Mc Donalds Research Report

8/3/2019 Mc Donalds Research Report

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Customer Acquisition and Retention

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A PROJECT REPORT ON

GROUP MEMBERS:

HR:

Sukeshi

Singh 010147

FINANCE II:

Mou Chakravorty 010157

Meena Kunwar 010161




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ACKNOWLEDGEMENT We are very thankful to Padmashree Dr. D.Y.Patil who has provided us this

priceless opportunity to work on this coveted topic. The entire experience which

I acquired while working on this project was highly informative as I got a

firsthand experience of conducting a full fledged survey though on a small scale

but was yet too effective. We would like to thank all those people who were

directly or indirectly responsible in making this project be real. We would also

give a special thank to the respondents, for giving their precious time to this

survey. All the questions and suggestion regarding this project are readily

welcomed.We hereby hope to have done complete justice to the given topic.

CONTENTS

Sr. Topic Page Number




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No

1 Fast Food Industry Profile 4

2 McDonaldµs Organizations Profile & History 10

3 Need for Study 18

4 Literature Survey 20

5 Objectives of study 22

6 Scope of objectives 23

7 Research Methodology 31

8 Sample Design 33

9 Analysis and Findings 34

10 Suggestions & Recommendations 38

11 Bibliography 39

1. FAST FOOD INDUSTRY PROFILE

Burgers, fries, chicken nuggets, hot dogs, sandwiches, soft drinks, you name itand you will have such yummy delights served instantly to you at the fast food

chains dotting the nooks and corners of the country. Almost all big fast food

brands of the world have set up shop in India and even home-grown brands are

doing brisk business in the Quick Service Restaurant (QSR) segment. Riding on

growing cosmopolitan outlook, ever-increasing disposable income, changing

consumer behavior and favorable demographics, the fast food industry has




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witnessed a rapid growth across the country. Exposure to western cuisine, the

rising number of nuclear families and growth in the number of employed

women have been other contributing factors to change the perception aboutIndia as a nation that is particular about its food, especially of the home cooked

and fresh variety. According to a National Restaurant Association of India

(NRAI) 2010 report, the fast food industry in India is currently estimated at `

6,750 crore to ` 8,000 crore, growing at a CAGR of 35-40 per cent annually. A

major chunk of this market is ruled by global players like McDonaldµs, Yum!

Brands, Dominos, Subway, Taco Bell, Barista, etc. The main reason behind the

success of the multinational chains is their expertise in product development,

sourcing practices, quality standards, service levels and standardized operating

procedures in their restaurants, a strength they have developed out of their years

of experience around the world. But domestic players like Nirulas, US Pizza,

Pizza Corner, Kaati Zone and home-grown Coffee Day Group or even

Haldiramµs, Bikanervala, Rasnaµs Devilµs Workshop are not lagging behind to

capture a fair share of the quick meals bazaar. With all these brands growing

rapidly, India, in fact, has emerged as one of the fastest growing fast food

markets in the world. Still, it remains largely underpenetrated and concentrated

in metropolitan cities. However, there is a large room for growth in untapped

tier-II and tier-III cities and this demand is expected to grow at a faster pace in

the near future. Owing to this, major fast food retailers have well understood the

market potential and are on their way to market their brands by using different

strategies such as campaigns and billboards. The fast food culture emerged as

early as the 19th century. At the time of the Industrial Revolution, a large

workforce was required to work for 10 to 12 hours a day.With so much work to

be done, fast food was the idea of a quick and easy lunch. In India, fast food

culture emerged in after independence, starting from the 1950s. Traditionally,

Indian consumers have been eating at roadside eateries, dhabas and stalls which

still occupy a major share of the unorganized sector. However, with the changesin the economy of the country and infusion of big corporate culture from the

West, the non-home food market has emerged with a large number of Indian

and foreign players sensing big bucks in this growing eating-out trend.

Organised modern formats like malls and supermarkets have become a favorite

destination for such outlets. Larger companies are teaming up with small

franchisors and mall owners to promote their brand. Fast food is tasty,




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economical and only a drive-through or phone-call away. So, it has become an

essential part of lifestyle in India over the past decade. The fast food outlets

generally serve burgers, fries, chicken nuggets, hot dogs, sandwiches and drinksto the busy person who doesnµt have more than five minutes to spare for his

meal. Fast food has rapidly gained popularity among the youth ever since its

emergence. Moreover, it costs less than traditional long meals commencing with

appetizer and concluding with dessert. With growing demand for fast food,

multinationals and their domestic counterparts have rapid expansion plans. Most

brands have either opted to have a master franchisee in India or unit franchisees

for their expansion. Depending on the investment capacity for a franchise, these

fast food majors have, in turn, created several job opportunities in the country as

