22 McDonald's (Deep)

McDonald’s

UNIVERSITY OF MUMBAI PROJECT ON

McDONALD’S

SUBMITTED BY

DEEP NANDKUMAR KADU.

PROJECT GUIDE

PROF.MRS.MAHALAKSHMI SANKAR.

BACHELOR OF MANAGEMENT STUDIES SEMESTER V (2009-2010) V.E.S COLLEGE OF ARTS, SCIENCE & COMMERCE, SINDHI COLONY, CHEMBUR - 400071

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McDonald’s

UNIVERSITY OF MUMBAI PROJECT ON

McDONALD’S

Submitted In Partial Fulfillment of the requirements For the Award of the Degree of Bachelor of Management By

DEEP NANDKUMAR KADU.

PROJECT GUIDE

PROF.MRS.MAHALAKSHMI SANKAR.

BACHELOR OF MANAGEMENT STUDIES SEMESTER V (2009-2010) V.E.S COLLEGE OF ARTS, SCIENCE & COMMERCE, SINDHI COLONY, CHEMBUR - 400071

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McDonald’s

DECLARATION I, DEEP NANDKUMAR KADU student of BMS – Semester V (2009-2010) hereby declare that I have completed this project on “McDONALD’S”. The information submitted is True & Original to the best of my knowledge.

______________ Student’s Signature DEEP NANDKUMAR KADU. Name of Student

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McDonald’s

CERTIFICATE This is to certify that Mr. DEEP NANDKUMAR KADU of T.Y.BMS has Successfully completed the project on “McDONALD’S” under the guidance of PROF.MRS.MAHALAXMI. SANKAR.

Project Guide Prof.Mrs Mahalakshmi Sankar.

Principal Dr. (Mrs) J.K.Phadnis.

Course Co-ordinator Mrs.A.Martina.

External Examiner

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McDonald’s

ACKNOWLEDGEMENT It gives me great pleasure to submit this project to the University of Mumbai as a part of curriculum of my BMS course. I take this opportunity with great pleasure to present before you this project on “McDonald’s” which is a result of co-operation, hard work and good wishes of many people. No words can adequately express my sincere thanks to all those who have help me in making this project a success. Also I acknowledge my deep sense of gratitude towards my guide Professor Mrs Mahalakshmi Sankar . I would also like to take this opportunity to thanks Mr.Bharat.Krishna.Vaity Restaurant Manager (Khalapur Store). I am grateful to Mrs. J.K.Phadnis, Principal of V.E.S College of Arts, Science & Commerce and Prof Mrs. A. Martina, BMS Co-ordinator (Bachelor of Management Studies) My debt to those who have helped me in one way or the other is heavy indeed. I would like to appreciate contribution of my family and friends who have extended their complete support in completion of this project. Last but not the least; I am thankful to the Almighty for giving me strength, courage and patience to complete this project.

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McDonald’s

EXECUTIVE SUMMARY McDonald’s is a globally successful fast-food restaurant. From the time of its birth it has gain enormous success and is growing at the international level. The powerful entry through franchisee system the standardization and adaptation strategy play an important role in gaining the huge success of McDonald’s and brand image of McDonald’s. McDonald’s strategy of standardizing their products on its preparation, techniques of presentation along with the adaptation strategy has created a difference in McDonald’s as compared to that of its competitors. Marketing being my subject interest knowing the strategy of one of the most successful company will really help me out. Thus, I have chosen McDonald’s as my study of subject for my 100 marks project in TYBMS. This has really helped me out to know lots of marketing techniques and practically understand the McDonald’s strategy of standardization and adaptation. [

STUDY: In the project focus has been made on McDonald’s franchisee in India. The challenges faced, their target market, segmentation strategies. The supply chain of the company and its ability to provide best quality food at the best cost. The 5 P’s of McDonald’s and the various schemes provided by the company to its employees while working in McDonald’s and even after their retirement from the company. McDonald’s as a service industry its life cycle is also studies. The present strength and weakness of the company and the future opportunities and its future threats are also study for better analysis of McDonald’s marketing in India. CONCLUSION: Studying McDonald’s and its marketing system has helped me a lot in understanding the marketing subject in a better manner. And it will be helpful for me in near future.

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McDonald’s

INDEX TITLE

PAGE NO.

CHAPTER I:-INTRODUCTION

01-05

1. INTRODUCTION 2. HISTORY 3. FRANCHISEES

01-02 03-04 05

CHAPTER II: - MCDONALDS IN INDIA 1. 2. 3. 4.

THE INDIAN BEGINNING OUR VISION CHALLENGES IN ENTERING INDIAN MARKET SEGEMENTATION ,TARGETING AND POSITIONING

CHAPTER III: - MCDONALDIZING THE SUPPLIERS 1. SUPPLY CHAIN

1. 2. 3. 4. 5.

1. 2.

3. 4.

CHAPTER IV: - MARKETING MIX PRODUCT PLACE PRICE PROMOTION PEOPLE

CHAPTER V: - MC EMPLOYEE EMPLOYEE BENEFITS FACILITIES EMPLOYEE RECOGNITION RETIREMENT BENEFITS

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06-12 06-08 09 10 11-12

13-19

20-26 20-21 22 22-23 23-26 26 27-30 27 28 29 30

McDonald’s

TITLE

PAGE NO.

