and what he saw there changed his life. Kroc stood in the shadows of the stand's two radiant golden arches, which lit up the sky at dusk, and saw lines of people snaking outside the octagonal restaurant. Through the building's all-glass walls, he watched the male crew, clad in white paper hats and white uniforms, hustle about the squeaky-clean restaurant, dishing out burgers, fries and shakes to the working-class families that drove up.

4 Unlike so many food-service operations Kroc had come across, this joint hummed like a finely tuned engine. They offered a nine-item menu -- burgers, french fries, shakes, and pies -- eliminated seating, and used paper and plastic utensils instead of glass and china. They had also devised the rudiments of a hamburger assembly line so they could deliver orders in less than sixty seconds. And the prices were remarkably low: fifteen-cent burgers and ten cent fries. Kroc instantly knew he had seen the future. 1.1 Ray Kroc Kroc felt sure the McDonald brothers' operation could succeed wildly if it expanded. So the next day, he offered them a proposition. At root, the McDonald brothers were indifferent businessmen, satisfied with the $100,000 they earned annually and unwilling to invest the energy to build a chain. But Kroc was a veteran salesman with more that thirty years of experience. Using every ounce of persuasion he could muster, he finally convinced the brothers to cut a deal: Kroc would sell McDonald's franchises for the low price of $950. In exchange, he would keep 1.4 percent of all sales and funnel 0.5 percent back to the brothers. Because franchisees kicked back such a meager percentage of total sales -- just 1.9 percent -- the corporate parent made very little money.

Branding a Service and an Operating System

For Kroc, duplicating the McDonald brothers' single store was just the beginning. To build a chain, Kroc knew that he had to impose discipline on the loosely run restaurant industry. And that meant refining standardized operating procedures into easily replicable processes. Forty years earlier, Henry Ford had realized that the mass production of automobiles required the marriage of precision parts to an efficient assembly process. Kroc's insight was to apply the same rigor to the construction of sandwiches. Espousing the idea that "there is a science to making and serving a hamburger," Kroc endowed his beef patties with exacting specifications -- fat content: below 19 percent; weight: 1.6 ounces; diameter: 3.875 inches; onions: 1/4

5 ounce. Kroc even built a laboratory in suburban Chicago to devise a method for making the perfect fried potato in the late 1950s. Instead of simply supplying franchisees with milk-shake formula and ice cream, Kroc wanted to sell his new partners an operating system. In other words, he branded a service. And this was the revolutionary means McDonald's would use to create a chain in which a store in Delaware and a store in Nevada could serve burgers of the exact same size and quality, each containing the same number of pickle slices and topped with the same-size dollops of mustard and ketchup, each arrayed on similar tray alongside potatoes deep-fried for the exact same length of time. As Kroc recalled, "Perfection is very difficult to achieve, and perfection was what I wanted in McDonald's. Everything else was secondary for me." But the exacting demands served a strategic goal. "Our aim, of course, was to insure repeat business based on the system's reputation rather than on the quality of a single store or operator," Kroc said.

Real estate as a financial engine

Although McDonald's franchises sprouted up across the Midwest and West like wildflowers after a spring rain, the company's success appeared to be short lived. While the original deal he had struck with the McDonald brothers endeared Kroc to early franchisees, it also set his fledgling enterprise on a direct course to insolvency. Through 1960, when the chain's restaurants racked up $75 million in sales, McDonald's earnings were a mere $159,000.

Deep in hock and with no profit growth in sight, Kroc faced a classic dilemma. He couldn't afford to expand. And he couldn't afford to tread water. Fortunately, Harry Sonneborn came up with a solution. He thought McDonald's could make money by leasing or buying potential store sites and then subleasing them to franchisees initially at a 20 percent markup, and then at a 40 percent markup. Under this plan, McDonald's would scout out sites and sign twenty-year leases at fixed rates.

6 Franchisees would then pay McDonald's either a minimum rate or a percentage of sales, whichever was greater. As sales and prices inevitably rose over the years, the company would collect more and more rent, as its costs remained virtually constant. Embracing Sonneborn's idea, in 1956 Kroc set up a subsidiary, the Franchise Realty Corporation, to execute the new strategy. In the years thereafter, he flew around the country in a small airplane, scouting suburban neighborhoods dotted with tract housing, schools, and churches -- which he regarded as fertile ground for the planting of new "Golden Arches." In this pre-strip-mall era, real estate along well-traveled byways was both cheap and plentiful. And in a short period of time, the real estate operation became a high-margin contributor to McDonald's bottom line. As Kroc noted: "This was the beginning of real income for McDonald's." The real estate strategy played perfectly into Kroc's larger goal of control. Rather than sell blanket geographic franchises, which would grant the holder the right to build as many or as few stores as he chose in a particular area, Kroc sold only individual franchises, for a low fee of $950. This insured that operators unwillingly to play by his rules could open no more than one outlet. As a landlord, Kroc could compose legal documents guaranteeing further control. And by writing leases that would force tenants to conform to corporate policy, he could more easily insure that the look, feel, and taste of McDonald's would be identical in Bangor, Maine, and Butte, Montana. Although Kroc stepped down as chief executive in 1968, giving way to Fred Turner, he remained a vital symbol of the company's roots, and an enduring influence over day-to-day operations. Though he killed the competition, the competition didn't kill Ray Kroc. He passed away from old age in January 1984, at the age of eighty-one, just the ten months before McDonald's sold its 50-billionth hamburger.

Worlds Oldest McDonalds

This 44 year-old site is the oldest in the worldwide chain of 20,000 restaurants and the last one with redand-white striped tile exterior. After opening in 1953, it immediately became the standard for the fast food franchises across the country. The building and its 60foot high neon sign with "Speedee the Chef" are eligible for listing on the National Register of Historic Places. Employees wear 50's style uniforms of paper hats, white shirts and bolo ties. The restaurant serves the

1.2 Worlds Oldest McDonalds

original menu of hamburgers, cheeseburgers, fries and old-fashioned milkshakes. Also available are more recent McDonald's items such as Big Macs and Happy Meals. McDonald's reopened the facility as it was with walkup windows and outdoor seating. They also constructed and addition housing a museum, gift shop, restrooms and more outdoor seating.

2. STRATEGY OF MCDONALDS
McDonalds Corporation, the world's largest and best-known global food-service retailer, has demonstrated positive momentum with a growth potential of opening 2,000 restaurants per year worldwide. Total stores in 1998 exceeded 23,000, with over 12,000 in the United States and 11,000 in company's strategic priority providing exceptional customer care, remaining an efficient and quality producer, offering high value, and effectively marketing McDonald's brand on a global scale. The future success of McDonald's is based on strategically managing its strengths and competitive advantages today to develop increasingly profitable positions in its global markets tomorrow. McDonald's strategy has the following core elements.

