The McDonald’s Story- Genesis

1954, a fifty-two-year-old milk-shake machine salesman saw a hamburger stand in

SanBernardino, 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.

Worlds Oldest McDonald’s

This 44 year-old site is the oldest in the worldwide chain of 20,000 restaurants and the
last one with red and 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 60- foot 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 original menu of hamburgers, cheese burgers, 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.
1955
Ray Kroc opens his first restaurant in Des Plaines, Illinois and the McDonald's
Corporation is created.
1957
Quality, Service, Cleanliness and Value (QSC& V) becomes the company motto.
1959
The 100th McDonald's opens in Chicago.
1961
Hamburger University opens in Elk Grove, near Chicago.
1963
One billion hamburgers sold. Ronald McDonald makes his debut.
1964
Filet-O-Fish sandwich is introduced.
1965
McDonald's Corporation goes public.
1967
The first restaurants outside of the USA open in Canada and Puerto Rico.
1968
The Big Mac is introduced. The 1,000th restaurant opens in Des Plaines, Illinois.
1972
A new McDonald's restaurant opens every day. The Quarter Pounder is introduced.
1973
Egg McMuffin is introduced.
1974
The first Ronald McDonald House opens in Philadelphia. The Happy Meal is launched.
1983
Chicken McNuggets is introduced. New Hamburger University campus opens in Oak
Brook, Illinois. Set in 80 wooded acres. Training is provided for every level of
McDonald's management worldwide.
1984
50 billionth hamburger sold. Ronald McDonald Children's Charities is founded in
Ray Kroc’s memory to raise funds in support of child welfare.
1989
McDonald's is listed on the Frankfurt, Munich, Paris and Tokyo stock exchanges.
1990
McDonald's opens in Pushkin Square and Gorky Street, Moscow.
1993
The first McDonald's at sea opens aboard the Silja Europe, the world's largest ferry
sailing between Stockholm and Helsinki.
1994
Restaurants open in Bahrain, Bulgaria, Egypt, Kuwait, Latvia, Oman, New Caledonia,
Trinidad and United Arab Emirates, bringing the total to over 15,000 in 79
countries on 6 continents.
1996
McDonald's opens in India – the 95th country.

GOALS AND OBJECTIVES

1. McDonald’s vision is to be the world’s best quick service restaurants experience.

2. McDonalds is committed to maintaining and developing the best food products in the
quick service restaurant market.
3. In order to deliver this, the company has made a number of commitments to food
safety and nutrition.
4. Lead the Quick Service Restaurant market by a program of site development and
profitable restaurant openings, and by attracting new customers. Increasing sales
through promotions will enable them to continue their program of expansion.
5. McDonalds have an objective to continual enhance and improve their menu. This will
better satisfy their customers and give customers more reason to visit. Many ideas for
new items on the menu come from the franchisees responding to customer demand.
Consumer tastes change over time and McDonalds has to respond to these changes.

MISSION STATEMENT
"McDonald's vision is to be the world's best quick service restaurant experience. Being
the best means providing outstanding quality, service, cleanliness, and value, so that
we make every customer in every restaurant smile."

CORE COMPETENCY AND SUSTAINABLE COMPETITIVE ADVANTAGE.

McDonald’s core competency is providing convenience when people need and want to
eat fast food at prices that are competitive and provide best value for the customer’s
money. One of McDonald’s competitive advantages is its focus on consistency of
quality, production of food and use of raw materials all around the world. The world
recognition associated with the brand. McDonald’s itself is also one of McDonald’s
competitive advantages.

Business Model

 Franchise Model – Only 15% of the total number of restaurants are owned by
the Company. The remaining 85% is operated by franchises. The company
follows a comprehensive framework of training and monitoring of its franchises to
ensure that they adhere to the Quality, Service, Cleanliness and Value
propositions offered by the company to its customers.
 Product Consistency – By developing a sophisticated supplier networked
operation and distribution system, the company has been able to achieve
consistent product taste and quality across geographies.
 Act like a retailer and think like a brand – McDonald’s focuses not only on
delivering sales for the immediate present, but also protecting its long term brand
reputation.
 McDONALD’S IN INDIA
McDonald's India is a joint-venture company managed by Indians. McDonald’s India, a
subsidiary of McDonald’s USA, has expanded its presence in India via 2 joint venture
companies – Connaught Plaza restaurants and Hard castle restaurants. McDonald’s
(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). The company has evolved special menu in the vegetarian category to suit
Indian tastes and preferences. Taking in consideration the Indian culture, it doesn’t offer
any beef or pork items in India. McDonals’s imparts world class training to its
employees.
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 today’s international markets. 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 is100% 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. The McDonald's philosophy of Quality,
Service, Cleanliness and Value (QSC&V) is the guiding force behind its service to the
customers. McDonald’s India serves only the highest quality products. All McDonald’s
suppliers adhere to Indian Government regulations on food, health and hygiene while
continuously maintaining their own recognized standards. All McDonald’s products are
prepared using the most current state-of-the-art cooking equipment to ensure quality
and safety. At McDonald’s, the customer always comes first. McDonald’s India provides
fast friendly service- the hallmark of McDonald’s that sets its restaurants apart from
others. McDonald’s restaurants provide a clean, comfortable environment especially
suited for families. This is achieved through McDonald’s stringent cleaning standards,
carefully adhered to. McDonald’s menu is priced at a value that the largest segment of
the Indian consumers can afford. McDonald’s does not sacrifice quality for value –
rather McDonald’s leverages economies to minimize costs while maximizing value to
customers.The company has invested Rs 450 crore so far in its India operations out of
its total planned investment of Rs 850 crore till 2007. McDonald’s India Pvt. Ltd. has
moved an application to the government seeking permission for payment and
remittance of the initial franchise fee and royalty to McDonald’s Corporation. The
permission has been sought on two grounds: McDonald’s India would pay an initial
franchise fee of $45,000 on each of the McDonald’s 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 McDonald’s
International. The company hopes to break even in 2008. They currently serve around 5
million customers a day and hope to grow at the rate of 50% to 70% a year.
 CHALLENGE’S ENTERING IN INDIAN MARKETS