CHAPTER VI:-MCDONALDS IN SERVICE INDUSTRY 1. MCDONALDS EXPERIENCE 2. MOMENT OF TRUTH 3. IMPORTANCE OF PRODUCT LIFE CYCLE 4. A PERFECT EXAMPLE OF REVITALIZINGA PRODUCT IN DECLINE STAGE CHAPTER VII:- ANALYSIS 1. COMPETITORS ANALYSIS 2. SWOT ANALYSIS

31-35 31 32-33 34 35 36-38 36-37 38

CHAPTER VIII: - EXHIBITS 1. INDIAN MENU 2. SURVEY QUESTIONNAIRE

39-43 39 39-43

CHAPTER IX: - NEED FOR MCDELIVERY AND KIOSK 1. MCDELIVERY 2. KIOSK CONCLUSION

44-50 45-47 48-50 51

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McDonald’s

INTRODUCTION McDonald's Corporation is the world's largest chain of fast-food restaurants. 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. McDonald’s has achieved this enormous success, its best practices in the global food industry, international growth trends and challenges, and various lessons that have been learned from their expansion in foreign countries. This shows how McDonald’s creates both customer and brand loyalty for their products and services. In 1937 Brothers Dick and Mac McDonald open a hot dog stand called the Airdrome at the airport in Monrovia, California & in 1940 the brothers move the Airdrome building to San Bernardino, California, where they open the first McDonald's restaurant. Although McDonald's did not invent the hamburger or fast food, its name has become nearly synonymous with both. The McDonald's Golden Arches logo was introduced in 1962. It was created by Jim Schindler to resemble new arch shaped signs on the sides of the restaurants. He merged the two golden arches together to form the famous 'M' now recognized throughout the world. Schindler's work was a development of the stylized 'v' logo sketched by Fred Turner, which was conceived as a more stylish corporate symbol than the Speedee chef character that had previously been used. The McDonald's name was added to the logo in 1968. McDonald's has its familiar golden arches logo; McDonald's has 31,886 restaurants worldwide serving Big Macs, Chicken McNuggets, salads and French fries. Most restaurants offer drive-thru service and some suburban locations offer outdoor playgrounds for children. Approximately 70% of McDonald's restaurants are operated by independent franchisors. The number of restaurants in the U.S. has reached saturation and most new McDonald's are now being opened in Europe, Middle East and Asia.

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McDonald’s In order to be a franchisee, an individual must have at least $175,000. There is about 2,400 owner/operators system wide. McDonald's is looking to boost sales by opening restaurants 24 hours a day. An estimated 30% of store revenue comes from breakfast sales. The company has instituted a dollar menu which includes a double cheeseburger in a bid to boost sales from value-oriented customers.

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McDonald’s

HISTORY The first McDonald's restaurant was located in San Bernardino, CA in 1954 and operated by two brothers Dick and Mac McDonald. Ray Kroc, a milk shake machine salesman, thought the restaurant was great and purchased the rights from the brothers. Kroc opened his first McDonald's restaurant in Des Plaines, IL in 1955 and preached cleanliness in restaurants. McDonald's would grow quickly as it signed on franchisees to open restaurants around the country. McDonald's would go public in 1965. The Big Mac was introduced system wide in 1968 and was the brainchild of Jim Delligatti, one of Ray Kroc's earliest franchisees, who by the late 1960s operated a dozen stores in Pittsburgh. The Egg McMuffin was developed by owner operator Herb Peterson in 1973. The site of the McDonald brothers' original restaurant is now a monument. With the expansion of McDonald's into many international markets, the company has become a symbol of globalization and the spread of the American way of life. Its prominence has also made it a frequent topic of public debates about obesity, corporate ethics and consumer responsibility. In 2007, the company had record revenues of $22.8 billion, a 9% increase from the previous year. Net income was $2.39 billion. McDonald's sold the Boston Market restaurant chain in 2007 and owns a stake in Chipotle Mexican Grill. In 2007, the Company completed the sale of its businesses in Brazil, Argentina, Mexico, Puerto Rico, Venezuela and 13 other countries in Latin America and the Caribbean to a developmental licensee organization. An estimated 10% of all workers have once worked at McDonald's in their lifetime.

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McDonald’s

FRANCHISEES

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McDonald’s Franchising refers to the methods of practicing and using another person's philosophy of business. The franchisor grants the independent operator the right to distribute its products, techniques, and trademarks for a percentage of gross monthly sales and a royalty fee. Various tangibles and intangibles such as national or international advertising, training, and other support services are commonly made available by the franchisor. Agreements typically last five to twenty years, with premature cancellations or terminations of most contracts bearing serious consequences for franchisees. McDonald's does business in more than 30,000 restaurants in 119 countries around the world serving 47 million customers each day. In many countries around the world it does not have a presence and its current strategy is to focus on the markets where it does not do business. No firm date has been established for the opening of new markets. In certain markets McDonald's have a presence but it is not seeking franchisees and it has included instructions regarding those markets. McDonald's sincerely appreciate the customers expressed interest in McDonald's and their continued patronage of our restaurants.

MCDONALD’S INDIA The Indian beginning 13

McDonald’s A 50-50 joint venture partnership between McDonald’s Corporation [USA] and two Indian business, McDonald’s began its journey in India in October 1996. Connaught Plaza Restaurants Pvt. Ltd headed by Vikram Bakshi owns and operates the northern and eastern operation which includes restaurants in New Delhi, Uttar Pradesh, Rajasthan, Punjab, Haryana, West Bengal etc. Amit Jatia’s company Hardcastle Pvt. Ltd. Owns and operates McDonald’s restaurants in West and South India. HRPL has restaurants in Maharashtra, Madhya Pradesh, Karnataka and Andhra Pradesh, Chennai and its growing rapidly. The head office for Hardcastle Restaurants Pvt. is spread across two building in Mumbai, one at Bhulbhai Desai Road and the other at Santacruz. The head office houses all the support departments required to run the restaurants in the western and southern region. These includes:-

Construction It is involves in all construction and design related work for the stores as per McDonald’s standards. It prepares project plans for new stores to be put to the management and implements the same after approval.

Country Purchase All the purchases of raw material for restaurants products are done by the country purchase department team for both the Delhi and Mumbai markets. It works as a national supply chain. The main aim is to purchase the best quality material from the authorized supplier and at lowest possible cost. Once the material is ordered by a country

purchase it first goes to the distribution centre and then to the restaurants according to their requirement.

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McDonald’s

Country Quality Assurance & Product Development This department works closely with the country purchase department. It looks after the quality of both raw material and of finished product. It develops new product for the menu based on customer preference.

