Chapter 1.

Introduction

Origin of the report:

As a partial requirement of M.com (Management) program we are required to study the “international marketing” In the classroom we get the opportunity to know the theoretical part of the subject.

But without practical orientation it is somewhat difficult to grasp the core concept. Marketing is entirely based on practical situation. So in order to enhance the understanding of the core concept, we are required to prepare a report on practical situation to understand how to implement and practice the theoretical part in real life situation and how to Market a product.

Objectives of the study:

General Objective:

The general objective of preparing this report is to know how to know about the international Marketing & MNC in India & fulfill the requirement of the subject International Marketing.”.

Specific Objective:

The specific objective of preparing this report is -

To get a general idea about the international Marketing.

To gather practical knowledge about MNC.

To analyze the problems faced in growth of Indin international marketing

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Scope of the study:

An international marketing is plays a pivotal role in the economy of any country. They provide necessary instrument and employment to setup different industries essential for a nation to build strong economy. This report has been done basically on analyzing the theoretical and practical practices of International marketing.

Methodology:

The report in this study is basically an inductive one. Two different types of systems have been selected here based on convenience. The report is based on both primary and secondary information.

Primary Information: The primary data have been collected from our class lecture, various types of individual professionals.

Secondary Information: The secondary information has been extracted from various textbooks of marketing. Other notable information that was used for this report was the information gathered from websites which is mention in bibliography

Limitation:

In spite of having the wholehearted effort, there were some limitations, which acted as a barrier to conduct the program and for doing an empirical research work, such as: Time Constraint:

The study is based on the analysis of international marketing But this allocated time is not enough for a complete and fruitful study.

Lack of Experience:

Due to lack of experience, there is a chance of having some mistake in the report though best effort has been applied to avoid any kind of mistake.

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Introduction:

A multinational corporation (MNC) or multinational enterprise (MNE) is

a corporation that is registered in more than one country or that has operations in more than

one country. It is a large corporation which both produces and sells goods or services in

various countries. It can also be referred to as an international corporation. They play an

important role in globalization. The first multinational corporation was the Dutch East India

Company, founded March 20, 1602

Such a company is even known as international company or corporation. As defined by I. L.

O. or the International Labor Organization, a M. N. C. is one, which has its operational

headquarters based in one country with several other operating branches in different other

countries. The country where the head quarter is located is called the home country whereas;

the other countries with operational branches are called the host countries. Apart from

playing an important role in globalization and international relations, these multinational

companies even have notable influence in a country's economy as well as the world economy.

The budget of some of the M. N. C.s are so high that at times they even exceed the G. D. P.

(Gross Domestic Product) of a nation.

Definition

There is more universally accepter definition of the term multinational corporation. Different

authorities define the term differently

 

As  ILO Report 

 The essential nature of the multinational enterprise lies in the fact that is managerial

Headquarters are located in one country ( home country ) while the enterprise carries out

operations in a number of other countries as well (host countries)

 

Obviously, what is meant is, A corporation that controls production facilities in more than

one country, such facilities having been acquired through the process of foreign-direct

investment. Firms that participate in international business however large they may be, solely

by exporting or b hunting technology is not Multinational enterprises.

 

The United Nations MNCs as ,Enterprises which control assets- factories, mines, sales

offices and the like in two or more countries.

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What are the Advantages and Disadvantages of Multinational Corporations?

Multinational Corporations no doubt, carryout business with the ultimate object of profit

making like any other domestic company. According to ILO report "for some, the

multinational companies are an invaluable dynamic force and instrument for wider

distribution of capital, technology and employment; for others they are monsters which our

present institutions, national or international, cannot adequately control, a law to themselves

with no reasonable concept, the public interest or social policy can accept. MNC's directly

and indirectly help both the home country and the host country.

Advantages of MNC's for the host country

MNC's help the host country in the following ways

1. The investment level, employment level, and income level of the host country increases

due to the operation of MNC's.

2. The industries of host country get latest technology from foreign countries through MNC's.

3. The host country's business also gets management expertise from MNC's.

4. The domestic traders and market intermediaries of the host country gets increased business

from the operation of MNC's.

5. MNC's break protectionalism, curb local monopolies, create competition among domestic

companies and thus enhance their competitiveness.

6. Domestic industries can make use of R and D outcomes of MNC's.

7. The host country can reduce imports and increase exports due to goods produced by

MNC's in the host country. This helps to improve balance of payment.

8. Level of industrial and economic development increases due to the growth of MNC's in the

host country.

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Advantages of MNC's for the home country

MNC's home country has the following advantages.

1. MNC's create opportunities for marketing the products produced in the home country

throughout the world.

2. They create employment opportunities to the people of home country both at home and

abroad.

3. It gives a boost to the industrial activities of home country.

4. MNC's help to maintain favourable balance of payment of the home country in the long

run.

5. Home country can also get the benefit of foreign culture brought by MNC's.

Disadvantages of MNC's for the host country

1. MNC's may transfer technology which has become outdated in the home country.

2. As MNC's do not operate within the national autonomy, they may pose a threat to the

economic and political sovereignty of host countries.

3. MNC's may kill the domestic industry by monpolising the host country's market.

4. In order to make profit, MNC's may use natural resources of the home country

indiscriminately and cause depletion of the resources.

5. A large sums of money flows to foreign countries in terms of payments towards profits,

dividends and royalty.

Disadvantages of MNC's for the home country

1. MNC's transfer the capital from the home country to various host countries causing

unfavourable balance of payment.

2. MNC's may not create employment opportunities to the people of home country if it adopts

geocentric approach.

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3. As investments in foreign countries is more profitable, MNC's may neglect the home

countries industrial and economic development.

Applicability to particular business

MNC's is suitable in the following cases.

1. Where the Government wants to avail of foreign technology and foreign capital e.g. Maruti

Udyog Limited, Hind lever, Philips, HP, Honeywell etc.

2. Where it is desirable in the national interest to increase employment opportunities in the

country e.g., Hindustan Lever.

3. Where foreign management expertise is needed e.g. Honeywell, Samsung, LG Electronics

etc.

4. Where it is desirable to diversify activities into untapped and priority areas like core and

infrastructure industries, e.g. ITC is more acceptable to Indians L&T etc.

5. Pharmaceutical industries e.g. Glaxo, Bayer etc

What Are the Cultural Problems Encountered by Multinational Companies?

Multinational companies face a number of different cultural problems as they move forward

in today's global marketplace. Many of those problems are internal cultural problems, but

some may of an external nature also. Given the nature of the global environment,

multinational companies will increasingly find themselves having to make decisions that are

based on cultural problems created by the global market.

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1. Diversity

o One of the main cultural challenges faced by multinational companies is the diversity of

cultural perspectives found within the organization. This can cause problems in terms of

management and policy development, because it makes it difficult for the organization to

make company-wide policy decisions without having to take into consideration the variety of

cultural viewpoints represented within the organization itself. In short, as companies move

forward in the global context, too much diversity may create problems.

2. Organizational Culture

o Along the same lines as an overabundance of diversity, multinational companies also face the

difficult task of developing a unified organizational culture from within. Because of the

different cultural perspectives represented within the organization as a whole, company

leaders generally face the difficult task of having to create a workplace culture to which all

employees can adhere. Concepts of teamwork and unity may have different meanings across

the national boundaries, making it far more tricky to develop a unified company perspective.