 Regiocentricism: Re-engineering the menu - McDonald’s has continually

adapted to the customer’s tastes, value systems, lifestyle, language and
perception. Globally McDonald’s was known for its hamburgers, beef and pork
burgers. Most Indians are barred by religion not to consume beef or pork. To
survive, the company had to be responsive to the Indian sensitivities. So
McDonald’s came up with chicken, lamb andfish burgers to suite the Indian
palate.
 The vegetarian customer – India has a huge population of vegetarians. To
cater to this customer segment, the company came up with a completely new
line of vegetarian items like McVeggie burger and McAlooTikki. The separation
of vegetarian and non-vegetarian sections is maintained throughout the various
stages.
PRODUCT LIFE CYCLE

The requirements of customers change over time and thus the product offering has to
be changed accordingly. What is the fashion today may be out of market within few
weeks. Thus continuous innovation is required.

Product Life Cycle Curve

To counter these changes McDonalds has continuously introduced new products and
has phased out the old ones which were at the decline stage of their PLC. The
introduction is timed such that the new product does not cannibalize the product already
in the maturity or growth stage. Thus the secret lies in getting profits with different
products in the different
stages of the PLC.
A perfect example of revitalising a product in decline phase

The French Fries have been an important part of the McDonalds menu worldwide. But
now it was in the stage of decline and was actually not generating proper return. In an
attempt to revitalize it, a new variant was introduced namely Shake Shake Fries. This
is being served with chatpata spice mix which has resulted in increase in the sales of
French Fries and has elevated it from to the decline stage. This is used to delay the
decline of a well established product which has the potential of generating further
revenue.
 BCG Matrix
The need for strategy, in order to expand its existing product in very promising markets
for Mc Donalds is very essential. Mc Donalds, along with KFC, and other major fast food
chains have dominated the American continent as well as else where. Since the 1950’s
when the founder of Mc Donalds had a dream, of building an empire in the fast food
market, the company has undergone lots of changes.
Nowadays, Mc donalds, still dominates the burger fast food industry while has stores in
more than 100 countries operating vast profits. Although, due to increased conditions of
life, and differentiation of the life style of the population around the world, there is still a
lots of room for expansion, especially in countries with large population, and high
development rate. Mc Donalds using the BCG matrix and SWOT analysis to analyze
what is the current position of the company and identify that the company has the
potentials to growth in fast food market.
In the late 1960s the Boston Consulting Group, a leading management consulting
company, designed a four-cell matrix known as BCG Growth/Share Matrix. This tool
was developed to aid companies in the measurement of all their company businesses
according to relative market share and market growth.
The BCG Matrix made a significant contribution to strategic management and
continues to be an important strategic tool used by companies today. The matrix
provides a composite picture of the strategic position of each separate business within a
company so that the management can determine the strengths and the needs of all
sectors of the firm. The development of the matrix requires the assessment of a
business portfolio, which include an organization’s autonomous divisions ( activities, or
profit centers).
The BCG or growth- share matrix imposes a two- dimensional analysis on management
of Strategic Business Units: a comparative analysis of business strength and an
assessment of the environment. The business strength measure is the businesses
Relative Market share. The environmental measure is the Market Growth Rate.
BCG Matrix: The market growth rate measures industry attractiveness. Because or the
case of YUM Brand, all SBUs ( KFC, Sub-wqy, Pizza Hut) are located in the same fast-
food industry, the referent standard is the in the industry growth rate measured against
the SBU’s growth rate. The underlying theory examining market growth rate is in the
industry life cycle. The BCG assumes the growth rate(life cycle stages) affects a firm
finances.

Placing products in the BCG matrix results in 4 categories in a portfolio of a company:

1. Stars (=high growth, high market share)
 Use large amounts of cash and are leaders in the business so they should also
generate large amounts of cash.
  Frequently roughly in balance on net cash flow. However if needed any attempt
should be made to hold share, because the rewards will be a cash cow if market
share is kept. So, Mcdonlds Malaysia is under Star position.
2. Cash Cows (=low growth, high market share)
 Profits and cash generation should be high, and because of the low growth,
investments needed should be low. Keep profits high.
3. Dogs (=low growth, low market share)
 Avoid and minimize the number of dogs in a company.
 Beware of expensive ‘turn around plans’.
4. Question Marks (= high growth, low market share)
 Have the worst cash characteristics of all, because high demands and low
returns due to low market share
 If nothing is done to change the market share, question marks will simply
absorb great amounts of cash and later, as the growth stops, a dog.

