1

PREFACE

These days institutes have started giving more and

more stress on the management training as it is
the first interference of a management student
with the culture of the corporate world and it also
gives a student a firsthand experience to the
knowledge gained by them through their faculty in
the classroom.

Our institute has been looking in the same

direction and also determined to produce quality
students who are having a balance knowledge of
both theoretical aspects and practical knowledge
as well and in the same context we have to
undergo a summer training of 8-10 weeks in a
company.

To cover this aspect of curriculum, I underwent

training at MC DONALDS. Here in I got to do a live
project with the company which was Analyzing the
distribution channel of the company.
2

NEHA RAWAL
 3

AN OVERVIEW OF THE INDIAN FAST FOOD MARKET

Up to the year 1995 Indian food market was predominantly

dominated by the traditional dhabas, potential restaurants in the

customers colony and some restaurants in a five star hotel.

Having fast food i.e., burgers, pizzas etc., was considered to be an

option for eating out. It was not at all synonymous with the

American concept of fast food as a quick takeaway bite or a

substitute for lunch.

Apart from fast food being available at the local colony

restaurants and at some five star restaurants, Nirulas was the

only fast food chain existing in the country with its restaurants

expanding with every passing year since its inception. It has been

almost 50 years now since its set up and there is hardly anyone

who doesnt know that Nirulas exists. Nirulas was the first one to

bring fast food to India back in the 50s since then it has evolved

into an eating place with a tremendous brand equity and brand

recognition. It proved to be a perfect eating place for an average

middle class who wants to eat out at an affordable price that cant

afford the five-star restaurants and would not want to go to the

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local dhabas.

Nirulas almost had a monopoly for decades due to the way it has

been placed. It is a place where a person from an average middle

class group to upper class group can go to eat out. Its popularity

has increased over the decades. With the trends changing and the

incomes rising almost anybody who can afford to eat out could go

for a snack at Nirulas.

However the year 1995-96 witnessed a drastic change. 1996 is

considered to be the year of Indias entry into the world food

market. International giants such as McDonalds, KFC, TGIF,

Dominos, Pizza Hut all bombarded the Indian food market.

Before these, UK-based joint called Wimpys had established its

chain in the country in 1990. By year 1996 it had about three to

four joints established in Delhi. However it did not pose much of a

threat to Nirulas reason being lack of variety and that wimpys

was looked at more of a hang-out place rather than eating out

with the family.

Its been the American international giants i.e., McDonalds, Pizza

Hut etc., who have targeted their restaurants to the families.

 5

Apart from the foreign and Indian fast food chains setting up

shops, there are a range of specialty restaurants offering varied

fare such as Chinese, Mexican, French, Italian etc. These places

however offer range of items different from burgers, pizzas etc,

but they definitely are competition to both foreign and Indian fast

food chains.

However, restaurant business is such which is surrounded by

threat from everywhere be it Indian or foreign joints.

It is only these international joints and specialty restaurants which

are gradually coming up and some Indian restaurants which have

made up the food market. Prior to this it was only the local

restaurant which became visible while passing by or through local

banners etc., and the five star restaurants were for the elite class

out of reach by the average middle class customer. There was

hardly any awareness or promotion to beat competition.

Each of the foreign food joints that have come into the country

have their own strategy lined up to differ from the rest. Each of

these studied the Indian tastes and style and thereby targeted the

Indian customer. An average Indian restaurant going person is

 6

not a convenient eater, unlike the Americans.

If he is paying, he is paying for food that tastes good (Spicy, soft,

savory etc.), not for how pleasantly the stuff is served or how

spotless the widows are. He wants food for that can make him

come back to the restaurant. An Indian food joint owner would

definitely understand this but an American company which comes

and places itself directly without knowing the customer is

definitely in for trouble. Customer loyalty in a restaurant business

is essentially low. When a customer goes to a restaurant usually

looks at the quality of food, variety, ambience, speed of delivery

and the location. The variety would influence the frequency of

visits since taste is a dominating factor to the Indian customers.

Almost all the fast food chains both Indian i.e., Nirulas and

foreign i.e., McDonalds etc., are targeting the families. This serves

to be an advantage because the turnaround time is short and

family has higher propensity to spend because different members

order larger variety of dishes.

Each of these restaurants delivers quality, value and services in

its own way through its line of strategies. The emphasis is on the
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value that the restaurant is delivering to the customers.

 8

MCDONALDS

COMPANY PROFILE

McDonald's Corporation, also referred to as Mickey D's,

(NYSE: MCD) is the world's largest chain of hamburger fast food

restaurants, serving around 68 million customers daily in 119

countries. Headquartered in the United States, the company

began in 1940 as a barbecue restaurant operated by Richard and

Maurice McDonald; in 1948 they reorganized their business as a

hamburger stand using production line principles. Businessman

Ray Kroc joined the company as a franchise agent in 1955. He

subsequently purchased the chain from the McDonald brothers

and oversaw its worldwide growth.

A McDonald's restaurant is operated by a franchisee, an affiliate,

or the corporation itself. The corporation's revenues come from

the rent, royalties and fees paid by the franchisees, as well as

sales in company-operated restaurants. McDonald's revenues

grew 27 percent over the three years ending in 2007 to $22.8

billion, and 9 percent growth in operating income to $3.9 billion.

 9

McDonald's primarily sells hamburgers, cheeseburgers, chicken,

French fries, breakfast items, soft drinks, milkshakes and desserts.

In response to changing consumer tastes, the company has

expanded its menu to include salads, fish, wraps, smoothies and

fruit.

Worldwide Operations

There are more than 23,000 McDonalds restaurants in III

Countries (as of Jan. 1998). McDonalds 1997 year end system

wide sales were $ 33,368.3 billion.

McDonalds is the largest and the best known global food service

retailer. Its global market potential is enormous seeing the

member of restaurants it has. On any day McDonalds serves less

than one percent of the worlds population. It has outstanding

brand recognition. (It is one of the most recognized brands all

over the world), experienced management, high quality food, site

development expertise, advanced operational systems and

unique global infrastructure position it to capitalize on global

opportunities.
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McDonalds Vision is to dominate the global food service industry,

Global dominance means setting the performance standard for

customer satisfaction and increasing market share and

profitability through successfully implementation of convenience

value and exception strategies.