3. Human Resources

o Companies of a multinational variety will also face problems when it comes to human

resources operations. For instance, when it comes to recruiting, human resources managers

may find themselves having to overcome cultural barriers to find qualified candidates for

positions abroad. In some cases, management professionals may find themselves facing a

lack of qualified talent to fill important positions that require advanced degrees and training.

Finding employees at home who are qualified or willing to step in and fill such positions in a

context outside of their home country may also prove problematic. Some employees may

simply not want to serve in certain parts of the world.

4.Sales

o Another problem that multinational companies may face in a global environment is the ability

to develop products and market those products in a way that appeals to a wide segment of the

world's population. Companies run the risk of developing products and strategies that run

contrary to the cultural norms of the people to which they are attempting to market the

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products. Multinational companies face the challenge of developing and marketing products

that have global appeal.

5. Communication and Cultural Norms

o Another significant issue faced by multinational companies is how business is conducted

across international lines. Differences in communication, for instance, make it essential to

understand cultural norms in the countries in which these companies operate. For instance,

John Hooker at Carnegie Melon University points out that some forms of communication

have implied and understood meanings that only make sense within a culture's context. This

form of "high context communication" requires knowledge of the culture and its understood

traditions.

6. Etiquette and Customs

o Multinational companies also have to have representatives and leaders who know how to

avoid violating or ignoring cultural practices and customs in business meetings. For instance,

sending a woman to conduct business negotiations in the Middle East might be offensive to

some Middle Eastern businessmen who typically don't socialize in public with women. In

some Asian cultures, bowing, rather than shaking hands, is a more acceptable form of

greeting. Other etiquette concerns can include eating customs in business dinners, bringing

and giving gifts when appropriate, differences in body language and dress and even methods

of negotiation

Market imperfections

It may seem strange that a corporation can decide to do business in a different country, where

it does not know the laws, local customs or business practices. Why is it not more efficient to

combine assets of value overseas with local factors of production at lower costs by renting or

selling them to local investors?

One reason is that the use of the market for coordinating the behaviour of agents located in

different countries is less efficient than coordinating them by a multinational enterprise as an

institution. The additional costs caused by the entrance in foreign markets are of less interest

for the local enterprise. According to Hymer, Kindleberger and Caves, the existence of

MNCs is reasoned by structural market imperfections for final products. In Hymer's example,

there are considered two firms as monopolists in their own market and isolated from

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competition by transportation costs and other tariff and non-tariff barriers. If these costs

decrease, both are forced to competition; which will reduce their profits. The firms can

maximize their joint income by a merger or acquisition, which will lower the competition in

the shared market. Due to the transformation of two separated companies into one MNE the

pecuniary externalities are going to be internalized. However, this does not mean that there is

an improvement for the society.

This could also be the case if there are few substitutes or limited licenses in a foreign market.

The consolidation is often established by acquisition, merger or the vertical integration of the

potential licensee into overseas manufacturing. This makes it easy for the MNE to enforce

price discrimination schemes in various countries. Therefore Hymer considered the

emergence of multinational firms as "an (negative) instrument for restraining competition

between firms of different nations".

Market imperfections had been considered by Hymer as structural and caused by the

deviations from perfect competition in the final product markets. Further reasons are

originated from the control of proprietary technology and distribution systems, scale

economies, privileged access to inputs and product differentiation. In the absence of these

factors, market are fully efficient. The transaction costs theories of MNEs had been

developed simultaneously and independently by McManus (1972), Buckley & Casson (1976)

Brown (1976) and Hennart (1977, 1982). All these authors claimed that market imperfections

are inherent conditions in markets and MNEs are institutions that try to bypass these

imperfections. The imperfections in markets are natural as the neoclassical assumptions like

full knowledge and enforcement do not exist in real markets.

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International power

1. Tax competition

Multinational corporations have played an important role in globalization. Countries and

sometimes subnational regions must compete against one another for the establishment of

MNC facilities, and the subsequent tax revenue, employment, and economic activity. To

compete, countries and regional political districts sometimes offer incentives to MNCs such

as tax breaks, pledges of governmental assistance or improved infrastructure, or lax

environmental and labor standards enforcement. This process of becoming more attractive to

foreign investment can be characterized as a race to the bottom, a push towards greater

autonomy for corporate bodies, or both.

However, some scholars for instance the Columbia economist Jagdish Bhagwati, have argued

that multinationals are engaged in a 'race to the top.' While multinationals certainly regard a

low tax burden or low labor costs as an element of comparative advantage, there is no

evidence to suggest that MNCs deliberately avail themselves of lax environmental regulation

or poor labour standards. As Bhagwati has pointed out, MNC profits are tied to operational

efficiency, which includes a high degree of standardisation. Thus, MNCs are likely to tailor

production processes in all of their operations in conformity to those jurisdictions where they

operate (which will almost always include one or more of the US, Japan or EU) that has the

most rigorous standards. As for labor costs, while MNCs clearly pay workers in, e.g.

Vietnam, much less than they would in the US (though it is worth noting that higher

American productivity—linked to technology—means that any comparison is tricky, since in

America the same company would probably hire far fewer people and automate whatever

process they performed in Vietnam with manual labour), it is also the case that they tend to

pay a premium of between 10% and 100% on local labor rates. Finally, depending on the

nature of the MNC, investment in any country reflects a desire for a long-term return. Costs

associated with establishing plant, training workers, etc., can be very high; once established

in a jurisdiction, therefore, many MNCs are quite vulnerable to predatory practices such as,

e.g., expropriation, sudden contract renegotiation, the arbitrary withdrawal or compulsory

purchase of unnecessary 'licenses,' etc. Thus, both the negotiating power of MNCs and the

supposed 'race to the bottom' may be overstated, while the substantial benefits that MNCs

bring (tax revenues aside) are often understated

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2.Market withdrawal

Because of their size, multinationals can have a significant impact on government policy,

primarily through the threat of market withdrawal. For example, in an effort to reduce health

care costs, some countries have tried to force pharmaceutical companies to license their

patented drugs to local competitors for a very low fee, thereby artificially lowering the price.

When faced with that threat, multinational pharmaceutical firms have simply withdrawn from

the market, which often leads to limited availability of advanced drugs. In these cases,

governments have been forced to back down from their efforts. Similar corporate and

government confrontations have occurred when governments tried to force MNCs to make

their intellectual property public in an effort to gain technology for local entrepreneurs. When

companies are faced with the option of losing a core competitive technological advantage or

withdrawing from a national market, they may choose the latter. This withdrawal often

causes governments to change policy. Countries that have been the most successful in this

type of confrontation with multinational corporations are large countries such as United

States and Brazil which have viable indigenous market competitors.

3. Lobbying

Multinational corporate lobbying is directed at a range of business concerns, from tariff

structures to environmental regulations. There is no unified multinational perspective on any

of these issues. Companies that have invested heavily in pollution control mechanisms may

lobby for very tough environmental standards in an effort to force non-compliant competitors

into a weaker position. Corporations lobby tariffs to restrict competition of foreign industries.

For every tariff category that one multinational wants to have reduced, there is another

multinational that wants the tariff raised. Even within the U.S. auto industry, the fraction of a

company's imported components will vary, so some firms favor tighter import restrictions,

while others favor looser ones. Says Ely Oliveira, Manager Director of the MCT/IR: This is

very serious and is very hard and takes a lot of work for the owner.pk

Multinational corporations such as Wal-mart and McDonald's benefit from government

zoning laws, to create barriers to entry.