Growth Strategy
Add 2000 restaurants annually, some company owned and some franchised, with about two-thirds outside the United States. Promote more frequent customers via the addition of breakfast and dinner menu low price specials, and Extra Value Meals. Dominate the global food-service industry. Global dominance means setting the performance standard for customer satisfaction while increasing market share and profitability through the firm's convenience, value, and execution strategies. Improve an already strong position. The firm's strategies are simple and emphasize making customers happy with everyday low prices and outstanding restaurant operations so they visit more frequently. Further strategies are to increase market share by attracting more customers more often to increase profitability by being more efficient, and to create economies of scale.

Store Location (Distribution)

Locate restaurants only on sites that offer convenience to customers and afford long-term sales growth potential. (The company utilized sophisticated site selection techniques to obtain premier locations. In the United States, the company supplemented its traditional suburban and urban locations with outlets in food courts, major airports, hospitals, and universities; outside the United States the strategy was to establish an initial presence in the central cities, then opening freestanding units with drive-thrus outside center cities). Utilize store and site designs that are attractive and pleasing inside and out, and, where feasible, provide drive-thru service and play areas for children.

Product Line Strategy

Offer a limited menu. Expand product offerings into new categories of fast food (chicken, Mexican, pizza, and so on), and include more items for health conscious customers. McDonald's has been giving franchisees more leeway in trying out new ideas and new menu items apart from the core hamburger-and-fries selection. Pizza puffs and breakfast bagels are on the menu in certain locations and sandwiches are being sold at sharp discounts on selected days or times. In York City, a vegetarian sandwich is on at least one store's menu. Do extensive testing to ensure consistent high quality and ample customer appeal before rolling out new menu items system wide. The firm's "Made for You" just-in-time ordering system is available in nearly 10 percent of its outlets, promoting the theme and benefits of serving hotter food and producing cost savings from reduced waste. The combination of advanced

10 equipment, sophisticated computer technology and new operation procedures will enable delivery of food "Made for You" at the speed of McDonald's.

Store Operations
Establish stringent product standards, strictly enforce restaurant operating procedures (especially concerning food preparation, store cleanliness and friendly courteous counter service), and build close working relationships with suppliers to assure that food is safe and of the highest quality. McDonald's' first priority is to improve restaurant operations. Strategic initiatives encompass realigning its structure and reducing its operations as a reaction to economic turmoil in certain international regions. Furthermore, the next generation of quality food preparation is being introduced to support its industry leadership into the next century. Relationships with its global network of suppliers add a dimension to its leadership position.

Sales Promotion, Marketing, and Merchandising

Enhance the McDonald's image of quality, service, cleanliness, and value globally via heavy media advertising and in-store merchandise promotions funded with fees tied to a percent of sales revenues at each restaurant. Continue to use value pricing and Extra Value Meals to build customer traffic. Use Ronald McDonald to create greater brand awareness among children, and the "Mc" prefix to reinforce the connection of menu items and McDonald's.

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3. INDIAN FAST FOOD SCENARIO

There are approximately 22,000 registered restaurants in India, which have sales of over $15,000 per month. In addition, there are more than 100,000 roadside restaurants (dhabas) selling their prepared foods in small stalls in cities and on highways. There are 1,568 registered hotels in India.

The opportunity for U.S. food companies in India's food service market is small but growing. Sales by Indian food service companies totaled approximately $6 billion in fiscal year 1998. Restaurants account for approximately 55 percent of Indian food service sales. The institutional sector consists of hospitals, prisons, defense establishments, schools, company canteens, railways and airlines.

3.1 Indian Food Service Sub-Sector Sales FY 1998 100 percent = $6 billion Hotels 5%
Restaurants

Institutes 40%

Restaurants 55%

Institutes Hotels

* Excludes roadside restaurants Source: Literature search, Interviews, PSi analysis

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Factors driving increased food service sales:

Growth in Personal Income: The increase in buying power of Indian consumers is driving growth in the food service sector. India's per capita income has increased by over 20 percent from 1992 to 1996. Shrinking Household Size: The total number of households in India has increased by less than 3 percent per year from 1990 to 1998; however, the number of households in middle, upper and high-income categories has grown by more than 12 percent annually. These households have higher disposable income per member and have a greater propensity to spend on food.

Urbanization: Approximately 50 percent of high, upper and middle-income

group Indian consumer households reside in urban areas. Growing Number of Women in the Workforce: Over 16 percent of the population of Indian women work full-time and spend most of their time away from home. Due to these changes many Indian consumers are opting for meals away from home. Menu Diversification: High-income Indian consumers are seeking variety in their choice of food. Urban Indian consumers are aware of various international cuisine (e.g. Continental, Chinese, Mexican, Italian, Thai, and Japanese) and an increasing number are willing to try new foods

A growing number of specialty restaurants, fast food outlets, home delivery and take-away restaurants have opened in the last few years. A number of foreign restaurant chains (e.g. Domino's, Pizza Hut, Pizza Express, McDonalds, TGIF, KFC and Baskin Robbins) have started operations in India and have achieved success.

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4. MCDONALDS IN INDIA
McDonald's India is a joint-venture company managed by Indians. McDonalds India, a subsidiary of McDonalds USA, has expanded its presence in India via 2 joint venture companies Connaught Plaza restaurants and Hardcastle restaurants. McDonalds (India) has a 50 per cent equity stake each in both joint venture companies. Connaught Plaza restaurants manages operations and expansions across North India (Delhi, Jaipur and Punjab) led by Vikram Bakshi and Hardcastle restaurants, which is headed by Amit Jatia, manages operations and expansions across Western India (Mumbai, Pune, and Gujarat). Around the world, McDonald's traditionally operates with local partners or local management. In India too, McDonald's purchases form local suppliers. McDonald's constructs its restaurants using local architects, contractors, labour and - where possible local materials. McDonald's hires local personnel for all positions within the restaurants and contributes a portion of its success to communities in the form of municipal taxes and reinvestment. Six years prior to the opening of the first McDonald's restaurant in India, McDonald's and its international supplier partners worked together with local Indian Companies to develop products that meet McDonald's rigorous quality standards. Part of this development involves the transfer of state-of-the-art food processing technology, which has enabled Indian businesses to grow by improving their ability to compete in todays international markets.

14 McDonald's worldwide is well known for the high degree of respect to the local culture. McDonald's has developed a menu especially for India with vegetarian selections to suit Indian tasted and culture. Keeping in line with this McDonald's does not offer any beef and pork items in India. McDonald's has also re-engineered its operations to address the special requirements of a vegetarian menu. The cheese and cold sauces used in India is 100% vegetarian. Vegetable products are prepared separately, using dedicated equipment and utensils. Also in India, only vegetable oil is used as a cooking medium. This separation of vegetarian and non-vegetarian food products is maintained throughout the various stages of procurement, cooking and serving.

