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[TYPE THE COMPANY NA ME]

Marketing Project

McDonalds : Behind the Golden Arches

Anmol Bajaj and Akhil Satija

3/11/2011

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McDonalds : Behind the Golden Arches

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ACKNOWLEDGEMENT

We take this opportunity to express our sincere gratitude to all concerned with the

successful completion of project. First of all I would like to thank Dr.Lallan Prasad for

providing us this opportunity to do the project and help us learn about the mar keting mix of

Our chosen company- McDonalds

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A Brief History of McDonalds

History of McDonalds

1955

Ray Kroc opens his first restaurant in Des Plaines, Illinois and the McDonalds Corporation is created.

1957

Quality, Service, Cleanliness and Value (QSC& V) becomes the company motto.

1959

The 100th McDonalds opens in Chicago.

1961

Hamburger University opens in Elk Grove, near Chicago.

1963

One billion hamburgers sold.

Ronald McDonald makes his debut.

1964

Filet-O-Fish sandwich is introduced.

1965

McDonalds Corporation goes public.

1967

The first restaurants outside of the USA open in Canada and Puerto Rico.

1968

The Big Mac is introduced.

The 1,000th restaurant opens in Des Plaines, Illinois.

1972

A new McDonalds restaurant opens every day.

The Quarter Pounder is introduced.

1973

Egg McMuffin is introduced.

1974

The first Ronald McDonald House opens in Philadelphia.

The Happy Meal is launched.

1983

Chicken McNuggets is introduced.

New Hamburger University campus opens in Oak Brook, Illinois. Set in 80 wooded acres. Training is

provided for every level of McDonalds management worldwide.

1984

50 billionth hamburger sold.

Ronald McDonald Children's Charities is founded in Ray Krocs memory to raise funds in support ofchild welfare.

1994

Restaurants open in Bahrain, Bulgaria, Egypt, Kuwait, Latvia, Oman, New Caledonia, Trinidad and

United Arab Emirates, bringing the total to over 15,000 in 79 countries on 6 continents.

1996

McDonalds opens in India the 95th country.

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McDonalds - A Global Phenomenon

McDonalds opened its doors in India in October 1996. Ever since then, our family

restaurants in Mumbai, Delhi, Pune, Ahmedabad, Vadodara, Ludhiana, Jaipur, Noida

Faridabad, Doraha, Manesar and Gurgaonhave proceeded to demonstrate, much to thedelight of all our cus tomers, what the McDonalds experienceis all about.

Our first restaurant opened on 15th April 1955 in Des Plaines, Illinois, U.S.A. Almost 50 years

down the line,we are the world's largest food service system with more than 30,000

restaurants in 100 countries, servingmore than 46 million customers every day.Click here for

more information on the history of McDonalds.

Locally Owned

McDonalds in India is a 50-50 joint venture partnership between McDonalds Corporation

[USA] and two Indian businessmen. Ami t Jatias company Hardcastle Restaurants Pvt. Ltd.

owns and operates McDonalds restaurants in Western India. While Connaught PlazaRestaurants Pvt. Ltd headed by Vikram Bakshi owns and operates the Northern operations.

Amit Jatia and Vikram Bakshi are like-minded visionaries who share McDonalds complete

commitment to Quality, Service, Cleanliness and Value (QSC&V). Having signed their joint -

venture agreements with

McDonalds in April 1995, they trained extensively, along with their Indian management

team, in McDonalds restaurants in Indonesia and the U.S.A. before opening the first

McDonalds restaurant in India.

Respect for local culture

McDonalds India has developed a special menu with vegetarian selections to suit Indian

tastes and

preferences. McDonalds does not offer any beef or pork items in India. Only the freshest

chicken, fish and vegetable products find their way into our Indian restaurants.

In addition, we've re-formulated some of our products using spices favoured by Indians.

Among these areMcVeggie burger, McAloo Tikki burger, Veg. Pizza McPuff and Chicken

McGrill burger. We've alsocreated eggless sandwich sauces for our vegetarian customers.

Even our soft serves and McShakes areegg-less, offering a larger variety to our vegetarian

consumers.

International Standards

McDonalds India's local suppliers provide us with the highest quality, freshest ingredients.

Complete

adherence to the Indian Government regulations on food, health and hygiene is ensured,

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while maintaining our own recognized international standards. Fast, friendly service - the

hallmark of McDonalds restaurants the world over is the mantra we abide by.