Finance & Information Technology It looks after all the day to day financing accounting transaction and taxation related activities of the application of Information Technology to the the company processes.

Corporate Affairs It associates with brand building and protection of the brands. It works closely with real estate in doing feasibility studies for sites from a legal angle. It looks after license and liaison activities of the company with outside agencies, i.e. regarding media and government authority.

Legal & company Secretarial. It helps the company sign legal deals for the new restaurants sites. It safeguards the interest of the company and act as guardians of the company as regards to its legal functions. It provide advisory support to the other departments as regards legal issues and ensures compliance with applicable laws.

People Resources / Human Resources. It conducts activities related to recruitment, selection, remuneration, retention, and matter related to employee satisfaction.

Training, Learning & Development. It is responsible for the training and Development of employees involved in operational activity and the employees in the Corporate office.

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McDonald’s

Operation This department id responsible for the day to day functioning of the restaurants in a profitable manner.

Marketing & Communication. It is responsible for brand positioning increasing brand awareness and thus resulting in increased sales. It is also responsible for advertising, media relation and implementing various product promotion schemes like Happy Meals, Value Meals, etc.

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McDonald’s Our vision is to be the world’s best quick service restaurant experience. That means that our restaurant will be the best place for our customers to enjoy fast, friendly services …… fresh food favorites…… a clean welcoming environment…… and a fun experience at a fair price.

OUR VALUES Our vision is supported by a set of core values: •

We are dedicated to providing customers unparalleled levels of quality, service, cleanliness, and value. It is what RAY KROC taught us.

•

We are committed to our people because we know that a diverse team of well trained individuals working together is the key to our continued success.

•

We approach all aspects of our business with honesty and integrity.

•

We always give back to the communities in which we do business.

We celebrate our achievements, yet we are never satisfied with our results.

“To be our customer - favourite place and way to eat.”

CHALLENGES IN ENTERING INDIAN MARKETS ➢ Regiocentricism: Re-engineering the menu - McDonald’s has continually adapted to the customer’s tastes, value systems, lifestyle, language and perception. Globally 17

McDonald’s McDonald’s was known for its hamburgers, beef and pork burgers. Most Indians are barred by religion not to consume beef or pork. To survive, the company had to be responsive to the Indian sensitivities. So McDonald’s came up with chicken, lamb and fish burgers to suite the Indian palate. ➢ The vegetarian customer – India has a huge population of vegetarians. To cater to this customer segment, the company came up with a completely new line of vegetarian items like McVeggie burger and McAlooTikki. The separation of vegetarian and nonvegetarian sections is maintained throughout the various stages.

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

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McDonald’s

% of kids who influence what FMCG brand their family buys

80% 70%

71% 59%

60%

52%

50% 40% 30% 20% 10% 0%

Biscuits

Burgers & Pizzas

Fruit Juices

As shown above, kids reign supreme in FMCG purchase related to food products. So to attract children McDonalds has Happy Meal with which toys ranging from hot wheels to various Walt Disney characters are given (the latest in this range is the toys of the movie Madagascar). For this, they have a tie-up with Walt Disney. At several outlets, it also provides special facilities like ‘Play Place’ where children can play arcade games, air hockey, etc. This strategy is aimed at making McDonald’s a fun place to eat. This also helps McDonald’s to attract the young urban families wanting to spend some quality time while their children have fun at the outlet. To target the teenagers, McDonald’s has priced several products aggressively, keeping in mind the price sensitivity of this target customer. In addition, facilities like Wi-Fi are also provided to attract students to the outlets like the one at Vile Parle in Mumbai.

“Mc Donald’s Mein Hai Kuch Baat” projects McDonald’s as a place for the whole family to enjoy. When McDonald’s entered in India it was mainly perceived as targeting the urban upper class people. Today it positions itself as an affordable place to eat without compromising on the quality of food, service and hygiene. The outlet ambience and mild background music highlight the comfort that McDonald’s promises in slogans like “You deserve a Break Today” & “Feed your inner child”. This commitment of quality of food and service in a clean, hygienic and relaxing atmosphere has ensured that McDonald’s maintains a positive relationship with the customers. 19

McDonald’s

Customer Perception and Customer Expectation Customer perception is a key factor affecting a product’s success. Many potentially revolutionary products have failed simply because of their inability to build a healthy perception about themselves in the customers’ minds. McDonalds being an internationally renowned brand brings with it certain expectations for the customers.

Target Segment A Family with children Urban customer on the move Teenager

What is McDonald’s for me? A treat to children, a fun place to be for the children. Great taste, quick service without affecting the work schedule Hangout with friends, but keep it affordable.

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

McDonaldizing the Suppliers SUPPLY CHAIN Supply Chain is one of the critical factors for the smooth functioning of any business. And when we are talking about fast food business with McDonald’s as the subject of the study it can expected a Supply Chain model of one of the highest precisions. It is this unmatched Supply Chain Structure, which not just ensures on time delivery of raw materials and supplies to McDonalds but also enables it to cut down on its cost and maximize profitability along with maintaining highest quality standards of its products. The level of commitment of McDonalds can be gauged from the fact that even before it set up its first restaurant in the country it infused Rs 400 Crore to set up its delivery mechanism. McDonald’s initiative to set up an efficient 20