4.1 Jatia and Bakshi

The McDonald's philosophy of Quality, Service, Cleanliness and Value (QSC&V) is the guiding force behind its service to the customers. McDonalds India serves only the highest quality products. All McDonalds suppliers adhere to Indian Government regulations on food, health and hygiene while continuously maintaining their own recognized standards. All McDonalds products are prepared using the most current state-of-the-art cooking equipment to ensure quality and safety. At McDonalds, the customer always comes first. McDonalds India provides fast friendly service- the hallmark of McDonalds that sets its restaurants apart from others. McDonalds restaurants provide a clean, comfortable environment especially suited for families. This is achieved through McDonalds stringent cleaning standards, carefully adhered to. McDonalds menu is priced at a value that the largest segment of the Indian consumers can afford. McDonalds does not sacrifice quality for value rather McDonalds leverages economies to minimize costs while maximizing value to customers.

15 The company has invested Rs 450 crore so far in its India operations out of its total planned investment of Rs 850 crore till 2003. With its India operations showing signs of success, the US food chain McDonalds Corporation has sought its pound of flesh. The global food chain major has claimed an initial franchise fee of $45,000 and five per cent royalty fee of the gross sales from its operations in India. McDonalds India Pvt Ltd has moved an application to the government seeking permission for payment and remittance of the initial franchise fee and royalty to Mc Donalds Corporation. The permission has been sought on two grounds: McDonalds India would pay an initial franchise fee of $45,000 on each of the McDonalds restaurants already franchised or to be franchised, in the future, in India; and a royalty equal to 5 per cent of the gross sales from the operations of all its Indian restaurants on a monthly basis to McDonalds International. The company hopes to break even in 2003. They currently serve around 3 million customers a day and hope to grow at the rate of 50% to 70% a year.

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5. BEHIND THE COUNTERS Krocs Principles

McDonalds success is the result of its dedication to operating regimen. More than any other early competitor in fast food, McDonalds was deadly serious as it went about the task of defining its operations, setting basic standards of achievement, and monitoring suppliers and operators to determine whether standards are being met. Korcs personal commitment to quality, service and cleanliness is legend. QSC long ago became the most popular acronym among fast-food operators, but the phrase originated with Kroc, and he used QSC to distinguish McDonalds from all other competitors in an industry that was otherwise rife with duplication. QSC has now been changes to QSC & V, where V stands for Value for Money. In setting up its operating system, McDonalds displayed no particular genius, just tenacity. To survive today, all fast-food chains must build central organizations to develop standards of operation and train the licensees to meet them. They must be responsible for picking suppliers and setting specifications on all food products. And finally, they must monitor the system to determine that the franchisees are following standards and that the suppliers are meeting product specifications. As logical and basic as that sounds, it was a revolutionary concept in food franchising when McDonalds took that approach in the 1950s. In fact, McDonalds greatest impact on American business is in the areas that consumers do not see. In their search for improvements, McDonalds operations specialists moved back down the food and equipment supply chain. They changed the way farmers grow potatoes and the way companies process them. They altered the way ranchers raised beef and the way the meat industry makes the final product. They invented the most efficient cooking equipment and pioneered new methods of food packaging and distribution.

17 The McDonalds in India is following the same tradition. Long before the first Maharaja Mac was served up, McDonalds was here in India, setting up the elaborate cold chain that supplies all the restaurants in the country. It took six years from 1991 when the work started, until the system was in place. We spent Rs.50 crore even before the first restaurant was set up in 1996, Amit Jatia confesses.

The Supply Chain

The supply chain objectives are assured supply, low cost and safe and consistent quality. During 1990, when they first set out to outline their infrastructure, they found that the cold chain system was non-existent. There were only 200 refrigerated trucks across the country and very few cold storages. The cold storages were primarily used by the ice-cream sector and they were of very poor quality. The cold chain system set up involved the transfer of technology from McDonalds in the US and its international partners. The standards also strictly adhere to Indian Government regulations on food, health and hygiene. Currently, McDonalds distribution centers (DCs) are in touch with all the suppliers through electronic interconnectivity (e-mail). The supply chain converts the 15-day lead-time from the suppliers to a one-day ordering lead-time for the restaurant. The products are picked up in temperature- controlled vehicles by a third-party logistics company and delivered at the DCs. The DCs then supply to restaurants on a need-basis. All products go through the quality control checks before reaching the customer. According to Hardcastle Restaurants national supply chain product manager Mr. S D Saravanan: Traditionally, any supply chain functions through suppliers, stockists, distributors, primary wholesalers, secondary wholesalers and retailers. However, at McDonalds India, the supply chain involves only producers, distributors and retailers.

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5 .1 T h e M c D o n a ld s S u p p ly C h a in S u p p lie rs

D istrib u tio n C e n tre s

M c D o n a ld s R e sta u ra n ts

Air Freight Ltd. (Logistics)

5 .2 E x a m p le o f th e S u p p ly C h a in Trik a y a A g ric u ltu re ( S u p p lie rs o f Le ttu c e )

R a d h a k rish n a Fo o d la n d Ltd . ( D istrib u tio n C e n tre a t Th a n e )

M c D o n a ld 's R e sta u ra n t ( V a sh i)

19 After they receive the stock from the suppliers, they implement on planning for material requirement as per the demand from the McDonalds restaurants and send orders to suppliers. A similar copy of the order is also sent for advanced intimation to be made to the third party logistics company Air Freight Ltd. The DC will consider stock in hand, present consumption, shelf life of the products, truck capacity and lead-time. Meanwhile, suppliers produce and keep products ready as per the demand from the DC. McDonalds post-harvest facilities include a cold chain consisting of a vacuum precooling room to remove field heat, a large cold room and a refrigerated van for transportation where the temperature and the relative humidity of this crop is maintained between 1 degree Celsius and 4 degree Celsius and 95 per cent, respectively. Vegetables are stocked in the pre-cooling room within half an hour of harvesting. The pre-cooling room ensures rapid cooling to two degrees Celsius within 90 minutes. The pack house, pre-cooling and cold room are located at the farms itself, ensuring no delay between harvesting, pre-cooling, packaging and cold storage. Thus, zero percent spoilage and freshness are being maintained. McDonalds India sources food products through 45 different suppliers and 10 key local companies. The key local suppliers include: Vista Processed Foods (VPF), Trikaya Agriculture, Dynamix Dairy Industries, Radhakrishna Foodland, Cremica, Shah Bector and Sons, Global Green Company and Bector Foods. Another striking factor of McDonalds is that it never has any written contracts with the suppliers. The relationship is only based on trust. The McDonalds team help the suppliers develop, and hence they are assured that McDonalds will stick to them through thick and thin.

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Mechanism of each supplier

Trikaya Agriculture, which is an intrinsic part of the cold chain and supplies fresh lettuce to McDonalds at the rate of 300 metric tonne per annum. The farm has the total capacity to produce 1,000 metric tonne, per annum. According to Trikaya Agriculture Pvt Ltd farm manager Mr. M E Gowda: Initially, lettuce could only be grown during the winters. With McDonalds partnership, Trikaya is now able to grow the crop all round the year. India, now supplies lettuce to five star hotels, flight kitchens, clubs and offshore catering companies. And it will soon be exporting to international markets, especially to McDonalds Asia Pacific and Middle East operations. Vista Processed Foods (VPF) based in Taloja, Maharashtra, with technical and financial support extended by OSI Industries Inc, US, and McDonalds Corporation Inc, US operates infrastructure and support services. It supplies vegetable patties, chicken patties, pies and pizza puff at the rate of 30 metric tonne per month to McDonalds India. McDonalds vegetable and chicken

patties are processed through the latest food processing technological plant at Vista. Vista has installed hi-tech equipment for the purpose of deboning, blending, coating, passing the patties through the stern breading machine, frying and freezing. Vistas pie line has the sophisticated, computerized Rondosheeter (the machine where processing takes place) in operation, which includes hi-tech refrigeration plants for the manufacture of frozen foods at temperature as low as minus 35 degrees.