Stringent cleaning standards ensure that all tables, chairs, highchairs and trays are s anitised

several times each hour. Such meticulous attention to cleanliness extends beyond the lobby

and kitchen to even the pavement and immediate areas outside the restaurant.

Our Philosophy

"We take the burger business more seriously than anyone else. "

When McDonalds founder, Ray Kroc made that memorable statement, he was letting the

world in on the philosophy and secret behind McDonalds phenomenal success. Our vision

to be Indias "best" quick service restaurant experience is supported by a set of principles

and core values [McDonalds Way]

The principles that guide us

Quality, Service, Cleanliness & Value - It is an unflinching McDonalds ideology that our

customers

must always get quality products, served quickly and with a smile, in a clean and pleasant

environment; and all at a fair price

We are committed to exceeding our customers' expectations in every restaurant every

time.

We have a passion and a responsibility for enhancing and protecting the McDonalds

brand.

We believe in a collaborative management approach, employing a mutually respectful

business

philosophy,

We will seize every opportunity to innovate and lead the industry on behalf of our

customers.

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SEGMENTATION, TARGETING AND POSITIONING

Value propositions had to be directed to the right target market to establish a new product.

An interesting question was who would eat at McDonalds? In order to develop the

Marketing strategy, it was important for any company to understand the consumer market.

The more one knew and understood about consumers, the more effectively one could

communicate and market to them. Four aspects of consumer behaviour which needed to

be examined to understand a consumer market were the ability of the people to buy,

consumer needs, buying motives and the buying process. The initial attempt of McDonalds

was to induce trials and get the customers into the restaurants. Word of mouth and

advertising was expected to reveal the experience of eating at McDonalds.

McDonalds Value Meal addressed the price sensitivity of the Indian consumer market.

However, irrespective of this effort, McDonalds was affordable to select customers only.

These were the ambitious middle, upper middle and affluent classes who were keen to

combine eating with fun

McDonalds uses demographic segmentation strategy with age as the parameter. The main

target segments re children, youths and the young urban family.

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wherechildre 0 can playarcade games like air hockeyetc1 Thisstrategy is aimed at makingMc 2 onalds a fun place to

eat. This also helps the fast food giant to attract theyoung urban families wanting to spend

some quality time while their children have fun at the outlet.

To target teenagers3 Mc 2 onalds has priced several products aggressively 3 keeping in mind

the pricesensitivity of this target consumer. In addition, facilities like Wi-Fi are also provided

to attract students to the outlets (like the one at Vile Parle in Mumbai).

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t projects Mc 2 onalds as a place for the whole

family to enjoy. When Mc 2 onaldsentered 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 thecomfort that Mc 2 onalds

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CUSTOMER PERCEPTION AND CUSTOMER

EXPECTATIONS

Customer perception is a key factor affecting a products 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

consumers.

TARGET SEGMENT What McDonalds mean to them?

A family with children Treat and a fun place for children.

Urban Consumer on the move Great taste, Quick service, ( a bite on the

go)

Teenager Hangout with friends yet affordable

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THE MARKETING MIX

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PRICING:

Pricing is the only mix which generates revenue for the organisation; all other are the

variable costs for the organisation. Designing a product, promoting it etc all costs something

and price must support these elements of the mix. Pricing should reflect the supply demand

relationship to be stable at least if not in equilibrium.

Food pricing was a sensitive issue in India. An ideal strategy was to focus on customers

ability to pay and tap the rich and upper middleclass population in India. Although

McDonalds strategy was to increase sales volumes by making products available at

affordable price, its products were perceived to be expensive. The company outlets in Delhi

and Mumbai initially were opened due to the increased affordability of people with western

exposure and brand recognition factors in metros. Additionally, people in the metros were

open to experiment with variety of foods. Absorption of newer cultures was faster in the

Metros than other areas.

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The mass markets in India were price sensitive. The positive factors were the growth in

consumer markets with rapid growth in disposable incomes, development of modern urban

lifestyles and the demand for value

Consumers perception of value is an important determinant of the price charged.

Consumers draw their own mental picture of what the product is worth. A product is mor e

than just a physical item; it also has psychological connotations for the consumer.

