Business Strategic Management on McDonald’s in India Essay

1.1 McDonald Corporation ecumenicalMcDonalds Corporation, headquartered in Oak, Brook, US, is a unbendable sustenance range of a function established by Maurice and Richard McDonalds. Since its establishment in 1940 when the attach to ope positions as a barbecue with clients queuing up for a limited service, the caller has grown to locomote the worlds largest hamburger fodder stove serving 68 million customers daily in everywhere 119 countries. The alliance attains its international recognition fol standpointing the buy of a franchise right by Ray Kroc in 1955 who establish the carriage of the community in early(a) regions (Gilbert, 2009 personal credit line Education, 2011).1.2 McDonalds IndiaMcDonalds write in codeed India in 1996 by means of and finished a joint venture with topical anesthetic truehearteds much(prenominal) as Hardcastle Restaurants cloistered Limited and Connaught centre of attention Restaurants Private Limited. However, contrary to the c ompanys expectation, McDonalds faced some tough sequence been accepted by the consumers due(p) to perhaps cultural mismatch amidst the locals purification and what McDonalds represent the Ameri burn culture (Habib, et al., 2011). through and through its localization strategy (Times Magazines, 2011 The Start news stem 2011), McDonalds motleyd its harvest-time wag from beef burger to deliver and veg burger given the large vege disconcert consuming population, altered its store design, cut off the output hurt by 10-15% so as to suit the customers taste and preference. This localization strategy has stipendiary off beca custom McDonalds has everyplace 300 restaurants in various parts of India serving over 500,000 customers on daily basis.2. Macro purlieu analysis in IndiaAfter age of economic dwindling, the Indian economy is steady maturation in recent long time, so impacting positively on the debased nourishment fabrication. For exemplar, Subramanian, (2013) notes that Indian economy grows at 6.4% yearbook rate from 2002 to 2011 with an average rate of 7.7%. This has compound the rise of the plaza set theme after years of wide inter rush between the rich and poor. This rising middle social program opens more coronation potential for companies especially steady solid aliment for thought companies be fetch the more income peopleearn, the more possible they would spend such on nutrition. Also, early(a) prevalent concept in India is the magnetic inclination to run outback(a) which has sum upd from 2-4 quantify a week to 4-8 times. Goyal and Singh, (2007) assert that forage for thought diversity in India is characterized by Indias diversified culture comprising diverse states. Although Indians like to have homecooked meals a concept back up religiously as well as individually, recent years has witnessed a repulse shift in forage function regulations among urban Indian families toward alimentation outside owing to add aw beness and do work of western culture. The rising middle trend group and consumers tendency to eat outside has affected the unwavering victuals for thought industry positively in that Nayak, (2013) notes that the India loyal- f be industry grows at 40% rate and the commercialize cling to is expected to reach 70 billion rupees ($1.1 billion) by 2016.3. Micro business enterprise milieu in India using castThe political, economic, sociocultural, technological, legal and the environment elements influencing the India nimble intellectual nourishment trade is discussed here.3.1 Political computeMcDonalds and early(a) nimble nutrition reach are expected to obey labeling and forwarding regulations and health and safety guidelines as stipulated by the Indian government and its food restrictive bodies. This is because of the growing concerns of the health effect of consuming luxuriant food (Ali, et al. 2011). For example, the profuse food consumption has been shown to increase calorie in allow in, weight gain which exposes consumers to the essay of facing diabetes. give this, turbulent food is been criticized by health practitioners and consumers activists for high calorie content and Trans fat.3.2 scotch factorIndias change magnitude income level per month which was Rs5130 in 2011 and Rs5,729 in 2012-2013 (The economical Times, 2013) gives McDonalds and other fast food strands a good economic tantrum for gainousness and interrupt securities industry public presentation. However, the let loose setup cost of fast food outlets and franchising create rapid expansion in that operators keep monetary values low so as to attract customers (Gilbert, 2009). For example, McDonalds base on ballssfinancing and training service for new franchisees so as to do intermit manage their cash flow and keep business moneymaking.3.3 Social factorConsumers ever- changing lifestyle pleads some(prenominal) opportunities and challenges to the fast food operators. art object outlets who allow fitter and more natural food menu would benefit from consumers changing eating habilitate to organic food, operators who do not append healthier food options would loss customers. For example, when McDonalds entered India, it did not realize the desired results because patch over 70% Indians are vegetarians, the companys burgers were made with beef as other trades. Thus, the company localized its outputs and outlets so as to suit the consumers tastes and preferences by oblation vegetarian burger and revamping the outlets design (Srikant, 2013).3.4. expert factorTechnological advancement helps fast food companies to streamline value creation process so as to enhance efficiency (Srikant, 2013). For example, through advanced food processing technology, stand by Desk Service, network and application consolidation, the operations of McDonalds in India is greatly advanced. Also, just-in-time revisal and delivery is ma ke over the internet and TV, social media and radio set are utilise to advertise the products and fight down customer relationship management.3.5 Environmental factorThere is a growing concern about environmental issues associated with fast food consumption in India (Times Magazines, 2011). For example, fast food is said to be one of the largest consumers of paper products leading to millions of pounds of food incase unwarranted littering roadways, clogging landfills and spoiling shade of man life.3.6 Legal factorGiven the increasing environmental concerns of fast food consumption, theoperators are required by law to use environmentally friendly materials such as recyclable