Many industries such as General Electric and Boeing lobby the government to receive

subsidies to preserve their monopoly.

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4. Patents

Many multinational corporations hold patents to prevent competitors from arising. For

example, Adidas holds patents on shoe designs, Siemens A.G. holds many patents on

equipment and infrastructure and Microsoft benefits from software patents. The

pharmaceutical companies lobby international agreements to enforce patent laws on others.

GROWTH OF MNCs

The rapidity with the MNCs are growing is indicated by the fact that while according to the

world investment report 1997

there were about 45,000 MNCs with 2,80,000 overseas affiliates; according to the

world investment report 2001,

there were over 63,000 of them with about 8,22,000 overseas affiliates. China was host to

about 3.64 lakh of the affiliates (i.e., more than 44% of the total) compared to more than 1400

in India. The developed countries have less than 12% if these affiliates

The possess staggering resources as would be clear from the fact that the sales of 200 top

corporations in1982 were equivalent of 24.2 per cent of the world’s GDP and have risen to

28.3 per cent of the world GDP in 1998. This shows that 200 top MNCs now control over a

quarter of the world’s economic activity. In fact the combines sales of thee 200 MNCs

estimated at &7.1 trillion in 1998 surpass the combined economies of 182 countries. If we

subtract the GDP of the big 9 economies -USA, Japan, Germany, France, Italy, UK, Brazil,

Canada and china-from the world’s GDP, the GDP of the remaining 182 countries of the

world comes to $6.9 trillion in 1998 which is less than the sales of the 200 top MNCs. An

idea of the giant size of these MNCs can also be had from the revelation made in a study

conducted by the Washington based institute of policy studies (IPS) that of the 100 largest

economies in the world, 51 are corporations; only 49 are countries.

The MNCs are estimated to employ directly, at home and abroad. Around73 billion

people representing nearly 10 per cent of paid employment in non-agricultural activities

world wide and close to 20 per cent in the developed countries considered alone/ in addition ,

the indirect employment effect of the TNC activities ate at least equal toy hew direct effects

and probably much larger. For example, the US footwear company Nike currently employs

9000 people; while

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nearly 75,000 people are employed by is independent sub- contractors located in different

countries. Based on such information, the total number of jobs associated with TNCs world

wide may have been 150 million at the beginning of the 1990s.

REASONS FOR THE GROWTH OF MNCs

The important reasons for the growth of multinationals are as follows:

1. Expansion of market territory: The increase in per capita income alongside the

growth of various economies and growth of GDP resulted in the rise of living

standards of the people. Due to these factors. The market territory of the firms

expended. In addition to this, the large operations of the MNCs builds up its

international image, which contributed to extend its market territory beyond the

physical boundaries of the country in which it is incorporated?

2. Market Superiorities: A number of market superiorities can ve observed in MNCs

over the domestic companies. They may be:

a. Availability of more reliable and up to date data and information:

b. They enjoy market reputation:

c. They adopt more effective advertising and salad promotion technique and

thymus they face less difficulties in marketing the products:

d. They have efficient warehousing facilities due to lower inventory requirement

and also enjoy quick transportation

3. Financial superiorities: An MNC enjoys financial superiorities over domestic

companies. They are:

a. Huge financial resources at the disposal of the MNCs. they can turn the

environment and circumstances in their favor by utilizing these resources:

b. They have easy access to external capital markets:

c. Because of its international regulation, thy can raise funds from international

banks and financial institutions easily.

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4. Technological superiorities: Expansion or growth of MNCs is dot to the

technological backwardness of underdeveloped contraries. Infect MNCs are rich in

technology. Thee rich financial resources of the MNCs enable them to invest on R$ D

and develop the advanced technology. There are certain reasons due to which the

developing countries regard the transfer of technology from the MNCs. These reasons

are:

a. Lack of industrialization and insufficient resources:

b. Local manpower , capital, etc. cannot be optimally utilized by the developing

countries on their own:

c. Developing countries are unable to import raw materials, capital equipment,

technology, etc: on their own due to paucity of resources:

d. The developing countries also lack in marketing the products due to

competition:

e. Lack in exploiting mineral and nature of its own.

5. Product innovation: Advanced R$D departments enable MNCs to develop new

products and superior designs of their products. Developing and underdeveloped

countries suffer from limitation in this regard. Therefore, they invite MNCs to their

countries.

Globalization

Multinational corporations are important factors in the processes of globalization. National

and local governments often compete against one another to attract MNC facilities, with the

expectation of increased tax revenue, employment, and economic activity. To compete,

political powers push towards greater autonomy for corporations, or both. MNCs play an

important role in developing the economies of developing countries like investing in these

countries provide market to the MNC but provide employment, choice of multi goods etc

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Criticism of Multinational companies

Anti-corporate advocates criticize multinational corporations for entering countries that have

low human rights or environmental standards. They claim that multinationals give rise to

huge merged conglomerations that reduce competition and free enterprise, raise capital in

host countries but export the profits, exploit countries for their natural resources, limit

workers' wages, erode traditional cultures, and challenge national sovereignty

Micro-multinationals

Enabled by Internet based communication tools, a new breed of multinational companies is

growing in numbers. These multinationals start operating in different countries from the very

early stages. These companies are being called micro-multinationals. What differentiates

micro-multinationals from the large MNCs is the fact that they are small businesses. Some of

these micro-multinationals, particularly software development companies, have been hiring

employees in multiple countries from the beginning of the Internet era. But more and more

micro-multinationals are actively starting to market their products and services in various

countries. Internet tools like Google, Yahoo, MSN, Ebay and Amazon make it easier for the

micro-multinationals to reach potential customers in other countries.

Service sector micro-multinationals, like Facebook, Alibaba etc. started as dispersed virtual

businesses with employees, clients and resources located in various countries. Their rapid

growth is a direct result of being able to use the internet, cheaper telephony and lower

traveling costs to create unique business opportunities.

Low cost SaaS (Software As A Service) suites make it easier for these companies to operate

without a physical office.

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Chapter 2.

MNC’S IN INDIA

Various MNCs’ contribution to India’s industrial development has been a very mixed

blessing. The entries of all hues of MNCs have made the industrial development scene even

more uneven and patchy. However, the scene is changing faster than ever, and it is just a

short time before even this picture changes significantly.

Why are Multinational Companies in India? 

There are a number of reasons why the multinational companies are coming down to India.

India has got a huge market. It has also got one of the fastest growing economies in the

world. Besides, the policy of the government towards FDI has also played a major role in

attracting the multinational companies in India.

For quite a long time, India had a restrictive policy in terms of foreign direct investment. As a

result, there was lesser number of companies that showed interest in investing in Indian

market. However, the scenario changed during the financial liberalization of the country,

especially after 1991. Government, nowadays, makes continuous efforts to attract foreign

investments by relaxing many of its policies. As a result, a number of multinational

companies have shown interest in Indian market

Regulation of MNCs in India

Different government agencies in India control MNCs. These agencies include: (i) the

department of company affair (ii) The Reserve Bank of India (iii) The Ministry of Industrial

Development and (iv) The ministry of finance. Control over MNCs in India is not efficient as

these agencies have no coordination among themselves. The government of India imposed

certain regulation to control MNCs. These are:

1 . Permissible period of agreement was reduced from 10 to 5 years.