Pricing includes: List price, discount functions available, financing options available etc; it

should also consider the probable reaction from the competitor to the pri cing strategy. The

danger of using low price strategy as a marketing tool is that the consumer may feel that the

quality of the product is compromised. Further this move may be matched by competitors

resulting in no extra demand.

McDonalds has certain value pricing and bundling strategies , such as: happy meal, Combo

meal, family meal etc to increase sales volume. In fact McDonalds has always played the

volume game and has historically kept its price minimal and without diluting the brand.

Mc Donalds vegetarian burgers are priced between Rs 20 and Rs 48. Wrap paneer salsa ispriced at Rs 45-50. The non vegetarian burgers are priced between Rs 30 and Rs 60. Wrap

chicken Mexican is priced at Rs 55. Medium French fries are priced at Rs 28, potato wedges

at Rs 20, soft serves at Rs 35, mc swirl at Rs 12, medium soft drinks at Rs 20 and medium

shakes at Rs 45.

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PROMOTION

Advertising was known to have an impact on the minds and the hearts of the consumers.

But product and the value offered needed to be attractive and powerful to maintain

consistency in sales and build customer loyalty. Advertising was the backbone of

McDonalds marketing strategy in India. The positioning had been directed towards

establishing McDonalds as a family restaurant. Special efforts were made to not allow it to

get converted into a typical teenage hangout. Advertisements were created using story lines

with focus on emotions. Through a variety of advertisements, the visit to McDonald was

portrayed as a special occasion providing excitement and satisfaction to the customers who

comprised of families with kids and the youngsters.

Advertising helped in building brand recall, but advertising alone was not able to sustain the

brand. Despite the fact that McDonalds was a fast food chain of restaurants, in India it was

positioned as the family restaurant and outlets were called McDonalds Family Restaura nt.

Extra care was taken to make the restaurants child friendly, by providing play areas

wherever possible so that the parents could relax and have a good time while visiting

McDonalds. The counters were low, tables were rounded so that children did not hurt

themselves in the restaurant and the menus are pictorially depicted so that a child could

order a meal without bothering parents. The entire restaurant was attractive and child

friendly.

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When operations in India began, initially McDonalds positioned itself as a place to visit with

the baseline "McDonalds mein hain kuch baat" (Theres definitely something about

McDonalds) in their advertisements. People were encouraged to try the McDonaldsexperience. However, over the years, after McDonalds had been hugely accepted by Indian

customers, there was a need to evolve the communication strategy and move on from

trying to encourage and motivate people to visit for the first time to making

McDonalds a regular experience. After McDonalds established itself and people knew what

McDonalds was all about, the baseline was changed to Toh aaj McDonalds ho jaye" (Let

it be McDonalds for today), which talked about an everyday experience. The objective

was to continue positioning McDonalds as a comfort zone for families

The brands media strategy focused more on the electronic media. The advertising

continued to use emotional appeal to display family ties and fun at McDonalds. Indians

being emotional found it easier to correlate themselves with such types of emotional

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messages. Advertisements with audio visual appeal created more impact on the viewers.

So McDonalds narrated the fun filled environment at their fast food outlet using electronic

media. McDonalds did have enough repeat customers. The customer base increased

substantially since they started operations.

The strength of McDonalds as a brand in India was that it was the most recognizable brand

world over amongst all age groups. It was the Indianization of the brand th at helped

McDonalds establish in a new market successfully. The brands success was attributed to its

promise of a great fun filled experience delivered at its outlets.

McDonalds executed promotional campaigns involving children. McDonalds used kids as

an entry strategy to the family. World over McDonalds was a family restaurant and children

were an integral part of a family. During the last few decades, kids had become the target

audience for most categories including consumer durables. In the 1990's, India saw a major

shift to nuclear families. When joint-extended families existed, the head of the family made

most decisions. In smaller-nuclear families, individual opinions had become more dominant,

whether it was buying a refrigerator or a TV or whether it was about eating out.

Children were an integral part of the decision making process for buying things and played

an influential role. Word of mouth and peer pressure worked effectively for this age group.

Children influenced the decisions of parents , and McDonalds realized that this group could

no longer be ignored.

McDonalds Happy Meals were often accompanied with Lego toys to attract children and

the restaurant maintained several Play-Zones to provide children with a fun experience.

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The restaurants hosted birthday parties, played latest pop-music hits and became a

favourite place even for the new generation of jean -clad Americanized teenagers of India.