McDonald’s supply chain and deploy state-of-art technology changed the entire Indian fast food industry and raised the standards of performance to international levels. As already mentioned, McDonalds had been working on its supply chain even before it opened its first joint in the country. McDonalds, an international brand which was trying to make inroads into the country, developed its Indian partners in such a manner that they stayed with the company from the beginning. The success of McDonalds India was achieved by sourcing all its required products from within the country. To ensure this, McDonalds developed local businesses, which can supply it highest quality products. Today, McDonalds India works with 38 different suppliers on a long term basis and several other stand alone restaurants for its various other requirements. McDonald’s distribution centres in India came in the following order: Noida and Kalamboli (Mumbai) in 1996, Bangalore in 2004, and the latest one in Kolkata (2007). McDonald's entered its first distribution partnership agreement with Radha Krishna Foodland, a part of the Radha Krishna Group engaged in food-related service businesses. The association goes back to July 1993, when it studied the nuances of McDonald's operations and requirements for the Indian market. As distribution centres, the company was responsible for procurement, the quality inspection programme, storage, inventory management, deliveries to the restaurants and data collection, recording and reporting. Value-added services like shredding of lettuce, repacking of promotional items continued since then at the centres playing a vital role in maintaining the integrity of the products throughout the entire 'cold chain'. Cold Chain was one of the unique concepts of McDonalds supply chain in India, on which it had spent more than six years to get the system into place. This system brought about a veritable revolution, immensely benefiting the farmers at one end and enabling customers at retail counters get the highest quality food products, absolutely fresh and at great value. Through its unique cold chain, McDonalds has been able to both cut down on its operational wastage, as well as maintain the freshness and nutritional value of raw and processed food products. This has involved procurement, warehousing, transportation and retailing of perishable food products, all under controlled temperatures. The following list of suppliers, who build up the major supply chain of McDonalds, reveal how this ‘Cold Chain’ works and contributes towards the efficiency of McDonalds.

 Dynamix Dairy Industries (Supplier of Cheese):

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McDonald’s Dynamix has brought immense benefits to farmers in Baramati, Maharashtra by setting up a network of milk collection centres equipped with bulk coolers. Easy accessibility has enabled farmers augment their income by finding a new market for surplus milk. The factory has: •

Fully automatic international standard processing facility.

•

Capability to convert milk into cheese, butter/ghee, skimmed milk powder, lactose, casein & whey protein and humanized baby food.

•

Stringent quality control measures and continuous Research & Development

From farm two degrees Celsius in 90 minutes is the first step to quality. For example, the Rs 262-crore Dynamix Dairy Industries, located in Baramati in Pune district of Maharashtra, manufactures cheese slices for McDonald’s at 10 metric tonnes per month. Dynamix has helped set up 15 bulk cooling centres throughout the district from which it purchases milk. Each cooling centre, which is equipped with modern measuring and

testing equipment and a large cooling tank, is not more than a few kilometers away from local dairy farms. A farmer can deliver milk even twice a day on his bicycle and get a printed receipt on the spot, which also lists the quality of the milk supplied by him as per fat content, colour and solids content. If the milk is sub-standard or adulterated, it is rejected on the spot. A batch of milk can vary from one litre to 10 litres, or more. Each batch is mixed in one large stainless steel cooler and chilled immediately to two degrees Celsius to stop bacterial growth and preserve freshness. From this point onwards, until just before the burger is actually served in a McDonald’s restaurant hundreds of kilometers away, the temperature is never allowed to increase. When the refrigerated milk arrives at the Dynamix plant at Baramati, the milk in every single tanker is thoroughly tested and rejected if found sub-standard, adulterated or contaminated. The sophisticated testing lab can check fat content with an accuracy of 0.1 per cent. It can even detect minute traces of pesticides or antibiotics administered to cows. This instant feedback and the rejection of the entire tanker-load forces farmers to follow the best practices in terms of animal husbandry, use proper feeds, cut down on the indiscriminate use of pesticides and animal medicines and completely stop even the slightest attempts at adulteration.

 Trikaya Agriculture (Supplier of Iceberg Lettuce):

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McDonald’s Implementation of advanced agricultural practices has enabled Trikaya to successfully grow specialty crops like iceberg lettuce, special herbs and many oriental vegetables. Farm infrastructure features: •

A specialized nursery with a team of agricultural experts.

•

Drip and sprinkler irrigation in raised farm beds with fertilizer mixing plant.

•

Pre-cooling room and a large cold room for post harvest handling.

•

Refrigerated truck for transportation.

Trikaya Agriculture, a major supplier of iceberg lettuce to McDonald's India, is one such enterprise that is an intrinsic part of the cold chain. Exposure to better agricultural

management practices and sharing of advanced agricultural technology by McDonald's has made Trikaya Agriculture extremely conscious of delivering its products with utmost care and quality. Initially lettuce could only be grown during the winter months but with McDonald's expertise in the area of agriculture, Trikaya Farms in Talegaon, Maharashtra, is now able to grow this crop all the year round. McDonald's has provided assistance in the selection of high quality seeds, exposed the farms to advanced drip-irrigation technology, and helped develop a refrigerated transportation system allowing a small agri-business in Maharashtra to provide fresh, highquality lettuce to McDonald's urban restaurant locations thousands of kilometers away. Post harvest facilities at Trikaya include a cold chain consisting of a pre-cooling room to remove field heat, a large cold room and a refrigerated van for transportation where the temperature and the relative humidity of the crop is maintained between 1º C and 4º C and 95% respectively. Vegetables are moved into the pre-cooling room within half an hour of harvesting. The precooling room ensures rapid vacuum cooling to 2º C within 90 minutes. The pack house, precooling and cold room are located at the farms itself, ensuring no delay between harvesting, precooling, packaging and cold storage. With this cold chain infrastructure in place, Trikaya Agriculture has also a plan to export this high value product to other international markets, especially to McDonald's Middle East and Asia Pacific operations. McDonald's expertise in packaging, handling and long-distance transportation has helped Trikaya to do trial shipments to the Gulf successfully. In addition to export, McDonald's assistance has enabled Trikaya Agriculture to supply this crop to a number of star-rated hotels, clubs, flight kitchens and offshore catering companies all over India. 23

McDonald’s

 Vista Processed Foods Pvt. Ltd. (Supplier of Chicken and Vegetable range of products including Fruit Pies) A joint venture with OSI Industries Inc., USA, McDonald's India Pvt. Ltd. and Vista Processed Foods Pvt. Ltd., produces a range of frozen chicken and vegetable foods. A world class infrastructure at their plant at Taloja, Maharashtra, has: •

Separate processing lines for chicken and vegetable foods.

•

Capability to produce frozen foods at temperature as low as -35 Degree Cel. to retain total freshness.