21 Dynamix Dairies: In some cases, the Indian suppliers had the technology but no market for the products they produced. For example, Dynamix Dairies through its relationship with McDonald's was introduced to a large consumer to supply milk casein and other milk derivatives. The two companies entered into a business relationship resulting in an initial export order of approximately US $12 million per year with the potential to increase. After the food products are processed at their respective companies, they are received and stocked at the McDonalds distribution partner the Rs 80- crore Radhakrishna Foodland Ltd to ensure that all McDonalds restaurants are supplied without interruption. The company however failed with potato farming, despite spending $10 million in Uttar Pradesh. But it claims that by 2004, McDonalds will source potatoes from India for French fries. With all 80 restaurants in place, we expect our consumption of French fries to be 10,000 metric tones and then it makes economics sense to grow processed grade potatoes in India, says Jatia. However, the newly introduced potato wedges are being made from potatoes grown in Gujarat.

HACCPs
There is a concept known as the HACCPs followed in McDonalds. HACCPs stands for Hazard Analysis and Critical Control Points. There are some key areas identified by McDonalds for e.g. the patties for the burgers have to be stored at a certain level of temperature. A list of these HACCPs is given to all the suppliers and they have to strictly adhere to them. Surprise checks are made by the McDonalds employees to check if all the quality standards are being followed.

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6. THE MEDIA MAGIC

[

You deserve a break today, so get up and get away to McDonalds. The above break commercial was one of the initial commercial themes adopted by McDonalds USA which became the best known commercial song on television and, in fact, the most identifiable advertising themes of all time. Needham was one of the first advertising agencies of McDonalds, which made many revolutionary advertisements for the company. Needhams advertising formula became known in McDonalds as food, folks, and fun, and it remains the backbone of al the chains advertising campaigns. McDonalds is now, one of the worlds mightiest consumer marketers. Its brand valuation is $25 billion, making it the ninth most valuable brand in the world.

McDonalds Marketing Strategy Worldwide

The first step in developing a marketing strategy is to understand the customers, enabling reaction to their changing needs and the changing dynamics of the market. To this end McDonalds conduct several stages of in-depth customer research and audits of the McDonald's brand. The research involving both quantitative and qualitative research methods. This research tells them a lot about how McDonald's is perceived and about trends that are taking place in the market. They also conduct research into the local area of their restaurants, into the general market environment, and into specific areas of their business, children for example.

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McDonalds also have to have a thorough understanding of their competition. They consider 3 basic areas:

1. The Total Eating Out Market gives the broadest competitive context and includes all restaurants, hotels, pubs, and any other outlet where people eat 2. They also focus on the Quick Service Restaurant sector. This includes all the obvious competition and also fish and chip shops, and sandwich shops any outlet where food is served quickly. 3. The final sector that they focus on is defined as the Burger House Sector. This looks only at restaurants serving hamburgers including Burger King, Wimpy, Wendy's and all independent burger bars.

A useful way to gaining knowledge of all aspects of the competition is the examination of the four Ps of the marketing mix: Price, Promotion, Place, and Product. Competitive Promotion: Before they communicate with their customers they must be aware of what the competitors are communicating so that they can create a beneficial difference between McDonalds and them. Competitive Pricing: Being in touch with the pricing of their competitors allows them to price their products correctly, balancing quality with value. Competitive Product: Quick Service Restaurants are constantly expanding their menus. This can be done on a short-term promotional basis or as a long-term expansion strategy. Competitive Place: Distribution is key to any retailer or brand.

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Why Mudra in India?

DDB Needham and Leo Burnett are the advertising agencies of McDonalds worldwide. Hence, when they came to India, the subsidiaries of both the companies pitched for the account and Mudra, the Indian partner of DDB Needham got the account. Since the very beginning Mudra has been the advertising agency of McDonalds India. The Mudra team meets up with McDonalds marketing team on a regular basis and they have a debate and discussion on the new strategies to be adopted. McDonalds uses various medias like television, hoardings and bus shelters. They are almost out of print ads. McDonalds also sponsor many television programmes like Kaun Banega Crorepati, Children shows etc. Even the paper mats on the trays at the McDonalds are designed as per the ongoing marketing strategy of McDonalds. For e.g.: During the French fries issue, all their paper mats had description of the burgers, how the vegetarian products are made etc, to regain the confidence of the customers. The placing of the pamphlets, banners in and around the outlet are decided upon by the Area Sales Manager and the Operations Manager, in co-ordination with the Restaurant Manager. For e.g.: Currently they have the Bugs Life Theme going on wherein they give free Bugs Life toys with the Happy Meal. All the outlets are decorated with the pictures of the toys and even the paper mats have pictures of the toys on them. The hoardings around the outlets carry the same theme.

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The 80-20 Menu Boards

Even the menu counters in the outlet are a marketing tool for the company. They have to be designed such that they catch the attention of the customer and tempt him to order the product. So McDonalds have menu boards that are descriptive as well as visual. They call it the 80-20-menu board- eighty percent visual and twenty percent descriptive. The aim is to make things easier for the customer to understand what the 39, 49, 59, 79, 89 rupee options are. And of course it is easier for McDonalds also to give back the one rupee change so that the service can be quick.

6.1: 80-20 Menu Boards

The marketing strategy of McDonalds in India has gone through manly 3 stages: Stage I: Building the Brand Stage II: Awareness of the products Stage III: Gunning for market share.

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Stage I: Building the Brand

The Stage Fright Advertisement (We make you smile!) The initial marketing strategy was focused on building the brand name in India. McDonalds wanted to bring an awareness of its presence, of the arrival of McDonalds in India. Hence, even thought it had presence only in 2 cities, Delhi and Mumbai, it still went in for Nationwide Advertising. The first advertisement of McDonalds in India was of a child getting tensed in a Fancy dress competition and forgetting his lines. His father then takes him to McDonalds where he forgets all his fears and gives a brilliant performance appreciated by all in the restaurant. Every child in India could relate itself to the child in the advertisement and it gave the parents the idea that if their child were unhappy, taking him to McDonalds would definitely bring a smile to his face. When Vikram Bakshi was asked how did the idea for the first advertisement come up, his reply was: The idea came from the experiences of what we saw happening at the restaurants. I think one of the things that recent research has shown is that 69 percent of the kids prefer us. That kind of response is overwhelming! We have seen over a period of time that some of the things we set out to do in 1997-98 are paying off now. Really the kids are very happy to be here. They find it a hassle free experience. Nobody to say, "Sit down!" or "Don't move!" He is no longer told that if he runs around he will bang into someone and spill things over. He doesn't encounter adults all the time like he does in specialty restaurants-waiters who are in their thirties and forties, with faces which say, "Keep out of my way!" What he sees when he comes into McDonalds is a place that is brightly lit-there are no dark corners that he needs to be scared of. The people working here are all young. He can walk up alone to the counter and ask for whatever he wants, someone will talk to him, take him seriously, look after him, ask him questions. He has a play area where he can run around. And clearly even parents are happy to bring their children here. I have seen many

27 instances where parents come in with their children; they are playing while the parents are also enjoying themselves. There was this lady I met and she asked me, "What is this that you do to children?" So I said, "What do we do meaning?" She said, "My two year-old recognizes McDonalds. When I took her to Wimpy's the other day she refused to enter the place, saying it was not McDonalds."

