The Global Business

Strategy of
McDonald and how it
reached All the
Corners of The
World by
Standardization &
Adaptation.
 GROUP PROFILE
GROUP NAME: Bloopers

NO. NAME ID
1.
JAHIDUL ISLAM RAHAT 1391
2.
MD. RUHUL AMIN 1392
3.
ROKEYA TAMANNA LAIZU 2290
4.
NUSRAT JAHAN PRITI 2291
5.
JANNAT- E- HIUM 2294
6.
NANDITA RANI SAHA NITU 2295
7.
MD. ASHRAFUL ALAM APON 2299

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 TABLE OF CONTENTS

S.NO CHAPTERS PAGE

NO.
Introduction
1. 4
McDonalds corporation
2. 5
Ten strategies that are keeping McDonald's
3. barreling forward 6
The external environment and its effect on
4. strategic marketing planning of McDonald 8

5. Business Level Strategy 10

How it reached to the every corners of the

6. world 11

Marketing Mix
7. 12
Importance of PLC in McDonalds
8. 17
A perfect example of revitalizing a product 17
9. in decline phase

10. McDonald’s advertising 18

11. 18
Industry Analysis – The Five Forces Model
13. Micro environmental issues 20

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14. Macro environmental issues 22

15. SWOT analysis for Mcdonalds in India 23

16. Customer characteristics 23

17. Competitive Strategies 24

18. Diversification 24

19. Standardization & Adaptation 25

20. Performance 25

21. Marketing mix 4ps 26

22. Mcdonald’s in Tokyo, Japan 27

23. Focal points of Japanese market 27

24. Unique characteristics of the Japanese 28

market
25. Meeting the demands of local culture by 29
standardization & adaption
26. A strategy of lowering prices in Japan 29

27. Conclusion 30

28. Bibliography 31

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INTRODUCTION

The McDonald’s Corporation is one of the most successful global restaurant chains around
the world. They have used effective management and global expansion strategies to enter
new markets and gain a share of the foreign fast food market. This assignment presents how
McDonald’s has achieved this enormous success, its best practices in the global food
industry, international growth trends and challenges, and effect on its operating income and
number of increasing restaurants across the globe from their expansion in foreign countries
with proper standardization & adoption process. We basically focus on McDonald’s United
States, India & Japan market here & how they achieve success though standardization &
adoption process. Overall, the assignment provides a discussion of how McDonald’s enters
into a foreign market and what strategies it uses in order to be a dominant leader in the fast
food industry.

Although there has been considerable examination of the perceived global success of
McDonald, I have included in my assignment, apart from the global strategies McDonald has
used in entering new markets and shutting down the rival’s business, how it gained advantage
by selling franchise. Knowing the external environment is crucial for the success/downfall of
any business corps, how McDonald is impacted due to the several environmental factors
across globe where standardization & adoption is key ingredient.

The assignment throws light on the growth pace of the company right from its birth. It will
benefit any reader in understanding McDonald’s success. Through this report, the operating
profit of McDonald is highlighted in terms of its franchise business and own restaurants. It
also shows the number of increasing restaurants across the continents. The next section
incorporates a review of the literature and presents the research problem. Then, the
methodology used to conduct the study and the findings are explained. Lastly, the theoretical
and practical ramifications of this study are discussed followed by conclusion.

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McDonald's Corporation
The McDonald's Corporation is the world's largest chain of hamburger fast food restaurants,
serving around 68 million customers daily in 118 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.

McDonald's Corporation revenues come from the rent, royalties, and fees paid by the
franchisees, as well as sales in company-operated restaurants. In 2012, McDonald's
Corporation had annual revenues of $27.5 billion, and profits of $5.5 billion.

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.

McDonald's restaurants are found in 118 countries and territories around the world and serve
68 million customers each day. McDonald's operates over 32,000 restaurants worldwide,
employing more than 1.7 million people. The company also operates other restaurant brands,
such as Piles Café.

Focusing on its core brand, McDonald's began divesting itself of other chains it had acquired
during the 1990s. The company owned a majority stake in Chipotle Mexican Grill until
October 2006, when McDonald's fully divested from Chipotle through a stock exchange.
Until December 2003, it also owned Donatos Pizza. On August 27, 2007, McDonald's sold
Boston Market to Sun Capital Partners.

Notably, McDonald's has increased shareholder dividends for 25 consecutive years, making it
one of the S&P 500 Dividend Aristocrats. In October 2012, its monthly sales fell for the first
time in nine years.

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Ten strategies that are keeping McDonald's barreling forward
But just being McDonald's isn't enough — it's doing a lot, domestically and globally, to stay
ahead---

 Focusing heavily on emerging markets

McDonald's may seem like it's already everywhere, but it hasn't quite saturated the
world yet. Over the past few years, McDonald's has made a heavy push toward
emerging markets. And not just trendy markets like China and India, but places
previously devoid of the Golden Arches, like some African nations. Sales are up 8.1%
from last year in Asia/Pacific, Africa and the Middle East. Still, China is McDonald's
most important international front, where it's battling Yum brands whole heartedly. It
plans to have a whopping 2,000 stores there by 2013.

 McCafé has been a big win

The McCafé has been demolishing expectations ever since the company started
revving up its marketing machine for it in 2002. Now, there are 1,300 McCafé's
worldwide in dozens of countries, and it just keeps growing. Its latest moves have
been to Ukraine, along with a national rollout in Canada. The McCafé menu has been
growing as well, adding non-coffee items like smoothies over the past couple years.

 Offering a wider variety of food to attract more segments

It's not just snack foods and desserts that it's expanding into — there's a whole lot
more. McDonald's is trying to get more consumer segments to chomp up its offerings
by expanding non-traditional menu items, while keeping its core base of burgers-and-
fries eaters. Many of the new items help combat McDonald's ever-present negative
image of unhealthiness, though it will likely never shake it fully. For instance,
oatmeal has been a big hit for McDonald's, serving as a replacement for high-calorie
breakfast sandwiches. Additional types of salads have worked too, for people looking
for a somewhat healthier option.

 Delivering food to customers in places that demand it

Though not traditional in the US, McDonald's delivers in many markets around the
world, and the company cites it as one of the reasons it has been so successful in those
markets. Delivery is a common practice, even for fancy restaurants, in many Asian
and Middle Eastern cities, so McDonald's is just meeting the cultural norms of its
surroundings.

 Making its stores more attractive to get customers in

McDonald's is improving its physical locations to make them more appealing to
customers, and it seems to be working. In China, it's trying out a "Less is More"
concept design, which goes with softer colors and cushioned seats. Also, over 95% of
McDonald's locations have extended their hours now, and it has several thousand
stores that are open 24/7. Free Wi-Fi is now available in McDonald's restaurants

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across the world, and lately it has made a big push to get flat screen TVs in the stores.
It's even starting up its own TV channel with original programming, called McTV.

 Increasing its offering of snack items

Americans love to snack on stuff, and McDonald's has recognized that demand and
answered with a plethora of new products. Smaller items like wraps, along with an
expansion into desserts (which it plans to ramp up soon), have made their way onto
the menu and have done well.

 Shortening its menu cycle

The most prominent example of this is the McRib, making an unprecedented second
national appearance in two years. It took front and center this fall and was incredibly
successful, driving a 4.9% gain in same store sales. Special edition McFlurries have
been in and out of menus too, along with limited time smoothies. This sort of menu
cycle is a move toward a more European model, which swaps out new menu items
every six-to-eight weeks, reports Nation's Restaurant News.

 Importing more of its successful niche products internationally

McDonald's has an incredible variety of culture-specific food items across the planet,
and most wouldn't stand a chance internationally. But some are winners, and the
company has started to test them out in other markets. One example is Australia's
Chicken McBites (think popcorn chicken), which are now being tested in Detroit,
Michigan. Then there are full-size wraps, common in Europe, which are being tested
in new markets like the U.K. They have so many of these products that some are
bound to be hits, it just has to find the correct area to expand them to.

