Marketing McDonalds in India
The introduction of McDonald’s products in the Indian market was politically challenged because it is a taboo to eat beef in India.
The use of beef flavours caused McDonald’s to be sued for not adhering to complete vegetarian culture of Indians. Pressure was mounted against McDonald by fundamentalist groups in India for the government to close operations of the company in the country. Even though, this action was not successful, McDonalds had to close down some outlets in the country.
To penetrate into the market, McDonalds acquired quality real estates to establish their outlets. This strategy was difficult because there were strict rent control laws and many clearance requirements from many authorities.
McDonalds penetrated the Indian market when liberation in the economy was taking place. During this period, a class of young boomers was emerging. This class was made up of young and middle class people who had disposable income.
India is a developing country, and many consumers are sensitive to price changes. However, the middle income individuals in the economy formed the largest customer base for the company.
McDonalds had to invest a lot of resources to build cold chain infrastructure. This sustained the company to exist in the market, and the prices of products had to be offered at a competitively low rate to attract many customers.
Developing such an infrastructure made it possible for the company to attract the low income customers in the economy.
The Indian economy has encountered inflation in recent years, and this has been a significant challenge because the company cannot increase prices. The customers are sensitive to prices, and the company cannot increase prices to cover up increase in cost of production.
The entry of McDonalds in India was challenged by the social differences between Indians and Americans. Indians were not familiar with fast foods. For example, burgers were not a common food in India.
Indians living in urban areas have increased their food consumption over the years, and this formed a vital source of market for McDonald’s products.
The main McDonalds products used beef, and this was opposed to the culture of the people. Approximately 85 percent of Indians do not eat beef because Hindus worship the cow. In addition, Muslims do not eat pork. Therefore, McDonalds had to adapt to the vegetarian social system of the market.
To ensure that Indians accepted the operations of McDonalds in the market, the company had to develop strategic partnerships with local companies. The management employed local Indians, and was operated as a local company, though global standards were delivered.
When McDonalds was entering the Indian market, there were few technological infrastructures. For example, the company had to build cold chain infrastructure.
With time, Indians have developed their understanding on technological developments. McDonalds had to carry out a national outreach programme through social media. This strategy involved the use of the young generation to improve technological understanding among the people in the country.
McDonalds had to localize its equipment to improve understanding by local people. Global suppliers were invited to develop plants in the country.
Porter’s Five Forces Analysis of McDonald’s in India
Rivalry among competitors
There is intense rivalry among competitors in the fast foods industry in the Indian market. Many companies have penetrated the market, and there is intense competition to capture as many customers as possible.
It is not possible to differentiate the products, and most companies offer almost similar products. Therefore, the fast foods companies have been forced to offer almost similar products.
Even though, the consumption of urban Indians has increased, the number of companies selling foods has increased at a higher rate. This has caused competition because the existing companies seek to capture the demand of the customers.
Threat of new entrants
There is high threat of new entrants into the fast food industry in the Indian market. Few legal constraints exist, and many investors can enter the market. Global companies such as Dunkin Doughnuts and Popeye’s Chicken among others developed plans to enter the market.
Indigenous chains in India have a potential of creating competition to McDonalds. The McDonalds are familiar with the tastes and preferences of the Indians, and they may have a competitive advantage over McDonalds. In addition, indigenous chains can use local ingredients, as opposed to McDonalds. The company had to spend a lot of money in developing extensive cold infrastructure.
However, McDonalds draws a large number of its consumers from the urban Indians. This niche of consumers has a cosmopolitan taste, and McDonald has managed to provide different foods from the indigenous companies.
Threat of substitutes
There is high threat of substitutes for McDonalds from local food retailers. These retailers understand the taste of Indians, and have developed a variety of foods to match the demand in the market.
McDonalds had to develop products which match the needs of the Indians. Outreach programmes were used to encourage people to eat foods from the company. McDonalds made tailor-made foods attract a large number of customers.
McDonalds created unique products that were appealing to local customers. The company served a niche of customers and developed customer loyalty for the unique brands.
Bargaining power of suppliers
Suppliers’ bargaining power in the Indian market is low, even though this may change in the near future. McDonalds controls over 42 percent of the fast foods in the Indian market. This creates significant bargaining power for the company over the suppliers in the industry. Therefore, suppliers must accept the conditions set by McDonalds because the company is the leading buyer of products from suppliers.
McDonalds collaborated with global suppliers in outsourcing a variety of ingredients. This has made it possible for the company to control supplier bargaining power in the Indian market.
Nevertheless, the fast food industry has grown tremendously, and competitors in the market are gaining power. This may cause the suppliers to shift to competitors, and McDonalds will have lower bargaining power over its suppliers.
Bargaining power of customers
Customers in the industry have moderately low to slightly high bargaining power. There are many customers, especially the young and middle aged people in the country. Individual customers have low power to bargain because they have little or no influence on the performance of the company.