Stage II: Awareness of the Products

McDonalds then felt that it needed to highlight its products along with the experience. Hence, came the series of advertisements highlighting on the products and new launches of McDonalds. McDonalds wanted the customers to know that they have something for everybody, be it children or adults, vegetarian or nonvegetarian. The advertisements in these series were: The Sleeping Couple: In the sleeping couple advertisement the husband is shown dreaming about the various products of McDonalds. Anyone watching the advertisements felt like going to McDonalds right away. The Police and Thief: The thief is on a run from the police but makes a stop at McDonalds to have the new McPizza Puff and the Chicken McGrill. The Barber and the Customer: The customer is getting himself shaved when he hears about the launch of McPizza Puff and Chicken McGrill, and runs to the nearest McDonalds half shaved. The Runaway Bridegroom: A couple is getting married when the Bridegroom runs away in the middle of the marriage to have the new McPizza Puff and the Chicken McGrill and the whole family follows him. Veg Surprise: The latest commercials, around 3 of them, are focused on the launch of the new Veg Surprise for Rs.17 only with the punch line Yakein hi nahin hota.

28

Stage III: Gunning for market share

The latest advertisements of McDonalds are a transition from the first strategy. In the initial advertisements, McDonalds was attempting to build a relationship with the customers. But now, the advertisements portray that the relationship has already been established. Its got the mind share, and its now gunning for market share. The ad campaigns are trying to portray McDonalds as a constant companion, which makes people feel special. The recent commercial highlights the bond that McDonalds shares with people. It shows a child moving to a new locality, and he is sad. But when he sees McDonalds in his neighborhood, the child is once again reassured. The recent ad campaign is targeting the Indian is targeting the Indian father, as he is still looked upon as a decision-maker. The new positioning: McDonalds is a special place where caring dads take their families to give them a great time. So its a clear positioning as a family restaurant. We are positioning ourselves as the welcoming and affordable family restaurant committed to values of quality, fun and excitement. It is also a restaurant which makes you feel special and makes you smile, says Amit Jatia.

29

Miscellaneous Advertisements
There were many other advertisements made by McDonalds emphasizing on the schemes, the prices and various other aspects. Some of them were: The Itch Karo Scheme: This advertisement was to promote the scheme of McDonalds wherein you could win prizes right from a small Cadbury to a television and bike. Soft Serve Cone: There were many advertisements focusing on the Rs.7 soft serve cone. One of them was of a traffic policeman who gets tired of directing the customers to the McDonalds outlet. This advertisement if of the most liked and remembered advertisements of McDonalds. Happy Meal: There are various advertisements relayed during children programmes on television and also children channels emphasizing on the happy meals and the toys you get with them.

30

The French Fries Issue

On May 4th 2001, the outcry over the alleged use of beef flavoring in the preparation of French fries by McDonalds led to attacks on two outlets in Mumbai and Thane. Within hours of the story breaking that McDonalds in the U.S. had been using oil with a beef extract for cooking its fries, the burger giants Indian operation knew it had a crisis on its hands. Amit Jatia and his staff huddled together with PR specialists from Corporate Voice Shandwick, ad men from Mudra DDB, corporate affairs and legal experts. Police security for all outlets was first red alerted. Then, posters were made from office printers with the headline: 100 percent Vegetarian French Fries in McDonalds India. Below this were various bullets of information such as: No flavors with animal products/extracts are used for preparing any vegetarian products in India. The posters were plastered over all the Big M outlets. The main imperative was to supply proof. On the day the story broke in India, McDonalds submitted samples of the fries to leading laboratories in Pune and Mumbai, such as the Council of Fair Business Practices, as well as Delhis Central Food and Technical Research Institute. Tests were quickly done by the BMC (Bombay Municipal Corporation) and FDA and local political parties. It took a week but the results were clear no beef or meat in the oil or products which were rapidly passed to the press. The results were also posted in the various outlets and put as inserts in the daily papers in sensitive areas like Bombays Vile Parle, Charni Road and Thane district. All these marketing efforts helped the Big Mac to avert the crisis and regain the confidence of the customers. For a few days after the news, the sales dropped drastically, but now, the outlets are back to their usual footfalls and french fries remain the most favorite and most selling product of McDonalds India.

31

Wheres Ronald McDonald??

In countries like Australia and U.K, where McDonalds has its presence since decades, many of the marketing strategies have been focused on Ronald McDonald and his friends like Hamburglar, Grimace etc. Ronald McDonald is a prominent figure in the childrens life of those countries. 6.2 Ronald McDonald

The very first Ronald McDonald was the famed weatherman Willard Scott. In the very first Ronald McDonald commercial, with Willard Scott as Ronald(c.1960), he actually says something to the effect of "I know you're not supposed to talk to strangers, kids, but it's okay to talk to me, because I'm Ronald the hamburger-loving clown!" Originally he wore shoes made of buns, a cup on his nose, and a hat with a hamburger meal on it. Soon, this was dropped for the more familiar clown outfit. But in India, none of the advertisements currently focus on Ronald McDonald. The main reason for this being, the Company is still trying to build the brand loyalty and awareness in India. It is still in its developing stage and cannot focus on many aspects at the same time.

32

Social Marketing
McDonalds believes in giving back to the community in which they do business. Besides commercial marketing McDonalds also undertakes many social drives to build brand loyalty among the customers. Ronald McDonald House Charities (RMHC) works to improve the health and well being of children by awarding grants to organizations and supporting 206 Ronald McDonald Houses worldwide. RMHC has not yet been established in India. But McDonalds India has undertaken many social activities like: Supporting Health drives like Pulse Polio since 1998. McDonalds Spotlight, an inter-school performing arts competition started in 1998 for schools all over Mumbai and Navi Mumbai to provide the students with an atmosphere for healthy competition. Over 120 schools participated in 1998,1999 and 2000. McDonalds has tied up with Nehru Science Centre, Mumbai (NSCM) in 2000 for a period of three years to bring the students of Mumbai a science quiz. This quiz has been conducted by NSCM for the past ten years. With McDonalds, it hopes to get the contest to a new level. Having cleanliness drives with the BMC like the one on 15th August 1997 for making Mumbai garbage free and joined in celebrating 50 years in Indias independence.