In order to expand its operation McDonalds goes by a simple

thumb rule to estimate how many outlets it wants: One restaurant

for every 25,000 people with new markets sprouting in so many

parts of the world, the chain is expanding at a breathtaking pace

of one restaurant every three hours.

McDonalds franchises restaurants in many international markets

and decisions relating to the selection of candidates are made

local by the management in the country where the restaurant is

located.
 11

CORPORATE OVERVIEW

McDonald's Corporation operates more than 31,000 quick-service

restaurant businesses under the McDonald's brand, in 121

countries around the world. In addition, the company operates

other restaurant brands, such as Aroma Caf, Boston Market,

Chipotle Mexican Grill, Donates Pizza and Prt a Manger.

Revenues for 2001 were US$14.87 billion, with net income at

$1.64 billion.

Most McDonald's offer both counter and drive-through service,

with indoor and sometimes outdoor seating. Drive-through often

have separate stations for placing, paying for, and picking up

orders, though often the latter two steps are combined. In some

countries "McDrive" locations, near highways, offer no counter

service or seating. Locations in high-density neighborhoods, as in

many downtowns, often omit drive-through service.

Especially themed restaurants also exist, such as Rock-and-Roll

McDonald's, 50's themed restaurants. Many newer McDonald's in

 12

suburban areas feature large indoor or outdoor playgrounds,

called McDonald's Play lands or Play Places.

The McDonald's Corporation's business model is slightly different

from that of most other fast-food chains. In addition to ordinary

franchise fees, supplies and percentage of sales, McDonald's also

collects rent, partially linked to sales. As a condition of the

franchise agreement, McDonald's owns the property on which

most McDonald's franchises are located. According to Harry J.

Sonneborne, one of McDonald's founders:

"We are in the real estate business. The only reason we sell

hamburgers is because they are the greatest producer of

revenue from which our tenants can pay us rent."

McDonald's trains its franchisees and others at Hamburger

University in Oak Brook, Illinois.

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HISTORY

1940: The first McDonald's restaurant was founded on May

15 by brothers Dick and Mac McDonald in San Bernardino,

California.

1948: The McDonald's restaurant gained fame when the

brothers implemented their innovative "Speedee Service

System", an assembly line for hamburgers.

1954: entrepreneur and milkshake-mixer salesman Ray Kroc

became interested in the McDonald's restaurant when he

learned of its extraordinary capacity. After seeing the

restaurant in operation, he approached the McDonald brothers

with a proposition to open new McDonald's restaurants, with

himself as the first franchisee. Kroc worked hard to sell

McDonald's. He even attempted to prevail on his wartime

acquaintance with Walt Disney, in the failed hope of opening a

McDonald's at the soon-to-be-opened Disneyland. Eventually

 14

he opened his first restaurant in Des Plaines, Illinois. It was an

immediate success.

1955: Kroc's founds "McDonald's Systems Inc.", on March 2.

1960: The company was renamed "McDonald's Corporation".

1961: McDonald's brothers agreed to sell Kroc business

rights to their operation for $2.7 million, which Kroc borrowed

from a number of investors (including Princeton University).

The agreement allowed the brothers to keep their original

restaurantrenamed "The Big M"which remained open until

Kroc drove it out of business by opening a McDonald's just one

block north. Had the brothers maintained their original

agreement, which granted them 0.5% of the chain's annual

revenues, they would have been collecting nearly $180 million

per year today.

Early 1960s: One of Kroc's marketing insights was his

decision to market McDonald's hamburgers to families and

 15

children. A Washington, DC franchisee sponsored a children's

show called Bozo's Circus, 'Bozo' was a franchised character,

played (in Los Angeles) by Willard Scott. After the show was

cancelled, Goldstein hired Scott to portray McDonald's new

mascot, "Ronald McDonald" in the first three television

advertisements featuring the character. The character was

eventually spread to the rest of the country via an advertising

campaign, although it was decided that both Scott and his

version of the original costume were unsuitable for the role. An

entire cast of McDonald land characters was developed.

1974: On October 12, the first McDonalds open in the United

Kingdom

1990: On January 31, the first McDonald's opened in Moscow.

In contrast to the fast food stereotypes of McDonalds in the

United States where it is seen as cheap, convenient, low quality

food, in parts of the world such as Russia and China,

McDonald's food is seen as a status symbol and the restaurants

are admired for their atmosphere and cleanliness.

 16

1992: Stella Liebeck receives third degree burns from coffee

purchased at a McDonald's drive-through. She sued in what

became known as the McDonald's coffee case.

Circa 1995: McDonald's receives complaints from franchisers

that too many franchises were being granted, leading to

competition among franchisees. McDonald's started conducting

market impact studies before granting further franchises.

1997: McDonald's wins the "McLibel" case, in what many

consider to be a Pyrrhic victory in terms of its image.

2001: The FBI reported that employees of Simon Worldwide,

a company hired by McDonald's to provide promotion

marketing services for Happy Meals and the

'Millionaire'/'Monopoly' contest, stole winning game pieces

worth more than $20 million.

2002: A survey in Restaurants and Institutions Magazine,

ranked McDonald's 15th in food quality among hamburger

 17

chains.

2002: McDonald's posted its first quarterly loss ($344m) for

the last quarter. It responded to the stiff competition from other

fast food restaurants, offering higher quality burgers and more

variety, by attempting to move more up market by expanding

its menu and refitting restaurants.

2003 McDonalds started a global marketing campaign which

promotes a new healthier and higher-quality image. The

campaign was labeled "I'm lovin' it" and began

simultaneously in more than 100 countries around the world.

2003: According to Technomic, a market research firm,

McDonald's share of the market has fallen 3% in five years and

is now at 15.2%.