well. From as low an investment as ` 2-3 lakh to big investments to the tune of

over one crore, the fast food segment offers immense opportunities for a far-

sighted entrepreneur. The US-based fast food giant Dominoµs Pizza is the

undisputed leader in the countryµs pizza market with a share of over 50 per cent

in the organised pizza market and over 65 per cent share in home-delivery

segment. It operates under a master franchise agreement with the Bharatia

group-promoted Jubilant Foodworks which also has Dominoµs master

franchisee rights for Nepal, Sri Lanka and Bangladesh. As on September 2010,

the brand had 339 stores across 79 cities in the country with nearly 99 per cent

of the stores being company-owned. The company plans to expand aggressively

in the Indian market aiming to open around 60-65 outlets every year for the next

few years. Yum! Restaurants, owner of Pizza Hut, KFC and Taco Bell

restaurant chains in India, is the worldµs largest restaurant company in terms of

system restaurants with more than 37,000 restaurants in over 110 countries.

Yum has over 107 KFCs and 160 Pizza Hut units in India. KFC is the worldµs

No.1 Chicken QSR and the largest brand of Yum Restaurants. The company is

constantly experimenting with consumersµneeds and market trends and has

expanded to 21 cities in India. In the next 5 years, the brand aims to open 500outlets expanding to 75 cities. KFC would also introduce some of its other

international range of products in the country. The company has achieved 75

per cent top-line sales growth (Y-O-Y) since the last 5 years. Pizza Hut, on the

other hand, has grown from being a fast food major to being a brand in the

affordable casual dining category. Currently, there are 160 restaurants across 34

cities which are completely franchisee owned. In fiscal year 2011-2012, the




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brand plans to increase its number by 10-25 per cent. Taco Bell also plans to

open up to 100 outlets by 2015 and expand into tier-II and -III Indian cities

eventually. Yum! Brands India aims to be a billion dollar business by 2015 withover 1000 stores and 50,000 employees. Subway restaurants, worldµs largest

submarine sandwich chain, has more than 34,000 locations worldwide operating

in 95 countries. Presently, it has over 197 stores in 26 cities across the country.

The brand is currently in the midst of expansion across the country with plans to

reach 250 by the end of 2011 and 320 outlets by the end of 2012. Bengaluru-

based US Pizza, owned by United Restaurants Ltd, has today pioneered the

freshly baked pizza and home delivery in India. Founded in 1994, the brand

began franchising in 1998 and has today opened 77 stores across various cities.

It is targeting to open about 36 stores every year and mainly looking at tier-II

and III cities. Leading QSR chain Nirulaµs too has announced plans to open 70

new outlets, taking its tally to 150, by March 2012. At present, it runs 80 outlets

(mostly franchised) across seven cities.

The new outlets would have various formats including ice cream kiosks. Ethnic

QSR chains too have a huge following. However, unlike their Western

counterparts, home grown chains have largely been restricted to specific

regions. Haldiram¶s, for instance, is planning to expand first in and around the

NCR region. That itself can absorb 10-15 more restaurants. Later it plans tolook at Amritsar, Ludhiana and Chandigarh. Bengaluru-based Kaati Zone,

owned by East West Ethnic Foods Private Limited, was incorporated in 2004 as

a brand of Indian quick service restaurants whose aim was to reach customers

both within India as well as overseas. Currently, it has outlets in Bengaluru but

is looking for expansion in the southern and western regions. Another reason

behind the tremendous growth of fast food industry in India is that brands keep

innovating and experimenting with their products, launching new items at

regular intervals and running campaigns and food festivals to attract consumers.

Their major strengths are quality food, delivery on time and offerings at

affordable prices. Seeing the growth in fast food business, even coffee chains

have jumped into the business with different recipes. Also, with the café culture

changing, guests no longer visit a café only for coffee; they also look for light

on the goµfood options which are healthy yet can be used for meals options.

Keeping the changing trend in mind, Cafe Coffee Day has also designed the




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new menu which includes a wide range of food items along with the innovative

range of beverages. The brand only operates through its company-owned outlets

across the country. It plans to expand its network from the current 1000 outletsto 2000 by 2014. The company gets about 35-40 per cent of its revenues from

food items at their cafes while the rest is accrued from beverages including

coffee. Recently, Barista Lavazza also launched its Coffee Confession menu

which has a huge range of fast food products with different taste. The fast food

industry has been very successful in India, both in financial terms as well as in

terms of popularising its quick service culture. But the industry confronts many

hurdles, too. High cost of real estate is the most painful aspect.While globally

the standard real estate cost is 10-15 per cent of sales as rentals, in India it goes