33

7. THE HUMAN TOUCH

We're not just a hamburger company-serving people; we're a people company serving hamburgers.

With more than 500,000 people on the payroll at any one time, the McDonalds System is easily one of the largest employers in the United States. One out of every 15 American workers got his or her first job from McDonalds. It was at McDonalds where they first learned about work routines, job discipline, and organizational teamwork. McDonalds by now had replaced the U.S. Army as the nations largest job training organization. An unwritten rule during McDonalds first decade prohibited the hiring of women in the restaurants. It was rationalized on the grounds that many tasks such as carrying hundred-pound sacks of potatoes from the basement were too strenuous for the women. But that was a thinly veiled disguise for the real reason: Kroc feared that female employees would attract too many teenage males who would convert McDonalds into another high school hangout. But Krocs worst fears that attractive female crewmembers would convert McDonalds into a teenage hangout proved unfounded and today, McDonalds crews are 56 percent female, and fully women manage 46 percent of all units.

34

Hamburger University
Hamburger University is McDonald's worldwide management training center located in Oak Brook, Illinois. Designed exclusively to instruct personnel employed by McDonald's Corporation or employed by McDonald's Independent Franchisees in the various aspects of the business. All training programs begin with one essential ingredient: The Basics of McDonald's Operations. Founded in 1961, Hamburger University's has come a long way since McDonalds opened their first training facility in the basement of a McDonald's restaurant in Elk Grove Village, Illinois. Since that time they've moved Hamburger University twice and watched the size of classes grow from an average size of about 10 to more than 200 per class. 7.1 Hamburger University Today, more than 65,000 managers in McDonald's restaurants have graduated University, from now Hamburger located in a

130,000 square foot, state-of-the-art facility on the McDonald's Home Office Campus in Oak Brook, Illinois, with a faculty of 30 resident professors. Because of McDonald's international scope, translators and electronic equipment enable professors to teach and communicate in 22 languages at one time. McDonald's also manages ten international training centers, including Hamburger Universities in England, Japan, Germany and Australia.

35

Equal Opportunities Policy

McDonald's is an equal opportunity employer, ensuring that employees and job applicants are selected, trained, promoted and treated on the basis of their relevant skills, talents and performance and without reference to race, color, nationality, ethnic origin, gender, sexual orientation, marital status, age or disability. The company aims to ensure that no job applicant or existing employee is disadvantaged by conditions, requirements and policies that cannot be shown to be just and fair. In support of this McDonald's Diversity policy promotes and sustains a working environment, which is free from unlawful discrimination, harassment and bullying. McDonald's regards all of its employees as members of a team where everyone's opinion is valued and everyone is regarded as equal in status and must always be treated with respect. The person responsible for this policy is the Human Resources and Training Director, but it is the responsibility of all employees, particularly managers and area management, to challenge questionable behavior and practices. The Human Resources department monitors the effectiveness of the policy at regular intervals and takes corrective action as necessary to ensure that it is being complied with. Employees who feel that they have been unfairly treated in any way regarding this policy are encouraged to use the remedies outlined in the Company's handbooks.

36

Outlets in India
McDonald's India is an employer of opportunity, providing quality employment and long-term careers to the Indian people. The average McDonald's restaurant employs more than 100 people in 25 different positions from cashier to restaurant manager. McDonald's world class-training inputs to its employees can be seen in the present close to 2000 employees currently in Mumbai and Delhi. Manpower Planning: The Scheduling Manager is in charge of the manpower planning in the outlet. They have full timers who work for 9 hours and part timers who work for 3-4 hours. If they expect more customers (during holidays etc) then more part timers are recruited. Recruitment: Done by reference of the employees in the outlet or other outlets. Organization and Salary Structure:

R e s ta u ra n t M a n a g e r (R s .1 8 ,0 0 0 - 2 0 ,0 0 0 )

1 s t A s s is ta n t M a n a g e r (R s .1 1 ,5 0 0 )

2 n d A s s is ta n t M a n a g e r (R s .1 0 ,4 0 0 )

S h ift R u n n in g F lo o r M a n a g e r (R s .6 ,5 0 0 )

F lo o r M a n a g e r (R s .5 0 0 0 )

T r a in in g S q u a d (R s .2 1 p e r h o u r)

C re w M e m b e r (R s .1 4 .5 p e r h o u r)

37 Training and Development: Training is a continuous process at the McDonalds. It is the responsibility of the training squad to train the other employees. The training squads maintain training logs of the employees, which clearly states that which employee is to be trained, and on what station. The 3/30 Plan: According to this plan, the training squad has to train 3 people on three different stations in a month. One employee is trained on one station, say the vegetarian station for 10 days, and then for the non-vegetarian station for the next 10 days and so on. This is done till the employee becomes proficient on the station and is capable of handling the station on his own. Performance Appraisal:

Every employee joins in as a Trainee Crew where he is given the Green Badge. After a period of 3 months, the employee is checked for the health safety, cleanliness and sanitation after which he is given the Yellow Badge. After receiving the Yellow Badge, there are 5 stations that the employee has to be proficient in: 1. Backroom Cleaning This includes mopping the floors, clearing the tables, maintenance of the machines etc. 2. Fried Products This involves frying of the French Fries, Pizza Puff etc. to the right degree. 3. Buns, Dress and Grill (BDG) This includes grilling the bun and dressing them properly. There is a time limit given to perform every function and the employee has to perform it efficiently, with minimum wastage. 4. Counter The last station is of the counter handling. The employee should be able to converse with the customers courteously and take proper orders.

38 5. Personality The last criteria is the overall personality of the employee. McDonalds being in the service industry, having smart and courteous employees is of utmost importance to them. The productivity record has to show 90+ points. The productivity is checked in various ways. For example McDonalds has a policy if serving each customer within one minute on an average. The productivity at the counter is checked by the time taken by an employee to complete the order. For E.g.: If Freda (A service-counter in charge) has taken 2.5 minutes on a average to serve each customer in her shift, at the end of the shift, the shit running manager will speak to her and ask her the reason and accordingly ask her to try and improve. If this trend continues, Freda is trained further. After the productivity record shows 90+ points, the employees have to appear for a documented written test where they must get more than 90 marks. Having got a 90+ average of the two, the employee is promoted to the next hierarchy level. Shifts:

McDonalds have different shifts for managers, full time employees and part time employees. Their main shifts consist of: Open Shift 7:00 am to 4:00 pm Mid Shift 12:00 am to 9:00 pm Close Shift 3:00 am to 12:00 pm McDonalds have a special night shift where the managers have to account for the days transactions, inventory, wastage etc. The night shift for the mangers is from 11:00 pm to 8:00 am.