2003: The firm reports a $126m loss for the fourth quarter.
 18

CHALLENGES

As the world's largest restaurant chain, McDonald's is the target

for criticism. Even though the majority interest in its foreign

franchise locations are locally owned, the company is seen as a

symbol of American domination of economic resources. Urban

legends about the company and its food abound and it is often

the target of unusual lawsuits.

Some franchises in the Middle East have been targets of arson

and other acts of violence because the business represents, to the

attackers, an invasion by American business and culture that they

oppose based on a nationalist or Islamist ideology.

However, McDonalds has modified its products to cater for local

tastes, not least in countries that have special dietary laws. In

Muslim countries like Malaysia, bacon is not served in McDonalds

burgers or in its breakfast menu, as pork is haram, or not

permissible under Islamic dietary law. In Israel, the nature of

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kosher dietary laws, forbidding the mixture of meat and dairy

products, means that cheeseburgers are not popular among

Jewish customers; furthermore, all meat not prepared in a certain

manner is considered unkosher by strict observers of the dietary

laws. McDonalds has taken steps to cater to Jewish customers by

opening a kosher McDonalds in Jerusalem and by offering a

'Passover Bun' for the eight-day period in which practicing Jews

abstain from leavened bread. In India, the fact that Hinduism

forbids the eating of beef has prompted McDonalds to look for

alternatives, like lamb.

Soft drinks on offer also vary from country to country, with local

brands available on tap alongside Coca Cola, Fanta, etc. For

example, Irn Bru in Scotland and Guarana in Brazil are more

popular in those countries than the leading international brands.

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CRITICISM

As the world's largest fast-food company, McDonald's has been

the target of criticism for allegations of exploitation of entry-level

workers, ecological damage caused by agricultural production and

industrial processing of its products, selling unhealthy (non-

nutritious) food, production of packaging waste, exploitative

advertising (especially targeted at children), and contributing to

suffering and exploitation of livestock. McDonald's historic

tendency towards promoting high calorie foods such as French

fries has earned it the nickname "the starchy arches".

In the high profile McLibel Trial McDonald's took two anti-

McDonald's campaigners, Helen Steel and Dave Morris, to court

for a trial lasting two and a half years - the longest in English legal

history. McDonald's won the case: however, many of the

campaigners' criticisms of the company were found to be fair,

creating a great deal of bad publicity for the company.

McDonald's has also been criticized for its litigious and heavy-
 21

handed approach to preserving its image and copyrights - in one

case suing a Scottish cafe owner called McDonald for

infringement of the name McDonald's, even though the business

in question was a family business dating back well over a century.

In another case, McDonalds enjoined the creator of Ronald

McDonald from performing as, or displaying the likeness of, the

character in any form. McDonald's also replaced the performer

who portrayed Ronald in the first three television ads (Willard

Scott, a former Bozo) which featured Ronald McDonald. In South

Africa, however, McDonald's had to battle against the country's

trademark laws, which stated that a registered trademark had to

be used within a certain period of time. This resulted in a local

company announcing plans to launch its own fast food chain using

the McDonalds name, although the South African High Court

eventually ruled in McDonalds' favor.

In June 2004 the UK's Private Eye reported that McDonald's was

handing out meal vouchers, balloons, and toys to children in

pediatric wards. This was especially controversial as the report

was made within weeks of a British Government report stating

 22

that the present generation may be the first to die before their

parents due to spiraling obesity in the British population.

In 2004, Morgan Spurlock's documentary Super Size Me produced

negative publicity for McDonald's, with suggestions that

McDonald's food was contributing heavily to the rash of obesity in

American society. Subsequent to the showing of the film at the

Sundance Film Festival, but before its cinematic release,

McDonald's phased out its Supersize meal option and began

offering several healthier menu items though no link to the film

was cited in this decision.

Emblem for globalization

McDonalds has become emblematic of globalization. The

Economist magazine uses the "Big Mac index" (the price of a Big

Mac) as an informal measure of purchasing power parity among

world currencies. Thomas Friedman suggested that no countries

with McDonald's would go to war with each other, a "rule" broken

by the American bombing of Serbia. It remains a target of anti-

globalization protesters worldwide.

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On July 18, 1984, there was a shooting at a San Ysidro McDonald's

by the Yum Yum doughnut shop. James Oliver Huberty killed 21

innocent people and wounded 19 before being shot by a police

sniper.

Nicknames
McDonald's is also known as

Golden Arches (U.S. slang)

Mickey-D's (U.S. slang)

Mick-dicks (U.S. slang)

Macca's (Australian slang & New Zealand Slang)

Mackey-D's (British slang)

Placcy-D's (British slang, from the word "plastic", referring to

the food)

McDo (French slang)

MacDoh (French Canadian slang)

Der Schotte (German slang) (lit. the Scotch) because of the

'Mc' prefix and maybe the somewhat cheaper price in

comparison to a regular international restaurant.

McDoof (German slang) (lit. McStupid) because of the

 24

content of the burgers and the bright corporation sign, known

as the "Golden Arches". The name was invented by German

writer Gnther Wallraff.

McDonaldos (Mexican slang)

McDonas (Mexican Slang)

Makku or Makudo (Japanese slang)

Mak Kee (Hong Kong Slang)

McDee's (New Zealand Slang)

McD's (Scottish slang)

Donken, Mackidnnkan (amongst tweens) (Swedish slang)

Meki (Hungarian slang)

Mec (Romanian slang)

MacDohNo (Khmer slang)

MakDo (Filipino slang)

Mardones (Chilean slang)

McFuck (Polish Slang)

Food offered at most McDonald's outlets

Hamburgers and cheeseburgers, including the Big Mac

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McChicken a mildly spicy chicken-burger.

Chicken McNuggets small chicken pieces served with a

dipping sauce.

Egg McMuffin bacon and egg sandwiches, served only in

the morning.

French fries which were, until the practice was discontinued,

fried in beef tallow.

Salads

Donuts

Milkshakes

Carbonated soft drinks such as Coca Cola

Ice cream: simple cone, sundae, "McFlurry"

Coffee and Tea

The range of foods offered depends on the time of day. In the

morning, when designated breakfast foods are served, certain

other items such as the Big Mac are not available.