2. The maximum rate of royalty was imposed in technology imports for those industries

which were allowed to import technology.

3. Those industries were moot allowed to import technology where domestic companies ate

competent.

4. Exports and other marketing restrictions were imposed.

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Some regulations as stated above were imposed. However these regulations are moot

adequate and therefore MNCs be properly regulated to safeguard the interest of the country.

Following suggestions ate given to regulate them.

a. Government interference: Host country government should have its representatives on

the management of thee corporations. Interferences of the representatives of the government

is must on such matters as influence or are likely to influence the economic development of

the country. It should be made clear to the MNCs that if they do not function in the Interest of

the country they are likely to be nationalized.

b. Local ownership: Majority or 51 per cent shares of the subsidiaries of MNCs should be

held special industries of the host country.

c. Beneficial collaborations: Government should allow collaboration of MNCs for those

special industries where such collaboration is essential.

d. Research of an appropriate technology: MNCs many be compelled to spend a part of

their profit in the development of appropriate R $ D for the benefit of host country.

e. Substitution of technology: Only in the initial stages of development the imported

technology should be used. Thereafter that technology should be developed indigenously so

that the dependence on MNCs could be reduced.

f. Collaboration in heavy and basic industries: Collaboration with MNCs should be

allowed only in heavy and basic industries. Collaboration in consumer goods industry should

not be allowed as it many hamper the domestic industry.

g. Check on monopolistic tendencies: Oligopolistic or monopolistic tendencies of MNCs

should be closely watched to safeguard the interest of consumers as well as of local

producers.

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Salient feature of MNCs in India:

The salient features of MNCs in India are as follows:

a. Bi-Country: Most of the MNCs functioning in India have the rheas offices in two

countries i.e. and U.S.A... Out of 171 subsidiary companies 116 had their head offices in

U.K. and 25 in U.S.A.

b. Trends of MNCs: Numbers of MNCs in India have gone down but the volume of their

assets increased considerably. In 1974, the number of MNCs in India was 575 which came

down to 350 in 1980. But their assets increased from Rs. 1741 crore to Rs. 2401 crore.

During the same period the number of subsidiaries also came down to 125 from 188.

c. Sources of capital: Large numbers of subsidiaries operating in India have mobilized their

financial resources from within India.

d. Industry wise distribution: Of all the MNCs operating in India 30 per cent are engaged in

plantation (tea) and mining. Large of their branches are also found in the field of trade

banking and services their number is relatively less in case of industries. Share of commerce

trade and finance in the total assets of these corporations is 76 per cent. Share of processing

industry and transport is 6 per cent each respectively.

e.High rate of profitability: The rate of profitability of MNCs in comparison to domestic

industry is very high. Profitability of MNCs (private) on an average was 34% whereas that of

Indian private companies was 11.5 per cent. Similarly the profitability of foreign public

limited companies was 24 per cent as again only 11 per cent in case of domestic public

limited companies.

f. Subsidiaries: a company is called a subsidiary company if atleast 50per cent of its paid up

capital is held by another company. Presently there are 88 subsidiaries of MNCs. Out of these

83 companies the share of MNC varies 70 to 100 per cent of their share capital.

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G.Heavy remittances abroad: according to Dr.K.N.Raj, rate of profitability on MNCs is

very high. In a short period they repatriate the amount of initial investment to their head

office. Besides they also remit to their parent company; large amounts by way of royalty and

technical services. For example Essoan American Petroleum Company had remitted to its

head office Rs. 83 crore as a part of profit on investment of Rs. 30 crore in India.

h. Limited transfer of improves technology: The MNCs in India have kept their technology

a closely guarded secret. Transfer of improved technology by MNCs to India has taken place

on a very limited scale. It is the old technologies which mostly continue to prevail in India.

i. Indianisation: MNCs have accepted the proposal of Indianisation. According to the

provision of foreign exchange management act (FEMA), all foreign companies had to reduce

their ownership to 74 per cent or they had to reduce their share in the share capital of Indian

branches to 40 per cent. Most of the MNCs have accepted these conditions. Many of them

have already taken steps to reduce the amount of foreign capital.

Profit of MNCs in India 

It is too specify that the companies come and settle in India to earn profit. A company enlarges its jurisdiction of work beyond its native place when they get a wide scope to earn a profit and such is the case of the MNCs that have flourished here. More over India has wide market for different and new goods and services due to the ever increasing population and the varying consumer taste. The government FDI policies have somehow benefited them and drawn their attention too. The restrictive policies that stopped the company's inflow are however withdrawn and the country has shown much interest to bring in foreign investment here.

Besides the foreign directive policies the labour competitive market, market competition and the macro-economic stability are some of the key factors that magnetize the foreign MNCs here.

Following are the reasons why multinational companies consider India as a preferred destination for business:

1. Huge market potential of the country2. FDI attractiveness3. Labour competitiveness4. Macro-economic stability

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Advantages of the growing MNCs to India 

There are certain advantages that the underdeveloped countries like and the developing countries like India derive from the foreign MNCs that establishes. They are as under:

1. Initiating a higher level of investment.2. Reducing the technological gap3. The natural resources are utilized in true sense.4. The foreign exchange gap is reduced5. Boosts up the basic economic structure

Disadvantages of the growing MNCs to India

Some of disadvantages are1. Supplant domestic savings by destroying competition, remove local entrepreneur, unstable industrial growth2. Cause strain to BOP i.e. balance of payment by repetration of profits, interests, loyalities, management fees.3. Local professional cannot access to working strategies of MNCs4. Mncs by introducing new technology cause technological unemployment. mncs adopt capital intensive technique. so machine takes place of workers

MNCs and Indian Industries:

Some economists think that MNCs are helpful for Indian industrial sector they think that

Indian companies learn new technique of production and new management techniques with

the arrival of MNCs in the Indian economic scene. MNCs increase competition in the

industrial sector so when Indian companies compete with global giants they also improve in

their working. With the entrance of MNCs in India demand for skilled persons increased to a

great extent so more and more people are becoming skillful and the problem of skilled

persons is solved for Indian industries also. MNCs also bring foreign capital in the country,

which help to expand the market and Indian industries also take benefit of it.

There are some economists who have some different opinion according to them the

technology transferred by them is not useful for countries like India because MNCs use

capital intensive technique and developing countries have scarce capital and labour abundant

so the technology they transfer is of little use. The competition increased by MNCs is also

disastrous for domestic industries only few strong domestic industries have enough strength

to face the competition with global giants. As well as skilled persons are concerned MNCs

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give higher salaries to the skilled persons and thus able to explore the services of the most

skilled persons and the Indian industries are still out of the services of these skilled people.

No doubt MNCs bring foreign capital in India but this capital later becomes the cause of

reimbursement of profit to the MNC’s parent countries, which cause capital flight from the

country.

MNCs and agriculture:

 Indian economy is an agrarian economy; a major part of the population depends on

agriculture directly or indirectly. If we go back to past few decades Indian agriculture was

considered backward but now the time is changing and MNCs such as Mahyco-Monsanto

help in modernizing Indian agriculture. They provide modern agricultural inputs such as

HYV seeds, pesticides, fertilizers and modern agricultural equipments to the Indian farmers

and thus Indian agriculture has turned itself from subsistence level to making profits. MNCs

also encourage research activities in the field of agriculture in developing countries like India.