 Expanding its dollar menu to breakfast

McDonald's fired up a breakfast dollar menu in 2010 as the economy continued to
slump, which supplemented its existing dollar menu for its usual fare. It has been
working well thus far, capitalizing on Americans' attraction to the super-cheap in
times like these. But even before that, its breakfast business was growing, just at a
lower rate than normal. Competitors like Burger King and Dunkin' Donuts have made
their own types of dollar menu, but nobody has had the widespread success that
McDonald's has enjoyed.

 And it hasn't been scared to take anybody on

Many of these expansions drew looks from brand new competitors, because
McDonald's was encroaching on their territory. In most cases, McDonald's leveraged
its size and brand to attack head on. McCafé is the most obvious example, and it has
performed admirably against Starbucks and Dunkin' Donuts. Its upcoming expansion
into desserts is likely to concern Dunkin' even more, along with niche dessert chains
like Dairy Queen. But there's plenty of risk in doing this. As it opens it to more fronts
than ever, it has bigger, powerful brands breathing down its neck, and even more
complexity to worry about in its internal operations.

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The external environment and its effect on strategic marketing
planning of McDonald
 Political/legal factors
Political environment consists of the government activities covering the economy and
its subdivisions. Ecological regulation, business margins, tariffs, income tax policy,
labor rule and political constancy are some of the main components of it. The safety,
schooling, and infrastructure of a nation are also the concern of government.
While operating globally, different types of taxes cover up a significant company
obligation. Countries with strong consumer protection laws may associate great costs
if there is a violation in product quality or service through litigations and lawsuits.
For instance, in 2006, a lawsuit against McDonald’s that it misinformed about
ingredients of french fries and hash browns. French fries and hash browns are fried in
oil consisting of 99% vegetable oil and 1% natural beef flavor. Casein (a dairy
product) and wheat bran were partly used to make the beef flavor. But before serving,
McDonald's again fries the potatoes in 100% vegetable oil. Plaintiffs charge that
McDonald's deceived by claiming French fries and hash browns gluten, dairy and
wheat free.
However, these lawsuits have cost a huge for paperwork, diagnosing customers, court
and legal fees and also the market image of McDonald's goodwill. So it is very clear
that McDonald's as a food provider is much more affected by these political, legal and
customers safety issues. On the other hand, health experts and consumer advocates
blame McDonald's for contributing to health issues of heart attacks, diabetes, high
cholesterol and obesity.
Countries with flexible consumer safety laws are a source of extra provision for
McDonald’s. Differences in individual country’s government policies extremely
influence McDonald’s international operation. Favorable and stable political situation,
legislation, legal procedure and sustained use of logo are just an indispensable part of
the business success. However, McDonald’s is proved adequate in favorable
legislations and right use of logo.

 Economic factors
Economic expansion, the rates of interest, exchange and inflation comprises the
overall economic environment. They extremely affect a business’s function and core
decisions. Cost of capital is the main determinant of a business escalation and growth.
This cost of capital often fluctuates with the movement of interest rates whereas
exchange rates affect the cost of exporting and price of imports.
McDonald’s practices hardship in countries that is hit by inflation and fluctuations of
exchange rates. As a market leader, McDonald’s most often focuses very high target
market which works as an additional advantage as these markets are rarely unstable.
The major portion of their cost comes from gas prices as their main transportation
system to move 100% of the products runs by gas guzzling trucks.
The purchasing power of consumers is determined by the economic growth of the
particular state. For instance, in Pakistan, McDonald’s food prices are at higher rate
than the local restaurants always. But majority of the Pakistani’s live in the middle
class group who obviously consider McDonald’s as unaffordable at regular basis. For
this tendency of people and economic downfall of recession, McDonald’s profit might
have declined if people continue to consider it as luxury.

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  Product lines and pricing
McDonald's first and foremost sells hamburgers, french fries, soft drinks, breakfast
items, various types of chicken sandwiches and desserts. In most markets,
McDonald's also offers salads and vegetarian items, squashing and other unique local
products. Soup type products are served only in some selected countries like Portugal
etc. And for this special deviation from its standard menu helps McDonald’s to be
popular among the countries other than its homeland. Sometimes this difference is
employed either for regional food taboos and religious prohibition like the one in
India as no beef is served there. In India, non-vegetarian menu contain s chicken and
fish items only. This strategy is also used to serve food with which the local people
are much familiar such as McRise in Indonesia. McDonald’s offers several flavors of
Mcflurry ice cream from a mix of M&Ms to Oreo cookies.
Much is talked about McDonald’s pricing strategies and its menu price differes in
different countries. Also the higher price in the local restaurants very often becomes
burden for the customers. For instance, when monthly income of key city inhabitants
in China just ranged from 120 yuan ($17.54) to 130 yuan then Big Mac of a 10 yuan
and a 5 yuan double-cheese burger were not reasonable for the majority. So it is a
threat for McDonald’s where other competitors are focusing much on it to grab more
customers. So McDonald's can develop a good, healthy and affordable range of
snacks for people who can’t afford a full meal.

 Customer’s preference
With a brand value of $49.5 billion, McDonald’s has grown 49 percent in worth and
now is the most favored brand in the fast-food group. McDonald’s innovative choice
and giving importance to the people’s ever-changing demand with due progress,
technology and development is the key to McDonald’s present situation. Now a day
fast food cafes are becoming the dining hall of the majority for superior child-size
menus, playing grounds and impulsive branding crusades.

 Competitors
One of the environmental factors surrounding McDonald’s is the fierce competition
from the competitors. There is an intensive price war, extreme battle of innovations,
breakthrough and serious promotions and advertisements. Different competitors in the
global fast food industry are now just going mad about increasing competition that led
to aggressive pricing strategies amongst the large brands. Competitions also pushed
them to increased menu diversification, product developments for increasing sales and
market share and at least maintaining current market share.

 Social factors
Population growth, career opportunity, cultural distinctiveness, health of the masses
and social security build the ground of societal factors. McDonald’s food products
demand and its operational strategies differ greatly to cope with the movement of
these factors.
At the time McDonald’s started in Pakistan, fast food was not very popular to
Pakistani people. With the passage of time and the changes of the eating habits and
lifestyle, fast food got its acceptance. McDonald’s also keeps providing Halal food to
consider the religious and cultural issues. But at times anti American feeling and

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 prohibition of American goods affects McDonald’s. McDonald’s customized its menu
in accordance of the Pakistani tastes.
McDonald's does not offer bacon in Pakistan as people do not eat it. Increasing
employment through joining with many ethnic groups and the alliance certification
program with a cup of tea for everyone at 1200 McDonald’s in UK are also some
mentionable social duties by McDonald's. In 1974, McDonald's established a charity
house named Ronald McDonald House that helped over 10 million people since
incorporation.

 Technological factors
Technological factor’s main elements are R&D, computerization, technology
motivation and technological change rate. Technological movements affect
expenditures, excellence, and innovation and machine made food is more hygienic.
McDonald's employee’s quick service and quality food standards are the result of its
high-tech operating procedure. Customized database management system and
computers and smart cashiers are used in McDonald's to speed up serving and
operating excellence.

Business Level Strategy

A brief overview of Strengths, Weaknesses, Opportunities and Threats facing the company is
as follows----

Strengths

The company’s strengths include the brand value and brand recognition that it has built over
the years. The company’s employees and human resource policies are some of the most
recognised and renowned in the world, a fact that has been made evident by the efforts that
the company has taken in providing “unique opportunities we provide employees”, as
proclaimed by Richard Floersch, Executive Vice President and Chief Human Resource
Officer, on two of its programmes that would celebrate top-performing restaurant employees
and its world class training and people development” (Marketwatch, 2012) on the occasion of
London Olympics, 2012. Apart from brand and people, its world-wide distribution system
and its price leadership and market share are the strengths. Corporate branding, inbound and
outbound logistics, operations, sales and marketing are all strengths that the company has
been thriving on.