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MCDONALDS IN INDIA

A locally Owned Company

McDonalds India is a locally owned company managed by Indians.

In Mumbai Amit Jatias company, Hard castle restaurants Pvt. Ltd.,

owns and manages McDonalds restaurants. In Delhi, McDonalds

restaurants are owned and managed by Vikram Bakshis

Connaught Plaza restaurants Pvt. Ltd. Both these individuals are

responsible for the running of McDonalds India.

Local Sourcing is Key for Truly Indian Products

Around the world, McDonalds traditionally operates with local

partners or local management. In India too, McDonands

purchases from the local suppliers. McDonalds constructs its

restaurants using local architects, contractors, labour and - where

possible - local materials. McDonalds 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

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reinvestment. Its 98% of the inputs are obtained domestically.

McDonalds sources food products from local companies. Mutton

patties are supplied by Al-Kabeer, Hyderabad, Andhra Pradesh;

fresh lettuce comes from Pune, Ooty, Maharashtra and Dehradun;

cheese from Dynamix Dairies, Baramati, Maharashtra; sesame

seed buns and sauces from Cremica Industries Phillaur, Punjab,

and pickles from VST Natural Foods, Hyderabad, Andhra Pradesh.

Setting Up of an Extensive Food Chain

For three years before the opening of the first McDonalds

restaurant in India, McDonalds and its international supplier

partners worked together with local Indian companies to develop

products that meet McDonalds vigorous quality standards. These

standards also strictly adhere to Indian Government regulation on

food, health and hygiene. Part of this development involves the

transfer of state-of-the-art food processing technology which has

enabled Indian business to grow by improving their ability to

compete in todays international markets.

For instance, Cremica Industries worked with another McDonalds

supplier from Europe to develop technology and expertise which

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allowed Cremica to expand its business from baking to also

providing breading and batters to McDonands Indian and other

companies. Another benefit is expertise in the areas of agriculture

which allowed McDonalds and its suppliers to work with farmers

in Ooty, Pune and Dehradun and other regions to cultivate high

quality lettuce. This includes sharing advanced agricultural

technology and expertise like utilization of drip irrigation systems

which reduce overall water consumption and agricultural

management practices which result in greater yields.

In some cases, these Indian suppliers had the technology - but no

market for the products they produced. For example, Dynamix

Dairies -- through its relationship with McDonalds was introduced

to a large customer of 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. McDonalds local supply networks

through Radhakrishna Foodland, to get products from the various

suppliers to restaurants in Delhi and Mumbai.

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Respect for the Indian Customers and Culture

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 tastes

and culture. Keeping in line with this McDonalds does not offer

any beef or pork items in India. McDonalds has also re-

engineered its operations to address the special requirements of a

vegetarian menu. Vegetable products are prepared separately,

using dedicated equipment and utensils. This separation of

vegetarian and non-vegetarian food products is maintained

throughout the various stages of procurement, cooking and

serving.

An Employer of Opportunity

McDonalds India is an employer of opportunity, providing quality

employment and long-term careers to the Indian people. The

average McDonalds restaurant employs more than 100 people in

25 different positions - from cashier to restaurant manager.

McDonalds world-class training inputs to its employee could be

seen in the present close to 1000 employees currently in Mumbai

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and Delhi.
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COMMUNITY PARTNERSHIP

McDonalds believes in giving back to the communities it serves.

Wherever McDonalds goes it becomes a part of the community it

operates in and contributes towards the development of the

locality. For example, McDonalds has introduced the concept of

Litter Patrol - McDonalds employees go around the immediate

vicinity of the restaurant every day, packing up garbage left

behind not only by customers from McDonalds restaurants but

also by other visitors to the area. The result is a cleaner

neighborhood.

To commemorate 50 years of Indian independence, on 15 August,

1997, McDonalds Mumbai organized a No Garbage Drive, in

association with the Brihan Mumbai Municipal Corporation and

five schools in Bandra. Inaugurated by the Municipal

Commissioner, this was in support of BMCs Zero Garbage,

initiative. Other community activities undertaken by McDonalds

in India includes the adoption of local public parks for restoration

and beautification, thereby providing a play area for children. In

fact in Delhi, McDonalds has even addressed the security issues

 32

relevant to a particular residential colony.

Charities, especially those benefiting children, are often the

recipients of McDonalds support - either through the use of the

restaurants for meetings or for fund-raising activities. McDonalds

International charitable foundation, Ronald McDonald House

Charities supports charities around the world. In fact, in 1993,

RMHC donated to the Indian Prime Ministers Relief Fund following

the devastating earthquake in Maharashtra.

Quality, Service, Cleanliness and Value

The McDonalds philosophy of 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

McDonalds own recognized standards. All McDonalds products

are prepared using the most current, state-of-the-art cooking

equipment to ensure quality and safety.

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At McDonalds the customer always comes first. McDonalds India

provides fast, friendly service - the hallmark of McDonalds which

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

Indian consumers can afford. McDonalds does not sacrifice

quality for price - rather McDonalds leverages economies of scale

to minimize costs while maximizing value to customers.

McDonalds has a 20-year profitability plan for India and it intends

having at least 50 restaurants here by the year 2000. The

company has already invested Rs. 50 crore in its Indian

operations, and each of the two joint venture partners has

invested about Rs. 17.56 crore.

B). MARKETING FUNCTIONS

McDonalds started its operations in India in October 1996 and by

July 1998 it has served about 10 million customers in the country.

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McDonalds marketing philosophy is captured in its motto of

Q.S.C.V., which 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 maintaining McDonalds own

recognized standards. All its products are prepared using the most

current, state of the art cooking equipment to ensure quality and

safety.

At McDonalds, the customers always comes first. McDonalds

India provides fast friendly SERVICE the hallmark of McDonalds

which sets its restaurants apart from others.

Its 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

Indian customers can afford.

It is a strategy in India is to target the plain and simple mass

market. The target consumers for McDonalds are the family and
 35

the kids. McDonalds has been positioned as a Family

Restaurant.