Nonetheless, the lawsuit against McDonalds over the use of beef affected the bargaining power of the company over its customers. The customers may withdraw completely from buying products of the company, and buy from other companies. This may create a higher bargaining power to the customers.
Rivalry among competitors
Threat of substitute products
Threat of new entrants
Bargaining power of customers
Bargaining power of suppliers
There is high competition among existing companies in the market
Many investors penetrating the market
Free entry and exit exist in the market
There is high threat of substitute products
Indigenous foods are being produced.
There is high threat of new entrants
Many multinational companies are penetrating the industry
Local and indigenous firms have grown
Moderately medium to high bargaining power of customers
Customers can shift their demand from McDonalds to other firms in the market.
There is low bargaining power of suppliers
McDonalds controls a large portion of the market, and can obtain material from different suppliers.
Both local and international suppliers provide the company with products
Figure 1. Summary of Porter’s Five Forces Analysis of McDonald’s in India
The 4 Ps marketing mix analyses
McDonalds had to change its iconic products to match the consumer needs after entering the Indian market.
The company started to develop vegetarian menus to suit the cultural practices of the people.
The use of pork and beef were shunned away by customers, and this made the company change the ingredients use din manufacturing products.
McDonald had to “Indianize” its brands to avoid pressure from customers and other groups.
The company had to conduct public campaigns to improve the image of its products among the Indian customers.
McDonalds has adjusted prices for its products to fit into the economic standards of the Indian customers.
The Indian customers are price-sensitive, and most people perceived the company to have high prices. This attracted the young and middle class people in the society.
The company has maintained low prices in the Indian market compared to its operations in the U.S.
McDonalds has used value pricing strategy. In addition, the product bundling strategy has been applied in creating combo meals.
The happy price menu was introduced in 2004 to reduce the prices to attract the young people and low income class.
When inflation was experienced in 2009, the company reduced food prices by 2.5 percent.
McDonalds has learnt the culture of Indians so that promotional strategies can be effective. For instance, promotional strategies aim at promoting the values of family and the Indian culture.
The company used ads in TVs to connect the Indian families with the brands of the company.
McDonalds appreciated the cultural aspects of Indians by providing local foods and employing local professionals.
However, the company maintained world class standards during its promotional communications.
During inflation, the company promoted its products among low income customers. For example, the introduction of happy price menu was established to cater for the needs of the low income class.
The company has applied technology in its promotional strategies. For instance, the use of Bollywood stars, viral marketing and the application of social media in communicating with customers.
McDonald established long-term leases with the owners of estates when entering the Indian market. However, many landlords were unwilling to establish such contracts, and the company had to accept the provisions of the people in the country.
Various outlets were opened in the country, and this attracted many customers. The number of outlets has increased from 61, in 2008 to 169 in 2009. By 2011, the company had 212 outlets.
Plans are underway to increase the number of outlets by 180-190 by the year 2015.
McDonald has dominated the Indian market because it controls about 46% of the market. This gives the company bargaining power over suppliers.
The brand image of the company is strong, and many people are aware about the products of the company. The company has unique promotional strategies, distinct storage services and custom made products.
The company has been accused of Americanizing its products. Various conservative groups have opposed the activities of McDonalds because it does not appreciate the Indian culture.
The pricing strategy of McDonalds has been affected by inflation in India. The company has been forced to offer low prices despite the high costs incurred in the production process. India has poor transport system which affects the movement of goods and services.
There are many potential customers in the market because the market has not yet been saturated. McDonalds can expand its operations in the country to increase sales volume.
The number of young boomers is increasing and this forms the largest number of customers for the company.
Many customers in India view McDonald products as junk foods. This may decrease the sales of the company because as customers acquire income they demand nutritious foods.
McDonalds promotes its products as nutritious but in reality the products are junk foods. This may cause a lot of criticisms.
Competition in the Indian market is high and McDonalds might be affected by the many companies penetrating the market.
Market entry strategies
McDonalds used strategic partnerships to enter the Indian market. The joint ventures were established with Connaught Plaza restaurants. The company also had joint ventures with local companies, such as, Hard Castle restaurant.
Despite entering into joint ventures and strategic partnerships with local companies, McDonalds maintained its international standards. The company did not compromise its standards on cleanliness, offering quality services and other standards.
The company also learnt the culture of the Indians, and established products which matched the cultural aspects of the people. For instance, beef and pork were considered to defy the cultures of the people, and the company had to establish vegetarian foods.
The company also targeted the young and middle income class of customers. These customers readily accepted the products of the company.
McDonalds conducted promotional education to promote the understanding of the Indian customers.
McDonalds established the culture of establishing many outlets in the market. This corporate culture was exercised in the Indian market, and the company has opened more than 200 restaurants in India.
The company has also maintained its culture of offering quality products. Despite the pressure to reduce the prices of its products, the company still maintained high standards for its operations.
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