Weaknesses

Weaknesses involve lapses in services and flaws in terms of customer satisfaction, since this
is an industry that emphasises on volume and speed. Another contrast is the difference
between standardisation and customisation – to focus on a world market and to strive for
standardisation is a perplexing mix that should be enough of a trouble to manage. The
abundant lawsuits that have dented the brand image, and the trend that goes towards healthier
eating habits to get fit and get in shape are factors that would not go well with the product
ideology of the company. Further, the high staff turnover rates that are trademark aspects of
the fast food industry are things that should give sufficient botheration for the human
resource management department.

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Opportunities

Opportunities for McDonald’s lie in the form of moderate to low bargaining power of
suppliers and the low bargaining power of buyers. This is a mass market industry that focuses
on price and product turnover than on differentiation in terms of product and service delivery.
An emphasis on operations and supply chain management go well with the brand image and
the product and delivery mechanisms. The key advantage is the franchise model and the
extensive reach that the model has given the brand through global distribution.

Threats

This is a market that has low entry barriers and low exit barriers, hence, the threat of new
entrants has always, and will always be, high. Further, there is also a moderate threat of
substitute products. One significant threat is that the company cannot afford to have any
lapses in its human resource management practices, which could risk the company’s
employability levels. The range of lawsuits that are pending and are still coming up against
the company are other aspects that need to be managed not just by the legal team but also by
the product as well as research and Development departments.

The strategy adapted by the company is certainly one of cost-based leadership rather than one
of differentiation. In a mass market industry, the company that manages its supply chain and
its operations, stresses on sales and marketing to increase turnover, and keeps its cost down,
would be able to lead the industry, as has been amply demonstrated by McDonalds.
Differentiation and value addition in product and service standards would only add to costs
and reflect on drop of profit margins and hit the bottom line.

How it reached to the every corners of the world

In 1940, McDonald’s operated only one QSR but today has restaurants at 33,000 locations in
118 countries. McDonald’s utilizes a variety of international market entry modes for rapid
expansion: sole ventures, franchising, master franchising and joint ventures. 15% of
McDonald’s branded restaurants are operated as sole ventures. This involves a significant
capital commitment but allows the highest degree of control. Most restaurants are operated as
franchises, allowing rapid expansion without high capital requirements. Franchising has also
allowed McDonald’s to benefit from local knowledge, demonstrated by the menu differences
by country. The combination of the master franchisee’s local knowledge and McDonald’s
brand and model has been a successful formula, allowing expansion whilst maintaining
significant control. McDonald’s has also expanded internationally through joint ventures.
Again, this allows for rapid expansion and utilizes the knowledge of firms in closely-linked
markets. Since 14 both firms invest equity in the project, there is a lower financial risk for
both parties.

Using the 4P’s of marketing mix, McDonald earned business success at every part of the
globe.

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Marketing Mix
Marketing mix must focus on the product, pricing, promotion, and placement of item in order
to make it successful. Marketing strategies must feature customer orientation, input, and
accessibility in the fight to the top of the market. McDonald’s is no different. One can
recognize that McDonald’s primary target market is children ages 3-11 and their parents.
McDonald’s understood that the parent was making the purchasing decision, most likely
based on price.

What McDonald’s marketing executives did was ingenious. They put a $.50 toy in with the
hamburger, french fries, and drink and gave it a special name, the “Happy Meal”. Then
McDonald’s marketed the Happy Meal to the kids. If you have you ever asked your child
where to buy a Happy Meal, they will tell you that there is only one place you can buy one,
and that is at McDonald’s. The year in which some McDonald’s Favorites were Introduced
are:-

1955 – Hamburgers, cheeseburgers, fries, shakes, soft drinks, coffee and milk
1963 -Filet-O-Fish
1968 -Big Mac and Hot Apple Pie
1973 -Quarter Pounder and Egg McMuffin
1974 -McDonaldland Cookies
1977 -Breakfast Menu
1978 -Sundaes
1979 -Happy Meals
1983 -Chicken McNuggets
1986 -Biscuit Sandwiches
1987 -Salads
1998 -McFlurry Desserts
1999 -Breakfast Bagels
2000 -Chicken McGrill and Crispy Chicken
2001 -Big N’ Tasty
2003 -Premium Salads, Newman’s Own® salad dressings and McGriddles
2004 – Chicken Selects® Premium Breast Strips

McDonald’s restaurants have a variety of strategies that apply to product, placement,

promotion, and price that makes them one of the most successful, well-recognized
organizations in the world.

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Product Strategies

McDonald’s marketing strategies should be looked at historically in order to see the larger
picture of the firm’s success. There have been so many strategies since the inception of the
firm that it is difficult to account for them all, the two most memorable are the development
of the “Golden Arches” and “Ronald McDonald”. These two icons have given customers a
mental image of what to look for when they want quality food for a low price fast. The firm
revolutionized the fast food industry and positioned itself as the market leader with low-
priced, quality food and provided an entertaining atmosphere for the children. These things
were what that the market wanted at the time and the firm answered in spades.

The perceived secret of McDonald’s success is the willingness to innovate, even while
striving to achieve consistency in the operation of its many outlets. For example, its breakfast
menu, salads, Chicken McNuggets, and the McLean Deluxe sandwich were all examples of
how the company tried to appeal to a wider range of consumers. The long history of
innovation and experimentation resulted in new profit centers like Chicken McNuggets and
the breakfast menu. Innovation and experimentation also produced some disappointments
like the McLean Deluxe, but inevitably experimentation in limited outlets provides
McDonald’s a way to retain its key strengths-quality and consistency-while continuing to
evolve. The use of franchising, again, provides various perspectives that, in turn, lead to
innovation for products and solutions. Franchisees agree to operate their restaurants in the
“McDonald’s way” but there remains room for innovation. Many ideas for new menu items
come from franchisees responding to customer demand. Developing new products is crucial
to any business even those that successfully relied on a limited menu for many years. As
consumer tastes change, menu innovation injects enthusiasm allowing the firm to explore
markets previously overlooked or ignored. The “Egg McMuffin”, for example, was
introduced in 1971. This item enabled McDonald’s to accommodate consumers of the
breakfast market. Filet-o-Fish, Drive-thrus, and Playlands were all products or concepts
developed by franchisees. McDonald’s tries a few new concepts simultaneous in different
parts of the country to find the most promising new menu item. Those with the most potential
could be rolled out further, while the ineffective ideas could be left to die quickly. This
strategy may be expensive, but the potential to unleash new areas of growth in a maturing
market seems to be right in line with what McDonald’s has always done.

In addition to the local flavors that have been created in the US, McDonald’s international
restaurants have been conforming to local, regional, and ethnic tastes, too. In a recent
McDonald’s case study this was explained further: “For example, ‘Maharaja McBurger’ is a
vegetarian burger marketed in India. The special requirements for ‘Kosher’ foods are
followed in Israel. Similarly, McDonald’s offers ‘Halal’ food in Muslim countries such as
Saudi Arabia, UAE, Kuwait, Indonesia, Malaysia, Pakistan, and Bangladesh. During
promotions, McDonald’s also introduces several other products. For example, its ‘Prosperity
Burger’ is popular in China, Taiwan, Hong Kong, and Singapore at the time of the Chinese
New Year celebrations. In order to respond to the growing phenomenon of health
consciousness, McDonald’s has moved in favor of lean ground beef, 100% vegetable oil, 1%
low-fat milk, low sodium, and low fat. This product strategy shows that McDonald’s is
interested in becoming part of the culture and is looking for ways to appeal to the market
internationally.