If we see the other part of the picture India with billion plus population, has put agriculture at

the heart of its economy and food security at the centre of its agriculture policy. In

developing countries, MNCs encourage commercial farming because they need cheap raw

material. Farmers also get good amount for their crop so the result is danger of food security,

which the world is facing these days. A big number of Indian farmers are small and medium

farmers who are not able to use expensive agricultural equipments so the gap is widening

among rich and poor farmers, which is disastrous for the agriculture.  Moreover MNCs are

making Indian farmers dependent on HYV seeds provided by them and thus the biodiversity

of Indian varieties are in danger.

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MNCs from social and moral viewpoint:  

MNCs are not fair in their working in the developing countries. Many MNCs are not paying

their tax liability, they prefer to establish in that country where tax laws are not strict

similarly they prefer to establish in that country where environmental laws are also not much

strict and these are mainly developing countries. They even send their toxic waste in these

countries by taking advantage of loose environmental laws even the quality of their products

vary with country to country we can take the example of coca cola which is of superior

quality in USA and is of inferior in India. MNCs also responsible for misallocation of

resources in the developing countries. They provide mainly luxurious products because there

is more profit in it. Thus demand for these products increase due to demonstration effect and

this leads to misallocation of resources towards luxurious goods but the need of developing

countries is to produce more and more necessary goods because most of the people belong to

poor or middle class.

Another aspect, which judges MNCs morally, is political interference. Generally it is the

practice of MNCs to gain the economic power in developing countries and then get political

power by giving help to the politicians at the time of elections and then manipulate industrial

policies in their favor they also interfere in the important political matters of these countries

which can cause a big danger to the sovereignty of developing countries. 

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Foreign Collaboration in India

 

In India there are basically two forms of foreign collaboration. The collaboration may be

either financial collaboration or it may be technical. In case of financial collaboration the

approving authority is the Reserve Bank of India and in the case of technical collaboration

the approving authority is department of Industrial Development in the Ministry of Industry,

Government of India.

The approach of the Government has been roughly the same since the year 1949 that is to

allow foreign direct investment on preferential basis in sectors that will be beneficial for the

country. The foreign or Indian undertakings will have to conform to the Industrial policy of

the country. Foreign investors are in all cases considered equal to their Indian partners.

 

The Government has enforced The Foreign Exchange Management Act 1999 (FEMA) in

place of the Foreign Exchange Regulation Act,1973 (FERA). The Old act aimed at

controlling foreign exchange whereas the new Act seeks to regulate foreign exchange.

 

A breach of the provisions of the old act resulted in a criminal offence with the burden of

proof lying on the guilty. However the new Act provides for only a civil remedy and for an

offence the accused cannot be arrested unless he defaults in payment of penalty for

contravention.

 

For setting up a foreign collaboration, approval from the government under the relevant

foreign exchange laws in force and the requisite Government policy is required.

 

Under the Act now a foreign collaboration may be formed by a foreign company without the

necessity of forming a company with an Indian counterpart. Any Foreign collaboration which

exceeds the minimum limited set out in the automatic route requires approval from the

government.

 

The Government has set up a foreign investment promotion board to encourage foreign

investment in India. Some of the functions of the Board include:

speed up clearance of proposals to review the collaborations cleared

Earmarking and ascertaining of contacts to invest in India.

23

10 Best MNC’s

1. Microsoft

Microsoft Corporation, an American multinational corporation is headquartered in Redmond,

Washington, United States that develops, manufactures, licenses, and supports a wide range

of products and services mostly associated with computing through its various product

divisions. 

2. NetApp

NetApp previously known as Network Appliance is a proprietary computer storage and data

management company headquartered in Sunnyvale, California.

3. Google

Google, an American multinational Internet and software corporation specialized in Internet

search, cloud computing, and advertising technologies is headquarters in United States. It

develops numerous Internet-based services and products, and makes profit primarily from

advertising through its Ad Words program. 

4. FedEx Express

FedEx Express is a cargo airline based in Memphis, Tennessee, United States. It is

considered the world's largest airline in terms of freight tons flown and the world's fourth

largest in terms of fleet size

5. Cisco

Cisco Systems is, an American multinational corporation headquartered in San Jose,

California, United States, designs, manufactures, and sells networking equipment

6. Marriott

Marriott Corporation, a hospitality company was founded originally by J. Willard Marriott

and Frank Kimball as Hot Shoppes

24

7. McDonald's

McDonald's Corporation today is the world's largest chain of hamburger fast food restaurants,

serving around 68 million customers daily in 119 countries

8. Kimberly-Clark

Kimberly-Clark Corporation is an American corporation that manufactures mostly paper-

based consumer products.

9. SC Johnson

S.C. Johnson was earlier previously known as S. C. Johnson Wax is a privately held, global

manufacturer of household cleaning supplies and other consumer chemicals based in Racine,

Wisconsin

10. Diageo

Diageo is a global alcoholic beverages company headquartered in London, United Kingdom.

It is the world's largest producer of spirits and a major producer of beer and wine.

25

Chapter 3.

McDonald’s Case study

International Expansion

While McDonald’s was astounding the experts with the rapid growth of its hamburger chain

in the United States, company had another big surprise brewing – international expansion.

They opened their first restaurant outside the U.S. in Canada on June 1, 1967 in Richmond

B.C., and the race was on. Canada today has more than 1,300 restaurants.

After a few false starts in the Caribbean and the Netherlands – where they tried a more hands-

off style and attempted to compromise their menu for local tastes – they realized that what

had worked so well in the U.S. could travel virtually anywhere. A strong local partner fully

trained and totally involved in the business the traditional McDonald’s menu and their

detailed operating procedures for QSC&V were the formula for success.

One of the most dramatic examples came in Japan, where Den Fujita, who owned an import

company specializing in handbags, shoes, and apparel, became McDonald’s joint venture

partner in 1971. Fujita opened his first restaurant on July 20, 1971 in a tiny 500-square-foot

restaurant in a prime location in Tokyo’s Ginza shopping district – a site that only allowed 39

hours for construction that normally took three months. On its first day, the restaurant rang up

$3,000 in sales, and Fujita has never looked back. At the end of 1993, McDonald’s was

Japan’s most successful restaurant chain, with some 1,400 restaurants – and nearly double the

annual sales of the next competitor.

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They also opened their first restaurants in Germany and Australia in 1971. Today, Germany

has more than 1,200 restaurants and Australia has some 700 McDonald’s locations. And after

entering France and England in the early 1970s, McDonald’s today runs some 980 restaurants

in France and more than 1,200 restaurants the United Kingdom.

These six countries – Canada, Japan, Germany, Australia, France and England – are known

as McDonald’s “Big Six” because combined, they provide about 80 percent of international

operating income. McDonald’s international operations are playing an increasingly important

role in their company’s results. In 1995, for example, 7,030 restaurants in 89 countries

produced sales of $14 billion.

Some of McDonald’s international openings have been so dramatic that they have become

headline news in the media around the world. On January 31, 1990, for example, more than

30,000 people lined up on a cold winter day in Moscow to visit the new, 23,680-square foot

McDonald’s – the most people ever served by a single restaurant to that date. That restaurant

opening culminated years of negotiations which had begun during the Montreal Olympics in

1976 and represented the largest joint venture agreement between the Soviet Union and a

food company.