The Characteristics of each SBU [Strategic Business Unit]

Type SBU Strategy SBU Required Net Cash Flow

Profits Investment
STAR Hold/ Increase High High or+

CASH COW Hold High Low High+

QUESTION Increase/Divest 0 or - Very High or High-or+
MARK Disinvest
DOGS Harvest or Low or- Disinvest +
Divest

The analysis requires that both measures be calculated for each SBU. The business
strength dimension, relative market share, is included to measure competitive
advantage. The Mc donalds is falling on cash cow where a low growth and high market
share is. So, the profit and cash generation is high and because of low growth,
investments needed should be low. The funds received from cash cows are often used
to help other businesses within the company, to allow the company to purchase other
businesses, or to return dividends to stockholders. So the Mc donalds should hold on
what it has doing now.
Three Paths to Success (star-cash cow-question mark)
 Continuously generate cash cows and use the cash throw-up by the cash cows
to invest in the question marks that are not self-sustaining
 Stars need a lot of reinvestments and as the market matures, stars will
degenerate into cash cows and the process will be repeated.
 As for dogs, segment the markets and nurse the dogs to health or manage for
cash
Three Paths to Failure (star-question mark-dog, cash cow-dog)
 Over invest in cash cows and under invest in question marks.
 Trade further opportunities for present cash flow
 Under invest in the stars
 Allow competitors to gain share in a high growth market
 Over milked the cash cows

CUSTOMER ANALYSIS

A) SEGMENTATION
McDonald’s uses demographic segmentation strategy with age as the parameter. The
main target segments are children, youth and the young urban family.

Series 1
4

3.5

2.5
Series 1
2

1.5

0.5

0
Category 1 Category 2 Category 3

As shown above, kids reign supreme in FMCG purchase related to food products. So to
attract children McDonalds has Happy Meal with which toys ranging from hot wheels to
various Walt Disney characters are given (the latest in this range is the toys of the
movie Madagascar). For this, they have a tie-up with Walt Disney. At several outlets, it
also provides special facilities like ‘Play Place’ where children can play arcade games,
air hockey, etc. This strategy is aimed at making McDonald’s a fun place to eat. This
also helps McDonald’s to attract the young urban families wanting to spend some
quality time while their children have fun at the outlet. To target the teenagers,
McDonald’s has priced several products aggressively, keeping in mind the price
sensitivity of this target customer. In addition,
facilities like Wi-Fi are also provided to attract students to the outlets like the one at Vile
Parle in Mumbai.
“Mc Donald’s mein hai kuch baat” projects McDonald’s as a place for the whole
family to enjoy. When McDonald’s entered in India it was mainly perceived as targeting
the urban upper class people. Today it positions itself as an affordable place to eat
without compromising on the quality of food, service and hygiene. The outlet ambience
and mild background music highlight the comfort that McDonald’s promises in slogans
like “You
deserve a Break Today” & “Feed your inner child”. This commitment of quality of
food and service in a clean, hygienic and relaxing atmosphere has ensured that
McDonald’s maintains a positive relationship with the customers.
The customers of McDonald’s have been segmented on the basis of Activities,
Interests, Opinions and Demographics into four categories, based on the product
attributes that fulfill needs like ‘fast’ food, ambience, status symbol and hygiene.

No. ACTIVITIES INTEREST OPINION DEMOGRAPHIC

1. “Fast” Food Student Sports, Influenced Age: 16-24
working, Music, by peer years old.
 Adventurous, Fashion, pressure, Marital status:
Energetic. Entertainmet Energetic, Single;
Recreation. Impulse Heavy
buying. users

2. Ambience Student Entertain- Ambitious, Age: 20-35 yrs

working/self ment, Future old.
made Recreation, business Marital status:
businessmen Fashion, and Single
, Music, social and Married.
working on Socialization. issues, Light to
projects. Politics. medium users.

3. Status Student, Sports, Energetic, Age: 16-25 yrs

Symbol Hanging out, Entertain- Impulse old. Marital
Adventurous. ment, buying, status: Single;
Fashion, influenced light to medium
Music, by users
Recreation. peer
pressure
4. Hygiene Working Home, Planned Age: 25-45 yrs
women/men, Recreation, Purchasing, old; Marital
house-wives; shopping, Authoritarian status: Newly
Shopping, Fashion, Strong married, Full
Club views, Nest; Light User
membership Politics,
. Future.
 FAST FOOD
This segment of customers enjoys the Quick Service Restaurant (QSR) facet of
McDonald’s and has its needs fulfilled. Since McDonald’s competes rigorously in
the market on the quick delivery attribute, the customers expect their food to be
delivered to them fast, both at the outlet, and at home (home delivery). A large
majority of this segment is composed of students whose activities are
adventurous, enthusiastic, energetic, and recreational and revolve around sports,
clubs, hangouts and shopping etc. This segment thus targets the market that
indulges in impulse buying and is influenced by peer-pressure. These customers
are heavy user of the product at hand. A minority of newly working people are
also included in this segment.