as high as 20-25 per cent. Added to this there are manpower issues, lack of

proper infrastructure, high costs of raw materials, supply chain and taxation

issues, to name a few. Further, the government is legislating laws in order to

keep a check on the fast food industry and it is emphasising more on the usage

of bio-degradable and environment friendly products. But such products cost

much higher than the normal products. Health related issue ± obesity ± is

another major concern. But emphasis is now more on low calorie food by most

players.While some of the factors responsible are intrinsic and hence can be

addressed, the others need institutional and government support. The general

plea of the industry is to waive off service tax on rentals, given the extremely

high rentals. There is a case for tax breaks for the fast food companies in the

initial years like it is provided to various other sectors. This will further fuel

growth and in turn create more employment opportunities and encourage more

entrepreneurs to enter this segment. According to McDonaldµs, support from the

government is needed in the form of legislation, subsidies, financing, tax

structure and setting up institutions for training. Simplification of the rules and

regulations and more transparency together with allowing FDI in retail would

go a long way in contributing to the growth of the restaurant industry.




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2. MCDONALD S OR GANIZATIONS PROFILE &

HISTORY The McDonalds Story The story of McDonaldµs started in 1954, when its

founder Raymond Kroc saw a hamburger stand in San Bernardino, California

and envisioned a nationwide fast food chain. Kroc proved himself as a pioneer

who revolutionized the American restaurant industry. Today McDonaldµs is the

worldµs largest fast food chain serving 47 million customers daily. McDonaldµs

is now one of the most valuable brands globally, worth more than $25 billion.

The Golden Arches and its mascot Ronald McDonald have gained universal

recognition. Though the company has roots in the US, McDonaldµs today has

become an accepted citizen of the world.

Year Event

1955 Ray Kroc opens his first restaurant. McDonaldµs Corporation iscreated

1957 Quality, Service, Cleanliness and Value (QSC & V) becomes

company motto

1963 Ronald McDonald makes debut

1965 The company goes public

1968 Big Mac is introduced




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1974 Happy Meal is launched

BUSINESS MODEL Franchise Model ± Only 15% of the total number of restaurants are owned bythe Company. The remaining 85% is operated by franchises. The companyfollows a comprehensive framework of training and monitoring of its franchisesto ensure that they adhere to the Quality, Service, Cleanliness and Value

propositions offered by the company to its customers.

Product Consistency ± By developing a sophisticated supplier networked

operation and distribution system, the company has been able to achieveconsistent product taste and quality across geographies.

Act lik e a retailer and think lik e a brand ± McDonaldµs focuses not only ondelivering sales for the immediate present, but also protecting its long term brand reputation.

McDonalds in India

McDonaldµs entered India in 1996. McDonaldµs India has a joint venture with

Connaught Plaza Restaurants and Hard Castle Restaurants. Connaught PlazaRestaurants manages operations in North India whereas Hard Castle Restaurants

operates restaurants in Western India. Apart from opening outlets in the major

metros, the company is now expanding to Tier 2 cities like Pune and Jaipur.

Challenges in Entering Indian Mark ets.

R egiocentricism: R e-engineering the menu - McDonaldµs has continuallyadapted to the customerµs tastes, value systems, lifestyle, language and perception. Globally McDonaldµs was known for its hamburgers, beef and pork burgers. Most Indians are barred by religion not to consume beef or pork. Tosurvive, the company had to be responsive to the Indian sensitivities. SoMcDonaldµs came up with chicken, lamb and fish burgers to suite the Indian palate.

The vegetarian customer ± India has a huge population of vegetarians. Tocater to this customer segment, the company came up with a completely new




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line of vegetarian items like McVeggie burger and McAlooTikki. Theseparation of vegetarian and non-vegetarian sections is maintained throughout

the various stages.McDonald¶s Values

McDonald's, worldwide, stands for QSC&V, where "V" stands for value and

therefore the value proposition assumes special significance. Explaining this,

Mr. Amit Jatia, Joint Venture Partner & Managing Director, McDonald's

(Western India) says, "McDonald's success has been built on commitment to the

delivery of QSC&V (Quality, Service, Cleanliness and Value) to customers, the

expansion of restaurant numbers to improve convenience and large scale

investment in supplier development, training and people. Getting QS&C

consistently and overwhelming appreciation of Value keeps our customers

satisfied and maintains our competitive edge."