McDonald’s menu is based on five main ingredients: beef, chicken, bread, potatoes and milk.
Their main products are hamburgers, chicken sandwiches, fries, and beverages. In addition,

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they serve a variety of breakfast items and desserts. Every McDonald’s is uniform; you know
exactly what you will get no matter what store you go in to. Although McDonald’s has
thousands of restaurants around the world, it standardizes menus and operating procedures in
these restaurants to insure consistency throughout. To maintain consistency in the current
menu while the firm tests new products to expand the product line, McDonald’s relies on test
marketing new menu items in pilot locations. New products are rigorously market tested so
that the franchisee will have a reasonable idea of its potential before it is added to the menu.
The introduction of new products, which have already been researched and tested,
considerably reduces the risk for the franchisee. The franchisees additionally benefit from the
extensive national market research programs that assess consumer attitudes and perceptions.
What products do they want to buy and at what price? How are they performing compared to
their competitors?

This approach allows the firm to identify which items are likely to prove popular with
consumers while ensuring that the company can deliver new products with consistent quality
nationwide. McDonald’s already has a history of doing this so it will not require major
changes to its operations strategy-at least initially. If the product line-up gets too large, then
the task of maintaining quality becomes exponentially harder. The trick is to consider how to
eliminate some of the existing menu items when you introduce new ones, while making sure
the staff is fully trained in how to execute these products successfully.

McDonald’s serves the world some of its favorite foods – Fries, Big Mac, Quarter Pounder,
Chicken McNuggets, and the Egg McMuffin. To this end, McDonald’s had done well with a
limited product range. Declining per unit sales and competitors gaining ground, may indicate
that McDonald’s menu needs a face-lift. One way to do that is by inserting a couple of new,
highly promoted menu items. This would refresh the product menu and provide new,
satisfying experience for dinner consumers.

Placement Strategies

McDonald’s focuses on store placement and are always looking for the best locations. This
strategy created some weakness in the last 10 years because it seemed that too many stores
were put in some areas, cannibalizing sales from the other McDonald’s. The company has
also made convenience a focus, not only through how fast it serves customers, but also in the
location of its outlets. Freestanding restaurants are positioned so that you are never more than
a few minutes away by foot in the city or by car in the suburbs. In addition, McDonald’s is
tucking restaurants into schools, stores, and more.

Because McDonald’s has pretty well saturated the U.S. market, it’s only real opportunities for
growth lie abroad, where the competition is not so cutthroat or by introducing new restaurant
concepts under brands other than McDonald’s. The organization’s overall objective is to
increase market share. In this instance, the focus is purely on localization with different
strategies for different countries. Pricing could not possibly be standardized across the globe
without alienating many countries with poorer economies, thus defeating the initial objective.
McDonald’s set an appropriate price for their product by looking at its competitors in each
country. McDonald’s is attempting to localize marketing communications due to the
realization that it couldn’t possibly appeal to all countries at the same time. The firm sees the
necessity to “brand globally, act locally”. For example, in China it was recognized that
advertising on television would be a waste of money because commercials between programs
are generally ignored. Instead, McDonald’s uses newspapers and magazines to promote its

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image. Similarly, in East Asia, McDonald’s targets children in order to gain optimum results.
Of course, the ultimate message (brand) is the same; the medium is what is strategically
modified.

Pricing Strategies

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. McDonald’s strategy is to offer quality food quickly to customers at a good value. The
pricing structure for McDonald’s over years has supported this message. The company strives
to differentiate itself from other fast food restaurants by offering a variety of menu items that
appeal to a variety of people from those who just want great hamburgers, to those who just
want a quick healthy meal. McDonald’s differentiates itself by offering a dollar menu,
combination meals, and a free toy with Happy Meals.

McDonald’s, over the years, has also ran many promotions to increase traffic or product
sales. For instance, the most recent roll out has been the 2004 Chicken Selects premium
Breast Strips. Right now, you can go to your local McDonald’s and “try them free.” With this
new product is offered a variation of the “usual” sauces for the Chicken Nugget – a Chipotle
Barbeque sauce is most commonly advertised. Another promotion was the “Campaign 55″
where diners could buy a featured sandwich, like the Big Mac in April, for 55 cents when
purchased with fries and a drink. This campaign wasn’t as successful as the fast food giant
found would have hoped.

Promotion Strategies

McDonald’s knows that some customers go to its stores to take a quick break from their day’s
activities and not because McDonald’s made the food ten seconds faster than their
competitors could. Therefore, McDonald’s marketing executives then put together the
phrase, “Have you had your break today?” They continued to develop this idea with “You
deserve a break today,” and now are in the “I’m Lovin’ It!” mantra. “I’m Lovin’ It!” doesn’t
seem to have as much punch as the earlier catch phrase, which still seems to be the favorite.
McDonald’s sees the use of these catch phrases and the use of the Golden Arches as a very
successful way of differentiating the restaurants from other fast food competitors.
McDonald’s has taken price competition out of the picture because the customer feels they
have gotten quality, convenience, service, and value – and McDonald’s still makes you feel
like you are getting a break in your hectic day. Creating catch phrases are only one kind of
promotion, and McDonald’s uses many kinds of promotions to keep the restaurants at the top
of the industry.

With the rise of health consciousness it has become more difficult McDonald’s to compete
because their reputation brands them as cheap food served fast. The firm’s response to
obesity claims against the organization and other unfavorable public sediment is to add
healthier items to their menu and promote and offer health-conscious alternatives to the
“would you like fries with that” legacy. In addition, McDonald’s has modernized their

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advertisements, pamphlets, and website to include nutritional information and addressing diet
restrictions. Breaking the unhealthy association is difficult on its own, but with media and
movies such as “Supersize Me” adding to the fray, McDonald’s has had to look for
alternative strategies to keep consumers happy.

Another promotional strategy McDonald’s uses is the huge investment in sponsorship. This is
also a central part of the image building process. Sponsorship of the 1998 football World
Cup, the Premier League and the European Championships increases awareness of
McDonald’s brand. However, McDonald’s still follows Ray Kroc’s community beliefs today,
supporting the Tidy Britain Group and the Groundwork Trust, as well as local community
activities. McDonald’s has become a known community partner with Ronald McDonald
Houses across the nation for the use of families whose children are hospitalized and getting
treatment far from home. This organization has created an image of partnership and
community investment with these and other kinds of philanthropic activities.
Determining which way to market McDonald’s and its products is a very important decision
that can either cause products to fail or take flight. These same decisions must be made in
regards to the marketing of the company as a whole. Strategy is the name of this game.

In a Nutshell

McDonald’s marketing mix is strategic because of the diverse approaches that are used. First,
in identifying the “four P’s” of marketing addressed earlier (product, price, promotion, and
placement), research shows that McDonald’s is very careful in making decisions that effects
each area and/or how each area effects the other. McDonald’s is concerned about how the
firm will fulfill the needs and wants of its customers and in the activities associated with
maintaining the relationships with its stakeholders. McDonald’s stakeholders include
customers, franchisees, suppliers, employees, and the local communities surrounding them.

McDonald’s has shown care for customers through the decisions to add more healthful foods
to the menus, by changing how products are packaged or how foods are prepared, and by
philanthropic contributions and sponsorships. The restaurant has developed competitive
advantages in the industry of serving quality fast food at a low cost. In addition to these
decisions, the development of the Golden Arches or Ronald McDonald has provided
consumers with memorable icons that are associated with quality, service, and value, just like
the McDonald brothers and Ray Kroc intended.

McDonald’s faces some difficult challenges in moving away from the fast food king to a
more health conscious provider for customers who care about what they eat. The keys to its
future success will be maintaining its core strengths-an unwavering focus on quality and
consistency-while carefully experimenting with new options. The company’s environmental
efforts, while important, should not overshadow its marketing initiatives. Though there are
many opportunities for this fast food giant, McDonald’s must keep the strategic nature of its
marketing efforts to stay on top and provide what customers want.