 AMBIENCE:
This segment enjoys the unique ambience provided by McDonald’s in all over
world. Since the regular consumers of this product belong to the upper-middle
class, they prefer having a meal with the level of customer service and a tinge of
sophistication that the outlets provide. The customers of this segment are
students as well as working class. These people enjoy recreation and
socialization activities. They have strong views about the current affairs and the
future business and social issues.

 STATUS SYMBOL:
The people of this segment perceive the use of this product as a status symbol
and basically comprise students and new-working class. These customers like
being seen at the right places and like to associate and socialize with people of
the same class. These customers are enthusiastic about entertainment, fashion,
music and
sports. They have fickle opinions and subject to change because of peer
pressure. They follow fads and indulge in impulse buying.

 HYGIENE:
 This segment comprises people who are concerned with hygiene and how the
food is prepared and served and also the cleanliness of the
environment where they eat. It comprises of middle-aged people mostly
housewives and working women/men. These are light users and make purchases
once in a while, probably as a substitute rather than a first-choice. These people
are authoritarian, have strong views about politics, business and current affairs.
They make planned purchases and weigh their options before they make a buying
decision.

B) POSITIONING

Positioning is about communicating your unique selling advantage or proposition to your

target audience in everything you do. Marketing, sales, customer service. The
consistency helps your customer remember. Can't articulate your unique selling
proposition in less than 10 words? Maybe you lack clarity about positioning. Our
marketplaces have lots of choices. Too many, perhaps, for the average consumer to
evaluate logically. With hundreds of choices in any given locale, many people simply
look for a referral to a product or with professional services: a company that their friends
trust. Those who shop around, consider two or three options and take the best of the
three. With hundreds of choices, and with products and services that most consumers
find hard to differentiate, how do you set yourself, apart from the crowd?
Positioning allows a marketer to think about why a customer would want to do business
with them. What do you offer that the other producers don't? What does a potential
client get by doing business with you, that will serve their needs well?
Positioning has three components:
 What are your strengths? Your distinctive competencies? What about your
offerings provide value to your customers?
 Who is your target customer? What about them, makes them an ideal fit for the
value you offer?
  How are you different from your competitors in ways that your customers and
potential customers will value? In other words, what is your unique selling
proposition? Your competitive advantage?
When all three are put together, you have a positioning statement. Positioning
statements are the basis for all marketing messaging, sales scripts, and at a corporate
level branding.
So here are the things you need to know to be able to develop your own market
positioning:
 Who are you? As a company? As a sales representative?
 What is your firm or known for? (Ask people what they think. It may not be what
your internal talk says it is. Is it prompt claims? Or telling it like it is? Or it might
just be everyone knows you.)
 What do your customers appreciate about your products or services? (Ask your
colleagues and your customers. Again, it might not be what you think. Maybe you
are known for high quality. Or perhaps for returning calls promptly or your
problem solving ability. Maybe it is just that you are convenient. )
 What are you particularly strong at? (These are your core competencies.)
 What are you better at, than anyone else in your business? As a company? As a
professional? As a sales rep? (Quality? Innovation? Cost effective choices?)
 Who are your most satisfied customers? What is it that they value most about
what you have to offer?
 Based upon your sales goals and annual plan, who is your target market? The
key here is the fit between what you do well and who or what type of business
needs what you are good at.
 What value can you bring your customers that they will value the most, based
upon your unique strengths?
 At a company level, can you articulate this competitive value for your target, best
customers? Does your branding reflect this? Do your communications use this
messaging as its foundation?
 Are your web, collateral, and sales force attuned to this value?
 Do your services focus on this value?
  Does your customer service reflect this value?
 Does your customer service reflect the promise of the brand? Or are
customers continually shocked that the customer service is not like
the brand image at all?
Your customers are bombarded with hundreds - perhaps thousands - of commercial
messages each day. Believe it or not buying your product or service is probably not
their most important priority. So, in the end, it comes down to relationships. Does your
vendor understand your needs?
Thus, positioning is EVERYTHING, because, positioning is that unique value you offer,
to that target market you seek, in ways that are better, more effective, more amazingly
meeting your needs than any of your competitors. And, the customer service, and
employee relationships need to MATCH or be INTEGRATED with the market
positioning.

IMPORTANCE OF POSITIONING

Marketing strategy that aims to make a brand occupy a distinct 'position,' relative to the
competing brands, in the mind of the customer. Firms apply this strategy either by
emphasizing the distinguishing features of their brand (what it is, what it does and how,
etc.) or try to create a suitable image (inexpensive or premium, utilitarian or luxurious,
entry-level or high-end, etc.) through advertising. Once a brand is positioned, it is very
difficult to reposition it without destroying its credibility.
 Develops Brand Image
 Creates Demand
 Creates Demand
 Creates Value In The Mind Of Customer
 Commands Premium Price

Targeting How did McDonalds Make it?