The value initiative at McDonald's is all - pervasive. Our strategy is to achieve best value by enhancing experience (offering best quality), while keeping pricesreasonable. This applies to products we serve our customers and to every other aspect of the way we do business. At McDonald's, costs are kept low byincreasing efficiency and cutting wastage at all levels. This is possible byadvanced operations, management and human behaviour skills tested over timein around 120 countries across the world. It is important to understand that

delivering top quality doesn't come easily. Customers, who walk into aMcDonald's restaurant, expect to be served food that is hot and fresh, madefrom the highest quality ingredients, served within minutes of placing their order and at a price, which is affordable. Such is the strength of the brand thatthey rely on McDonald's to do all this, without thinking about how it is actuallyachieved. This is accomplished through attention to the minutest details anddoing things the right way. Whether it is the McDonald's unique cold chainnetwork, which ensures that food products move from farms to restaurantsabsolutely fresh, at the lowest possible cost; or, the reverse osmosis water treatment plant at every restaurant to provide water, which is the ultimate in

purity, McDonald's in India has invested heavily in achieving quality.McDonald's Value off ers

Though all McDonald's food products offer tremendous value, we continually

review and improve our menu offerings to make sure that we not only meet our

customers' expectations, but also exceed them. As a result, we have introduced a

series of ongoing value options to enable our customers to appreciate this aspect

of the brand even more strongly.




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FINANCIALS 2010 HIGHLIGHTS:

Global Comparable Sales Growth - 5.0%

Earnings Per S

hare Growth - 11%

Average Number of Customers Served Every Day - 64 Million

6-Year Summary

Dollars in millions, except per share data

Year 2010 2009 2008 2007 2006 2005

Company-operatedsales

16,233 15,459 16,561 16,611 15,402 14,018

Franchised revenues 7,842 7,286 6,961 6,176 5,493 5,099Total revenues 24,075 22,745 23,522 22,787 20,895 19,117Operating income 7,473(1) 6,841(2) 6,443 3,879(5) 4,433(8) 3,984Income fromcontinuing operations

4,946(1) 4,551(2,3)

4,313(4) 2,335(5,6)

2,866(8) 2,578(10




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Net income 4,946(1) 4,551(2,3)

4,313(4) 2,395(5,6,7)

3,544(8,9)

2,602(10

Cash provided byoperations 6,342 5,751 5,917 4,876 4,341 4,337

Cash used for investing activities

2,056 1,655 1,625 1,150 1,274 1,818

Capital expenditures 2,136 1,952 2,136 1,947 1,742 1,607Cash used for (provided by)financing activities

3,729 4,421 4,115 3,996 5,460 -442

Treasury stock repurchased(11)

2,648 2,854 3,981 3,949 3,719 1,228

Common stock cashdividends 2,408 2,235 1,823 1,766 1,217 842

Financial position at year end:

Total assets 31,975 30,225 28,462 29,392 28,974 29,989Total debt 11,505 10,578 10,218 9,301 8,408 10,137Total shareholdersµequity

14,634 14,034 13,383 15,280 15,458 15,146

Shares outstanding inmillions

1,054 1,077 1,115 1,165 1,204 1,263

Per common share:

Income fromcontinuingoperations±diluted

4.58(1) 4.11(2,3) 3.76(4) 1.93(5,6) 2.29(8) 2.02(10)

Net income±diluted 4.58(1) 4.11(2,3) 3.76(4) 1.98(5,6,7)

2.83(8,9) 2.04(10)

Dividends declared 2.26 2.05 1.63 1.5 1 0.67Market price at year end

76.76 62.44 62.19 58.91 44.33 33.72

Company-operatedrestaurants

6,399 6,262 6,502 6,906 8,166 8,173

Franchisedrestaurants

26,338 26,216 25,465 24,471 22,880 22,593

Total System widerestaurants

32,737 32,478 31,967 31,377 31,046 30,766

Franchised sales(12) 61,147 56,928 54,132 46,943 41,380 38,913

Balance Sheet




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Period Ending 30-Dec-10 30-Dec-09 30-Dec-08

Assets

Current AssetsCash And CashEquivalents

2,387,000 1,796,000 2,063,400

Investments - - -

Net Receivables 1,179,100 1,060,400 931,200

Inventory 109,900 106,200 111,500

Other Current Assets 692,500 453,700 411,500

Total Current Assets 4,368,500 3,416,300 3,517,600

Long Term

Investments

1,335,300 1,212,700 1,222,300

Property Plant andEquipment

22,060,600 21,531,500 20,254,500

Goodwill 2,586,100 2,425,200 2,237,400

Intangible Assets - - -

AccumulatedAmortization

- - -

Other Assets 1,624,700 1,639,200 1,229,700

Deferred Long TermAsset Charges

- - -

Total Assets 31,975,200 30,224,900 28,461,500

Liabilities

Current LiabilitiesAccounts Payable 2,916,400 2,970,600 2,506,100Short/Current LongTerm Debt

8,300 18,100 31,800

Other CurrentLiabilities

- - -

Total Current

Liabilities

2,924,700 2,988,700 2,537,900

Long Term Debt 11,497,000 10,560,300 10,186,000Other Liabilities 1,586,900 1,363,100 1,410,100Deferred Long TermLiability Charges