•

International standards, procedures and support services. Vista Processed Foods Pvt. Ltd., McDonald's suppliers for the chicken and vegetable

range of products, is another important player in this cold chain. Technical and financial support extended by OSI Industries Inc., USA and McDonald’s India Private Limited have enabled Vista to set up world-class infrastructure and support services. This includes hi-tech refrigeration plants for manufacture of frozen food at temperatures as low as - 35° C. This is vital to ensure that the frozen food retains it freshness for a long time and the 'cold chain' is maintained. The frozen product is immediately moved to cold storage rooms. With continued assistance from its international partners, Vista has installed hi-tech equipment for both the chicken and vegetable processing lines, which reflect the latest food processing technology (de-boning, blending, forming, coating, frying and freezing). For the vegetable range, the latest vegetable mixers and blenders are in operation. Also, keeping cultural sensitivities in mind, both processing lines are absolutely segregated and utmost care is taken to ensure that the vegetable products do not mix with the non-vegetarian products. Now, at Vista, a very wide range of frozen and nutritious chicken and vegetable products is available. Ongoing R&D, both locally and in the parent companies, work towards innovation in taste, nutritional value and convenience. These products, besides being supplied to McDonald's, are also offered to institutions like star-rated hotels, hospitals, project sites, caterers, corporate canteens, schools and colleges, restaurants, food service establishments and coffee shops. Today, production of better quality frozen foods that are both nutritious and fresh has made Vista Processed Foods Pvt. Ltd. a name to reckon within the industry.

 Radhakrishna Foodland (Distribution Centres for Delhi and Mumbai) 24

McDonald’s An integral part of the Radhakrishna Group, Foodland specializes in handling large volumes, providing the entire range of services including procurement, quality inspection, storage, inventory management, deliveries, data collection, recording and reporting. Salient strengths are: •

A one-stop shop for all distribution management services.

•

Dry and cold storage facility to store and transport perishable products at temperatures upto -22 Degree Cel.

•

Effective process control for minimum distribution cost. McDonald's local supply networks through Radhakrishna Foodland, which operates

distribution centres (DCs) for McDonald's restaurants in Mumbai and Delhi. The DCs have focused all their resources to meet McDonald's expectation of 'Cold, Clean, and On-Time Delivery' and plays a very vital role in maintaining the integrity of the products throughout the entire 'cold chain'. Ranging from liquid products coming from Punjab to lettuce from Pune, the DC receives items from different parts of the country. These items are stored in rooms with different temperature zones and are finally dispatched to the McDonald's restaurants on the basis of their requirements. The company has both cold and dry storage facilities with capability to store products up to -22º C as well as delivery trucks to transport products at temperatures ranging from room temperature to frozen state.

Amrit Food (Supplier of long life UHT Milk and Milk Products for Frozen Desserts) Amrit Food, an ISO 9000 company, manufactures widely popular brands – Gagan Milk and Nandan Ghee at its factory at Ghaziabad, Uttar Pradesh. The factory has: •

State-of-the-art fully automatic machinery requiring no human contact with product, for total hygiene.

•

Installed capacity of 6000 ltrs/hr for producing homogenized UHT (Ultra High Temperature) processed milk and milk products.

•

Strict quality control supported by a fully equipped quality control laboratory.

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McDonald’s All suppliers adhere to Indian government regulations on food, health and hygiene while continuously maintaining McDonald's recognized standards. As the ingredients move from farms to processing plants to the restaurant, McDonald's Quality Inspection Programme (QIP) carries out quality checks at over 20 different points in the Cold Chain system. Setting up of the Cold Chain has also enabled it to cut down on operational wastage Hazard Analysis Critical Control Point (HACCP) is a systematic approach to food safety that emphasizes prevention within its suppliers' facility and restaurants rather than detection through inspection of illness or presence of microbiological data. Based on HACCP guidelines, control points and critical control points for all McDonald's major food processing plants and restaurants in India have been identified. The limits have been established for those followed by monitoring, recording and correcting any deviations. The HACCP verification is done at least twice in a year and certified. The relationship between McDonald's and its Indian suppliers is mutually beneficial. As McDonald's expands in India, the supplier gets the opportunity to expand his business, have access to the latest in food technology, exposure to advanced agricultural practices and the ability to grow or to export. There are many cases of local suppliers operating out of small towns who have benefited from their association with McDonald's India

MCDONALDS MARKETING MIX (5 P’S) 26

McDonald’s After segmenting the market, finding the target segment and positioning itself, each company needs to come up with an offer. The 5 P’s used by McDonalds are: 1. Product 2. Place 3. Price 4. Promotion 5. People

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

Product is the physical product or service offered to the consumer. Product includes certain aspects such as packaging, guarantee, looks etc. This includes both the tangible and the non-tangible aspects of the product and service.

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McDonald’s McDonalds has intentionally kept its product depth and product width limited. McDonalds studied the behaviour of the Indian customer and provided a totally different menu as compared to its International offering. It dropped ham, beef and mutton burgers from the menu. McDonald's success worldwide has been attributed to the ‘“Think Global, Act Local and Sell like a Retailer” philosophy. McDonald’s followed this international mantra while opening doors to the Indian subcontinent. With respect to the cultural and traditional sentiments, not only did McDonalds not serve it’s most popular product The BIGMAC (a beef burger) but also developed an egg-less mayonnaise for the first time in the worldwide system.

To suit the Indian palette, the McAloo Tikki™ burger, Veg. Pizza McPuff™ and Chicken McGrill™ burger were among other offerings that were formulated and introduced using spices favored by Indians. Furthermore, each restaurant kitchen was designed to maintain separate Vegetarian and Non-Vegetarian food counters. Reasons for introducing the products •

Beef which was a taboo in the Indian market was planned to replace by filling of Aloo Tikki to match up with the Indian culture.

•

Salad sandwich was introduced targeting the people who are more conscious about health.

•

The introduction of jain salad in the outlet keeping the jain people rituals of not eating ginger ,onion, potatoes etc.

