Challenges for McDonalds in India

Vegetarianism: Most Indians are barred by religion not to consume beef or pork. To survive, any foreign company had to be responsive to the Indian sensitivities. McDonalds worldwide is well known for the high degree of respect to the local culture. McDonalds has developed a menu especially for India with vegetarian selections to suit Indian tasted and culture. Keeping in line with this McDonalds does not offer any beef and pork items in India. Mc Aloo Tikki Burger and Maharaja Mac was created especially for the Indian vegetarian customers. The cheese and cold sauces used in also is 100% vegetarian. It also made a chicken and fish option available for the non vegetarians. McDonalds even separated the non vegetarian cooking process and the vegetarian cooking process to convince the customers of the Shudh Shakahari Experience which means pure vegetarian experience. In addition, the crew who cooks vegetarian food was asked to wear green aprons. McDonalds in India was one of its kinds as it did not offer beef at all. In order to convince and change the perception of the customers about the burgers they offered, McDonalds made attempts to clarify their stand about beef in India. So the world famous hamburger was without meat. This was indeed a classic case of product adaptation, to gain foothold in a new market.

Competition from Local Food Retailers: The competition from the local food retailers was intense. The food retailers had been doing business for years. Their familiarity with the market and the understanding of the local taste gave them a competitive edge. There were numerous eating joints which offered snacks and meals with affordable price tags. Organized food retailing was dominated by the north Indian style and the south Indian style restaurant chains. The metropolitan cities and some developed urban areas offered superior dining experience through the existence of some fine,

classic restaurants. But the price was expensive and only a select group of customers could afford to make visits there. On the other hand, the size of the unorganized food retailing was larger and comprised of roadside food vendors, dhabas (the eateries on the highways) and on the outskirts of the cities and a plethora of small eateries. Local food in a large assortment was widely available within acceptable price ranges. It was observed that food choices made by consumers were impulsive. Aroma, taste, habits and visibility worked on the subconscious level and played a major role in affective decision making. The local food business exactly understood the psychology of the customers and operated accordingly. The mass markets in India had their own set of preferences.

Strategy for McDonald:

Think Global, Act Local With more than five thousand ethnic communities represented, India has a very diverse population. Each region and subregion in India has distinct food traditions and preferences. India consumers typically maintain their distinct food habits even after migrating to different parts of the country. In large cities and metropolitan areas, some restaurants serve only specialty foods. Some regional fast foods such as samosa are popular among Indian consumers and are available in both specialty and multi cuisine restaurants throughout India. Most Indians also prefer to eat home-cooked foods and take immense pride in the varieties of food cooked at home. For most Indians, home-cooked foods are considers fresh, healthy and inexpensive. Given the distinct dietary habits and food preference of Indian consumers, it is not surprisingly that until the early 1990s Western fast food chains had largely ignored Indian markets. Why has McDonalds experienced so much success in India while so many other companies have struggled there? The simple answer is McDonalds recognized that its American corporate strategy would never work in India. And although the company was

unwilling to completely abandon the model that turned it into the one-of-a-kind international success that it is today, McDonalds was more than willing to adapt, modify, and sculpt it into a model that could be successfully employed there. Meanwhile other companies apparently assumed that expansion would be easy. They failed to consider the cultural differences between the American and Indian markets. Companies cannot afford to underestimate these marked differences. Compared to a country like China, India with its English speaking population and British influences seems to many people to be an easy target for expansion. However, success cannot be achieved simply by transplanting business techniques and products that work elsewhere in the world. Failure to adequately assess and adapt to the market, and ignoring cultural sensitivity can be a death blow to any company wishing to expand into India or any other country. McDonalds recognized the unique problems and opportunities of the Indian market. The company then took its time, adapting its products and just as importantly its corporate strategy, and has been hugely successful since. At the same time, the company cannot afford to become complacent and rest on its laurels. Any future missteps, however small, could ruin McDonalds efforts and hard fought gains in the country, allowing the companys rivals to catapult past them and onto even greater success. The companys localization strategy is clearly manifest in the critical area of management. With the set up of two joint ventures on a 50:50 basis with two local entrepreneurs in Mumbai and Delhi, it was obviously shown that McDonalds business plan is to emphasize India-centric management strategies and their easy access to bureaucracy in order to have an effective government relations. Unique cold chain An important factor for the success of McDonalds was its reliable distribution channels for supplies from local suppliers. As the food chain and distribution channels in India were inefficient, and imports were taxed at a staggering 65%, it was important that McDonalds obtain

its raw materials from local suppliers, but at the same time ensure that the supplies were of good quality, and were delivered efficiently. This would be necessary to ensure that the company maintains a high standard of quality, while at the same time ensuring low costs of production McDonald's had been working critically on its supply chain part. Considering, an international brand trying to make inroads into the Indian consciousness, its Indian supplier partners were developed in such a manner that made them stay with the company from the beginning. The success of McDonald's India is a result of its commitment to sourcing almost all its products from within the country. For this purpose, it has developed local Indian businesses, which can supply them the highest quality products required for their Indian operations. McDonald's India works with many Indian suppliers on a long-term basis, besides several
others standalone restaurants working with it, for various requirements. In the supply chain management for a QSR, the distribution centres hold special place for bringing food right to the outlet counters. For McDonald's India, the distribution centres came in the following order: Noida and Kalamboli (Mumbai) in 1996, Bangalore in 2004, and the latest one in Kolkata (2007). McDonald's entered its first distribution partnership agreement with Radha Krishna Foodland, a part of the Radha Krishna Group engaged in food-related service businesses. The association goes back to July 1993, when it studied the nuances of McDonald's operations and requirements for the Indian market. Better facilities and infrastructures were created along with new systems by them to satisfy McDonald's high demands, which finally culminated into an agreement with McDonald's India, for Radha Krishna Foodland to serve as distribution centres for our restaurants in Delhi and Mumbai. As distribution centres, the company was responsible for procurement, the quality inspection programme, storage, inventory management, deliveries to the restaurants and data collection, recording and reporting. Value-added services like shredding of lettuce, repacking of promotional items continued since then at the centres playing a vital role in maintaining the integrity of the products throughout the entire 'cold chain'. The operations

and accounting is totally transparent and is subject to regular audits. McDonald's had worked aggressively to attain the right suppliers and systems that ensured that 90 per cent of yield was indigenous before the doors were opened to consumers. The only products that we used to import were oil and fries, for which we have had made arrangements to manufacture the oil in India. We ensured that the products developed locally abide by global McDonald's standards. Over the last 10 years, the company has gained experience and adopted procedures that helped in maintaining a continuous supply of food products irrespective of the climatic conditions. Their logistics and warehousing system is robust that prepares them to deliver products at the same temperature throughout, without a single break in the cold chain. Pricing