Retail & Services McDonalds
Retailing consists of the sale of goods or merchandise from a fixed location, such as a department store or kiosk, or by post, in small or individual lots for direct consumption by the purchaser. Retailing may include subordinated services, such as delivery. It is the last stage in the distribution channel.
Retailing in India
India retail industry is the largest industry in India, with an employment of around 8% and contributing to over 10% of the country’s GDP. Retail industry in India is expected to rise 25% yearly being driven by strong income growth, changing lifestyles, and favorable demographic patterns. With the opening of new formats like departmental stores, supermarket chains, malls and others stores, Indian retail industry has come across a new era with a new experience to Indian customers.
India being world’s second largest producer of foods has the potential of being the world’s biggest consumer and producer of food. The accomplishments of the green and white revolutions have, however, not been matched by concurrent developments in supply chain management, and in new technologies for better processing, preservation, and storage of food. The Indian food industries sales turnover was Rs. 140,000 crores in the year 2000 & is predicted to increase by almost 15% by 2008.
McDonald’s around the globe being well established in metropolitan and large cities of India, now it plans to extend its business by reaching the small cities of India as well. There future plan is to establish a large number of retail format, self- service, family restaurants and small retail ice-cream parlors at various vintage location. The retail format will be open at the shopping mall at the metro stations, gas station etc… The organization has planned to start home delivery services in small cities as well. The future prospects of the company are to open more than 300 restaurants and 150 ice-cream parlors by the end of 2010. McDonald’s owns many agricultural farms also by which they supply French fries, milk products and bread buns all over the globe. Thus, McDonald’s following the market development growth strategy is entering new markets with existing product.
McDonald’s being a global presence by supplying almost 1% of total population of the world should follow growth strategy. It should enter new markets with new products with a large variety of health conscious food to improve upon the image which it is carrying currently, i.e, a supplier of non-healthy food. It should develop new products according to the taste of the market it plans to enter in accordance with the culture and traditions.
Today’s retail sector has grown rapidly, thus intensifying the competition. If a company in the present scenario wants to compete in the retail food sector, it requires a strong marketing mix. The marketing mix comprises of 8 Ps. A company needs to have a right balance of all the factors based on its core competency.
1. Placement Strategy
Also known as placement strategy this primarily refers to making the product available to the end consumer. McDonalds currently has over 100 outlets in India. Mc Donald’s placement strategy has always been to focus on the best locations, creating convenience for its consumers thus giving them an edge over its competitors worldwide. It uses a franchising strategy to minimize cost and expand its customer base rapidly. However this strategy has resulted in cannibalizing sales due to more than one store in the same location.
* India has been the first ever country, wherein McDonalds has started its delivery operations. It has been very successful and thus it now plans to invest Rs.3 million over a span of 3 years.
* In the next three years, it plans to invest Rs. 3billion in expansion in India, tripling there present number of outlets.
* It also plans to open up outlets at various petrol station across India, for which they have tied up with many petroleum companies.
* It can have a joint venture with various multiplexes(like PVR) cropping up in metros and tier-2 cities, to get instant access to a new array of customers.
* They should focus on improving there delivery operations by diverging funds that they already plan to invest.
* They can also enter into new market which they haven’t explored yet. Eg: eastern India.
* Since they are targeting mostly middle-class, they should open more outlets in tier-2 and tier-3 cities, wherein the major population is there target customers.
This map clearly shows that mc Donald’s is present in the all the main cities occupying all the prime locations.
2. Pricing Strategy:
It refers to a setting a price base similar to the competitor’s product price gain a competitive advantage in the market place.
Worldwide, McDonalds follows a Value Pricing Model, wherein it maintains quality standards at bare minimum prices, giving it competitive advantage due economies of scale, thus creating an entry barrier. In India, people spend more than 50% of their disposable income on food and beverages, which makes pricing of food product a very sensitive issue. The value pricing model of Mcdonalds ensures affordability and thus, attracts the widest section of customers.
* Demand based pricing strategy will be initiated in the McDonalds express outlets which will first be introduced in airports across the country. 10%-15% increase in pricing on limited products which will be made available on these outlets.
* The intention of the company will be to drive volumes, creating greater economies of scale, thus making pricing easier for the company.
* The profitability of the company can be increased by catering to premium segment of customers, or using premium pricing strategy.
* Further steps should be taken to reduce the cost factor, and increase value for the firm and its stakeholder.
3. Promotion Strategy:
Promotion strategy relates to communicating clearly to the target market about the products or services of the company.
Due to the highly competitive nature of the fast food industry, the firm needs to constantly invest in promotional activities to attract and retain customers. Promotional schemes used by McDonalds to target children and middle-class families are sales promotions and advertising through print as well as audio/visual media to boost sales to the desired levels.
McDonalds uses pull strategy to attract its customer base, wherein the promotion is directed towards the target customer to create demand. Consumers then pull the product through the distribution channels forcing the wholesale and retailer to stock it, and in McDonald’s case, franchisee.
* Sponsoring events for kids and school going children should be taken up to create multifaceted brand, which will also help in covering social responsibility of the company in concern.
* The company at present is in growth stage of the PLC, it should thus try to increase its customer loyalty. McDonalds can use persuasive advertisement as well as loyalty and discounting programs to achieve these results.
4. Product Strategy:
It is the most important factor in the marketing mix, taking into account the capabilities, in terms of engineering/design of product and sales distributions, existing in the company. It must evaluate the customer expectations and deliver accordingly with profit objective. However, product is a much larger term than simply a burger, i.e. the physical unit, it also includes the packaging, warranties, service, brand image and logos.
McDonald follows a mix of Standardization and Contextualization. Being a global company, to maintain a strong brand the company adheres to standard quality worldwide with catering to local tastes of different countries. The name McDonald creates a specific value addition to everything that is wrapped in their name , thus benchmarking the quality standards.