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Importance of PLC in McDonalds
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.

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 revitalizing 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

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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.

McDonald’s advertising
McDonald’s has for decades maintained an extensive advertising campaign. In addition to the
usual media (television, radio, and newspaper), the company makes significant use of
billboards and signage, sponsors sporting events ranging from Little League to the Olympic
Games, and makes coolers of orange drink with their logo available for local events of all
kinds. Nonetheless, television has always played a central role in the company’s advertising
strategy. To date, McDonald’s has used 23 different slogans in United States advertising, as
well as a few other slogans for select countries and regions. At times, it has run into trouble
with its campaigns. This “image” or “reputation” advertising has become a trademark of the
company and created many memorable television moments and themes, including:

McDonald’s is Your Kind of Place (1967)

You Deserve a Break Today (1971)
We Do it All for You (1975)
You, You’re The One (1976)
Nobody Can Do It Like McDonald’s Can (1979)
Renewed: You Deserve a Break Today (1980 & 1981)
Nobody Makes Your Day Like McDonald’s Can (1981)
McDonald’s and You (1983)
It’s a Good Time for the Great Taste of McDonald’s (1984)
Good Time, Great Taste, That’s Why This is My Place (1988)
Food, Folks and Fun (1990)
McDonald’s Today (1991)
What You Want is What You Get (1992)
Have you Had your Break Today? (1995)
My McDonald’s (1997)
Did Somebody Say McDonald’s (1997)
We Love to See You Smile (2000)
There’s a little McDonald’s in Everyone (2001) – Canada Only
i’m lovin’ it (2003)

Industry Analysis – The Five Forces Model

A brief industry analysis is done using The Five Forces Model (Porter, 1980, P. 4) to reveal
the state of affairs in the fast food industry as follows:

Potential Entrants – Threat of New Entrants – High

The threat of new entrants in the fast food industry is thought to be high, considering the
aspects such as ease of product distribution, product differentiation and standardization, the
difference made by economies of scale, entry barriers and switching costs. Since the majority
of fast foods outlets tend to work on the franchise model, expansion into new markets is easy,
considering that the fixed costs required for expansion tend to be low. With high levels of
standardization and with nothing significantly much added in terms of value, price is a major

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factor of consideration rather than product differentiation. Switching costs for buyers is
negligible, though there is some room for brand value and brand recognition, and the scope
for price wars in terms of retaliation from existing players to ward off new entrants. In
general, with low entry barriers into the industry, threat of potential entrants is considered
quite high.

Substitutes – Threat of substitute products – Medium

The fast food market may have built its brand value over time with price, some differentiation
and vigorous marketing activity, but there is no denying the fact that there are a lot more
products out there in the market, focusing on the same selling point of convenience and speed
as the fast food market does. Right from the whole range of frozen products along the
supermarket aisles that offer the convenience of simple reheating for consumption to the
increasing research and development that goes into the food industry to provide products that
are easier to cook and healthier to eat, there is a growing threat of substitute products that is
out there in the market. However, the range of products that are coming up as substitutes may
not match the prowess of brand value of global fast food chains, nor could they match up to
the combination of price leadership and ease of consumption, where people would just have
to walk in and not even heat stuff up. Hence, the threat of substitute products could be
considered to be medium.

Bargaining power of Suppliers – Low to medium

The scale offered by global presence in the large food chains might give some leverage for
the organizations to wield considerable influence over suppliers. However, in fast food, it is
not just the products but also, most definitely, the price that drives business. And there may
be limited scope for organizations to keep squeezing their suppliers, forcing lower prices out
of them, in an era of inflation and volatile prices of the raw materials involved in the industry.
Further, suppliers for the food industry also have alternative avenues of sales available to
them in the form of competitors who are growing in numbers in the industry. Hence, the
bargaining power of suppliers of raw materials for the food industry could be seen as being
low to medium.

Bargaining power of Buyers – Moderate

In this case, buyers have the advantage of having virtually no switching costs – when they are
not satisfied with brand A, all that they need to do is to walk through the doors and enter the
doors of brand B. High levels of competition in the industry and low switching costs augur
well for buyers. Further, the price elasticity of demand is also considered to be high, since
consumers are not really dependent on fast food as they may be for, say, bread and butter.
Given that fast food tends to be optional rather than compulsive, bargaining power of buyers
is high. However, this is an industry that deals in volumes, where there may not be much lost
just because one customer walked out of the door. The demand for fast food is not going to
go down anytime soon, despite all the signs and talk of recession and economic turmoil.
Hence, bargaining power of buyers could be considered moderate.

Industry rivalry – High

In terms of industry rivalry, existing rivalry is high. With the leaders in the industry being
McDonald’s and Burger King, there is no dearth of smaller competitors, given the low entry

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costs as well as the ease of expansion available through the franchise model. The competition
is indeed high when it comes to fast moving products that are at the low end of the price
chain, even as the established chains want to have their products and presence expanded. The
franchise model provides scope for such expansion and contraction, given that the labor
intensive industry could go in for additional staff or cut down on shifts, considering the
industry operates in terms of variable capacity to suit business needs. Thus, industry in the
fast food industry is high.

History of Mcdonalds in India

Mcdonald started their business in India in 1996.they start their business in India’s
capital Newdelhi. They choose a busy residential area Vasant Vihar.Mcdonald India is 50-50
partnership between Mcdonald USA corporation and Two Indians (Amit Jatia Hardcastle
Restaurant ltd Mumbai and Vikram Bakshi Cannaught plaza restaurant Delhi). Mcdonald as
of now has 210 stores in India. Majority of Indians are hindu and cows are sacred to them.
For mcdonalds to sell beef was almost impossible. The second majority population is muslim
and they eat Halal food. It was a big challenge for mcdonald’s as there were many protest
against mcdonalds. So Mcdonald changed their menu according to local community for
example they introduce Maharaja Mac instead of Bic Mac. Their menu is full of some spicy
products as we know that Indians use spice in their dishes in abundance. About 75 % of the
menu of mcdonald’s has been indianized and specially designed to woo Indians. Mcdonald’s
passed through some tough times but eventually managed to survive in that different culture
and different religious belief. Mcdonald by now has a big presence in India and are trying to
extend this ahead. Over all mcdonalds serve more than 47 million customers every day.

Macro environment
PEST analysis

Now I am doing PEST analysis of Mcdonalds. PEST analysis will give us details about
Political, Economic, Sociocultural and Technological analysis and effects of this analysis on
Mcdonald’s. I will be comparing both environments in USA and India.

Political influences

These are some influences a company doesn’t have any control of. USA politically is well
suited for business of Mcdonalds. Mcdonlad is very popular in USA. But government is
trying to control marketing of fast food because of health concern such as cholesterol,
cardiovascular and obesity issues. Creating good relations in terms of jobs and tax revenue
for government is a must to succeed in any market. India is very rich country in terms of
politics. The world largest democracy is present in India. But being nationalist country they
create some difficulties for foreign entries. Bhartiya Janata party is one of the leading Hindu
national party and they are against fast food chains as they want to see only vegetarian
restaurants in their country. Their party members always protest against fast food using meat
in their menu. Big risk for Mcdonald’s is BJP. Good news is that trends in India are changing
and young people like to eat fast food. Second good news is that India is changing slowly

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from nationalistic society to liberal mind set up and Congress party in power is the main
prove of liberal society. Mcdonalds expanded very fast in the last decade.