    A lot of McDonald's success can be attributed to its advertising campaign.  It
manages to capture the attention of the youth and also appeal to older generations.  It
seems that McDonalds has divided its advertising and publicity departments into two
factions.

The Children

    Why do most kids enjoy McDonalds?  A trip to McDonalds is in and of itself an
adventure.  There is the "fun center", toys, food and the playground.  Kids are lured into
the restaurant because of the amenities.  One perfect example of this are the happy
meal toys.  Children will rip open their happy meal to play with the cheap toy, often
times forgetting about the food that comes with it.  The frenzy even reached adults with
the introduction of the Beanie Babies.  The key is to introduce a catch, or a reason for
coming.  A hamburger can be made at home, but the toy can't.  The experience is what
sells to children.
    This is further bolstered by the cartoon characters and other similar features.   These
are what extend the influence of McDonalds beyond the door.  Children see Ronald on
television, in coloring books, signs, billboards etc.  The children then relate to the
character as more then just a tool of propaganda.  He becomes a real cartoon
character, or persona.  The children admire him outside of the restaurant. He is no
longer an icon but a reminder.  McDonalds does not need to impose their advertising
but rather wait for children to come to them.

Perhaps the most enticing aspect of McDonalds is the restaurant itself.  It is bright and
colorful.  It often times will have a playground along with activities.  This encourages
children not only to come but to stay.  McDonalds manages to be an all day event,
rather then simply a meal.
 

Adults

    How does McDonalds manage to bring adults into an environment with playgrounds
and cartoon characters?  

    McDonalds carefully separates its advertising campaign to target both young and
older audiences.  When dealing with the older audience McDonalds focuses on the
cheap and quick nature of the food.  They have even introduced food that give the
impression of being healthy (the McGrill for example).  By teaming up with the
Olympics, McDonalds manages to extend this impression.

"McDonald’s Olympic restaurants will serve nearly 1.5 million sandwiches, 188 tons of
potatoes and 12,000 kilos of lettuce to athletes, coaches, officials, spectators and media
during the Games. Athletes, coaches and officials in the two Village restaurants alone
will account for an average of 13,000 sandwiches served each day. In addition to the
two Village restaurants, McDonald’s will operate five other restaurants at Olympic
venues in Sydney."

Honestly, how does McDonalds expect the populous to believe that the Olympic
athletes constitute a large portion of McDonalds target audience?  This type of
deceptive advertising is what helped McDonalds become the universal powerhouse it
now is.
  The availability and efficiency of McDonalds also caters to the business customer
base.  It makes it convenient to have a quick lunch in a busy schedule.  In addition, the
majority of the adult crowd was raised on McDonalds food.  These factors make the
woes of fast food less obvious.  The customer knows the lack of nutritional value of the
food, but its convenience and price win over.

The Science behind McDonalds

    The atmosphere at McDonalds is carefully constructed so that it gets people in and
moves them out.  The chairs are always plastic and molded so that they are only
comfortable for a short period of time.  The restaurant is decorated in bright colors.  This
attracts people at first, and then pushes them out after a short while.  The food is
designed to be quickly consumed, giving the customers little reason to stay longer.

  To save on labor most of the stations are self serve and the products sold are
relatively easy to make.  This also allows for a less trained, and therefore cheaper, labor
force to be used. In addition, less then 30% of all McDonalds are owned and operated
by the company itself.  The rest are operated by average businessmen and
entrepreneurs.  This means that McDonalds saves on miscellaneous expenses and
simply collects on franchise fees and selling equipment.  Therefore, if a McDonalds
fails, the corporation simply loses a source of revenue, rather then invested capital.
 Marketing Mix

Logic: Marketers have four tools to use to develop an offering to meet the needs
of their targeted customers. Collectively they are called the
marketing mix. The "five Ps" of marketing: product, price, place, promotion and
people. Collectively these are called the marketing mix. More comprehensively they are
viewed as: product, service, or program - something of value you are offering the
customer, client, or park visitor price - what the customer, client, or park visitor pays
(direct costs are financial, indirect or alternative costs are such things as time it takes
and the things people give up if they choose your offering) place, distribution, location,
or accessibility - where the transaction takes place, perhaps in a park promotion or
communication - this is how you inform the target market the benefits in your marketing
mix. Collectively these are the tools organizations uses to develop offerings to satisfy
their target market(s) ... the only tools at their disposal.
Remember: If your marketing mix doesn't meet their needs they will not be satisfied –
and if they aren't satisfied you are unlikely to meet your objectives. The marketing mix
should be viewed as an integrated and coordinated package of benefits that reflect the
characteristics of customers and various targeted publics and satisfy their needs,
wants, and expectations. Note that the elements of the marketing mix should be
integrated because each element of the mix usually has some impact, direct or indirect,
on the other three. For example, if you improve the product or service you probably
have to change the price because it costs more to produce. Although you may not have
to change where the product is delivered to the customer, you will almost certainly have
to change the promotion or communication with the customer because you need to tell
the customer about the changes you have made in the product and how the changes
will make it more desirable and satisfying.
One problem in many organizations is that different divisions may be responsible for
different elements of the marketing mix. This happens even in well managed
organizations. The result is that the offering is confusing to the target market. Lack of
communication among divisions makes this problem worse. And if they don't share the
same view of organizational objectives, the problem is worse still.
These variables are known as the marketing mix or the 5 P's of marketing. They are
the variables that marketing managers can control in order to best satisfy customers in
the target market. The firm attempts to generate a positive response in the target
market by blending these five marketing mix variables in an optimal manner.

