McDonald's - Competitor Analysis

Essay by nikhilstarUniversity, Master's April 2009

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KFCOne of the major competitors for McDonald in the burger segment is KFC. It first came to India in 1995, where it was one of the first multinational food chains to have entered India. It proved not to be a very good time to have come to India where people were still not able to come to terms with multinationals coming to India, and it was targeted by many and remained a not so known food outlet, while the ones which came later became more popular. KFC India had to shut shop in the late 1990s after it faced heavy protests not only from anti-multinational groups but also animal rights' protector, PETA.

But unlike McDonald', KFC has not been able to establish itself and shun its image of being a beef burger shop. McDonald's is clearly poised well in terms of appeal to the majority of the Indian population, 40% of which is vegetarian.

While KFC has not been able to do that, and it is still seen as a chicken only restaurant.

McDonald's has a wider variety here with products starting from as low as Rs 20, while KFC has not been able to match that. KFC is still priced a little higher for the general Indian population and its strong customer segment is the cosmopolitan population which is mall going and earning or have spare money to spend, 18-30 years. While people from even small income range and lower middle class have been able to associate themselves with McDonald's. McDonald's has set up its own supply chain investing huge amount which leads to lower costs and prices.

When it comes to chicken burgers McDonald's needs to provide more variety on its menu as it is claimed that KFC is coming up with 15-20 new Indianised products.

McDonald's has more than 140 restaurants in India and is adding at a fast pace, while KFC has presence only in limited areas especially the southern part of the country.

KFC claims that even without much promotion it has the strongest brand recall for chicken products. KFC even sponsored a contest during a cricket match, and is a well known brand in the southern pFollowing is the marketing mix of KFC:Product•Zinger is its flagship product•Famous for its chicken recipe world over•Brought high selling products from international markets•Indianized menu with products like tikka wrap 'n; roll, chana snacker, thali, succulent chicken•Veggietables, one-of-a-kind kid's meal comes in several different laptop box designs featuring awesome puzzles and games.

•The veg products are juicy from inside and crispy on outside which differentiates KFC•Distinguished manufacturing for beg and non veg products•Planning to add 15-20 new products to menuPrice•Low priced to target the huge middle class as well as upper class population of india•Has sub 50 snackbox, and chana snacker at Rs. 25•Offers Veg and non veg thali at Rs 50•Twirl priced at Rs. 7Place•There are around 40 restaurants in the country•Strong hold in Mubai, Hyderabad, Bangalore•Planning to add 10 restaurants per year and reach 50 by 2008•Targeting non veg eating states e.g. West Bengal, Punjab, Andhra Pradesh, Tamilnadu besides the cities where it is already present.

•Has switched to franchisee model•Expanding and opening stores in mallsPromotion•Has started a TV campaign, following which sales surged by 30%•Promotion is centered around Finger Licking Good•Targets mall going population i.e. youth in the age group 18-30•Food courts are sporting the logo of KFC•Also sponsors cricket matches and related contestsLOCAL FOOD JOINTSAnother major competitor for McDonald are the local food joints offering burgers. The local food joints include the following:1.Joints which are limited to a city and have around 2 -3 outlets in a city. For instance "Om Sweets" in Gurgaon will come in this category.

2.Canteens in colleges. For instance Sharmaji at MDI.

Following is the marketing mix for the local food joints:Product•The burgers are made of local buns with cheese slices and vegetables like onion, cucumber and tomato slices and a potato or chicken cutlet.

•There are two or three variations on the basis of amount of cheese•The burgers are wrapped in local paper napkins•The ingredients used are Indian for instance burger has no mayonnaise. These cater to Indian tastes.

•The offering is generally one of the several other offerings at the joint•The time taken to deliver varies from 10 - 15 minutesPrice•The price ranges from as less as Rs 12 to a max around 50. Om Sweets offers the burger for Rs 45Place•These joints are generally located in market places or college campus where crowd is heavy.