Product Related Strategies

World over McDonalds is known for its juicy beef burgers. But in

order to settle in India the entire concept of beef burgers had to

be changed. India is the only country where McDonalds is

offering veggie burgers and non-veg burgers without beef (uses

mutton instead).

This is a classic case of Product Adaptation, where McDonalds

adapted its product according to the culture and norms of the

country in order to position itself in the market.

There have been other product adaptations too. McDonalds sells

a spicier Maharaja Mac in India as its flagship product in place of

the globally famed Big Mac. It also has a large capacity for

vegetarian burgers, the production and serving of which is

separated in such a way that the customer can actually see it.

McDonalds product line is almost similar to other burger chains in

the country.
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Burgers

Desserts

Beverages/shakes

Assorted items.

Burgers Pizzas Ice Additional Meal

(in (in Creams (in variety) Comb

variety) variety) (in os

variety)

16 1 4 2 (french 10

fries and veg

nuggets)

Table 6.1 how many varieties of burger provided by

McDonalds

Product standards, packaging, quality, processing are all the same

like at any other McDonalds outlet in the world. The quality

standards are so stringent that nowhere, not even is its rawest

state, is any of the food touched by hand. The typical burger

undergoes 54 checks before it is served. The menu at McDonalds

 37

has remained more or less the same over the past 2 years except

a couple of additions in the burgers variety and inclusion of

couple of items in the dessert variety.

McDonalds even has the calorie count carefully worked out for its

burgers. A veg burger offers 418 calorie, 10 gm of protein, 22gm

of fat and 48 gm of carbohydrate.

All Mc Donalds menu items fit into a balanced diet and it offers

certain items that fit well within a low fat diet (option of burger

with or without cheese).

Pricing Strategies

Worldwide McDonalds is known for its Purchasing power pricing.

The ability to pay-of a large section of customers has been the

sole criteria. This was assessed through market research. It

wanted to price its products in such a way that it can even be

accessible to a child. For this it examined Indian spending on

snacks and other foods before setting on the prices.

Price variations from 2007 to 2008 for a couple of items are as

follows:
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Item Entrylevel (2008)

(2007)

Mc Burger Rs. 15 Rs. 20

Maharaja Mac Rs. 55 Rs. 65

The company continued with the 1996 prices for about a year in

order to meet its one million target audience.

One look at the restaurant and it doesnt seem that the prices of

its products would be this low. Reason being that McDonalds gets

the materials (55 per cent of outlet running expenses) at a very

cheap rate. Therefore this is one of the reason that McDonalds

products are priced reasonably.

It buys its supplier from 35 suppliers who sell at incredibly low

prices. Products at McDonalds are neither elitist in its pricing nor

at the dhaba level, they are average in its pricing.

McDonalds was offering a softie at a price of Rs 6/- about a year

back during the festive season. Today this softie costs only a

rupee more at Rs.7/-. No restaurant of this calibure offers a

product at this rate.

McDonalds recently has come up with Ecomeals, in which one

 39

can afford to have a burger and coke for as little as Rs. 29/- and at

max for Rs. 49/- (Instore pamphlet enclosed) McDonalds keeps on

coming up with such meals almost every month such that almost

anyone can afford to have a Mc Donalds product.

 40

PROMOTIONAL STRATEGIES

Mc Donalds ad line goes like:

Food Family Fun

Mc Donalds had started its promotional activity with local area

banners and posters and now it has moved on to movie hall

commercial. Its commercial is a 60-second close up which focuses

on a burger being prepared in slow motion tantalizing the

audience as though its a strip tease.

It has even started advertising through local channels such as siti

cable. Mudra is the ad agency which puts up publicity banners in

Delhi and Mumbai and takes up the local T.V. commercials.

Newspapers such as Delhi times are also being used for local

advertising. McDonalds plans to advertise in national newspapers

such as Hindustan Times and Times of India in another couple of

months.

In addition to this Mc Donalds also has a public relation agency

handling its account that takes care of publicity and press

 41

releases. McDonalds keeps on coming up with sales promotion

schemes every now and then.

During World Cup Soccer it came up with this soccer game for

Rs.11/- with every meal combo ordered. Since kids are the prime

targets by the restaurant, it has come up with happy meals

especially for the kids along which a game is free.

Also, for the kids Mc Donalds is the most happening place for

birthday parties kids love the place due to all the attention and

knick knacks they are showered with. The restaurant even has

play pens displayed especially for the kids.

McDonalds also comes up with special schemes during the festive

season Last month i.e. September, during Navratras it came up

with special Shudh Shakahari Meal where a meal for two was for

Rs. 99/- and a meal for four was for Rs. 199/- (Instore pamphlet

enclosed). Another way through which Mc Donalds is promoting

its image is via community services. There are Mc Sermons on

maintaining parks, conducting litter patrols and putting up public

trash cans.

At majority of McDonalds restaurants, the management

 42

emphasises on developing parks for the kids as a play ground for

them. E.g. At McDonalds G.K. restaurant there is a play ground

developed for the kids in front of the restaurant. The

management has put boards at these parks to put across certain

messages for the commnity as a whole, such as :

If you see someone without a smile, give them one of yours

Children are the light of our future etc.

In addition to all these promotional measures, McDonalds has

boards put all over the roads to show directions to their

restaurant. These boards are put almost two to three kms before

the location of the restaurant. This makes it easier for the

customer who is not familiar with McDonalds restaurant location.

 43

DISTRIBUTION STRATEGIES

Till date Mc Donalds has 11 outlets in India out of which six are in Delhi and five in Mumbai. In

1997 there were about 3 outlets in Delhi and only three more outlets have been added to the list

by 1998.

By the year 2007 Mc Donalds plans to have about 50 outlets in the country. At Mc Donalds,

while opening a restaurant the emphasis is, to choose a site whereby 150-200 seating capacity

can be available. This is to attract as many people as possible into its premises.
 44

CUSTOMER DEMAND

The factors influencing customer demand for McDonalds menu items are as follows:

McDonalds world wide is known for its quality burgers. This world wide name for

burgers has influenced the demand for it in the Indian market. This can be known from the

fact that within two years it has served about 10 million customers at its restaurants.