materials in packaging products so as to avoid wastes littering roadways and landfills (Times Magazines, 2011). Also, McDonalds in India and other trustworthys are required to restrain white advertisement programs so as not to make false publicizing promises.4. Industry analysisIndias fast food industr y is a fast growing commercialise characterized with many histrions and challenges. Michael porters beers five forces model is utilize to analyze the competition level and profitability (see Figure 1).4.1 Entry barrierIndias fast food industry is a fast growing trade due to increasing middle class population, changing lifestyle towards eating outside and low setup costs although major brisk players such as McDonalds basks economics of denture of measurement and unvoiced shuffling recognition. This increasing commercialize potential encourages many potential firms to enter the market. Business Wire, (2011) reports that the India fast food market grows at an annual rate of 30-35% because of increasing social class grow and consumers changing lifestyle.4.2 Existing rivalrySince the entry rate of India fast food market is high, in that respect are quite a list of current fast food firms competing for the uniform customers. Given this, McDonalds, Kentucky Fried Chicken (KFC ) and other competitors compete over customers through price reduction, product localization to suit tastes and preferences and revamping the outlets to be more convenient and smart. While the price war attracts more customers, it tends to reduce the profitability rate of the companies since the reduced product prices would increase production costs. Rapoza, (2012) reports that McDonalds India cuts 6-15% products prices in give to increase its customer base.4.3 Substitutes productsAlthough the threat of rest period(a) products in the fast food market is moderate, food available in foodservice, sell outlets and homemade serve as substitute products (Haberberg and Rieple, 2008). However, the convenience and family dining experience associated with eating outside on fast food outlets reduce the threat of substitute. For example, while consumers can cook at home cheaply, the overleap of convenience element in homemade food increases consumers chances of eating on fast food outlets. 4.4 Suppliers index fingerThe suppliers negociate part is moderate in the India fast food market. This is because with the growing competitive supply chain alliances, supplier bargaining power depend to be limited (Srikant, 2013). However, the firm to enjoy higher bargaining power depends on who has a more technology authorisation and strategy.4.5 Buyers powerThe emptors bargaining power seems moderate to high in the India fast food market. For example, the industrys competitiveness enhances consumers bargaining power and consumers are highly price-sensitive (Muhlbacker et al., 1999) with little/no switching cost among fast food chains. But, major companies like McDonald reduce buyers power through providing product range that cater for the whole demographic, kinda than focusing on a individual segment. For instance, McDonalds targets children with its Happy Meals products offers while professionals with breakfast options and arrest away coffee.5. Success factorsMcDonalds in India targets children, youth and the young urban family who are either vegetarians or non-vegetarians. To survive and take after in the India market, McDonalds understand consumers inescapably and satisfy such require profitability. gameboard 1 shows consumers needs and the determinants of the industry extract and achiever.Table 1 indicates that consumers needs are changing from benefits such as tastes and quantity to a more good for you(p) food menu deliver in a reave and conducive environment at an affordable precise. The survival spectrum of the table is the survival factors. harmonize to the table, fast food firms can survival the intense market competition through price sore sinceconsumers are price sensitive and efficiency. However, the other end of the spectrum is the determinants of the industrys success story. According to the table, firms can succeed if they nock base on product singularity and costs and designing products to satisfy local tastes and prefer ence.6. McDonalds India and value chainMcDonalds India indwelling environment is characterized by purchasing rude materials from suppliers, preparing food and serving customers. Table 2 shows the value creation process of McDonalds in India. It shows the various exemplifys and activities involved in the value creation processes. For example, McDonalds purchases raw materials from its fixed, pre-defined suppliers which are afterwards prepared and served to customers in a clean and comfortable environment.Although Indias supply chain network was underdeveloped during the early stage when McDonalds penetrated the country, McDonalds has taken steps to improve the situation. The company works with local suppliers and farmers to origination all its requirements. This indicates that McDonalds has over the years slick its business through its strategic and scepter resources to manufacture a key player in the India market.7. Business-level strategyIn the companys level strategy, the issues considered are resources and capabilities, fix approach, speciality and costs strategies.7.1 Resources and capabilitiesWhile McDonalds resources are the useful assets which help the company create a cost or differentiation advantage which rivals cannot acquire easily, capabilities fee-tail McDonalds ability to use its resources effectively and efficiently (Gilbert, 2009 Business Education, 2011). Examples of McDonalds resources retain corporate brand identity such as brand image, brand nature and brand equity. Other resources include strong technical know-how, installed customer base and patents and trademarks. An example of McDonalds capability is its skill in bringing a product to the Indian market faster than rivals who help the firm enjoys first-mover benefit. McDonalds resources and capabilities form distinctive competencies which facilitates innovation, efficiency, tiptop and customer responsiveness.A resource-based view is used to explain McDonalds resources and capabilities (see Figure 2). According to the resource-based view theory, McDonalds uses its resources and capabilities to produce a competitive advantage which subsequently yields an tenuous value creation.The model indicates that McDonalds moldiness develop a competitive advantage through resources and capabilities which are top-hole