Economical influence

Economic variables such as currency exchange, employment, Interest rate, tax ratio and need
of international supply. Most of the organizations depend on foreign supply of raw material
for their products making. Currency exchanges also have a great impact on any organization.
USA has a High tax ratio, Low unemployment developed country, dealing in international
currency (Dollars).Business for Mcdonalds in USA is already established and low risked but
for India high unemployment rate, dealing in Rupees as currency and millions of people
living below poverty line is a concern for Mcdonalds. But India is having a booming
economy, low tax rate and availability of labor in abundance and development of middle
class society in India is a positive sign for Mcdonald’s future.

Sociocultural influences

Culture and society has a big impact on any organisation sales. Mcdonals in USA is serving
a liberal society. Religion has not much effect on Mcdonald’s. Culture is very much simple.
But in India society is very versatile. Though India is heavily populated but still Hindus don’t
eat meat, Muslim only eats Halal and they don’t eat pork. In India religion has a very big
impact on society. For Mcdonald it is a big concern. But in India life style is changing,
earning power is increasing, middle class is getting bigger in its size and people like to eat
outside in restaurants this has a very good impact on society.

Technological influence

One positive benefit of globalization was technological advancement. Althogh Mcdond’s

doesn’t use too many complicated machines in their food production but still they need
highly competitive technology. Technology is needed for example in supply chain
management, order taking, Inventory control, easy and quick payment procedures .Use of
technology can make management more reliable, effective and cost saving in short term as
well as long term. Customers happiness after getting what they are looking for on time and in
a disciplinary way make them come over and over again.in USA Mcdonalds use very
effective and expensive technology to be in a very competitive position to their rivals. In
India as franchises they use high technology. They use very good till system, good and
disciplined order taking and well managed staff who knows the proper use of technologies
inside the store.

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Micro environmental issues
Threats of New Entrance

Entry to a restaurant Business is very difficult. It is hard to make a prominent brand name.
There is high research and development costs and high cost of entry. Strong brands already in
competition make it more difficult such as Mcdonald’s, Pizza Hutt, Domino’s etc. New
entrants face a very high competition in the start of the business. In USA and India both
Entrance of new organization is very difficult as explained above.

Threats of Substitute

The substitutes in this industry are very high. People can choose variety of products they can
either choose Burger King, KFC, Indian Cuisine, Indian local shops, Indian Vegetarian
restaurants. The same situation is faced by Mcdonalds in USA and all over the world.

Bargaining power of customers

Bargaining power of customes refers to pressure a customer can exert on a business to get
good quality of food, good customer service and low price. Bargaining power of customer in
this industry is low. Mcdonalds provide a standard service, one price strategy and quality of
food. Customers have low bargaining power throughout the world in food industry.

Bargaining power of supplier

Bargaining power of buyer in this industry is low. Situation can change if the main
ingredients are not available. But with Mcdonalds simple menu and working with many
supplier, they are not facing a big threat.so the bargaining power is relatively low.

Rivalry with in the organization

Fast food restaurant industry is very competitive. The competition is as high as all the
organizations want to get hold of customer base. Food industry all over the world has the
same criteria because there are many small businesses operating in abundance and also top
brands. Mcdonald’s knows about the customers taste and preferences all over the world.so
they started Mccafe (morning breakfast).so Mcdonald’s is providing quality food from early
morning till late night in order to get competitive edge in the market.

SWOT analysis for Mcdonalds in India

SWOT analysis is a strategic planning method used to evaluate strength weaknesses,
opportunity and threats involved in a project or in Business. SWOT analysis will give us a
quick review of an organization current status.

Strength

Mcdonald’s is a market leader in the fast food industry. Mcdonald’s has a very strong brand
image. Mcdonald has expanded its business to more than 125 countries with more than 33000

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outlets throughout the world. Mcdonalds has one competitive advantage and that is Strategic
location. In India they are located in busy shopping malls, Airports and busy drive through.

Weaknesses

Mcdonald’s has created very successful brand image but the market segment is too focused
on kids. Mcdonald’s is often related to unhealthy food and obesity. Employee turnover rate is
so high. These all are weaknesses of Mcdonald’s in the world and India in particular.

Opportunity

Mcdonald’s can introduce healthy food consisting of low calories items. They should put
more efforts in Reseach and Development Management should try find ways to reduce food
wastage which leads to cost control. New products with different variety should be
introduced to capture the market.

Threats

Mcdonald’s is facing major competition from its rivals KFC and Burger King all over the
world. In India local curry shops are offering great challenge to mcdonalds. Company rapid
growth has made Mcdonalds very vulnerable to other countries economic slowdown. Press
associating Mcdonald’s with obesity destroys Mcdonald’s image. Mcdonald’s in the past has
been sued for its unhealthy products. Mcdonald’s should try and solve these problems by
investing heavily and effectively in research and development.

Customer Characteristic
India is the second most populated country in the world. It has 28 states and almost 4 times
the population of USA. India has more than one billion population. Three fourth of Indias
population lives in urban areas. Though per capita income is very low in India but still people
like to spend on costly products and eating out. Out of millions of households in India 49%
lives on low income, 30% lower Middle income, 12% Middle income group, 5% Upper
Middle income group and 4% high income group. Comparing this with USA where middle
income group is very high. consumers in India are highly family oriented. Mcdonald’s targets
high income earner, Middle income earner and lower middle income earner in India. Indian
consumers are getting brand awareness through internet, TV, Newspaper, Radio, Megazine
etc. Middle income group is getting bigger in size day by day as a result of economic boost in
India and that is very good news for mcdonald’s. Indian consumers are now getting
environmental awareness. They like to use Eco-friendly products and Mcdonalds is very
helpful in terms of packaging, and recycling. Family system gives a big chance for
Mcdonalds to get their sale rise as Indians are buying food in bulks. Indian consumers are
becoming very open minded which is a positive sign for Mcdonalds. For Mcdonalds to
succeed as they are now, they should go to expand in urban areas as well as rural areas and
target middle and lower income earners and beside this they should introduce certain
products which can be afforded by low income earners. Customers like spicy foods and

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Mcdonald has introduced many products which are spicy and tasting according to the
preference of Indians.

Competitive Strategies
As we know fast food industry proved to be very competitive industry. Mcdonald’s from its
day first has always tried to have strong competitive advantage over its rival. This is the only
way for Mcdonald’s to survive in globalized environment. Mcdonald’s strong rivals KFC,
Dominos, Pizza Hut and Subway are also operating in India as well as USA. In the fast food
most important thing for some customers is how quickly you take order and ready the meal
for customer. KFC and Jumbo King are offering very quick service to customers and in this
way taking customers from Mcdonald’s. Mcdonalds has tried very well to overcome this
advantage by making and readying its food as quick as possible. Mcdonalds is trying to
improve its graph for customer satisfaction and they are investing heavily throughout the
world including India. Mcdonalds uses Wi-Fi and they are trying to emphasize on
demographic characteristic of its customers in the area. Each month Mcdonald’s add some-
thing special in its menu. To check Mcdonald’s quality and reliability administration has
developed a very unique idea of Gap buster visiting Mcdonalds as mystery customer. They
are expertise who comes in the form of a customer and after serving give credits scoring to
the store. Mcdonald has introduced McBreakfast from 6 am to 11 am.

Mcdonald’s in its competitive strategies is emphasizing to target customers in the new urban
areas. Mcdonald’s Indian menu offers very competitive strategy for Mcdonald’s. Vegetarian
products, Halal and non- vegetarian foods for its customer is a unique and successful idea in
India. Kids like Mcdonald’s in India as they are giving free toys to customers who buy happy
meal deals. Mcdonald’s has actively invested in Discount vouchers given as a leaflets,
newspapers,Magazines certainly is a good business strategy and it has boosted Mcdonald’s
customer number, Business and sales.