1,332,400 1,278,900 944,900

Minority Interest - - - Negative Goodwill - - -Total Liabilities 17,341,000 16,191,000 15,078,900




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Stockholders' Equity

Misc Stocks OptionsW

arrants

- - -

Redeemable PreferredStock

- - -

Preferred Stock - - -Common Stock 16,600 16,600 16,600Retained Earnings 33,811,700 31,270,800 28,953,900Treasury Stock -25,143,400 -22,854,800 -20,289,400Capital Surplus 5,196,400 4,853,900 4,600,200

Other Stockholder Equity

752,900 747,400 101,300

Total StockholderEquity 14,634,200 14,033,900 13,382,600

Net Tangible Assets 12,048,100 11,608,700 11,145,200

3. NEED FOR STUDY To be successful, organizations must look into the needs and wants of their customers. That is the reason why many researchers and academicians havecontinuously emphasized on the importance of customer satisfaction, loyaltyand retention. Customer satisfaction is important because many researchµs haveshown that customer satisfaction has a positive effect on an organizationµs profitability. Due to this, the consequences of customer satisfaction anddissatisfaction must be considered. There is also a positive connection between

customer satisfaction, loyalty and retention. The importance of customer

satisfaction is apparent when you realize that, without customers, you don't havea business. A single unsatisfied customer can send more business away fromyour company than 10 satisfied customers. The more you focus on customer retention and customer support, the more long-term business you'll get. It'sworth it to focus on customer satisfaction strategies, no matter how large or small your company is.




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Understanding the needs of the customer is critical. A business relationship, just like any other relationship, relies on both people getting their needs met. No

matter what type of business you are in, all customers want the same thing.They want to feel welcomed and appreciated by you and your staff. They don'twant to get the impression that they are just being used by you for money. Smallinteractions like "Thank you" and a nice smile can go a long way towardcustomer satisfaction.Mak e sure your employees operate with the same principles. A big part of customer satisfaction is reliability. If customers come to expect a certain modeof behavior from you and your employees, you should deliver it to them each

and every time. Customers want to be able to rely on you. They expectconsistent delivery times (if applicable) and support. By training your

employees to treat all customers with the same respect, your customers will allhave the same experience with your company, which will increase customer satisfaction.Be honest when you don't meet expectations. Customer satisfaction is at itsmost important when something goes wrong in the chain of delivery. Whether acustomer was double charged or didn't receive what she ordered, your employees need to handle the situation with the utmost care. Your employeeshould apologize and take steps to rectify the situation. The phrase "thecustomer is always right" is at the core of a good customer satisfaction strategy.It doesn't matter whether or not the customer misread the instructions or made

the mistake; your employee should take steps to make the customer happy.Customer satisf action is the foundation of a good business. Satisfiedcustomers will make a great foundation for return business, and they may also bring in their friends and associates. Remember that customers are the heart of any business. Keep them satisfied, and encourage them to tell their friends abouttheir experiences with your business. Therefore, customer satisfaction, loyaltyand retention are all very important for an organization to be successful.




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4. LITERATURE SURVEY The importance of customer satisf action and delight on loyalty in the

tourism and hospitality industry Customer satisfaction has been a focus of researchers and marketers as an important antecedent of customer loyalty.Research has proven that satisfied customers show loyalty by purchasing more products or services, recommending products to others, and being less pricesensitive (Anderson, Fornell, and Mazvancheryls, 2004; Homburg, Koschate,and Hoyer, 2005). Recent studies propose customer delight as a new variable of interest in satisfaction research and are anticipated to possibly produce greater customer loyalty than satisfaction (Hicks, Page, Behe, Dennis, and Fernandez,

2005). Like customer satisfaction, customer loyalty is also considered crucial tothe success of a business organization because loyal customers are less

expensive to retain than to find and develop new customers (Reichheld andSasser, 1990). In recent years interest has also grown in understanding themulti-phases of loyalty as a useful way to segment customers with differentialstrategies (Knox andWalker, 2001; McMullan and Gilmore, 2002; Palmer,McMahon-Beattie, and Beggs, 2000).The problem of this research is to examine the impact of customer satisfactionand delight on loyalty by empirically testing a model. Furthermore, the studyaims to better understand four phases of loyalty development: cognitive,

affective, conative, and action loyalties. Data were collected from guests whostayed at a Midwestern resort during a peak summer vacation time using anonline and a paper survey (1,573 subjects from an online survey, 87 subjectsfrom a paper survey). The model was tested applying structural equationmodelling (SEM) to estimate the relationship between customer satisfaction,delight, and loyalty in a tourism and hospitality context. The findings supportthe proposed model and suggest that (1) customer satisfaction has a direct and