•

Seeing to the Indian mentality of having wheat chapattis led to the idea to introduce paneer salsa wrap and chicken Mexican wrap.

•

Filet-o-fish was introduced keeping in mind the demand of the sea food lovers having no competitors in the segment before.

Place: Where should be the product be available and the role of distribution channels?

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McDonald’s The place mainly consists of the distribution channels. It is important so that the product is available to the customer at the right place, at the right time and in the right quantity. Nearly 50% of U.S.A is within a 3 minute drive from a McDonald’s outlet. There is a certain degree of fun and happiness that a customer feels each time he dines at McDonalds. There are certain value propositions that McDonalds offer to its customers based on their needs. McDonalds offers hygienic environment, good ambience and great service. Now McDonalds have also started giving internet facility at their centres and they have been playing music through radio instead of the normal music. There are certain dedicated areas for children where they can play while their parents can have some quality time together.

Price: What should be the pricing strategy?

Pricing includes the list price, the discount functions available, the financing options available etc. It should also take into the consideration the probable reaction from the competitor to the pricing strategy. This is the most important part of the marketing mix as this is the only part which generates revenue. All the other three are expenses incurred. The price must take into consideration the appropriate demand-supply equation. McDonalds has certain value pricing and bundling strategies such as happy meal, combo meal, family meal etc to increase overall sales volumes.

Branded Affordability: Having established the image of comfort and familiarity, it now was 29

McDonald’s time to add new people to the fold. The Indian consumers continued to perceive McDonald’s as an expensive eating out option. The challenge was to overcome this perception and be accepted as an affordable brand. While the patented products like McVeggie™ and McChicken™ continued to cater to the patrons, the company needed to broaden the audience base to further entrench into the market. McDonald’s found success in its strategy of Branded Affordability and introduced the ‘Happy Price Menu’ of Rs.20/-. Engaging and Memorable campaigns were created to establish the Branded Affordability communication -The ‘Bahanas’, the yesteryears prices, or ‘bees mein full dhamal’!

Promotion: What is the suitable strategy and channels for promotion of the product?

The various promotion channels being used by McDonald’s to effectively communicate the product information are given above. A clear understanding of the customer value helps decide whether the cost of promotion is worth spending.

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McDonald’s There are three main objectives of advertising for McDonald’s are to make people aware of an item, feel positive about it and remember it. The right message has to be communicated to the right audience through the right media. McDonald’s does its promotion through television, hoardings and bus shelters. They use print ads and the television programmes are also an important marketing medium for promotion. Some of the most famous marketing campaigns of McDonald’s are: •

“You Deserve a break today, so get up and get away- To McDonald’s”

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“Aap ke zamane mein, baap ke zamane ke daam”.

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“Food, Folks, and Fun”

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“I’m loving it”.

Familiarity breeds’ comfort: The first step for the brand was to establish itself as a familiar, comfortable place. Taking a cue from the Indian family values, the year 2000 saw the first ever McDonald’s ad aired in the country. A child, who is unable to recite a poem and suffers stage fright, but when he enters McDonald’s, he easily recites it when in the comfortable familiar environment of McDonalds. Working on the insight – similarly when his family moves into a new place, the child misses all that has always been so familiar and dear. He then has the comfort of something that is dear and familiar to bring a smile to his face. McDonald’s was successful in creating an image of a warm and comfortable ambience through its

ads. ‘McDonald’s Mein Hai Kuch Baat’: Making McDonalds the consumers’ favorite place and way to eat. While kids and families were key, it was also important to talk to the generation that had not grown up on McDonald’s burgers and fries. An adult who works with logic and 31

McDonald’s reasoning would need a reason tempting enough. And what better way to talk to them than talk about McDonald’s core competence – food!

Even in Dreams: McDonald’s realized that the way to draw more consumers would be to increase the visibility of the brand and its products. The more a person saw food, the greater his urge would be to try it out. The company came up with its next round of campaign to address and reflect this. The campaign showed different people dreaming about McDonald’s. It depicted how the consumers were totally involved with McDonald’s and the food. New product stories delivered in a memorable and engaging approach. It was imperative for the success of the brand to be ‘Indianized’ – to continuously speak to consumers in their ‘language’ without taking away from its core American parentage. ‘From tears to smiles’ - campaigns were produced to introduce new, scrumptious products.

Let go the child within you: The general brand perception of McDonald’s in India was that of a place for kids. While the campaigns had worked in the past, targeting kids, McDonald’s recognized the fact that it could not always depend on the kids’ niche. When kids move up the consumption chain, there is a possibility of losing out on consumers. Moreover, the family outings with children only happen over the weekends and holidays. It was imperative to rope in adults who would patronize the brand over the weekends. Consequently, the next series of campaigns were targeted to drive in adult traffic to break away from the perception. The ad depicted a father being invited to a birthday party at McDonald’s. He is not at ease with the idea of visiting McDonald’s since he perceives it as a kids place. His child reminds him of the McCurry Pan™, Filet-o-Fish™ that he would be able to relish at the birthday party. The food boosts the father to go to the party, where to his astonishment is his boss’ party. The ad asserted that people celebrate birthdays and occasions at places they are comfortable in!

People: How to converge the benefits of internal and external marketing? McDonald’s understands the value of both its employees and its customers. It understands the fact that a happy employee can serve well and result in a happy customer. 32

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

MC EMPLOYEES Employee benefits MC DONALD’S provides you with many opportunities to talk to your management on any topic related to your employment/work. To begin with we follow an “open door” policy, 33

McDonald’s which means that all team members at MC DONALD’S are approachable at any time. Crew meetings are held every month in your restaurant where all the store related issues are discussed. Besides this you will also have rap session and meet 5 where you can express your view candidly.

RAP SESSION:Rap session are small informal discuss between crew and management for the purpose of discussing ideas, suggestions and problems. These sessions will be held about once every three months or whenever needed by the store manager or a member of the management team. Rap sessions are an opportunity for the crew to make their views known to the company. You will be paid for attending a rap session.