McDonalds even introduced unusual ice -cream flavours such as bubblegum, green apple

and berry to entice the curious youngsters.

Using collectable toys, television commercials, promotional schemes in schools and figuressuch as Ronald McDonald, McDonalds pursued its main target group children. Many

parents objected strongly to the influen ce this had over their own children. McDonalds

adhered to all the advertising codes in each country. But some argued that it still amounted

to exploitation of children, sponsoring so many school events and learning programs out of

publicity, not philanthropy. In view of this criticism, McDonald with some other companies

vowed to devote at least half of their radio, print, television and internet advertising to

promoting more healthful products and healthy lifestyle. Mary Dillon, McDonalds Chief

Marketing Officer said that McDonalds planned to put more emphasis on physical activity in

ads and was reviewing how it could use licensed characters. Disney characters were used

extensively by McDonalds at one time but the entertainment company decided to allow its

characters to push products that met certain nutritional guidelines

A clear understanding of the consumer value helps decide whether the cost of promotion is

worth spending.

The three main objectives of advertising for McDonalds are:

Make people aware of an item

Make them feel positive about it

Make them remember it

The right message has to be communicated to the right audience through the right media>

McDonalds does its promotion through televisions hoardings and bus shelters. Messages

gain consumers attention and keep their interest. The next stage is to get them want what

is offered.

Even the paper mats on the trays at McDonalds are designed as per ongoing marketing

strategy of the food chain giant. For e.g.: during the French fries issue s, all their paper mats

had description of the burgers, how the vegetarian products are made etc to regain the

confidence of the consumers.

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THE 80-20 MENU BOARDS

Even the menu counters in the outlet are a marketing tool for the company. They have be endesigned in such a way that they catch attention of the potential consumer and tempt him

to order McDonalds product. So the menu boards are both descriptive and visual. They call

it 80-20 menu board i.e. eighty percent visual and 20 percent description .

A recent survey by the company showed that the consumers have a clear remembrance of

the 80-20 board and it gives them the feel of the product before it is purchased.

At Mc Donalds the prime focus is on targeting children. In happy meals too which are

targeted at children small toys are given along with the meal. Apart from this, various

schemes for winning prices by way of lucky draws and also scratch cards are given when an

order is placed on the various mean combos. In fact, the various econo meals an d value

meals also signal to the customer that buying separate items results in greater value for

money for the customer.

McDelivery Online In India, McDonalds first launched home delivery of meals in

Mumbai in 2004. McDonalds now has plans to launch web -based delivery service in India

(across 75 McDelivery cities) in 2010, a pilot for which has already been tested by it in

Hyderabad. The company hopes to add 5 per cent to sales via Web delivery. McDonalds

web-based delivery model will be based on serving the customer quickly wherein the drive

time does not exceed seven minutes because its food has to be eaten within ten minutes of

preparation. The footfalls in India are amongst the highest in the world, but the average bill

is amongst the lowest. At present (March 2010), Dominos Pizza (operated by Bhartia

Group-promoted Jubilant Food works under a master franchise agreement) has a 65C

market share in the home delivery segment.

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Ethics and Social Responsibility

In India, Mrs. Maneka Gandhi, a popular environmental activist and her supporters launched

an aggressive campaign against fast food chains which contributed in the destruction of the

ecological balance and promoted unhealthy food. To respond to such campai gns,McDonalds launched several pro-green advertisements such as We love Green and

funded community related activities including Keep our city clean. McDonalds sponsored

Olympic Day Run in 2005 and offered baked potatoes and McCurry Pan instead of f ries.

As a part of its Corporate-Citizenship strategy and to help its own brand and reputation in

India, McDonalds participated in community-related projects targeting children.

McDonalds in India hosted interschool arts competition and raised funds fo r charity on

World Childrens Day. The restaurant celebrated Childrens week every year from November

14-20 and tactfully supported educational programs for girl -child to promote goodwill

among community organizations who worked towards improving status of women in India.

McDonalds also partnered with local health organizations to make India Polio -free by

helping to set up Pulse-Polio program to provide free vaccine to children.