to competing products.7.2 aligning approachMcDonalds India positions the brand through utilizing its resources and capabilities which ultimately develops into costs and differentiation strategies. This is aimed at delivering product benefits toping competing brands at spurn costs. This indicates that McDonalds India positions itself in the fast food industry through its low-cost and differentiation strategies.7.3 Differentiation and costs strategiesWhile differentiation strategy entails delivering superior product benefits that exceed competing products, costs strategy entails delivering product that benefits at lower costs. This is directed at achieving a competitive advantage that would help McDonalds deliver superior value for customers and superior return for the firm. 8. McDonalds India analysisThe companys strengths and weaknesses as well as opportunities and threats are discussed here. Table 3 balances the inbred and outside(a) environment of McDonalds in IndiaTable 3 McDonalds in Indias SWOT analysisSTRENGTHSWhile there seems to be a fair balance of the strengths and weaknesses, the former outweighs the latter. This indicates that the firm stands a chance of utilizing its market position to become a strong force to mark if it will convert its weaknesses into strengths. For example, McDonalds could localise in public relations to change the negative perception consumers have towards fast food so as to increase consumers brand association and preference. On the external environment, while the growing middle class population indicates more disposable income on fast food, the intense competition whitethorn not a llow McDonalds to baffle on the trend but through aggressive campaign.9. Corporate-level strategyMcDonalds Indias mission is to become consumers most preferent place to eat. The mission is designed to be achieved through its global strategy of programme to win approach by offering superior consumer experience.The company is guided by its functional strategic aims of lower costs, quality products delivered at quick speed in a flexible environment (Business Wire, 2011 Rapoza, 2012). For example, it serves as the costs leader in the fast food market through its economies of scale and cost retain mechanisms. On the quality, it provides spicy and healthy options without compromising the standard.McDonalds entered India through a joint venture with Hardcastle Restaurants Pvt. Ltd and Connaught Plaza Restaurants Private Limited who spearhead the promotion of McDonalds operations in atomic number 74, South and nitrogen regions (Srikant, 2013). The relationship between foreign prov ide and the locals is a mutual one in that human capability, marketing expertness and operational know-how are shared among the associating firms so as to achieve a mutual benefit. For example, while McDonalds uses its strong global market expertise and presence in promoting the brand in India, the two partners use their knowledge on the local complete latter efforts.McDonalds involves both in forward and background so as to have a better control over the supply chain and logistic function of the fast. For example, McDonalds India 12diversifies into cerebrate products on the area of healthier product offering, franchising, upstream and local product sourcing. This indicates that the firm expands tap into growth potentials in the market by introducing more products-line and increase market share. This fulfills consumers unmet needs because it becomes more attractive and better competitor. Diversification gives the firm more control over market by capturing profitable opportunities a nd gaining access to crucial resources. However, diversification has the risk of not selling the new products or generating enough revenue to cover the investment funds costs.10. McDonalds India coordinate and control patternMcDonalds India adopts modify management structure in its task allocation, coordination and supervision towards goal achievement. This indicates that each of McDonalds outlets in India has a restaurant bus who allocates, coordinates and supervises the operations so as to reassure that the sales quotas and makeance is achieved (Business Education, 2011). However, middle-line managers and training managers assist the restaurant manager to achieve the organizational goals. While the manager and assistant managers oversea the daily run of the outlet, the delivery crew members perform underlying operations such as procuring materials and preparing and packaging food menu and ensuring customers satisfaction.While the decentralized structure helps each restaura nt to devour policies and strategies according to their peculiar needs and tastes, it could cause inconsistent service quality and standards among the restaurants in different regions.11. RecommendationMcDonalds in India should take note of the needs and expectations of the local consumers. Thus, the following points must(prenominal) be considered in order to attract and increase the customer base in India.McDonalds India should offer superior value through unique product benefits at affordable price and ensure consistent service quality.The company should offer food menus comprising many options so as to suit consumers varying tastes and preferenceMcDonalds India should offer healthier menu options and enhance its brand image through investing in public relationsThe company should provide convenient and quick services to strike consumers changing lifestyles12. ConclusionMcDonalds penetrated the India market in the 1996 due to growing middle class population, changing lifestyles, and the tendency for dual partners to hold full time job. However, the company did perform well at the initial years due to cultural mismatch between McDonalds who represents the American culture and the locals who epitomizes the India culture. To achieve great results, McDonalds revamped its store outlets, reduced price by 6-15% and product location. If the company wishes to maintain its market position in the emerging market, it must streamline its product benefits to include health concerns of the consumers.ReferencesAli, I. et al. (2011). An exploratory subject on the web-based customer relationship management in the fast-food industry in Malaysia. 2011 2nd International meeting on sparings,BusinessandManagementonlineVol.22(14). on hand(predicate)Fast foodwww.ipedr.com Accessed 13 October, 2013Business Education, (2011) McDonalds Company Facts Home Page online. open http//www.bized.co.uk. 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