The Russian crew was soon serving between 40,000 and 50,000 customers each day – a total

of 15 million people in its first full year. To meet the unrelenting demand, they built a $45

million food processing facility near Moscow, one of the most modern food processing

facilities in Europe.

McDonald’s opening in Beijing, China, on April 23, 1992 shattered the Moscow opening day

record, attracting some 40,000 Chinese customers to the 28,000-square-foot restaurant, which

had 29 cash register stations to handle the flow. Located in the city’s busiest shopping

district, the restaurant has some 800,000 pedestrians passing by daily. The joint venture

partnership between McDonald’s and the General Corporation of Beijing Agriculture,

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Industry, and Commerce had been working for five years to establish the network of local

farmers, manufacturers, and other suppliers to support the restaurant.

Not to be outdone, two new restaurants opened in Poland in 1992 and each surpassed the

Moscow and Beijing records for opening day transactions, with the Warsaw restaurant

amassing 13,304 transactions in June 1992, a record which was broken six months later in

Katowice, 200 miles south of Warsaw in Poland’s coal country.

Other former Iron Curtain countries where McDonald’s has proven tremendously popular

include the Czech Republic, East Germany, Hungary, and Slovenia.

They also broke ground in another new part of the world when we entered the Middle East

with a new restaurant, which opened in Tel Aviv, Israel in October of 1993. New restaurants

were added in Saudi Arabia, Oman, Kuwait, Egypt, Bahrain, United Arab Emirates, and

Qatar, reflecting our extensive and long-term commitment to the region.Out of respect for

local cultures, McDonald’s restaurants in Arab countries maintain “Halal” menus, which

signify compliance with Islamic laws for food preparation, especially beef. In addition,

restaurants in Saudi Arabia do not display statues or posters of Ronald McDonald, since the

Islamic father prohibits the display of “idols.” And the first kosher McDonald’s opened in

early 1995 in a suburb of Jerusalem. It does not serve dairy products, and is closed on

Saturdays, the Jewish Sabbath.

The growth of McDonald’s to date – domestically and internationally – has proven the

validity of the first thought through Ray Kroc’s mind when he initially saw McDonald’s in

operation: “This will go anyplace.”

Marketing Plans:-

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The Team

Recruiting the right person at the right place and ensuring that right job is getting done is

what is the strength of making strong team members and as and when needed the continuous

development program is carried out.

Business Model

Franchise Model – 20% of the total restaurants are owned by the company while rest

80% is operated by. The company follows a comprehensive framework of training

and monitoring of its franchises to ensure that they adhere to the Quality, Service,

Cleanliness and Value propositions offered by the company to its customers.

Product Consistency – Based on the feedback form taken from restaurants company

has managed to maintain the product taste as per the requirement by consumer and

also the quality across the nations.

Act like a retailer and think like a brand – Protecting the brand reputation along

with the fastest delivery is the motto of McDonald’s.

FIRM CUSTOMERS

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Perfect vision to be maintained is by saying ‘All Population of India are our customers’.

Customer Perception and Customer Expectation

Creating image in the minds of customer is very important to sustained in the market hence

with right approach and by dedication towards consumers McDonald’s has met the

expectation unlike other who has failed to build healthy image about themselves in the

consumers mind.

Target Segment What is McDonald’s for me?

A Family with children A treat to children, a fun place to be for the children.

Urban customer on the move Great taste, quick service without affecting the work schedule

Teenager Hangout with friends, but keep it affordable.

Customers expect it to be an ambient, hygienic and a little sophisticated brand that respects

their values. The customer’s expect the brand to enhance their self-image. Customer

responses obtained at the Andheri, Mumbai and Kandivali outlet confirmed the fact that they

connect strongly with the brand. However, fulfilling some of the customer expectations like a

broader product variety provide McDonald’s a great scope for improvement.

Segmentation, Targeting and Positioning

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McDonald’s uses demographic segmentation strategy with age as the parameter. The main

target segments are children, youth and the young urban family.

As shown above, kids reign supreme in FMCG purchase related to food products. So to

attract children McDonalds has Happy Meal with which toys ranging from hot wheels and

recently they are handing out watch which really attract the kids. At several outlets, it also

provides special facilities like ‘Play Place’ where children can play arcade games, air

hockey, etc. (Witnessed in New York, USA). This strategy is aimed at making McDonald’s a

fun place to eat. This also helps McDonald’s to attract the young urban families wanting to

spend some quality time while their children have fun at the outlet. To target the teenagers,

McDonald’s has priced several products aggressively, keeping in mind the price sensitivity of

this target customer.

“Mc Donald’s mein hai kuch baat”- India (Oct. 13, 1996–1999) it immediately drive our

attention to its unique word hence many of them try its uniqueness hence it was mainly

targeted on upper middle class in India. Today it positions itself as an affordable place to eat

without compromising on the quality of food, service and hygiene. The outlet ambience and

mild background music highlight, friendly and helpful staff. The comfort that McDonald’s

promises in slogans like “You deserve a Break today” & “Feed your inner child”. This

commitment of quality of food and service in a clean, hygienic and relaxing atmosphere has

ensured that McDonald’s maintains a positive relationship with the customers.

5p’s of Marketing Mix

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After segmenting the market, finding the target segment and positioning itself, each company

needs to come up with an offer. The 5 P’s used by McDonalds are:

1. Product

2. Place

3. Price

4. Promotion

5. People

Product: How should the company design, manufacture the product so that it enhances

the customer experience?

As the marketing concept in concerned it is believe that ‘First impression is the last

impression’ hence the major focus on packaging precisely known as its looks is very

important aspects.

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“Our clear strategy is to bring the customers in initially and provide a range of entry-level

products so that they can try new items and graduate to the higher rungs.” ---

Vikram Bakshi,

Managing Director,

Northern Region, India

•McDonald’s product includes vegetarian and non-vegetarian items.

•Also involves combo.•Cares for customer’s sentiments towards religion and Culture.

•Separate cooking area and equipment’s.

McDonald’s SWOT Analysis

Strength

McDonald’s has a strong global presence with its nearest domestic competitor being

only half its size,

McDonald’s is the market leader in both the domestic and international markets.

McDonald’s benefit from cost reduction through economies of scale because of its

enormous size and its huge global presence allows it to diversify risk involved with

the economic performance of specific countries.

In international markets, McDonald’s is well placed to expand and take

advantage of long-term economic growth.

McDonald’s also has a strong real estate portfolio. The company’s outlets are located

in areas that are highly known for visibility, traffic volume and ease of access.

McDonald’s also has exceptional brand recognition. This strong brand recognition

creates significant opportunities for the company.

McDonald’s is able to generate more sales because of its brand recognition. Through

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aggressive market planning, McDonald’s has been able to recapture its youth market.

Weaknesses

The food industry is really saturated. As a result of this, MacDonald’s has to deal with

the prospect of looming market saturation, which could make it difficult to add new

outlets.

The market is forecast to grow by around 2% per year. There is also an increasing

price competition driven by too many competitors, which reduces the company’s

ability to increase revenue.

Nevertheless, the swift of the company’s focus from a value menu to a more diverse

one has recently limited the negative effect of the intense price competition that was

traditionally taking place among the industry leaders.