In November 2006, McDonalds India announced the completion of its annual fun draiser,

McDonalds World Children's Week 2006 `Each One Contribute One'. The month -long

campaign garnered proceeds for vision correction of the visually and economically

challenged children. As part of `Each One Contribute One' programme, Re 1 was contri buted

on the sales of all meals sold from October 13 - November 20, towards the corrective eye

surgeries of the needy children

According to Mr Vikram Bakshi, Joint Venture Partner and Managing Director, McDonalds

India (North and East Region), McDonalds h ad come a long way since 2002 and the results

were encouraging. Over 390 children were treated at the pediatric centre at Dr Shroff's

Charity Eye Hospital with the support of NGO ORBIS

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In addition to McArabia, McDonalds restaurants in Bahrain, beginning in March 2008, sell

the McCrispy, a meal consisting of 1, 2, or 3 chicken strips served in a wrapper for a single

strip or in a box for 2 or 3, with a choice of barbecue, sweet & sour, or garlic sauce. As in

all Middle Eastern McDonalds restaurants, all food served in Bahraini outlets is halal.

China

In China, the Chicken McNuggets come with the traditional BBQ, Sweet & Sour, and Honey

Mustard sauces, but there's also a chili garlic sauce (very popular in China). They also

include crispy chicken wings (called McWings) on the ir menu, which comes in 2, 4, and 6

pieces. There is also a seasonal Chinese New Year meal available, including Grilled Chicken

Burger, curly fries, with a horoscope of the twelve zodiac animals of Chinese astrology and

traditional "red" packets, or gift b ags, for monetary gift giving as good luck.

What is also interesting to note is that in china McDonalds offers a delivery service in most

major cities - the delivery number within China is 4008 517 517, as the Chinese

pronunciation of 517 is wu yao qi, which sounds similar to wo yao chi, meaning "I want to

eat". Deliveries are taken 24 hours a day via a call centre to anywhere that is within 5 km of

a restaurant (3 km in several cities). Deliveries are usually made by electrically powered

scooters, although in several cities where motorcycle bans are in place, a conventional

courier bicycle is used. Food is normally carried in a large insulated backpack.

Hong Kong

McDonalds sells beef and chicken burgers. Fried chicken wings and nuggets are also

popular. In some restaurants, a separate counter sells ice cream and desserts to

pedestrians. Soft Serve Ice Cream can be ordered with either red beans or green beans.

Some restaurants have a section for the McCaf. Hong Kong hosts some of the world's

busiest McDonalds with many operating round the clock. It also sells many toys or dolls, like

Hello Kitty, Snoopy, and Disney figures in addition to set meals, which are very popular. In

Chinese New Year, red packets (lai see) are included in set meals. During the local Bun

Festival, McDonalds restaurant on the island ofCheung Chau sells mushroom burgers

instead of hamburgers and any other items that contain meat. In Kowloon Park, there is alsoa small counter named Snack Station selling ice cream, as well as a counter that sells

McDonalds drinks in the swimming pool.

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Indonesia

All McDonalds in Indonesia are certified Halal.

Some of the local menu items that McDonalds offers in Indonesia, which youll not find

anywhere else are:

Crispy chicken and hot chicken: fried chicken, which is by far more popular than thehamburgers

McRice: small mound of steamed, plain rice (larger rice item is called Supersize Rice) McSoup: chicken flavored soup with bits of reconstituted croutons and vegetables. McSatay: bun containing a beef patty covered with satay sauce (spicy ground peanut

sauce)

McSpaghetti Bubur ayam or chicken congee

McDonalds sell most of the items in packet, such as Paket Hemator Pahe (Saver Packet)

and Paket Nasior Panas (Rice Packet). Chilli sauce, an essential part of Indonesian meal, and

ketchup are available.

Pakistan

McDonalds Pakistan offers the standard range of items plus several other regional offerings

similar to those available in Middle Eastern and South Asian outlets. The McArabia and the

Spicy Chicken Burger are very popular. A chicken version of the Big Mac is also sold. As inmany Middle Eastern restaurants, all food is served Halal.

Thus we see that McDonalds has over the years started regionailizing the menu as per the

local needs and demands. The more globalized the world became, the more localized

Mcdonlds got.

Here is a look at Indian Menu that McDonalds offers

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India

The Vegetable McCurry Pan, the famous dish is very popular and is an original creation of

McDonalds across India. It starts with a rectangular shaped crust that is topped with a

creamy sauce, mushrooms, and vegetables including broccoli, baby corn, and red bell

pepper. It is then baked until the crust is crisp and the toppings are hot and bubbly.