Opinion survey:About once a year we will ask all employees to complete a confidential questionnaire relating to their work and the operation of the store, the answers will help us to improve our management of the restaurant and conditions of employment.

Open door policy:Should an employee have questions about the contents of their handbook or have any basis for concern about any work conditions the management team’s office door is always open for private discussion. Employees should be encouraged to use this “open door policy” whenever they wish. Likewise, operations/human resources manager encourage you to use the open door policy if you have a concern unresolved by your immediate supervisor.

Facilities Crew room This room is provided for the employee for recreation and rest during the break time. The employee can study, listen to music, and get trained in this room.

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Breaks It is not easy to maintain quality, service, and cleanliness. It take hard work and hustle. To keep energy level high, all the crew member working above five consecutive hour are eligible for an unpaid break of an hour.

Employee Meal One of the best things about working for McDonald’s is for food. Employees can enjoy quality nutritious food at world standard hygiene levels. It is free to managers and crew. All the meals consumed must be recorded and consumed in the restaurants itself.

Locker Facility Lockers are available for the employees use at the restaurants for keeping the personal belongings in a safe and secure place during the shift.

Other Facilities In addition to the above facilities the employee also enjoys with the team member during the yearly store outing and various inter-store activities arranged system-wise and patchwise. These activities are fun and provide opportunity to have a good time and know fellow employees better.

Employee recognition Incentives All the crew at McDonald’s have the opportunity to get McDonald’s branded merchandise. Each restaurant is allotted “Mahabucks” every month based on monthly store allocation and various inter-store competitions. Mahabucks is a crew incentive programme where the Mahabucks coupons can be redeemed for the set of utility items available for that year. The 35

McDonald’s employee have the opportunity to earn the Mahabucks by becoming face of the month, face of the quarter, various rewards organized by the stores and through various inter store competitions.

Employee Referral Programme The employee can refer any friend who is interested in working at McDonald’s for a crew member’s job at any of the McDonald’s store. The employee receives an incentive after the referred crew member completes 3 months in the organization.

Graduate Career Advancement Programme McDonald’s believe that investing in the people is one of the best ways to build the brand and assure customer loyalty. Crew Member who completes their graduation are recognized for their academic growth by putting them on training programme which help them to become manager faster.

Retirement Benefits Employee provident fund All the employee are eligible for the provident fund scheme as per the company’s rule. Provident fund is a retire benefit provided to every employee of McDonald’s. Every employee contribute 12% of his basic salary to his/her PF account. There is an equal contribution by the

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McDonald’s employer. However 8.33% of the employer’s contribution is deposited to the Employee’s Pension Fund and the rest goes to the Provident Fund.

Employee State Insurance All the crew member are eligible for the Employee State Insurance as per the ESI rule. This benefit is provided to the employee for free medical treatment in case of sickness, maternity, and employment injury. The employee contribute 1.75% of his gross salary where as the employer contributes 4.75%

Bonus Depending upon the law applicable at the relevant time the employee will receive an amount of 8.33%of the basic salary earned during the financial year.

Gratuity All the full time employee who have completed 5 years of continuous employment with the company are eligible for gratuity. The employee will receive an amount of 15 days basic salary for every week worked. The amount is given at the time of separation or retirement from the company.

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McDonald’s

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

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

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“Moments Of Truth” – The Service Encounter Customer

Service Provider

Service Delivery Points

Managing these “moments of truth” is a great challenge in Service Marketing especially due to customer’s involvement as a co-producer of services (e.g. McDonald’s self-service concept wherein the customer not only collects the order but also cleans the table after consuming the food). However, McDonald's has been able to create a great experience for its customers by understanding the nature of the entire Service Delivery Process and the various stages in the process that are exposed to the customers. Transparency in the processes at its outlet has helped McDonald’s bring the back office in its

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McDonald’s outlet at the front so that the customer is able to know the operations and provide feedback on service design improvements. Internal Customer Focus is equally important as External Customer Orientation in order to win these “moments of truth”. McDonald’s focus on its People and their service delivery methods therefore plays a very important role in creating a successful Service Brand. The quality and the consistency of the service delivered by McDonald’s have been greatly enhanced by the combination of the factors mentioned above. This has helped McDonald’s become Service Leader and a successful Service Brand. This is evident from the fact that very few of its customers opt for take-home parcels or home deliveries while most of them prefer to eat at the outlet and enjoy the McDonald’s experience.

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McDonald’s

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 revitalising a product in decline phase 41

McDonald’s

The French Fries have been an important part of the McDonalds menu worldwide. But now it was in the stage of decline and was actually not generating proper return. In an attempt to revitalize it, a new variant was introduced namely Shake Shake Fries. This is being served with chatpata spice mix which has resulted in increase in the sales of French Fries and has elevated it from to the decline stage. This is used to delay the decline of a well established product which has the potential of generating further revenue.

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McDonald’s

ANALYSIS Competitors Analysis McDonald’s has been a leading fast-foods outlet in Vile Parle. But the outlet understudy has other competitors eating away into its market share. In addition to its traditional rivals—KFC, Dominos, Pizza Hut—the firm encounters new challenges. Jumbo King competes using a backto-basics approach of quickly serving up burgers for time-pressed consumers. On the higher end, the KFC has become potent competitor in the quick service field, taking away customers from McDonald’s. Perhaps in the new environment, fast, convenient service is no longer enough to distinguish the firm. At this time, a new critical success factor may be emerging: the need to create a rich, satisfying experience for consumers. This brings us to service and experience based competition which McDonald’s can use for competitive advantage against Jumbo King. Keeping in mind the demographics of the area, McDonald’s has Wi-Fi enabled the outlet to cater to the student community. It is for this overall “Food, Fun & Folks” experience that customers pay a premium over the other competitors. Competition also reduces product lifecycle; inducing firms to revise their products portfolios and to revisit their product market to understand changing needs, expectations and perception of different market segments. The new McBreakfast would be introduced between 6 to 11 am as a pilot project. This would open up a whole new revenue stream for McDonald’s by tapping into the student and working population by providing a healthy and wholesome breakfast. This shows how demographic shift can affect the demand for products and services. McDonald’s has anticipated these changes to maintain its competitive edge.