Lack of product innovation is another weakness of McDonalds.

The last break-through for McDonald’s was the Chicken McNugget in 1983, but

again the company’s new strategy seems to have successfully dealt with the problem

through the popularity of its new salads and other new products.

Lack of Jain meal.

Opportunities

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Also to increase profitability the company has slowed its expansion of McDonald’s

restaurants so as to refurbish and change the image of current restaurants and adding

new features such as Internet access.

McDonald’s still has plans for more international expansion.

McDonald’s still needs to penetrate in many countries especially in Europe, Asia and

Latin America.

Changing trends in eating habits toward more health eating, seen as a threat to

McDonalds can also be seen as an opportunity.

McDonalds introduced new premium salads and Fruit n’ Yogurt Parfaits in the US

which lead to growth in 2004 and the same products will probably bring some

more growth in foreign markets.

Threats

McDonald’s is exposed to changes in the global economy.

The company’s aggressive international expansion has left it extremely vulnerable to

other countries economic slowdown.

Foreign currency fluctuation is also another problem global companies like

McDonalds.

The Fast food industry is becoming an increasingly competitive sector.

MacDonald’s keeps up with competitors through expensive promotional

campaigns which leads to limited margins to gain market share.

McDonald’s is attempting to differentiate itself, with new formats and new menu

items, but other fast food industry are doing the same too.

McDonald’s, just like other fast food industry, often receives bad press because of its

link obesity.

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Increased concern such as this has led the Food Standards Agency and the

Department of Health in the UK to review the advertising of ’junk’ foods such as

McDonalds to children.

Top Competitors for MacDonald’s include: Yum! Brands, Inc, Wendy’s International,

Inc. Jack in the Box Inc, and Burger King Corporation.

Promotion:

What is the suitable strategy and channels for promotion of the product?

The various promotion channels being used by McDonald’s to effectively communicate the

product information are given above. A clear understanding of the customer value helps

decide whether the cost of promotion is worth spending.

There are three main objectives of advertising for McDonald’s are to make people aware of

an item, feel positive about it and remember it. The right message has to be

communicated to the right audience through the right media. McDonald’s does its

promotion through television, hoardings and bus shelters. They use print ads and the

television programmes are also an important marketing medium for promotion.

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Some of the most famous marketing campaigns of McDonald’s are:

“You Deserve a break today, so get up and get away- To McDonald’s”

“Aap ke zamane mein ,baap ke zamane ke daam”.

“Food, Folks, and Fun”

“I’m loving it”.

• Target customer – Children’s

• Awareness about products among People

• Use of Different Media like Television, hoardings and bus shelters

• DDB Needham and Leo Burnett agencies appointed for the advertisement

• Description of Products on Paper Mats placed in the trays.

• The placing of the pamphlets and banners in and around the outlets

• 80-20 Menu Board

• Lucky Promotion strategies

An activity, such as a sale or advertising campaign, designed to increase visibility or sales of

a product.

•McDonalds, for years has maintained an extensive promotion strategy with highest spending

on marketing amongst all its competitors.

Advertising:

Focus on overall experience.

“Brand globally and act locally”.

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Overall it is doing what it does the best – marketing. Intensive advertising aimed at children.

Paper mats on trays ensure that no new scheme goes unnoticed. 80-20 menu boards

marketing tool.

• Sponsors sport events with their logos advertised in these events. Significant use of

billboards and signage.

• Image of portraying warmth and a real slice of everyday life has become a trademark and

have created many memorable commercials.

Campaign

“I’m lovin’ it” is an international branding campaign which was launched in 2003 and has

proved to be its biggest success.

“aap ke zamaane mein baap ke zamaane ke daam” is a highly localized campaign which

aimed at attracting the masses through its happy price menu.

Majority of the customers learn about the firm’s product and services from the newspapers

ads, franchises and TV commercials. Only KFC and Pizza Hut is our major competitor in

India. More focus on service delivery time because of customer don’t have much time today.

Use electronic media for promotion.

Placement:

•Located at prime locations

•Evenly spread in India

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•Almost in all big cities

•At residential areas, malls, Multiplexes

Firm point of view

Easy availability of product and services to the customers

Easy availability for providing basic services and value added services

Easy complaint handling

To cover target market

Customers Point of view

Easy availability of Product and Services

Time and Money saving

Fast Service System and Resolve Conflict

HOW WOULD YOU IMPROVE THE CHANNEL ACTIVITIES?

Try to convert your traditional channel into remote channel

Price: What should be the pricing strategy?

39

Pricing includes the list price, the discount functions available, the financing options

available etc. It should also take into the consideration the probable reaction from the

competitor to the pricing strategy. This is the most important part of the marketing mix as this

is the only part which generates revenue. All the other three are expenses incurred. The price

must take into consideration the appropriate demand-supply equation.

McDonald’s came up with a very catchy punch line “Aap ke zamane mein ,baap ke

zamane ke daam”. This was to attract the middle and lower class consumers and the effect

can clearly be seen in the consumer base McDonalds has now.

McDonalds has certain value pricing and bundling strategies such as happy meal, combo

meal, family meal etc to increase overall sales volumes.

•Policy which caters to Indian customers

•Quite affordable products

•Heavily marketed “Happy Price Menu”

•Importance to brand and its integrity

Household Expenditures

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Pricing Strategy:

Purchasing power pricing:-

In 1997 slashed prices for vegetable nuggets and soft serve cone. In September 2001, they

offered Veg surprise burgers for Rs 17.

March 2004 – Aap ke zamane mein, baap ke zamane ka daam.

Value Ladder strategy :-

a) Started offering value meals in a range of prices.

b) Ensure affordability and attract widest section of customers.

c) Brought the customer and provided a range of entry- level products.

d) Try those new items and graduate to higher-rungs.

e) E.g- if a customer starts with McAloo Tikki, he will finally graduate to McVeggie and so

in Non veg.

f) Helped its Volume business.

Value Pricing.

a) McChicken & McVeggie Meal

b) Happy Meal for Kids

c) Big saving Meals

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d) A-la carte menu

e) Desserts

f) Beverages

Customers react positively due to Good quality of our product and services. McDonald’s

rationalizes its tariff with the passage of time in order to beat the competitors.

Cleanliness and Hygienic

Mc Donald’s focuses on clean and hygienic interiors of is outlets and at the same time the

interiors are attractive and the fast food joint maintains a proper decorum at its joints.

Cleanliness, speed, quality and transparency of process is the biggest physical evidence.

• The interiors are attractive and more or less consistent throughout the world. A proper

decorum and strict standards of cleanliness are maintained at all the joints. Extra care is given

to make the joints children Friendly Family environment message throughout the world, just

the way of communication is adjusted to different countries.

Play areas are provided so that kids don’t play areas are provided so that kids don’t

Become panicky. Counters are kept low and menus pictorially displayed so that children can

order for themselves.

• The physical appearance affects not only the impression outsiders have of a business

but also the way that business functions.

• Staff members

• Location & appearance

• Building maintenance

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Mcdonalds in Mumbai

Process:

The food manufacturing process at Mc Donalds is completely transparent i.e. the whole

process is visible to the customers. In fact, the fast food joint allows its customers to view and

judge the hygienic standards at Mc Donalds by allowing them to enter the area where the

process takes place. The customers are invited to check the ingredients used in food.