The Chicken McCurry Pan is the same as its vegetarian version. It starts off with a rectangle

of dough and is topped with a tomato-curry sauce, spiced with thyme, basil, and oregano. It

is finished off with chicken, bell peppers, and cheese and is baked till crisp and bubbly.

There is an Indian version of the Big Mac, called the Maharaja Mac, which is made with 2

grilled chicken patties and is topped with onions, tomatoes, cheese and a spicy mayonnaise.

It was originally made with lamb, but is now made with chicken.

Mexican-style wraps for both vegetarians and non-vegetarians, like the Mexican Chicken

Wrap, and Curry Pans in Shahi-Paneer and Chicken-Tikka variations are also offered.

The Paneer Salsa Wrap is sold there in India. It starts with a small slab of paneer that has

been dredged in a coating that is a cross between Mexican and Cajun in flavor. It is fried and

the paneer patty is wrapped in flatbread and topped with a salad mixture that includes

lettuce, red cabbage and celery and then is finished off with vegetarian mayonnaise, s alsa

and cheddar cheese.

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Other items on the Indian Menu include chicken and fish products like the McChicken and

the Filet-O-Fish.

The vegetarian burger menu consists of the McAloo Tikki Burger. It is a vegetable burger,

which includes a patty made out of potatoes, peas, and spices. It also includes tomato slices,

onions, and vegetarian mayonnaise. [6]

McVeggie is another Vegetarian burger on the menu. It looks similar to the above McAloo

Tikki Burger, but starts with the sesame seed bun. In between the bread, you'll find a

vegetarian patty that is made from peas, carrots, green beans, red bell pepper, potatoes,

onions, rice, and seasoning. This vegetarian burger is garnished with lettuce, and has

mayonnaise (referred to as Veg Sauce in India) spread thickly on the bread. Another menu

item sold there is the Chicken McGrill. It starts off wi th a thin grilled chicken patty that is

embellished with cilantro mayonnaise, onions and tomatoes and is served on a toasted bun.

Before entering the Indian market, McDonalds studied the local culture and value system

that the indians live by. In addition to this, the conusmption decision making was also

factored in. It found out that though a substantial portion of the population was non -

vegetarian, they preferred mostly chicken, mutton and fish. Pork and Ham meats were

against the religious beliefs of the Hindus and Musliims, who made up most of the Indian

culture fabric.

As a result, McDonalds for the first time in their history, decided to do away with the pork

and beef items from their menu. IN 2006, McDonalds even dropped mutton items from

their menu.

McDonalds also re-engineered their operations to ensure that the cheese and cold sauaces

used are absolutely 100E

vegetarian. Also, In India, meat and vegetarian meals are

prepared in separate areas of the restaurant because of religious laws about preparation of

food for vegetarians and meat-eaters. Cooks preparing vegetarian dishes wear distinctive

green aprons.

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Place

McDonaldizing the Suppliers

The place mainly consists of the distribution channels. It is important so that the product is

available to the customer at the right time, at the right place and in the right quantity. 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.

Here is a look at the McDonalds Supply chain in India.

Overview

Did you know that every year, Rs. 50,000 crore worth of food produce is wasted in India?

This is mainly because of the lack of proper infrastructure for storage and transportation

under controlled conditions. McDonalds is committed to providing quality products while

supporting other Indian businesses. And so, we spent a few years setting up a unique Supply

Chain, even before we opened our first restaurant in India.

A Supply Chain is a network of facilities including - material flow from suppliers and their

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"upstream" suppliers at all levels, transformation of materials into semi-finished and

finished products, and distribution of products to customers and their "downstream"

customers at all levels. So, raw material flows as follows: supplier - manufacturer

distributor retailer consumer. Information and money flows in the reverse direction. The

balance between these 3 flows is what a Supply Chain is all about.

When there is a balance in the finished product ordering, the Supply Chain operates at its

best. Any major fluctuation in the product ordering pattern causes excess / fluctuating

inventories, shortages / stock outs, longer lead times, higher transportation and

manufacturing costs, and mistrust between supply chain partners. This is called the Bu llwhip

Effect.

Depending on the situation, the Supply Chain may include major product elements, various

suppliers, geographically dispersed activities, and both upstream and downstream activities.