39 They also have a night shift for the employees where the scrubbing of the entire outlet takes place. Also, each and every machine is opened and cleaned. The night shift for the employees is from 7:00 pm to 4:00 am. Both the night shifts i.e. for the managers and the employees are done on rotation basis. Female employees are generally not allowed to do the night shifts. Holidays and Breaks: Managers can take 6 holidays in a month. If an employee is working for the 7-hour shift, he gets a break for 1 hour after 4 hours and if an employee is working for less than 7 hours, then he gets a break for hour. Employee Grievances:

The crew members are allowed to take 4 holidays in a month and the

McDonalds call it as the RAP SESSIONS. Once in a month, the employees can vent their problems to the Area Sales Manager or the Operations Manager. The Branch Manager is not included in the Rap Sessions.

High Employee Turnover

McDonalds in India faces a huge problem of high employee turnover. Recruiting and training employees is an ongoing process, which never stops at any of the outlets. On an interview with one of the ex-employees, it was found that the main reasons for the high employee turnover are: The profile of the employees mainly consists of college students who want to used their spare time and get some fast money. As a result the turnover is extremely high during the exam seasons, and similarly, the availability is high during the holidays seasons.

40 The employees feel that there is very slow growth in the company. It takes you 3 months just to get the yellow badge, and even after that, the promotions come very slow. The salary packages are not very attractive.

41

8. THE PUBLIC CHALLENGE

Its the normal morning hours at the Crossroads McDonalds. But the outlet hasnt received the weekly delivery of its raw materials. An old lady approached the counters and asks:
Old Lady: Fish-O-Filet and a coke please Employee: Madam, you are in luck, we dont have Fish-O-Filet, but you can have any other burger and a Coke on the house. Never say NO to a customer is the policy of McDonalds clearly visible from the above true incident. In the words of Mr.Amit Jatia, We are extremely customer focused. For us customer is the God and there is no short cut to that. At McDonalds each and every outlet has a Customer Care Representative (CRR) whose only job is to look after the customer complaints. Any customer problems, be it as small as dropping the coke on the way or as big as the French fries issue has to be handled by the CRR. Besides the CRR, you also have many host and hostesses who keep taking rounds, making sure that the customers are comfortable.

8.1 Changes in Consumer Perceptions

1999
From serving just Burgers Bland western food Expensive western restaurant Loud, for youngsters Childish

2001
To ice-creams, fries, shakes and pizza Less spicy, non-oily, crisp, fresh and different Affordable family restaurant, money well spent Mature, calm, cultured, straightforward for families Childlike, and young at heart

42

Steps taken to improve customer service:

Guard placed at the entrance: From this year onwards, a guard has been placed at all the entrances to greet and welcome the customers Host and Hostesses: More employees are now placed in the front area than the back area to interact with the customers. Mystery Diner: Delegates of the company visit the outlets as normal customers and check if the service is being given properly and then report to the Head Office. These surprise checks keep the employees on their toes. 2 Meter Rule: Any employee coming within 2 meters distance of any customer has to greet and smile at the customer. Served in 60 seconds: This is an upcoming scheme of McDonalds wherein every customer will be served within 60 seconds and if they are unable to do so, the customer will get free French fries. This scheme is going to be launched in McDonalds Asia-wide. Standardization: At McDonalds, the way of doing each and every thing has been written down, and so has been the way to take down the order from the customer. They follow a 6-step rule. As soon as the customer comes to the counter they have to: 1. Welcome the customer 2. Take the order 3. Repeat the order 4. Take money 5. Give the ordered products 6. Greet the customer

43

Survey of Customers
Objective of the survey: To find out the perception of McDonalds in the minds of the customer. Methodology: Primary data was collected as it gives first hand information and also the data can be adjusted according to the needs. The tool used was the questionnaire method. This method was chosen as it obtains standardized results that can be tabulated and treated statistically. A broad category of the questions asked were: 1. 2. 3. 4. 5. 6. 7. Frequency of visit Favorite Product Favorite Advertisement Is McDonalds value for Money? French Fries Issue Unique Selling Proposition of McDonalds Suggestions to improve McDonalds

(A copy of the detailed questionnaire has been attached in the Annexure) Sample: We conducted a survey of around 100 customers of McDonalds. The profile was mainly distributed in 3 categories:

Categories Below 15 years Between 15 years to 25 years Above 25 years

Number of Customer Interviewed 28 customers 42 customers 30 customers

Processing of Data: The data collected from the questionnaires was tabulated and the percentages were derived. For e.g.: If out of 100 customers, 54 are veg and 46 are non-veg, the percentages where taken and analyzed.

The findings of the survey were as follows:

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8.2 Ratio of Vegetarians and Non-Vegetarians visiting McDonalds

Non-Veg 46%

Veg 54%

The percentage of vegetarian people visiting the restaurant is slightly more than the non-vegetarians. The vegetarian customers feel a lack of choice in the products as compared to the non-vegetarians who seemed to be comparatively satisfied. Since McDonalds has an equal footfall of vegetarian customers, it would be advisable to increase its vegetarian product line.

8.3 Favorite Product

Others 27% McChicken Burger 19%

McVeggie Burger 12%

French Fries 42%

Even after the big issue over french fries, they remain to be the most favorite product of most of the customers of McDonalds. Some of the customers love to visit McDonalds just to have the French fries. The McChicken Burger and the McVeggie Burger are the second favorites.
40%

39%

32%

29%

8.4 30%Do you find the product line satisfactory?

20% 10% 0%

Yes

No

Its okay

45

Only 32% of the customers find the product line satisfactory. Rest all of them find it either okay or not satisfactory at all. Customers would like to have more variety to choose from. They feel that McDonalds should include more deserts and more items like the Pizza McPuff besides the burgers.

8.5 Favorite Advertisement

35% 30% 25% 20% 15% 10% 5% 0%

31% 26% 21%

7%

7%

8%

Stage Fright

Shifting Sleeping Traffic Others House Couple Policemen

None

The first advertisement of McDonalds (Stage Fright) remains to be the most popular and recalled advertisement. While these advertisements are very popular amongst the children and teenagers, 26% of the customers, mostly consisting of the elders failed to remember any of the advertisements or simply said that they didnt like them.

8.6 Do you find McDonalds value for money?

No 72% Yes 28%

46

Most of the parents gave a positive answer to this question, but the teenagers and customers below the age of 25 didnt find McDonalds value for money at all. The main reason for the parents preferring McDonalds is because their childrens like it and hence they dont mind paying any amount. The customers below 25 years find it a good place to hangout and like the food, but dont find it worth the cost.

8.7 Problems faced in the visits to McDonalds

43%
45% 40% 35% 30% 25% 20% 15% 10% 5% 0%

24% 9% 3%

21%

Long Queues

Wrong Order

Bad Music

Other No Problems Problems

Long queue was a major problem of all the customers. They said that the waiting period was too long, especially in the evenings and weekends. They felt that even thought the service is fast; McDonalds could do with increasing the number of counters. Wrong order was an issue with the Jain customers who had to change their burgers at least twice to get a Jain burger. The customers below the age group of 25 felt that the outlets played outdated music, which irritates them. But nearly 43% of the customers said that they havent had any problems at all in any of their visits. Even if they had some small issues, the employees of McDonalds solved them very well.