Product Price Promotion Place

The product is the Pricing decisions Promotion decisions Place (or
physical product or should take into are those related to placement)
service offered to account profit communicating and decisions are those
the consumer. In margins and the selling to potential associated with
the case of physical probable pricing consumers. Since channels of
products, it also response of these costs can be distribution that
refers to any competitors. Pricing large in proportion serve as the means
services or includes not only to the product price, for getting the
conveniences that the list price, but a break-even product to the target
are part of the also discounts, analysis should be customers. The
offering. Product financing, and other performed when distribution system
decisions include options such as making promotion performs
aspects such as leasing. decisions. It is transactional,
function, useful to know the logistical, and
appearance, value of a customer facilitating
packaging, service, in order to functions.
warranty, etc. determine whether Distribution
additional decisions include
customers market coverage,
are worth the cost of channel member
acquiring them. selection, logistics,
Promotion decisions and levels of
involve advertising, service.
PR, media type.
The marketing mix principles (also known as the 5 p’s.) are used by business as tools to
assist them in pursuing their objectives. The marketing mix principles are controllable
variables, which have to be carefully managed and must meet the needs of the defined
target group. The marketing mix is apart of the organizations planning process and
consists of analyzing the defined:
How will you design, package and add value to the product? Product strategies.
What pricing strategy is appropriate to use? Price strategies.
Where will the firm locate? Place strategies.
How will the firm promote its product? Promotion strategies
How will the firm maintain relations? People.

MARKETING MIX
s

Product
How should the company design, manufacture the product so that it
enhances the customer experience?

Product is the physical

product or service
offered to the
consumer. Product
includes certain
aspects such as
packaging, guarantee,
looks etc. This includes
both the tangible and
the non- tangible
aspects of the product
and service.
McDonalds has
intentionally kept its product depth and product width limited. McDonalds studied the
behavior of the Indian customer and provided a totally different menu as compared to its
International offering. It dropped ham, beef and mutton burgers from the menu. India is
the only country where McDonalds serve vegetarian menu. Even the sauces
and cheese used in India are 100% vegetarian. McDonalds continuously innovates
its products according to the changing preferences and tastes of its customers.
The recent example is the introduction of the Chicken Maharaja Mac. McDonalds bring
with it a globally reputed brand, world class food quality and excellent customer
specific product features.
Marketing is fundamentally about providing the correct bundle of benefits to the end
user, hence the saying ‘Marketing is not about providing products
or services it is essentially about providing changing benefits to the changing needs and
demands of the customer’. The vegetarian burger menu consists of the McAloo Tikki
Burger. It is a vegetable burger with potato, peas, and spices, tomato, onion, and a
vegetable-tomato mayonnaise. McVeggie is another Vegetarian burger on the menu. It
looks similar to the above McAloo Tikki Burger, but is made from mixed vegetables,
peas, and spices, lettuce and veg mayonnaise (referred to as Veg Sauce in India).
Another new Menu Item added is the McSurprise burger. It contains a patty, onion,
Italian mayonnaise.There is also a Pizza McPuff, consisting of a puff pastry stuffed with
peas, sliced cheese etc. McDonald’s concentrated on studying the Indian culture, its
value-systems and its influence in food consumption decision making. It found that
although a substantial proportion of the populations were non-vegetarians, they stuck to
mostly fish, mutton and chicken. Muslim took beef but though pig meat to be dirty;
Hindus preferred neither beef nor pork; Christian took both beef and pork. McDonald’s
decided, for the first time in their business history, to drop ham and beef burger from
their menu. Two years back, they even excluded mutton burgers from their offerings.
McDonald’s developed a menu especially for Indian with vegetarian selection to suite
Indian taste. It introduced products like McTikki Aloo for the Punjabi taste buds.
McDonald’s has also re-engineered its operation to address the special requirements of
a vegetarian menu. The cheese and cold sauces used in India is 100 % vegetarian.
McDonald’s are committed for giving customers wholesome, healthy, and delicious
food. They ensure that the cooking area as well as cooking equipment for vegetarian
products is visibly segregated from the non Vegetarian sections. What’s more- their
crew members cooking vegetarian food items are identifiable by their green aprons.

PRICE:
What should be the pricing strategy?
Pricing includes the list price, the discount functions available, the financing options
available etc. It should also take into the consideration the probable reaction from the
competitor to the pricing strategy. This is the most important part of the marketing mix
as this is the only part which generates revenue. All the other three are expenses
incurred. The price must take into consideration the appropriate demand-supply
equation. McDonald’s came up with a very catchy punch line “Aap ke zamane mein
,baap ke zamane ke daam”. This was to attract the middle and lower class consumers
and the effect can clearly be seen in the consumer base McDonalds has now.
McDonalds has certain value pricing and bundling strategies such as happy meal,
combo meal, family meal etc to increase overall sales volumes.
DIiagram from Mcdonalds behind golden arches=====
Pricing is the only mix which generates a turnover for the organization. The remaining
3p’s are the variable cost for the organization. It costs to produce and design a product,
it costs to distribute a product and costs to promote it. Price must support these
elements of the mix. Pricing is difficult and must reflect supply and demand relationship.