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positive influence on cognitive and affective loyalty; (2) customer delight has adirect and positive influence on cognitive and affective loyalty; (3) customer

satisfaction has a greater influence on cognitive loyalty than on customer delight; (4) customer delight has a greater influence on affective loyalty than oncustomer satisfaction; (5) cognitive and affective loyalties have a direct and positive influence on conative loyalty; and (6) conative loyalty has a direct and positive influence on action loyalty.This study is one of few empirical studies on customer satisfaction, delight, andloyalty and tests a more comprehensive model than previous research efforts.This study will contribute to the body of knowledge on customer satisfaction,

delight, and loyalty and provide important theoretical and applied suggestionsfor the tourism and hospitality industry. Future studies should replicate the

findings and test the model with different samples such as types of accommodations (e.g., motel, business hotel, bed and breakfast), places (e.g.,other states, other countries), and service industries (e.g., restaurant, airline,cruise). With attitudinal research, validating the accuracy of action loyalty or intended future behaviours should be validated with actual measures of futurereturns to the business and recommendations of the business to others.

5. OBJECTIVES OF STUDY




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Below are the objectives of this project:

Discovering the most appreciated product by the customers.

y

By this we will try to find out the most liked product of McDonalds, sothat the company could concentrate on maintaining the consistence of that product and simultaneously improve and promote the other products.

y Analyzing the reason of dissatisfaction among customers.

y By this we will try to find out the reasons which are affecting thecustomer¶s satisfaction and resulting in loss of customers.

y Analyzing Brand association of the customers.

y By this we will try to find out the component of the brand to which thecustomers are more linked to by checking the recall of the brand.

6. SCOPE OF OBJECTIVESSegmentation, Targeting and Positioning

McDonaldµs 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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As shown above, kids reign supreme in FMCG purchase related to food products. So to attract children McDonalds has Happy Meal with which toysranging from hot wheels toVarious 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. Atseveral outlets, it also provides special facilities like µPlay Place¶ wherechildren can play arcade games, air hockey, etc. This strategy is aimed atmaking McDonaldµs a fun place to eat. This also helps McDonaldµs to attract

the young urban families wanting to spend some quality time while their children have fun at the outlet. To target the teenagers, McDonaldµs has pricedseveral products aggressively, keeping in mind the price sensitivity of this targetcustomer. In addition, facilities likeWi-Fi are also provided to attract studentsto the outlets like the one at Vile Parle in Mumbai. ³Mc Donalds mein hai

kuch baat´ projects McDonaldµs as a place for the whole family to enjoy.When McDonaldµs entered in India it was mainly perceived as targeting theurban upper class people. Today it positions itself as an affordable place to eatwithout compromising on the quality of food, service and hygiene. The outletambience and mild background music highlight the comfort that McDonaldµs

promises in slogans like ³You deserve a Break Today´ & ³Feed your innerchild´. This commitment of quality of food and service in a clean, hygienic andrelaxing atmosphere has ensured that McDonaldµs maintains a positiverelationship with the customers.

Customer Perception and Customer Expectation Customer perception is akey factor affecting a productµs success. Many potentially revolutionary products have failed simply because of their inability to build a healthy




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perception about themselves in the customersµminds. McDonalds being aninternationally renowned brand brings with it certain expectations for the

customers.

Target Segmentation What is McDonald's for me?

A Family with children A treat to children, a fun place to be for thechildren

Urban customers on themove

A treat to children, a fun place to be for thechildren.Great taste, quick service without affecting the

work schedule.Teenager

Hangout with friends, but keep it affordable.

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

McDonalds Mark eting Mix (5 Ps)

After segmenting the market, finding the target segment and positioning itself,each company needs to come up with an offer. The 5 Pµs used by McDonaldsare:

1. Product

2. Place

3. Price4. Promotion

5. People

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




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Product is the physical product or service offered to the consumer. Productincludes certain aspects such as packaging, guarantee, looks etc. This includes

both the tangible and the non-tangible aspects of the product and service.McDonalds has intentionally kept its product depth and product width limited.McDonalds studied the behavior of the Indian customer and provided a totallydifferent menu as compared to its International offering. It dropped ham, beef and mutton burgers from the menu. India is the only country where McDonaldsserve vegetarian menu. Even the sauces and cheese used in India are 100%vegetarian. McDonalds continuously innovates its products according to thechanging preferences and tastes of its customers. The recent example is the

introduction of the Chicken Maharaja Mac.McDonalds bring with it a globally reputed brand, world class food

quality and excellent customer specific product features.Place: Where should be the product be available and the role of distributionchannels? The place mainly consists of the distribution channels. It is importantso that the product is available to the customer at the right place, at the righttime and in the right quantity. Nearly 50% of U.S.A is within a 3 minute dri vefrom a McDonaldµs outlet. There is a certain degree of fun and happiness that acustomer 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. Thereare certain dedicated areas for chi ldren where they can play while their parentscan have some quality time together.