Diversification
Mcdonald’s has diversified product range in India and all over the world. Due to diversified
nature of products Mcdonald’s is famous among masses. They offer McBreakfast, Lunch and
Dinner, Coffee and many more diversified products. Now if Mcdonalds move to fully new
business for example Hotel (McHotel) will be a concern. According to guardian news moving
to totally new business will damage the image of Mcdonalds. If they are really interested they
should do a partnership with another company. As Burger King has done it. Landor
marketing Director said move like this will certainly change the fundamentals of the
company. Diversification can be revealed from Indian market.75 % menu has been Indianite.
Halal food for Muslims has been introduced. Mcdonald’s happy price menu in India, the 4p’s
and flexible operating platform all shows Mcdonalds to be a diversified organization.

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Standardization Vs. Adaptation
Standardization

Mcdonald’s has a slogan.” Think globally and act locally”.Mcdonald’s sell standardized
product. The taste make up, ingredients, looks, weight etc will be similar in one part of the
world to the other part of the world. Cheese Burger in United Kingdom will taste similar to a
cheese burger in USA. Think globally and act locally can be proved in India as Mcdonald’s
in India has changed its menu list. Halal Burger and McVeggie burgers have been introduced
looking to the customers believes in India. Similar experience has been exercised in Middle-
east and Fiji. In Middle- east eating of Bacon is banned by government. Halal food is served
in Middle-east. McVeggie Burger in India will taste the same in comparison to McVeggie
burger in Fiji. Mcdonald’s sell standardized products. All the products should be looking,
tasting, weighing and prepared in the same way across the globe. McVeggie burger was
prepared in India after Research and Development was conducted purely in India.

Adaptation

Mcdonald’s follows strategy of product adaptation. Mcdonald’s slogan “think globally and
act locally” is the best example. The best example for Mcdonald’s adaptation strategy will be
India. Mcdonald’s cannot use beef Tallow to fry the fries and burger cutlets (Cows are sacred
due to religious belief of Hindu’s).Bacon cannot be used in Middle east as they are Muslim
countries and it is against their religious belief to eat pork. Products are tailored according to
the personal taste of the country people where it operates. Due to adaptation Mcdonald’s
menu in various countries is different.

Performance
Much of retail is struggling in India but Mcdonald’s has been seen unaffected and it’s
planning on accelerating its expansion on the Indian subcontinent. Mr. Jatia who is managing
half of the Indian franchises said number of customer is jumping 10% to 15 % each month
compared to a year ahead. People of India are now relying on Mcdonald’s. Mcdonalds
adaptation policy has boosted its sales. Mcdonald’s annual sale throughout the world is $29
billion annually. Burger king is the second largest fast food organization in terms of sales and
is strong competitive rival. Due to company having a customized menu in India Mcdonald’s
is getting popular day by day. Performance can be measured in terms of outlets opened by
Mcdonalds in the past years.in 2010 and 2011 Mcdonalds opened 80 stores in India. In 2010
Mcdonald’s sale improved by 30%.Vikram Bakshi MD Mcdonald’s India said the total sale
of $29 billion dollar Mcdonald’s India just accounts for 0.37% of the whole sale. But the
potential is so high and are expecting to get higher in future. Although Mcdonald’s is facing
certain problems like roads are not in very good condition for transport, power supply
shortage etc. but still sales rise and customer satisfaction shows that Mcdonald’s in India is
performing very well.

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Marketing mix or 4 p’s
Price, Product, Place, Promotion are collectively called as product mix. In order to meet
organizational objectives product mix is considered to be very vital.it should be viewed as
coordinated and integrated package of benefits that shows the characteristics of customers
and related place.

Product

product is the physical product or service that is offered to a customer. As we know that
Mcdonald’s is very customer oriented and all their products are customized according to the
local community. In order to succeed in market research has suggested that customers are
always looking for innovation and new products. Mcdonald is famous for its product
innovation. Mcdonald’s has introduced new products, removed old products and always
looking for the better products so that customers are satisfied. Mcdonald’s India majority of
products are vegetarian products.

Price

Price is a very important tools which identifies how reliable and qualitative a product is.
When a customer is buying something He/she first draw in his/her own mind of what the
product is worth of. If the price of a product is very low customer think quality is being
promised. Price should really ‘reflect brand and its integrity. Mcdonald’s products are
classified in two categories, BA (Branded affordability) and BCV (Branded Core Value
products) an example of BA is McAllo, tikka and chicken Mcgrill burgers which cost
consumer 20-30 rupees. BCV products mainly include McVeggie and McChicken Burgers
that cost 50-60 Indian rupees.

Promotion

Promotion is a way by which company tries to communicate with public and make them
aware of what the company is offering. One of the method is Advertisement. Advertisement
is conducted on TV, Cinema, Internet, magazines, Poster site, Press and radio. Other ways of
promotion includes direct mail, loyalty scheme, door drops and merchandising. Mcdonald’s
is unique in the way they do promotion. In order to capture the market Mcdonald’s India has
promoted well to improve its sales. Although advertising is expensive the return is so high.
Mcdonalds spends big part of its budget on promotion.

Place

Place plays very important role in launching a product and making it successful. Mcdonald’s
has expanded throughout in India Urban areas. Mcdonald is currently targeting urban areas as
we know that big part of population is living in urban areas. Place doesn’t only include
physical location but it is includes all the processes that eventually leads to product ending in
customers hand. Place plays very important role in getting priority over the rivals and place
should be selected after research on the local demography, income level and customers
preferences. Mcdonalds in India chooses a particular place after long research and checking

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local area’s demographic characteristics, income level etc. This is the reason Mcdonalds is
very successful in India.

Mcdonald’s in Tokyo, Japan

The golden arches of McDonald’s are one of the most recognizable icons in the world and
nowhere more so than in Japan where the fast-food giant has 3,156 stores and employs over
160,000 crew.

Long-term residents of Japan will remember the opening of the company’s first store in the
Ginza Mitsukoshi department store in July 1971. Since then, McDonald’s Japan has gone
from strength to strength in the Japanese market, developing human resources at its famous
Hamburger University where 8,000 employees annually receive training in management,
team building, communication skills, and QSC&V (quality, service, cleanliness and value).

McDonald’s is also heavily involved in charity and sports sponsorship in Japan. The Ronald
(Donald in Japan) McDonald House Charities supports children hospitalized far from home
and their families; McDonald’s provides food education and work experience; in local
communities, it runs “Clean Patrols” to clean up the areas surrounding stores and gives out
crime prevention whistles. In sports, McDonald’s Japan supports children’s baseball and
youth soccer. For the current World Cup, McDonald’s sent 11 Japanese children and their
guardians to Brazil to accompany the Japanese team onto the pitch.

But, of course, everything hinges on the McDonald’s dining experience and these are
challenging times for the fast food industry. In 2013, operating profit for McDonald’s Japan
slid 53.5% from the previous year to ¥11.52 billion and net profit plunged 60.1% to ¥5.138
billion. System-wide sales fell 4.8% to ¥504.45 billion.

Overseeing McDonald’s Japan operations is Canadian Sarah L Casanova. After obtaining a

Master of Business Administration from McMaster University in Ontario in 1990, Casanova
joined McDonald’s in 1991. She has worked in Russia/Ukraine, Malaysia and Singapore,
before assuming her current position in Japan last summer.

Japan Today editor Chris Betros visits Casanova at the McDonald’s Japan office in Tokyo’s
Shinjuku to hear more.

Focal points of Japanese market

In 2014, McDonald’s have been focusing on three key areas – enhancing our exclusivity,
introducing new initiatives to meet consumers’ demands and modernizing restaurants. Our
customers told us that the menu was becoming a little ho-hum and not very exciting. With
our exclusivity, our strengths are “Made for You,” “Kids and Family” and “Drive-Thru.” We
have been improving restaurant facilities for kids and families to give them the best restaurant
experience possible. We’ve also enhanced our breakfast menu to attract more customers. To
further meet customers’ needs, we intend to double the number of McDelivery restaurants
(133 as of December 2013) in 2014.