8.8 Did the French Fries issue make you hesitant from visiting McDonalds?
No 64%

Not Aware 15%

Yes 21%

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64% of the customers said No to this question. They felt that a Multi-national company like McDonalds would never make such a big blunder in a religious country likes India.

8.9 Unique Selling Proposition of McDonalds

30% 25% 20% 15% 10% 5% 0%

26%

24%

19%

17% 6% 8%
Others

Food

Hygiene

Ambience

Quick Service

Location

Food remains to be the favorite part of McDonalds. Hygiene ranks the next with 24%. This was a popular answer amongst mothers as they found it to be a very hygienic place for their children. The young and energetic ambience of McDonalds is also liked by all. Other USPs of McDonalds include good crowd and courteous employees.

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8.10 Suggestions to improve McDonalds

22% 7% 13% 15% 19% 24%
5% 10% 15% 20% 25%

No Suggestions Better Music More Space Home Delivery More Variety Low Prices
0%

22% of the customers were very satisfied with McDonalds and said that it is fine the way it is. On the other hand, 24% of the customers want the prices to be reduced and also have more variety to choose from. Some of them would even like to have home delivery. Surprisingly, none of the Indian customers suggested starting drive-ins which are extremely popular in the other countries. Recommendations based on the survey are: 1. More items should be added to the product line, especially in the vegetarian category. 2. The prices need to be slashed down. The french fries, chicken burger and the veg burger are the most popular items, so their process can be reduced to attract more customers. 3. The advertisements can also focus on the hygiene factor of McDonalds, for e.g.: McDonalds can stress on the fact that they do not serve any burger, which has been prepared but not consumed for 10 minutes. 4. The peak time management should be improved. More counters should be opened during the peak hours. 5. The music played at the outlet should not be outdated.

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9. RENDEZVOUS WITH AMIT JATIA

The experience of meeting Mr. Amit Jatia, Managing Director, McDonalds India, himself was exhilarating. The simplicity of his persona enthralled me. Mr.Amit Jatia was absolutely clear about his vision and objectives for McDonalds, which was clear by his immediate answers to each and every question. A student of Jai Hind College, Amit Jatia was born and brought up in Bombay. He did his undergraduate course in Business Management from U.S.A and then came back to join his family business in India. After trying his luck in many fields, in 1994 McDonalds U.S.A approached him to become a local partner along with Vikram Bakshi. He grabbed this opportunity and is now the proud Managing Director of McDonalds India, handling operations in the Western Region of India. But it wasnt a cakewalk to begin the operations of a huge organization like McDonalds in India. The biggest problem that they faced was to get the supply chain in place. The quality of farm produce and the food processing facilities required to meet the McDonalds standards did not exist. The second big challenge they faced was to get their employees customer-oriented. Customer service as a concept did not exist in India and it was difficult to inculcate this in their employees. According to Amit Jatia, India is a more difficult market to deal with, as compared to the other emerging markets. This is not due to the customers, but mainly due to the complex regulations that Government has created which hinder growth. The laws are not in tune with todays times. We are dealing with laws that were set in 1800s. And that hinders business because today the whole ball game is different. If the Government takes a positive approach towards business, the companies can move much faster. When asked to define McDonalds in a single sentence, Amit Jatias reply was, we are out to make people smile! For us the customer if God, and there is not shortcut to

50 that. The customer has got to be happy in the end and thats the bottom line. Companys policy should not restrict a customer from being happy. The company has to organize its life around the customer and not that the customer organizes his life around the company. But customers are generally not forgiving. The customer perception has changed a lot over a period of time. In the beginning, customers used to despise the idea of selfservice, but now, the same idea of self-service attracts them as they feel theres nobody standing on their heads and they can do whatever they want. By and large, the perception of customers is fairly positive. In the next 10 years, he wishes that McDonalds in India would touch every Indians life in some manner, in every community.

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10. THE ROAD AHEAD

McDonalds, that has become synonymous with urban living, is all set to break boundaries and go national. It is doing this through the arteries of the country the national highways and expressways. Peckish travellers zipping from city to city will no longer have to be content with dhabas offering dal-roti. They can look forward to biting into burgers, french fries, McPuffs et all. McDonalds (India)is planning to start drive through restaurants on express highways across India. The first is being planned on the Mumbai-Pune highway this week and plans are afoot to have three more on the National Highway No. 1 in north India.For hungry drivers on the run, the company promises to deliver within 60 seconds after an order is placed. Theoretically, one can be back on the highway in just two minutes. Of course, the practical reality is that placing the order itself could take a little bit more than the said two minutes. McDonalds is projecting an income of 15 to 20 per cent from drive-through business on expressways in the immediate future. This is expected to grow to 40 per cent in the next five years. The company had a tied-up with public sector oil company Bharat Petroleum to set up restaurants at petrol pumps across northern India. Commenting on the clientele for the restaurant on the Mumbai-Pune expressway, which to be launched first, Amit Jatia, managing director, McDonalds restaurant, Mumbai said, We are expecting business traveller to frequent the outlet. Our survey reveals that 15,000 to 20,000 vehicles use the highway everyday. Of this, passenger traffic is around 12,000 vehicles per day and the rest is commercial. Besides the vehicular traffic, we are also targeting nearby towns to sustain business.

52 McDonalds will have to face competition from the more affordable dhabas, the roadside eateries that dot highways all over the country. The companys confidence stems from a model already in place in north India. McDonalds has a 170-seater restaurant at Noida near Delhi. The restaurant at Noida attracts a lot of drive through business. Around 30 per cent of sales at this outlet is from drive through clientele like tourist buses and passenger traffic, that is, the business traveller, said Vikram Bakshi, managing director, McDonalds restaurant, New Delhi. McDonalds is closely looking at options on National Highway. One as it is considered to be one of the busiest highways in India. In the immediate future, we plan to have three restaurants on this highway one each at Delhi-Jaipur highway, Delhi-Ambala Highway and DelhiLudhiana highway, Bakshi added. While, an extension to expressways may be a recent development, it has been arrived at after looking into the business prospects, logistics and supply chain. Jatia says, Drive through restaurants are only one of the options to meet McDonalds target of 80 restaurants across India by 2003 with an investment of Rs 850 crore. Internationally, 40 per cent of the companys business is from express highways. With a strong backing of reliable supply chain, extensive advertising and efficient employees, McDonalds is trying to fulfill all the customer challenges. Hence, we can truly say that McDonalds mein hain kuch baat!

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11. BIBLIOGRAPHY Books

McDonalds: Behind the Golden Arches John Love McDonalds Corporation Annual Reports

Websites
http://www.mcdonalds.com http://www.financialexpress.com http://www.indiainfoline.com http://www.psi-world.com http://www.mcspotlight.com http://www.brandquiver.com http://www.bized.ac.uk/compfact/mcdonalds/ http://www.expressindia.com http://www.adageglobal.com http://www.wiley.com http://www.planetcustomer.com