Pricing includes the list price, the discount functions available, the financingoptions available etc. It should also take into the consideration the probablereaction 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. Allthe other three are expenses incurred. The price must take into consideration theappropriate demand-supply equation. McDonaldµs came up with a very catchy

punch li ne

Aap ke zamane mei n ,baap ke zamane ke daam. This was toattract the middle and lower class consumers and the effect can clearly be seen

in the consumer base McDonalds has now. McDonalds has certain value pricingand bundling strategies such as happy meal, combo meal, family meal etc toincrease overall sales volumes.




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

The various promotion channels being used by McDonaldµs to effectivelycommunicate the product information are given above. A clear understanding of the customer value helps decide whether the cost of promotion is worthspending. There are three main objectives of advertising for McDonaldµs are tomake people aware of an item, feel positive about it and remember it. The rightmessage has to be communicated to the right audience through the right media.McDonaldµs does its promotion through television, hoardings and bus shelters.They use print ads and the television programmes are also an importantmarketing medium for promotion. Some of the most famous marketing

campaigns of McDonaldµs are:y You Deserve a break today, so get up and get away- To McDonaldµs

y Aap ke zamane mein, baap ke zamane ke daam.

y Food, Folks, and Fun

y Iµm loving it

People:

How to converge the benefits of internal and external marketing? McDonaldµsunderstands the value of both its employees and its customers. It understands

the fact that a happy employee can serve well and result in a happy customer.McDonald continuously does Internal Marketing. This is important as it must precede external marketing. This includes hiring, training and motivating ableemployees. This way they serve customers well and the final result is a happycustomer. The level of importance has changed to be in the following order (themore important people are at the top):

1. Customers

2. Front line employees

3. Middle level managers

4. Front line managers

The punch line Iµm loving it is an attempt to show that the employees are

loving their work at McDonalds and will love to serve the customers.

Importance of PLC in McDonalds




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The requirements of customers change over time and thus the product offeringhas to be changed accordingly.What is the fashion today may be out of market

within few weeks. Thus continuous innovation is required. To counter thesechanges McDonalds has continuously introduced new products and has phasedout the old ones which were at the decline stage of their PLC. The introductionis timed such that the new product does not cannibalize the product already inthe maturity or growth stage. Thus the secret lies in getting profits with different products in the different stages of the PLC.

A perf ect example of revitalizing a product in decline phase

The French Fries have been an important part of the McDonalds menuworldwide. 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 wasintroduced namely Shake Shake Fries. This is being served with chatpata spicemix which has resulted in increase in the sales of French Fries and has elevatedit from to the decline stage. This is used to delay the decline of a wellestablished product which has the potential of generating further revenue.

Competitors Analysis

McDonaldµs has been a leading fast-foods outlet in Vile Parle. But the outletunderstudy has other competitors eating away into its market share. In additionto its traditional rivals²KFC, Dominos, Pizza Hut²the firm encounters newchallenges. Jumbo King competes using a back-to-basics approach of quicklyserving up burgers for time-pressed consumers. On the higher end, the KFC has become potent competitor in the quick service field, taking away customersfrom McDonaldµs. Perhaps in the new environment, fast, convenient service isno longer enough to distinguish the firm. At this time, a new critical successfactor may be emerging: the need to create a rich, satisfying experience for consumers. This brings us to service and experience based competition whichMcDonaldµs can use for competitive advantage against Jumbo King. Keeping inmind the demographics of the area, McDonaldµs hasWi-Fi enabled the outlet tocater to the student community. It is for this overallFood, 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 changingneeds, expectations and perception of different market segments. The newMcBreakfast would be introduced between 6 to 11 am as a pilot project. Thiswould open up a whole new revenue stream for McDonaldµs by tapping into thestudent and working population by providing a healthy and wholesome breakfast. This shows how demographic shift can affect the demand for




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products and services. McDonaldµs has anticipated these changes to maintain itscompetitive edge.

SWOT Analysis:

STRENGTH

1. Strong Brand

2. Customer intimacy

3. Product innovation

4. Supplier integration

WEAKNESS

1. Low depth and width of

product.

Opportunities

1. Expand into tier 2 and tier 3

cities.