Dm from Adobe Reader ======

The customer's perception of value is an important determinant of the price charged.
Customers draw their own mental picture of what a product is worth. A product is more
than a physical item; it also has psychological connotations for the customer.
The danger of using low price as a marketing tool is that the customer may feel that
quality is being compromised. It is important when deciding on price to be fully aware of
the brand and its integrity. A further consequence of price reduction is that competitors
match prices resulting in no extra demand. This means the profit margin has been
reduced without increasing sales.
PHYSICAL EVIDENCE:
The physical evidence factor of all the McDonalds centers are the signboards, golden
arches, buildings, interiors, colors combination of yellow and red, clean facilities, visible
food preparation section etc. the site shown in the picture is 52 years-old and is the
oldest in the worldwide chain of 20000 restaurants and the last one with red-and white
stripped tile exterior. After opening in 1953, it immediately became the standard for the
fast food franchises across the country. The building and its 60-foot high neon sign
with “Speede the Chef” are eligible for listing on the national register of historic.
Value Pricing
Ö Happy meal – small burger ,fries ,coke+toy
Ö Medium Meal Combo- burger ,fries,coke-veg Rs:75 ,Maharaja Mac
Meal Rs: 95
Ö Family Dines under Rs: 300
Ö Price lower than Pak ,Srilanka ,50% lower than U.S.

PLACE:
Where should be the product be available and the role of distribution
channels?
The place mainly consists of the distribution channels. It is important so that the product
is available to the customer at the right place, at the right time and in the right
quantity. Nearly 50% of U.S.A is within a 3 minute drive from a McDonald’s outlet.
There is a certain degree of fun and happiness that a customer feels each time he dines
at McDonalds. There are certain value propositions that McDonalds offer to its
customers based on their needs. McDonalds offers hygienic environment, good
ambience and great service. Now McDonalds have also started giving internet
facility at their centers and they have been playing music through radio instead of the
normal music. There are certain dedicated areas for children where they can play
while their parents can have some quality time together. Place in the marketing mix, is
not just about the physical location or distribution points for products. It encompasses
the management of a range of processes involved in bringing products to the end
consumer. Efficient and effective distribution is important if the organisation is to meet
its overall marketing objectives. If organisation underestimate demand and customers
cannot purchase products because of it profitability will be affected.

Direct Distribution Indirect Distribution

MANUFACTURER MANUFACTURER
 RETAILER
CONSUMER

CONSUMER

PROMOTION

What is the suitable strategy and channels for promotion of the product?
The various promotion channels being used by McDonald’s to effectively communicate
the product information are given above. A clear understanding of the customer value
helps decide whether the cost of promotion is worth spending. There are three main
objectives of advertising for McDonald’s are to make people aware of an item, feel
positive about it and remember it. The right message has to be communicated to the
right audience through the right media. McDonald’s does its promotion through
television, hoardings and bus shelters. They use print ads and the television
programmes are also an important marketing medium for promotion.
Some of the most famous marketing campaigns of McDonald’s are:
 “You Deserve a break today, so get up and get away- To McDonald’s”
 “Aap ke zamane mein ,baap ke zamane ke daam”.
 “Food, Folks, and Fun”
 “I’m loving it”
A successful product or service means nothing unless the benefit of such a service can
be communicated clearly to the target market. An organizations promotional mix can
consist of:
The promotions aspect of the marketing mix covers all types of marketing
communications. The methods include advertising, sometimes known as 'above the line'
activity. Advertising is conducted on TV, radio, cinema, online, poster sites and in the
press (newspapers, magazines). Key objectives of advertising are to make people
aware of an item, feel positive about it and remember it. The more McDonald's knows
about the people it is serving the more it is able to communicate messages which
appeal to them Messages should gain customers' attention and keep their interest. The
next stage is to get them to want what is offered. Showing the benefits which they will
obtain by taking action, is usually sufficient. The right messages must be targeted at the
right audience, using the right media.
The Media Magic:
“You Deserve a break
today, so get up and get
away- To
McDonald’s”
The above break
commercial was one of the
initial commercial themes adopted by McDonald’s United State 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 McDonald’s
which made many revolutionary advertisements for the company. Needhams
advertising formula became know in McDonald’s as “Food, Folks, and Fun” and it
remains the backbone of all the chain’s advertising campaigns. McDonald’s is now, one
of the world’s mightiest consumer marketers. Its brand valuation is $25 billion, making
the ninth most valuable brand in the world.
Why Mudra in India?
DDB Needham and Leo Burnett are the advertising agencies of McDonald’s are
worldwide. Hence, when they came to India, The subsidiary 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
McDonald’s India. The Mudra team meets up with McDonald’s marketing team on a
regular basis and theyhave a debate and discussion on the new strategies to be
adopted.
McDonald’s uses various Medias like television, hoardings and bus shelters. They are
almost out of print ads. McDonald’s also sponsor many Television Programmers like
kaun Banega Crorepati, Children shows etc.
Even the paper Mats on the trays at the McDonald’s are designed as per the ongoing
Marketing Strategy of McDonald’s.
For e.g.: During the French fries issues, 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 outlets is 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.
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 McDonald’s 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.
Under the recent research conduct by McDonald’s they found that the consumers would
have a clear remembrance of the 80-20 Board. This board also helps give a feel of the
product before it is purchased.
Reconnecting with customers’ thro’ contemporary global marketing direction “I’m loving
it”. “I am loving it” refers an attitude we want your employees to embrace & reflect in
their services.
Their other lucky Promotion strategies were like :-
 Collaboration with coke, Mtv, Hungama .com, Sony Music, etc.
 Scratch cards on large jumbo meals.
 Prices- caps, T-shrit, internet card, CD’s, Free tickets to Lucky Ali’s contest.
  Purchase of 2nd meal in a month qualified for Opel Corsa/ NZ trip.