The factor that influences customer demand for the organizations product to a great

extent is the offering of highest quality product, providing services which is fast friendly and

accurate, creating a restaurant atmosphere which is always clean, comfortable and ideally

suited to India families and children.

McDonalds products are offered at a value which can be affordable by the maximum

number of Indian cosumers.

The Chain of restaurants provide a variety of comfortable seating arrangement to

accommodate different size groups of people from individuals to large families.

 45

MCDONALDS CUSTOMER BASE

In 1997, Mc Donalds 3 outlets received about 15,000 customers daily.

A Mc Donalds restaurant with about 150-200 seating capacity serves about 40,000

customers per month.

By July 1998, Mc Donalds has served 10 million customers in the country.

 46

COMPARITIVE ANALYSIS

A comparative analysis for the three food chains has been made on the following five

parameters:

Performance

Variety

Price

Accessibility

Service

Performance

Nirulas started its operations in the country as early as in 1930s but its first fast food restaurant

came up around in 1950s . This means that the chain is about five decades old. Wimpys is about

8-9 years old and Mc Donalds just two years old.

Each of these chains has its own reputation and name in the market. Nirulas being in the country

for so long still has its distinguished fan following and is surviving in the market despite the

coming in of the international chains such as Mc Donalds and Wimpys. Nirulas is considered to

be more of a dinein eating place than a fast food joint like the other two. Most of the time the

customers coming in at Nirulas are not in a hurry to leave, they want to relax and enjoy their

meals.In contrast Mc Donalds and Wimpys are considered to be a place to grab a bite or a quick

take away fast food joint. McDonalds in US is a lunch time place from which customers keep

away in the evening. Nirulas on the other hand is packed after dusk with carloads of families to
 47

have dinner. Despite Mc Donalds being placed as a comfortable family eating restaurant, a

person would come to the restaurant to have a quick meal for lunch or dinner alone or with his

family.

When Wimpys came into the country in 1990, with two outlets in Delhi, Nirulas had about 11

outlets all performing well, serving a wide variety of items from thaalis to hotdogs to pizzas. But

Wimpys was not performing well except in a couple of locations such as C.P and G.K in Delhi.

The worst came for Wimpys when Mc Donalds had itself in locations where there was already a

Wimpys outlet. Market became sluggish for Wimpys after the entry of Mc Donalds. Preference

for the Mc Donalds burger increased vis--vis the Wimpy burger for quite some time (about a

year). People started liking its service, quality of food, ambience etc.

However, in the past six to eight months Wimpys has tried to review its position by offering a

variety in the menu i.e. inclusion of salads, pizzas etc, to beat competition.

The trend for kids birthday parties at these restaurants which was initiated by Wimpys has

witnessed quite a set back from the entry of Mc Donalds. The audience suddenly started

preferring Mc Donalds for birthday parties than Wimpys within a year of its entry. (on an

average Mc Donalds hosts about five to six birthday parties at each week at majority of its

restaurants).

When Mc Donalds came up in locations where Nirulas was already established, it affected the

restaurant drastically in the initial few months. But as and when the customers had tried the Mc

Donalds product, they returned back, happy that Nirulas offers a wider choice and tastier food.

Hence, Nirulas is still performing well in the market despite the coming in of Mc Donalds and

Wimpys. Wimpys however would need to re-define its strategy to survive since it is in for a lot
 48

of competition and as far as Mc Donalds is concerned , its worldwide brand recognition is

enough to make it sustain in the market.

Variety

The range of items given in the above table and no. of meal combos are standard items which the

restaurant has. In addition to this Nirulas comes up pizza of the month and ice cream of the

month. Wimpys comes up with new meal combos every two months and Mc Donalds comes up

with a meal combo also almost every month.

For all the product lines Nirulas takes the cake vis--vis other two joints. The customer has a

range of items to choose from at Nirulas. He is just not restricted to a few items in the menu list.

One has every thing from Indian to Western food at most of its joints, Wimpys too has a variety

of items in the list, but nowhere near to what Nirulas is offering. Though McDonalds has the

least variety of items in its menu, it is surviving in the market because of its world wide brand

recognition. The fact that McDonalds burger is famous all over the world, is what that is

making it sell like hot cakes in India.

However if one wishes to just grab a bite one could go to McDonalds but if one is looking for

variety then Nirulas is the place to go to. From the market research study conducted to know

consurner prefrences, Nirulas is the most prefered eating place and variety is one of the unique

attributes for Nirulas which attracts customers to its restaurant. In the burgers category Nirulas

has the maximum variety, Wimpys stands second and Mc Donalds has the least variety. For

Pizzas Nirulas has more variety than Wimpys and for ice creams too Nirulas has maximum

variety.
 49

Price

Each of the products at Wimpys, Nirulas and Mc Donalds are priced so as to suit every ones

pocket.

When Mc Donalds opened its first restaurant in the country it adopted a price strategy whereby

all its products were priced lower than the domestic counterparts. It had priced its chicken burger

at Rs. 39, a rupee below Nirulas equivalent in 1996. Today, the burger is priced at Rs. 43 and

Nirulas burger is for Rs. 49. Though their veg burger prices are the same at Rs. 34/- each, 1998

prices of each of the three restaurants for their chicken and veg burger are:

Chicken Burger (Rs.) Veg Burger (Rs)

Nirulas 49 34
Mc Donalds 43 34
Wimpys 43 33
Table 10.1 prices of burger in different outlets

The prices of its products are very much competitive with a rupee or two below or above.
 50

The above analysis can be summaried in the following chart :

Variety Service Ambience Price Accessibility Taste of

Food

NIRULAS Has 15 types of Takes about Not too Moderately Located at the Spicy
Burgers, 12 10-15 min. Spaciours Expensive most visited
types of Pizzas For order to places
& 30 types of arrive
Ice-Creams to
choose from

WIMPYS 14 types of Take abot 5 Spacious Expensive Located only at Not too
burgers, 8 types to 6 min certain major spicy
of Pizzas & 17 certain joints markets
types of Ice- & 60-90 sec.
creams to in another
choose from

MCDONA 12 types of Average Very Affordable Located only at Not at all

LDS burgers, no McDonalds Spacious certain major spicy
Pizzas, 2 types restaurant markets
of Ice-creams serves in
to choose about 60-90
sec.