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Unique characteristics of the Japanese market
Actually, I’ve found that McDonald’s customers are not that different around the world,
though every market has some differences in taste preferences. In Japan, one of our best
sellers is the Teriyaki Burger which is a Japanese flavor done in a Japanese way. However,
the core menu remains Big Macs, Double Cheeseburgers and Egg McMuffin. Our French
fries are as loved here as they are anywhere else.

Japanese consumers love new items, and you see this not just in fast food restaurants. So they
introduce a lot more new menu items in Japan than they would in other McDonald’s markets.
An example of that is the World Cup menu—every single item is brand new and developed in
Japan.

Modernizing some restaurants

Since McDonald’s have been in Japan for 43 years, they need to look at modernizing their
restaurant environment from a long-term perspective. They will remodel some restaurants,
and there will be some closures. They’re opening more Gold Standard Drive-Thrus.

Feedback from consumers

McDonald’s does a number of customer research efforts, online surveys and face-to-face
focus groups. McDonald’s really want to put their customers first and they need to know
what they want and where they are not meeting their needs.

Sales tax hike impact on business

The results were within what McDonald’s predicted. McDonald’s talked to a lot of customers
beforehand and they said they wanted transparency in our pricing. McDonald’s went to one-
yen pricing, exactly 3% on most items, rather than in 5 or 10-yen increments. Customers said
they really loved the 100-yen menu, so McDonald’s decided to keep that. The tax went up but
the tax-inclusive price stayed at 100 yen. And McDonald’s lowered the price of the
hamburger—which is iconic to consumers—to 100 yen and McDonald’s had tremendous
response to that.

Potential for growth in Japan

Definitely, out of the top 10 or 12 countries for McDonald’s, Japan is the most-dense per
population for IEO (informal eating out). There is huge potential here for McDonald’s. The
IEO value is 16.1 trillion yen. McDonald’s have 3.1% of that.

McDonald’s foods in Japan

Once a McDonald’s loyal employee said, because I love the food and I eat something from
the menu almost every day, usually for lunch. I love Big Macs. When I’m out doing
restaurant visits, meeting the crew and managers, they want me to try the food. I try and get
out for an entire day visiting McDonald's hamburgers have been part of the Japanese diet for
30 years. Now the country's largest fast-food chain is drawing renewed attention for its robust
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sales in a weak economy. McDonald's Japan accounts for about 65% of the domestic
hamburger market and boasts the highest sales in the entire restaurant industry. On July 26
McDonald's Japan made an initial public offering of its shares on Jasdaq, a sister trading
system of the Nasdaq stock market in the United States. While the IPO was made in the midst
of a prolonged slump in the stock market, interest was high. The IPO price was 4,700 yen
(37.60 U.S. dollars at 125 yen to the dollar) per share, and the total value of all the stock
offered was 625 billion yen (5 billion dollars), marking the company as the top brand on
Jasdaq.

But it has even greater plans for the future. McDonald's Japan has set a lofty target of 10,000
stores and sales of 1 trillion yen (8 billion U.S. dollars) by 2011. The company's success is
often attributed to localized marketing strategies, detailed manuals, and ultra-low prices.
Manuals have become widely used throughout Japanese industry and society, and the
slashing of prices has become a common practice in the restaurant and distribution industries.
It seems that a "McDonald's effect" is spreading to all corners of society.

Meeting the demands of local culture by standardization &

adaption

McDonald's Japan began after obtaining an operating license from McDonald's Corporation
in the United States. The first store in Japan opened in Tokyo's Ginza district in 1971. At the
time, some people in the business world said that the new shop would not last a month. Five
years later, McDonald's Japan had grown to 100 stores. Eleven years after opening,
McDonald's Japan had climbed to the top of the restaurant industry with annual sales of 70
billion yen. As of December 2000, 3,600 stores were operating in Japan with annual sales of
431.1 billion yen (3.4 billion dollars), second only to the United States.

Although McDonald's originated and developed in the United States, the key to its
acceptance in Japan was the adoption of Japanese marketing strategies. Instead of the
company's original pronunciation, it is called "Makudonarudo," a sound that is more pleasing
to the Japanese ear. And in order to carry out a unified strategy of expansion, McDonald's
Japan has rejected the U.S. model of relying on franchises and has been employing a system
of direct management. It has also launched a number of Japanese-style products, such as the
Teriyaki McBurger, that have become popular.

Another key factor to the chain's acceptance among Japanese consumers has been its detailed
manuals, the size and breadth of which are astonishing. Twenty-five chapters cover
everything from methods of preparation and quality control to dealing with customers. If
these manuals were compiled into a book, it would run to 450 pages. For example, the
manual calls for the bottom of the double-sided hamburger grill to be set to 177 degrees
Celsius (351 degrees Fahrenheit) and the top to 218 degrees Celsius (424 degrees
Fahrenheit), with the patty being cooked for at least 38 seconds. As for buns, the top is to be
16 millimeters thick and the bottom 13 millimeters. While manuals are no substitute for
skilled cooks and servers, they play an indispensable role in securing a minimum level of
taste, quality, and service with which customers will be satisfied. The manuals prepare even
the newest part-time workers, who make up 95% of McDonald's employees, to be ready for
action quickly. Worker manuals, an American invention that McDonald's popularized in

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Japan, have been given Japanese touches and have not just spread throughout the private
sector but also penetrated into the bureaucracy and even old-style Japanese inns. Because of
its thorough manuals, McDonald's Japan has been attracting attention as a leader in
supervisory management and training.

A strategy of lowering prices in Japan

Resolutely lowering prices is a weapon that McDonald's Japan has been employing over the
past few years to register rapid growth. The company carried out a customer satisfaction
survey during the economic slump that followed the bursting of the "bubble economy" of the
late 1980s. Based on the results of that survey, McDonald's Japan lowered the price of a
hamburger from 210 yen to 130 yen. The company moved to lower prices again in April
2000, cutting the price of a hamburger in half to 65 yen (52 cents) on weekdays.

McDonald's Japan has put into practice a strategy of cutting supply costs and increasing the
number of stores, mainly smaller ones, based on thorough market research. This strategy has
combined with an era of deflation to win over consumers, even older male office workers
who had previously stayed away from fast food. McDonald's Japan is now selling about 1.3
billion hamburgers per year, about five times as many as before the price cuts. The number of
customers per year has grown as well: up 18% to 1.3 billion.

This successful company has seen its half-price strategy spread not just throughout the fast-
food industry but also through the restaurant industry as a whole. Even supermarkets,
specialty shops, and discount shops have been cutting prices recently. It looks as though
Japan will continue to feel the "McDonald's effect" for some time.

Conclusion

McDonald’s is one of most successful companies in the world today. With its rapid
embracement of globalization, the firm has been able to expand and retain numerable growth;
as well as continuing to explore with its growth potential in the coming years. From the
beginning of the company’s development in the United States, to its spread in England,
Australia and more recently India and China & Japan, the firm has been able to provide a
variety of hamburgers and other foods to its consumers. From the Big Mac, to the Maharaja,
the company’s successive strategies, specifically with heavy research and development have
allowed it to fulfill the tastes of locals in every country it operates. Its leaders in all of its
major departments have established prices worldwide in all types of currencies, making its
foods affordable for customers of all classes. McDonald has adopted differentiation and cost
leadership strategies. In terms of differentiation, the firm attempts to be diverse from its
competitors by adding something to its product that will provide a unique value to its
customers, achieved through well-designed and managed marketing activities resulting in a
perceived superior quality product and high brand image and recognition. Further, cost
leadership is achieved, not only through economies of scale but also through learning,
knowledge and experience in production and operational processes and through

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effective/efficient distribution networks and manufacturing systems along with
standardization & adaption in global market.

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