• Food manufacturing Transparent to customers

• Training to the licensees

• Invented the most efficient cooking equipment

• New methods of food packaging and distribution

• McDonald’s In India followed the same tradition

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People: How to converge the benefits of internal and external marketing?

McDonald’s understands the value of both its employees and its customers. It understands the

fact that a happy employee can serve well and result in a happy customer.

McDonald continuously does Internal Marketing. This is important as it must precede

external marketing. This includes hiring, training and motivating able employees. This way

they serve customers well and the final result is a happy customer.

The level of importance has changed to be in the following order (the more important people

are at the top):

1. Customers

2. Front line employees

3. Middle level managers

4. Front line managers

The punch line “I’m loving it” is an attempt to show that the employees are loving their work

at McDonalds and will love to serve the customers.

The employees in Mc Donald’s have a standard uniform and Mc Donald’s specially focuses

on friendly and prompt service to its customers from their employees.

Each outlet is headed by a Restaurant Manager. He is responsible for the daily

operation and customer interaction.

• Delivery Crew Member carries basic operation of a restaurant. Ensures customer

satisfaction at the restaurants. In order to motivate there employees they give them

stars as per their performance.

• Stars as per their performance

• Gives employees larger role in decisions

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• Philosophy of Quality, Service, Cleanliness and Value (QSC&V) is the guiding force

behind its service

• Customer always comes first

• Fast friendly service

• Provides clean, comfortable environment especially suited for families

The McDonald’s Experience

Marketing in a services industry is becoming an increasingly complex challenge. The

paradigms of service marketing demand a passionate understanding of customer expectations

and perceptions, and linking them to product design & delivery as well as operational

planning. This is where McDonald’s has excelled due to its ability to successfully integrate

the customer’s perspective in its products and operations in a comprehensive manner. The

revamped menu in Pakistan is an example of McDonald’s strategy of integrating the

customer’s perspective in its products. And, the operational integration is evident from

McDonald’s emphasis on its suppliers as its customers as well as its treatment of its

consumers as co-producers of services.

The ultimate aim of Service Marketing is not just to become a Service Leader but to create a

Service Brand. The Service Delivery Process is the key to achieving this aim of Service

Marketing.

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Core Product

Supplementary Process

Service Delivery Process

During the Service Delivery Process, each moment of interaction between the firm and the

customer, called “Moments of Truth”, helps understand the opportunities that a firm has to

win or lose the customer. For example, these “moments of truth” are created for McDonald’s

every time the guard at the McDonald’s outlet meets the customer, every time an attendant

takes down the order from the customer waiting in the queue, every time the cashier interacts

with the customer, every time the attendant helps the customer guided the customer towards

the table, every time the attendant cleans the table, etc.

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Customer

Service Provider Service Delivery Points

“Moments Of Truth” – The Service Encounter

Managing these “moments of truth” is a great challenge in Service Marketing especially due

to customer’s involvement as a co-producer of services (e.g. McDonald’s self-service concept

wherein the customer not only collects the order but also cleans the table after consuming the

food). However, McDonald's has been able to create a great experience for its customers by

understanding the nature of the entire Service Delivery Process and the various stages in the

process that are exposed to the customers. Transparency in the processes at its outlet has

helped McDonald’s bring the back office in its outlet at the front so that the customer is able

to know the operations and provide feedback on service design improvements.

Internal Customer Focus is equally important as External Customer Orientation in order to

win these “moments of truth”. McDonald’s focus on its People and their service delivery

methods therefore plays a very important role in creating a successful Service Brand. The

quality and the consistency of the service delivered by McDonald’s have been greatly

enhanced by the combination of the factors mentioned above. This has helped McDonald’s

become Service Leader and a successful Service Brand. This is evident from the fact that

very few of its customers opt for take-home parcels or home deliveries while most of them

prefer to eat at the outlet and enjoy the McDonald’s experience.

McDonaldizing the Suppliers

McDonald’s has changed the nature of not only the food service industry but also the food

processing industry as well. McDonald’s realized that the battle between fast food chains

would increasingly be one of efficiency of supply, lower cost production and greater desire to

innovate. It pioneered with innovative and sophisticated food distribution and packaging

systems when the traditional food processors were unwilling or unable to supply food items

that McDonald’s demanded. They achieved amazing consistency by devoting more attention

47

than anyone else to field service and training at store level. Production was concentrated in

huge plants devoted exclusively to McDonald’s. McDonald’s also started with tiny suppliers

and grew with them displaying great loyalty.

Nowhere is the supplier loyalty more evident than in development of new, improved

products. Some of McDonald’s classic food items like Filet-o-Fish, French Fries, Chicken

Nuggets etc. are results of supplier innovation. Interestingly, it took KFC more than three

years before in finally introduced its own version of chicken nuggets. Thus supplier

technological expertise had given McDonald’s a product which was not a mere marketing

innovation but a technical one. McDonald’s attempted to squeeze labour out of the stores by

moving more preparation back into the processing plant, creating the opportunity to develop

unique products based on suppliers’ processing skills. For the first time, McDonald’s

suppliers became the focal point of new product development. This converted the fast-

food industry’s most fragmented distributed system into more efficient one which helped

McDonald’s reduce its inventory and manage costs effectively.

Importance of PLC in McDonalds

The requirements of customers change over time and thus the product offering has to be

changed accordingly. What is the fashion today may be out of market within few weeks.

Thus continuous innovation is required.

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To counter these changes McDonalds has continuously introduced new products and has

phased out the old ones which were at the decline stage of their PLC. The introduction is

timed such that the new product does not cannibalize the product already in the maturity or

growth stage. Thus the secret lies in getting profits with different products in the different

stages of the PLC.

A perfect example of revitalising a product in decline phase

The French Fries have been an important part of the McDonalds menu worldwide. But now

it was in the stage of decline and was actually not generating proper return. In an attempt to

revitalize it, a new variant was introduced namely Shake Shake Fries. This is being served

with chatpata spice mix which has resulted in increase in the sales of French Fries and has

elevated it from to the decline stage. This is used to delay the decline of a well established

product which has the potential of generating further revenue.

McDonald’s

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Name: Gender: M / F

Age Group: a) Below 18 b)18-28 c)28-40 d)Above 40

Occupation: a) Student b) Business c) Service d) Housewife e) Any other

Feedback Form by McDonald’s outlets

Was your food hot and fresh?

Were the staffs friendly and courteous?

Was the service quick and efficient?

Did you find the restaurant clean?

Were the rest rooms clean?

Did we make you smile today?

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CONCLUSIONS:

After discussing various aspects of MNCs in developing country like India the big question

before us is whether MNCs play positive or negative role in developing countries? Generally

the governments of developing countries don’t keep control on the working of MNCs, which

is major fault on their side. MNCs can be helpful for developing countries only when they are

kept under control. We should not give incentives to the MNCs only because they are coming

from some powerful advanced countries. So MNCs should face same rules and regulations as

the domestic industries of the developing countries are facing.

International Expansion of MacDonald is very impressive they have made lots of product

innovation to capture market in India & their international marketing strategy is properly

implemented by Indian franchise

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Bibliography

Websites:-

1. www.Mcdonaldsindia.com .

2. www.wikipedia.com

Books :-

1. “Marketing Management”

2. “McDonalds – Behind the Arches” – John S Love.

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