PEOPLE
How to converge the benefits of internal and external marketing?
McDonald’s understands the value of both its employees and its customers. It
understands the fact that a happy employee can serve well and result in a happy
customer. McDonald continuously does Internal Marketing. This is important as it must
precede external marketing. This includes hiring, training and motivating able
employees. This way they serve customers well and the final result is a happy customer
The level of importance has changed to be in the following order (the more important
people are at the top):
1. Customers
2. Front line employees
3. Middle level managers
4. Front line managers
The punch line “I’m loving it” is an attempt to show that the employees are loving their
work at McDonalds and will love to serve the customers.

CUSTOMER PERCEPTION AND CUSTOMER EXPECTATION

Customer perception is a key factor affecting a product’s success. Many potentially

revolutionary products have failed simply because of their inability to build a healthy
perception about themselves in the customers’ minds. McDonalds being an
internationally renowned brand brings with it certain expectations for the customers.

TARGET SEGMENT What is McDonald for ME?

A family with children A treat to children, a fun place to be

for the children.
Urban customer on move Great taste, quick service without
affecting the work schedule
Teenagers Hangout with friends, but keep it
affordable.

Customers expect it to be an ambient, hygienic and a little sophisticated brand that

respects their values. The customer’s expect the brand to enhance their self-image.
Customer responses obtained at the Vile Parle, Mumbai outlet confirmed the fact that
they connect strongly with the brand. However, fulfilling some of the customer
expectations like a broader product variety provide McDonald’s a great scope for
improvement.
The McDonald’s Experience

Marketing in a services industry is becoming an increasingly complex challenge. The

paradigms of service marketing demand a passionate understanding of customer
expectations and perceptions, and linking them to product design & delivery as well as
operational planning. This is where McDonald’s has excelled due to its ability to
successfully integrate the customer’s perspective in its products and operations in a
comprehensive manner. The revamped menu in India is an example of McDonald’s
strategy of integrating the customer’s perspective in its products. And, the operational
integration is evident from McDonald’s emphasis on its suppliers as its customers as
well as its treatment of its consumers as co producers of services.
The ultimate aim of Service Marketing is not just to become a Service Leader but to
create a Service Brand. The Service Delivery Process is the key to achieving this aim of
Service Marketing.

SUPPLEMENTARY PROCESS

SERVICE DELIVERY PROCESS

CORE PRODUCT

During the Service Delivery Process, each moment of interaction between the firm and
the customer, called “Moments of Truth”, helps understand the opportunities that a firm
has to win or lose the customer. For example, these “moments of truth” are created for
McDonald’s every time the guard at the McDonald’s outlet meets the customer, every
time an attendant takes down the order from the customer waiting in the queue, every
time the cashier interacts with the customer, every time the attendant helps the
customer guided the customer towards the table, every time the attendant cleans the
table, etc.
 “Moments Of Truth” – The Service Encounter

CONSUMER

SERVICE PROVIDER SERVICE DELIVERY POINTS

Managing these “moments of truth” is a great challenge in Service Marketing especially

due to customer’s involvement as a co-producer of services (e.g. McDonald’s self-service
concept wherein the customer not only collects the order but also cleans the table after
consuming the food). However, McDonald's has been able to create a great experience for its
customers by understanding the nature of the entire Service Delivery Process and the various
stages in the process that are exposed to the customers. Transparency in the processes at its outlet
has helped McDonald’s bring the back office in its outlet at the front so that the customer is able
to know the operations and provide feedback on service design improvements. Internal Customer
Focus is equally important as External Customer Orientation in order to win these “moments of
truth”. McDonald’s focus on its People and their service delivery methods therefore plays a very
important role in creating a successful Service Brand. The quality and the consistency of the
service delivered by McDonald’s have been greatly enhanced by the combination of the factors
mentioned above. This has helped McDonald’s become Service Leader and a successful Service
Brand. This is evident from the fact that very few of its customers opt for take-home parcels or
home deliveries while most of them
prefer to eat at the outlet and enjoy the McDonald’s experience.