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McDonald’s Two Dimensional Perceptual Mapping

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McDonald’s

SWOT Analysis

The Road Ahead ➢ Entry to Tier 2 and Tier 3 cities – The main target customer for McDonald’s is the new urban Indian family. With the customer demographics constantly changing and tectonic social and cultural shifts being observed in Tier 2 and Tier 3 cities due to globalization, the company is now expanding to Tier 2 cities like Pune and Jaipur. ➢ Rolling out McBreakfast across all outlets – In India, the company has recently launched its entry into the breakfast food category. This is now launched on a pilot basis on select stores. In Mumbai, it available at the Vile Parle outlet. The company views this category as a key growth driver in future.

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McDonald’s

Exhibits 1. McDonald’s Indian Menu Vegetarian McVeggie McAlooTikki Paneer Salsa Wrap Salad Sandwich Potato Wedges Pizza McPuff

Non Vegetarian Chicken Maharaja Mac McChicken Burger Chicken Nuggets Wrap Chicken Mexican Fillet-O-Fish

Survey Questionnaire Q. Which is your favorite product at McDonald’s?

Q. Is the product line in McDonald’s adequate?

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Q. What is the main problem you faced at McDonald’s?

Q. Which area do you think needs the most improvement?

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Q. What is the first thing that strikes your mind about McDonald’s?

Kids playing at McDonalds Vile Parle

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THE NEW BREAKFAST MENU STARTED AT SELECT STORES IN MUMBAI.

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The Business Need for McDelivery & kiosk

McDelivery and Kiosks are two integral factors in the McDonalds growth model.

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McDonald’s

McDELIVERY “If you can’t come to McDonalds, McDonalds will come to you.” After nearly eight years in India, McDonald's finally started coming to your doorstep. The key idea is convenience. We are a quick service restaurant available at high-traffic locations. But there is a large number of people who find it difficult to travel. The key is to deliver hot and fresh food. Why McDelivery is an Important Business model? • McDelivery is one of the Important Business models of Brand extensions . • McDelivery contributes to around 7.5 % of Total sales. • The key idea is Convenience because McDonalds believe in being accessible. • By offering home delivery we can reach out to the Customers and increase our penetration . • MDS SOI contribution to the store system wise is 15.30%. • Based on the Data it is presumed that in the Coming days the contribution of McDelivery will be on increasing trend. • Current number of MDS Stores – 36 Plan by end of 2009 - 46 MDS stores Analysis shows that the Sales Trend is continuously on increasing Trend. •

In 2008 Regridding phase was done because of which TC’s for 2008 Were impacted compared to 2007 but now again there is an Increasing trend.

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In 2007 – 27 MDS In 2008 – 34 MDS In 2009 Plan – 46 MDS Stores In 2009 till date: 36 stores

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In 2007 sales ended – Rs 8,31,98,038/52

McDonald’s •

In 2008 Sales ended – Rs.9,05,83,754/-

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SOI Contribution Figures positive.

MDS GM% Lab Cost% Outside Services% PAC% SOI%

2008 56.67% 12.99% 16.69% 14.61% 12.95%

2009 plan Feb YTD 57.6% 55.9% 12.7% 12.1% 13.1% 15.4% 18.6% 16.6% 12.8% 15.3%

Delivery Sales & GC Trend from year 2004-2008

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Strategy for 2009

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McDONALD’s KIOSK

At McDonalds we have made effort to cover every possible area for serving to the Customer needs. After serving the meals we have made Kiosk as a means of fulfilling the custom of something sweet following the main course.

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McDonald’s

Why KIOSK is an Important Business model? •

Kiosk is one of the important model of Brand Extensions.

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Kiosk is a Business model which requires comparatively less initial investment.

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Also it helps us to increase the number of Guest Counts and Sales.

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It is a way of extending our Brand with overall less Initial and Operating investments.

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Kiosks helps us to give vaired choices to our Customers

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Kiosks contrbute around 3.7% of our Total Sales.

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Kiosk provides 23% of positive SOI.

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Currently we have 25 Kiosks and plan is to reach 28 by Dec 2009.

Kiosks GC & Sales Trend

Sales Contribution from New Business Models Kio

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McDonald’s

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As per the Ananlysis the Trend of Sales of Kiosk seems to be On increasing terms.

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In 2007 – 14 Kiosks In 2008 – 22 Kiosks In 2009 (Plan)-28 Kiosks In 2009(Till dat)-25 Kiosks

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The Chart below reflects the KIOSK as a strength for the system.

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CONCLUSION About 50 restaurants will be added to the 47 already in the India according to Vikram Bakshi, managing director of Connaught Plaza Restaurants, which holds the franchise for New Delhi and the north of the country."McDonald's considers China and India to be vital for expansion and will continue to invest more and more in both these countries," Mr Bakshi told Bloomberg News. He said the expansion is expected to cost between 10bn and 13bn rupees (£136-176m; $211-275m). Western India will get fifteen new outlets over the next 12 months at a cost of 600m rupees, according to Amit Jatia, managing director of regional franchise holder Hardcastle restaurants. Indian growth McDonald's has invested about 7bn rupees in India since it entered the market in 1996 and reported growth of about 40%. India has a population of over 1 billion and an emerging and affluent middle class. The food chain has tailored a number of its products to the Indian market, including the Paneer Salsa Wrap, McAloo Tikki and the mutton speciality for a country which does not eat beef, the Chicken Maharaja Mac. "In the next two years, we should finally have a menu that is entirely relevant to the Indian household," Mr Bakshi said. From the above information it is very clear that Mc Donalds is aggressive about its Indian operations and this fast food chain is here to stay feeding millions of Indians the Jai ho way think global act local.

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