2. Entry into breakfast category

THREATS

1. Changing customer lifestyle and

taste

2. Increase competition from local

fast food outlets like jumbo king

The Road Ahead

Entry to Tier 2 and Tier 3 cities ± The main target customer for McDonaldµsis the new urban Indian family.With the customer demographics constantly




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changing and tectonic social and cultural shifts being observed in Tier 2 andTier 3 cities due to globalization, the company is now expanding to Tier 2 cities

like Pune and Jaipur.

Rolling out McBreakf ast across all outlets ± In India, the company hasrecently launched its entry into the breakfast food category. This is nowlaunched on a pilot basis on select stores. In Mumbai, it is available at the VileParle outlet. The company views this category as a key growth driver in future.

7. RESEARCH METHODOLOG Y Research is an endeavour to discover answers to intellectual and practical problems through the application of scientific method. Research is asystematized effort to gain new knowledge. -Redman and Mory.Research is the systematic process of collecting and analyzing information(data) in order to increase our understanding of the phenomenon about whichwe are concerned or interested.R esearch Objectives

The purpose of research is to discover answers through the application of scientific procedures.The objectives are:

y To gain familiarity with a phenomenon or to achieve new insights into it ± Exploratory or Formulative Research.

y To portray accurately the characteristics of a particular individual,

situation or a group ± Descriptive Research.

y To determine the frequency with which something occurs or with whichit is associated with something else ± Diagnostic Research.

y To test a hypothesis of a causal relationship between variables ± Hypothesis-Testing Research.

The design used for this research is Exploratory Research.

Data: Primary research entails the use of immediate data in determining the

survival of the market. The popular ways to collect primary data consist of

surveys, interviews and focus groups, which shows that direct relationship

between potential customers and the companies.Whereas secondary research is




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a means to reprocess and reuse collected information as an indication for

betterments of the service or product. Both Primary as well as Secondary data

has been used to complete this research.

R esearch Instrument:

A testing device for measuring a given phenomenon, such as a paper and penciltest, a questionnaire, an interview, a research tool, or a set of guidelines for observation. A questionnaire has been used for this research.R esearch Plan:

The R esearch plan for this topic is as follows:

y Exploratory Research Design will be used to complete the research.

y Data will be collected from Primary as well as Secondary sources.y A brief questionnaire will be used to interrogate the audiences and collect

primary data.

8. SAMPLE DESIG N

Sample Unit:




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A sample is a finite part of a statistical population whose properties are studiedto gain information about the whole(Webster, 1985). When dealing with people,

it can be defined as a set of respondents(people) selected from a larger population for the purpose of a survey. A population is a group of individuals persons, objects, or items from which samples are taken for measurement for example a population of presidents or professors, books or students. In this casethe sample unit is individual between the age of 18 to 35, who visit Malls &Mcdonalds.Sample Frame:

A sample frame is a list that includes every member of the population from

which a sample is to be taken. Without some form of sample frame, a randomsample of a population, other than an extremely small population, is impossible.

In this case theS

ample Frame is individuals between the age of 18 to 35 whovisit the VilleParle McDonalds.Time and Place:

The prospects will be identified and questioned at the VilleParle McDonalds between the periods of 6th Jul 2011 to 10th Jul 2011 from 11:00 am to 5:00 pm.Type of Sampling: The below Non Probability sampling methods have beenused in this research:Availability sampling

Judgmental sampling

Sample Size: The below formula has been used to determine the sample

size (N): The square root of N = (1.96)*(&)/precision

y Where & is the population standard deviation of the for the variablewhose mean one is interested in estimating.

y Precision refers to width of the interval one is willing to tolerate and 1.96reflects the confidence level.

Thus the calculated sample size is 65.




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9. ANALYSIS AND FINDING S

After interpretation of the responses provided by the respondents, the below

results are found:

Q. Which is your favourite product at McDonaldµs?




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Q. Is the product line in McDonaldµs adequate?

Q. What is the main problem you faced at McDonaldµs?




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

Q. What is the first thing that strikes your mind about McDonaldµs?




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10. SUGGESTIONS & RECOMMENDATIONS

The most appreciated product by the customers is French Fries, McDonaldµsshould concentrate on maintaining the consistence of this product andsimultaneously improve and promote the other products.




Most of the customers do not have any problem with the delivery but some faceissues due to the long queues at the delivery counter. Hence McDonaldµs should

try to find out new ways of delivering the products to the customers, so that theydonµt have to wait in long queues.

Most of the people associate McDonaldµs with Burgers, Golden Arches & Fun.Hence McDonaldµs promote these factors more in order to retain the oldcustomers and acquire new ones.

11. BIBLIOGRAPHY

Book s:

1. Product & Brand Management By S. A. Chunawalla

2. Essentials of Marketing Research By Paurav Shukla

Websites:3. www.mcdonaldsindia.com/4. www.wikipedia.org/5. www.socialresearchmethods.net/

Mc Donalds Research Report

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