•They are the most famous and one of the few outlets available in area and footfalls are generally heavy due to these•The places are usually visited very frequently by local people, students, etcPromotion•The joints rely on word of mouth publicity•There is no promotion done through ads for these joints. The promotion at maximum is limited to local newspaperSUGGESTIONS•McDonalds could increase the number of items served on its menu. Currently there are only 6 vegetarian and 6 non-vegetarian items served on the menu. It is also evident from the survey that many people feel that the variety of menu available is average and could be improved. Some of the customers prefer something new every time they visit. These potential customers could be targeted by increasing the number of items in the menu.

•In the recent times McDonalds has been blamed for the high fat content in its products and many consumers perceive that the food served at their outlets is not healthy. Also, the consumers are becoming increasingly health conscious these days. McDonalds could introduce new items for such people containing lower fat content and lower calories, like calorie free burgers and salads. This could attract a whole new segment of health conscious people to its outlets.

•They could introduce items containing egg in their menu which could target people who eat egg and do not eat chicken. It would also add more variety to their current menu.

•McDonalds currently has a number of outlets in northern and western India. The number of outlets in southern and eastern parts of the country is significantly very low. They need to increase their presence in southern and eastern India where their competitors like KFC, Pizza Hut and Dominoes enjoy a larger market presence. They also need to modify their Indian menu for these parts of the country as the names of the current menu items are more synonymous to food available in northern and western India.

•Considering the low cost of food available at McDonalds it could even look at expanding into tier-2 and tier-3 cities which are largely unexploited by other fast food companies. There may be stiff competition from the local food joints in these places which McDonalds can overcome by offering localized food at competitive prices.

•The option for home delivery is currently not available in all areas. There is also an additional Rs. 15 that is levied for the delivery in the areas where it is available. In comparison some of its competitors offer free home delivery in specified time and also in all their outlets. McDonalds could learn from its competitors and provide free home delivery in all its outlets at no additional cost in order to attract people who prefer to have food at the comfort of their home or office. This could also reduce overcrowding at their certain outlets where many people wait for their turn for dine in or takeaway.

FUTURE OUTLOOKMcDonald's India has been able to establish itself in the market with 137 restaurants in the country and plans for expansions to smaller cities and further in metros. Planning 15 new outlets in Kolkata alone is indicative of its expansion plans. McDonalds plans to invest $3 billion over next five years and double its revenue by 2010. The expansion plans are in sync with the booming economy.

The future outlook is bright considering the rising middle class and development going across the country. The number of multiplexes in the country is growing day by day through which McDonalds can expand. Moreover, the working population is also increasing. Most of them are looking for alternatives to home cooked food which could save them a lot of time between working hours. Therefore McDonald's will find a great opportunity to leverage its brand popularity to increase its sales even further.

'The challenge which McDonald's may face in future will be the expansion to tier 2 and tier 3 cities. McDonald's brand, which is very strong across big cities, may not be as strong there. The concept of fast food will also be relatively new to smaller cities which have slower life than metros. Fast food in smaller cities is synonymous to Chinese served by small vendors. The primary competition will also be very different in smaller cities. The competition will be from local food to a much larger extent. The pricing which is a critical strength in metros may not remain strength. The opportunity lies hidden in the challenge and being a pioneer in fast food segment in smaller cities, McDonald's can achieve greater heights.

In the larger cities and metros McDonald's is well established and should experience a steady growth if it continues to fulfil the changing needs of its consumers which it has been doing over the past.

REFERENCES•www.mcdonalds.com, accessed on 18 July, 2008•www.mcdonldsindia.net, accessed on 18 July, 2008•en.wikipedia.org/wiki/McDonald's, accessed on 19 July, 2008•http://www.associatedcontent.com/article/263943/mcdonalds_strategic_marketing_mix.html?cat=4, accessed on 19 July, 2008•www.kfc.com, accessed on 25 August, 2008