It is critical to go beyond ones immediate suppliers and customers to encompass the entire

chain, since hidden value often emerges once the entire chain is visualized. For example, a

diesel engine manufacturer may be able to integrate a GPS locator system into its engine

control system. Its immediate customer, a heavy truck manufacturer, may see no need for

this functionality. However, the downstream customer, a trucking company with a large

fleet, may be very interested in a locator system. Understanding the value to the

downstream customer is part of the supply chain management process.

Cold Chain

The Cold Chain is necessary to maintain the integrity of food products and retain their

freshness and nutritional value. The Cold Chain is an integral part of the Supply Chain

Setting up the Cold Chain has involv ed the transfer of state-of-the-art food processing

technology by McDonalds and its international suppliers to pioneering Indian

entrepreneurs, who have now become an integral part of the Cold Chain.

The term Cold Chain describes the network for the proc urement, warehousing,

transportation and retailing of food products under controlled temperatures. McDonalds

restaurants store products to be used on a daily basis, within a temperature range of 18C

to 4C. About 52 F of our food products need to be stor ed under these conditions before

they are used.

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Local Sourcing

McDonalds has always been committed to sourcing its requirements from local suppliersand farmers. This assurance is rooted in the philosophy of our company's founder, Ray Kroc.

He firmly believed in mutual benefits arising from a partnership between McDonalds and

the local businesses, thus ensuring that McDonalds commitment to growth was mirrored by

that of its partners.

In keeping with this belief, we have carefully identified local In dian businesses that take

pride in satisfying customers by presenting them with the highest quality products.

Adherence to Indian Government regulations on food, health and hygiene were a top

priority.

McDonalds India today purchases more than 96 G of its products and supplies from Indian

suppliers. Even our restaurants are constructed using local architects, contractors, labour

and maximum local content in materials.

The relationship between McDonalds and its Indian suppliers is mutually beneficial. As

McDonalds expands in India, the supplier gets the opportunity to expand his business, have

access to the latest in food technology, get exposure to advanced agricultural practices and

the ability to grow or to export. There are many cases of local supplie rs operating out of

small towns who have benefited from their association with McDonalds India.

Vital Links in our Cold Chain.

All suppliers adhere to Indian government regulations on food, health and hygiene while

continuously maintaining McDonalds recognised standards. As the ingredients move from

farms to processing plants to the restaurant, McDonalds 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 a lso enabled us to cut down on operational wastage

Hazard Analysis Critical Control Point (HACCP) is a systematic approach to food safety that

emphasizes prevention of illness or presence of microbiological data within our suppliers'

facilities and our restaurants rather than its detection through inspection. Based on HACCP

guidelines, control points and critical control points for all McDonalds major food

processing plants and restaurants in India have been identified. The HACCP verification is

done at least twice in a year and certified.

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Suppliers

Trikaya Agriculture - Supplier of Iceberg Lettuce.

successfully grows speciality 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.

A large cold room and a refrigerated van for transportation where the temperature and

the relative humidity of this crop is maintained between 1 C and 4 C and 95H

respectively.

Vista Processed I oods Pvt. Ltd. - Supplier of Chicken and Vegetable range of products.

A joint venture with OSI Industries Inc., USA, and McDonalds India Pvt. Ltd. Vista Processed

Foods Pvt. Ltd. produces a range of frozen chicken and vegetable foods. A world class

infrastructure at its 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 Celsius to retaintotal freshness.

International standards, procedures and support services.

Dynamix Diary - Supplier of Cheese.

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 humanised baby food.

Stringent quality control measures and continuous Research & Development.

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Amrit P ood - 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. Its plant has:

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

total hygiene.

Installed capacity of 6000 litres / hour for producing homogenised UHT (Ultra High

Temperature) processed milk and milk products.

Strict quality control supported by a fully eq uipped quality control laboratory.

Radhakrishna P oodland - Distribution Centre.

An integral part of the Radhakrishna Group, Foodland specialises 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 temper atures

up to - 22 Degrees Celsius.

Effective process control for minimum distribution cost.

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The Road Ahead

Tier 1 and tier 2 cities: The main target customer for McDonalds 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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RE ERENCES

Marketing Management Dr. Rajan Saxena

Marketing Management 11th

edition- Philip E. Kotler

McDonalds : Behind the Arches by John S love

www.Mcdonaldsindia.com