Table 10.2 Analysis of different outlets

 51

RESEARCH METHODOLOGY

(a) Research Objective

The objective of conducting a market research study is to :

(i) Identify the unique factors which attract people to each of the three stated

restaurants.

(ii) Determine the percentage wise preference for these for these restaurants.

(iii) Finding out the frequency of visit at each of the stated restaurants.

(b) Attributes

(i) A set of attributes were generated on basis of which objective could be

determined. This would eventually determine what attributes/benefits the consumer

desires.

- Price - Accessibility

- Quality of food - Variety

- Speed of Delivery - Space

- Clean liness/hygiene - Decor

(ii) Based on above attributes concepts were developed on which analysis could be

made.

(iii) Finally a personally administered questionnaire survey was conducted (Based on

which findings have been presented).

 52

(c) Reasons for Selecting the various questions

(i) Question 1 & 2

To determine the frequency of visit to all three fast food restaurants and determine the income

generated approximately on basis of the expenditure incurred.

(ii) Question 3

Various factors being considered by respondents to select a restaurant.

(iii) Question 4

Evaluation of most preferred fast food restaurant on various criteria.

(d) Data Preparations

A total of 20 questionnaires used to conduct the survey. In accordance with the response drawn

from the questionnaire tables and graph have been prepared.

DATA ANALYSIS

Determination of Percentage wise Preference

Percentage wise preference for the two stated fast food restaurants as indicated by market

research study is :

Restaurants Consumer Preferences (in %)

Nirulas 36

Mc Donalds 64
 53

Table 12.1 consumer preferences in different restaurants

Fig 12.1 pie representation of different restaurants

The above pie diagram shows that 64% of consumers would prefer going to McDonalds

restaurant and the rest would prefer Nirulas.

The unique attributes which attract consumer to McDonalds that makes it stand out from the rest

is variety, accessibility and value for money.

Preference for McDonalds over and above Nirulas states that over the past many decades

McDonalds has maintained its brand recognition till date and it is very much likely to continue in

the future, since McDonalds being an Multinational company knows the customer tastes and

preferences better than the other foreign entrants.

54
 55

BARGRAPH INDICATING FREQUENCY OF VISIT

(Computations in Appendix II)

14
Nirulas McDonald's Wimpy
12
12

10

8
8
7
6
6
5
4 4 4
4
3 3

2
2
1 1
0 0
0
Do not visit Occasionally Monthly Weekly More than
once a w eek

Fig 12.2 graphical representation of customer visit in restaurants

 56

Indentifying Unique Attributes

The unique attributes of the two fast food joints are:

Nirulas: Variety, Accessibility, value for money.

Mc Donalds: Spacious, Service, hygiene, value for money.

Criteria most commonly considered by respondents while selecting a fast food joint.

Criteria Ranking (from 1 to 5)

Quality of food - 1

Cleanliness /hygiene - 2

Variety - 3

Speed of Delivery - 4

Price - 5

(Computations in Appendix )

Table 12.2 ranking

 57

SWOT ANALYSIS

SWOT Analysis is an overall evaluation of the previous analysis and the marketing strategy of

the organization in terms of its strengths and weaknesses of the unit, the opportunities available

to it and the threats posed by the external environment.

The strengths, weaknesses, opportunities and threats faced by each the restaurants are presented

individually.

McDONALDS

Strengths

Mc Donalds serves its customers with high quality products. There are extensive quality

tests at the supplier and all products are examined again in the restaurant to ensure that they

are of highest quality possible.

Mc Donalds provides fast, friendly service. Any customer visiting Mc Donalds is

usually served within 60 seconds.

Mc Donalds menu is priced in such a way that the largest segment of Indian consumers

can afford. It has a wide variety of products at different prices to be affordable to as many as

possible.

Mc Donalds is an active participant in community services.

Weaknesses

Mc Donalds has limited range of items in its menu. However, to get an item included in

the menu approval has to be made from the high tech kitchens at Mc Donalds headquarters in
 58

suburban Chicago.

In India burgers are a long way from becoming the common mans food, having fast food

is considered to be another option for dining out, unlike other countries.

Opportunities

Mc Donalds can develop two regional training colleges in India, one each in Delhi and

Mumbai. This can save the expense of the organization is sending its management team and

crew members to outside countries like Indonesia and America.

Mc Donalds expects to expand its chain in the coming years. It plans to open about 50

more restaurants across the country by the year 2002. This can have the opportunity to serve

and employ more people.

Threats

Mc Donalds faces tough competition from other food chains in the country both

international i.e. Kentucky Fried Chicken, Pizza hut, KFC and domestic i.e. Nirulas.

The decision taken by Mc Donalds India to serve Shudh Shakahari meals at its

restaurants can risk the global American image of Mc Donalds.

 59

LIMITATIONS

There are following drawbacks in the findings:

Sales figures (current and past) could not be made available for any of the restaurants.

Distribution strategies of Mc Donalds is not up to the mark.

Customer base figures not available for Nirulas

Organization structure for McDonalds could not be made available.

 60

CONCLUSIONS AND RECOMMENDATIONS

CONCLUSIONS

Indian food market has witnessed several entrants into the country over the past few years. Each

of the established food chains and the ones entering the market pose a threat to each other. In the

food market each restaurant faces competition from 1000 other restaurants, it could be a 5-star

restaurant or a roadside dhaba. In order to prove itself, the restaurant has to have a well-defined

marketing strategy and famous brand recognition to survive in the market.

The two fast food chains whose marketing strategies have been compared and analyzed also need

to look on their marketing strategies to do more than just survive in the market (Certain

recommendations have been put forth in the coming pages).

