In October 1996, McDonald’s opened its first store in New Delhi, India. In 2004, McDonald’s has already opened 58 outlets in the northern and western part of India and it is now planning to open 90 stores in the next three years. After all the strategic moves and tactics formulated and enforced by McDonald’s India, a question remains unanswered. Did McDonald’s really succeed in the Indian market? STEEP Analysis Socially speaking, McDonald’s India has adopted the cultural and religious norms of the Indian community via creating a vegetarian menu that would not contradict the market’s beliefs and practices.
To be culturally sensitive to Indians, the company adheres to family-centered, child-oriented, community-friendly strategies and activities to build its image. Moreover, its products are cleverly priced to meet the capabilities of its target market. Each outlet is demographically positioned in gasoline stations, shopping malls and train stations to reach its target market, the lower middle class Indians. Hence, the expected growth of working age people in India for the next 50 years manifests the stability of the defined target market.
To effectively manage its supply chain, it opted to contract train local suppliers. Moreover, McDonald’s extensively trained and provided technologically competent process flow to
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However, this growth is limited to some states of India and income distribution is distorted which indicates a restriction on the market. However, economically, McDonald’s has contributed in increasing the employment rate in India by providing an average 100 jobs for each restaurant. McDonald’s India encounters negative campaigns against the company concerning the ingredients used for its products. The image of being a junk fast food restaurant remains. To counter such conflicts, the company promoted various community-related and environment-focused programs.
Politically speaking, McDonald’s managed to blend well with the Indian government by providing products which are not opposed to the norms and religion and by actively participating and promoting community-based activities. It aims to establish corporate citizenship by giving back. Moreover, this tactic promotes a good image that contributes to the success of the brand. Porter’s 5 Forces Analysis With the remarkable economic growth of India, companies like KFC entered its market, but McDonald’s took 6 years to research and formulate its corporate strategies before penetrating the Indian market.
The exceptional performance exhibited by McDonald’s in India, the threat of competition is constant. Since it was able to Indianized its products and the strategy worked well, Burger King or the likes might consider to enter the market and adopt the same tactics. Government policies can also affect the market. The buyers of McDonald’s are price sensitive and to capture its target market, the company must reprice its products. Moreover, to continuously entice its customers, regular products must be developed which results to increase in expenses and longer return of investment.
Supply chain management plays a critical role in the success of a company. McDonalds tailored fit its supply management cycle to the Indian environment. Although assistance and support were provided for its suppliers, they still have the power to bargain because of non-availability of other suppliers to provide the company’s demands. The concentration ratio to the suppliers are relatively high. Although the products and services of McDonalds are highly differentiated, the existence of 22,000 restaurants and more than 100,000 dhababs cannot be ignored.
The variety of choices with prices that fit the customers’ budget can be alluring and enticing. The taste for authentic and pure Indian food is constant among Indians especially for those who live in rural areas. McDonalds enforces flexible and competitive corporate strategies that would fit and meet the needs and capabilities of the market, however, the strategies are costly. Innovation can be very costly but rewarding and McDonald’s is in the process of taking all the risks to establish its competitive edge and also the stability of its brand in the Indian market.
SWOT Analysis McDonald’s strengths mainly lies on its branding and image. It is a brand that represents the western and modern culture. With its expertise in business and its affinity for market research to ensure the success of each expansion, the direction and way towards success is attainable. The company showcased its flexibility and adaptability in terms of culture, politics and demographics. Furthermore, the company relies on extensive planning and forecasting. Marketing and risk management strategies are cleverly and logically enforced to achieve a common goal.
Eventhough McDonalds is a global company, it still has its weaknesses. In India, the McDonalds franchise is prone to high volume of expenses due to product innovations, community activities and other socio-civic programs that are tactically done to counter problems and adapt to the culture and norms of the country. Starting a vegetarian McDonalds opens the doors for opportunities for Buddhist countries expansion. A breakthrough was achieved by McDonalds and it may lead the company to prevail in the global market for fastfood restaurants.
Also read Burger King SWOT Analysis
Cultural differences, political issues and government policies are the crucial factors which are needed to be monitored and safeguarded by McDonalds because these may post as threats in the operations of the company in the country. Moreover, if revenues shoot up, the company must be ready for the threats of competition to enter the market. Key Success Factors Analysis Being a globally acclaimed company, McDonalds have several key success factors that warranted its status in the global market.
The brand and image itself is the competitive advantage of McDonalds in India. The strategic program “think global, act local” contributes to its success, hence, to think locally, the company engages to thorough and extensive market research. With this tool, the company can formulate strategies, identify target market, classify culture, threats, and opportunities. McDonalds commitment to quality, service, cleanliness and value also plays a critical role in the success of the company.
With this commitment, the image of the brand is established. Risks are constant in every business, however, McDonalds manages risks and formulates marketing strategies that would address pre-identified conflicts and problems. Its flexibility allows it to adopt to changes and differences in the market. Emergence Strategies Resilience is one of McDonalds assets in formulating corporate strategies. In India, the company repriced to meet the target market’s financial capacity.
Moreover, to contravene negative campaigns against the company like environmental and health issues, the company reactively come up with subtle yet effective ways to turn the situation around. Creativity Strategies In India, McDonalds identified it’s core target markets which are the lower middle class and the children who developed affinity for the children-oriented and family-centered activities sponsored by the company. The company aims to provide the value of excellent operations and products at a reasonable price.
Moreover, it is very strong in innovation of products such as the vegetarian burgers to facilitate the needs and preferences of the Indian market thereby promoting the leadership of its products and services. McDonalds India and its counterparts in other countries are very keen on customer service and attention. Tailored-fit products are regularly introduced to warrant customer satisfaction and loyalty. The company formulates family-oriented and children-focused strategies to promote direct customer communication and such action results to excellent customer interaction and relationship.
Indian customers value the socio-civic activities that McDonalds promotes and launches. The mere fact that the company has provided employment for locals is very crucial in the acceptance of a western food chain in a Buddhist country. Ambiance and price are also valued by the customers. They were given a place to hang out and eat without the paying premium price. Tailored-fit products and continuous innovation are also appealing to the customers in India. It showcases the value of respect for the needs and preferences of the market.
Learning Strategy Eventhough the McDonald’s conducted six long years of research in India before finally deciding to enter the market, the execution proved to be a learning experience. There were challenges and risks that were not pre-determined and the company must act decisively to address all these conflicts. In terms of political issues, the company opted to adopt a strategy that would allow its visibility in community-based activities thereby resulting to a positive image.
Resilience, predictiveness and flexibility in managing risks, conflicts and problems are essential in the success of McDonalds in a culturally influenced country. McDonalds cannot completely claim success in its Indian operations. Despite all the preparation and planning, the return on investment remains too long. It would take about 8 or 9 years before a branch can reach its ROI status. India’s culture is complex and the economic situation is also unbalanced thereby creating a difficulty in effectively managing a westernized fastfood restaurant.
If McDonalds cannot sustain the present appeal that it has with the Indian market, it would be the downfall of this franchise. On the order hand, if it maintains its appeal to the public by continuously innovating its products, expenses might go higher each year and since the profit margin is relatively low because the company opted to price its products reasonably, return on investment may take more than 10 years. Although the company has established its differentiation strategy in India, it failed in tagging a premium price for its products.