The attractiveness of both the restaurant chains in the fast food market can be judged from the

following factors :

Existing Competition

The Indian food market today has many established global chains, who have opened their

restaurants at major cities in the country. It is only those restaurants who have built their image

over many years in the country i.e., Nirulas and world famous brands such as McDonalds are

the ones to sustain themselves in the market. Any other restaurant below this caliber would not

have the power to fight these joints. Nirulas has the power to fight competition because it is not

identical to the MNC chains and has not duplicated their policies. Also as long as it continues to

deliver value to its customers it is unlikely to feel the heat of competition. McDonalds however

is new to the market but in a short period of time it has built a place for itself in the market by
 61

reaching the maximum number of audience in almost all income groups.

Substitutes Available

There are end number of substitutes available to the customer for fast food in the market. The

customer can choose from traditional Indian cuisine to special cuisine such as Chinese, Italian,

Thai etc. For the two fast food joints there must be more than a thousand restaurants to choose

from as substitutes. Even McDonalds burger could be a substitute for Nirulas Pizza or vice

versa. It all depends on the choice of the customer of what he wants to have.

Likely New Competition

Looking at the changing lifestyles and the increasing disposable income of the middle class, the

food market has enormous potential. McDonalds definetly will have problems in the future if

new multinational burger chains enter into the market. With this its market share will fall and it

could even become a non-player in the near future. However with its purchasing power pricing

policy it has dominated the middle class segment in the market. Until and unless some chain with

the same policy attacks the market, McDonalds does not have any threat from new burger chains

entering the market. For Nirulas however it is the variety and the location factor which can save

the chain from new competition.

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RECOMMENDATIONS

For the purpose of growth of each to the thee fast food restaurants i.e., Nirulas and McDonalds

certain recommendation have been given below :

McDONALDS

Variety : Mc Donalds should start considering new additions to its menu looking at the

expansion plan the company has lined up for India, it cannot do much until and unless it

makes new additions to the menu.

Being an international chain, there is scope for drive in restaurants in certain joints of Mc

Donalds. The new outlets, which the company plans to come up with, it would be an

excellent way of introducing something new in the country.

NIRULAS

Accessibility: Nirulas should look at more and more places like Destination Point and

Leisure bowl to expand its chain of outlets.

Standard of hygiene: People of India are becoming more hygiene conscious. Therefore

the management needs to become more hygiene conscious. The restaurant should start

providing with disposable spoons, plates etc., Mineral water should also be provided free of

cost.

Dcor: Any new restaurant that Nirulas plans to come up with should be spacious,

vibrant and give a pleasant look.

Services: Staff needs to be more efficient and friendly.

 63

Other than the variety provided by Nirulas a low calorie diet could also be added to its

menu. This would attract health conscience people into the restaurant thus improving its

customer base.

The companys plan of opening up of outlets in West and South East Asia should be

materialized as soon as possible as this would affect the image of the restaurant nationally.

Comman Recommendations for all: Overnight services could be started by a few joints of

Nirulas and McDonalds. Since overnight services are there at McDonalds restaurants in

certain parts of the world, it could start these services in India too. However these restaurants

can quote extra charges for their service after 12O clock midnight.
 64

SAMPLE QUESTIONNAIRE

Dear Respondent,

As a student of marketing, research study on fast food restaurants is being conducted. Your views

on the subject would be appreciated.

Q1: Do you like fast food?

(a) Yes (b) No

Q2: which fast food joint do you like?

(a) McDonalds (b) Nirulas (c) Both (d) others

Q3: How often do you visit your favourite fast food joint?

(a) occasionally (b) Monthly (c) Weekly (d)More than once a

week

Q4: Which all criteria do you consider while selecting a fast food restaurant?

(a) Price (b) Accessibility (c) Quality of food (d) Variety

(e) speed of delivery (f) Space (g) cleanliness/hygiene (h) Decor

Q5: What is your approximate expenditure per visit?

(a) Rs 100 Rs 200 (b) Rs 250 Rs 350 (c) Rs 400 Rs 600 (d) Rs 600 above

Q6: Between McDonalds and Nirulas which one would you prefer?

(a) McDonalds (b) Nirulas

 65

Q7: How do you come to know about the new menu items at your preferred joint?

(a) Newspaper (b) Tv ads (c) Friends/Family (d) SMS

(e) Online ads/e-mails

Q8: Can you recall the latest advertisement of your preferred joint?

(a) Yes (b) No

Q9: Can you easily differentiate between McDonalds and Nirulas?

(a) Yes (b) No

 66

APPENDIX - I

Percentage wise preferences

Assumptions

A visit occasionally implies once in two months.

A visit more than a week implies twice in a week.

Average expenditure per person in Rs. 100/- (by analysis of 0.2).

Keeping the above in mind weights of no of respondents can be given as:

More than

Occasionally Monthly Weekly once a week

1 2 3 4

Therefore expenditure incurred by 20 respondents at the stated fast food restaurants would be:

Nirulas

0 + (12x100) + [2x 2(100)] + [3x (100) ] + ]3x(100)]

= 0 + 1200 + 400 + 1200 + 2400 = 5200

 67

Mc Donalds

0 + [5x100] + [4x2(100)] + [ 4x8(100)]

= 500 + 800 + 3200 = 4500

.
 68

APPENDIX - II

Assessment of Frequency of visit 50 Respondents

Name More than Weekly Monthly Occasionally

once a week

Nirulas 7 6 2 3

Mc Donalds 12 9 7 4

Assessment of Preferences indicating favourable fast food joint

Name No. of Respondent % of Respondents

Nirulas 18 36%

Mc Donalds 32 64%

BIBLIOGRAPHY

Sources Refered

1. Internet : McDonalds Website

 69

Nirulas, Website.

2. Company Literature : McDonalds India Information Booklet

Nirulas Company Information Booklet,

3. News Papers : Economic Times

Dated - 15th September 1995

July 21st 1996

4. Magazines : A & M - Issue 15th February 1997

A & M - Issue 31st May 1998

A & M - 15th January 1995

First City - January 1997

5. McDonalds Restaurant Brochures

6. Nirulas Restaurant Brochures

7. Wimpys Restaurant Brochures