Brand Dossier McDonald’s

Literature Review on McDonald’s

Submitted to

Prof.Srinivas Govind Rajan

Submitted by

Kalyan Kumar Das

Jyotishree Gupta

Amit Kumar

Literature Review on McDonald’s

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Brand Dossier McDonald’s

Index

Serial no Topic Page no

1 Early History of the Brand & its evolution over time 32 Initial Positioning & Subsequent repositioning,if any 6

3 Advertising,sales promotion and segmentation strategy followed by the brand

10

4 Analysis of the product & generic competition to the brand 135 Strategy adopted over time by the brand to tackle com-

petition or prime market expansion16

6 Distribution Strategy followed by the brand 187 Summary regarding the future direction for the brand 21

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McDonald’s History & Its Evolution: In 1937 Patrick McDonald opened the “Airdrome” restaurant in California. Here he sells hamburgers at 10cent & orange juice drink was 5 cent. In 1940 his two sons “Mac” and “Dick” modified the concept of “Airdrome” & renamed it McDonald’s.

In 1948 Mac & Dick introduced the “Speedee service system” which helped them to change the concept of fast- food restaurant. After some time Mcdonald brothers realized that most of their profit came from selling hamburger,they closed down their successful carhop drive in to establish a streamlined system with a simple menu of hamburgers,cheeseburgers,French fries,shakes,soft drinks and apple pie. The carhops was eliminated to make McDonald’s a self-serve Operation.

In 1953, Mcdonald brothers began to franchise their successful Restaurant, starting in Arizona & California. In 1954, Ray Kroc , a seller of Multimixer milkshake machines learned that the Mcdonald’s formula was ticket for success. In 1961, Mcdonald brothers gave him rights to expand their fran -chise. In 1967 Mcdonald open their first restaurant outside the America. They open one in Rich-mond,British Colombia.By 1963 they had 102 restaurant at different Location.

Phenomenal growth in the 1960s and 1970s

In 1960, the McDonald's advertising campaign "Look for the Golden Arches" gave sales a big boost. Kroc believed that advertising was an investment that would in the end come back many times over, and advertising has always played a key role in the development of the McDonald's Cor-poration. Indeed, McDonald's ads have been some of the most identifiable over the years. In 1962, McDonald's introduced its now world-famous Golden Arches logo. A year later, the company sold its billionth hamburger and introduced Ronald McDonald, a red-haired clown with particular appeal to children. In 1961 Kroc bought out the McDonald brothers for $2.7 million, aiming at making McDon -ald's the number one fast-food chain in the country.

In 1965, McDonald's Corporation went public. Common shares were offered at $22.50 per share. By the end of the first day's trading, the price had shot up to $30. A block of 100 shares purchased for $2,250 in 1965 was worth, after 12 stock splits (increasing the number of shares to 74,360), about $1.8 million by the end of 2003. In 1985, McDonald's Corporation became one of the 30 companies that make up the Dow Jones Industrial Average.

McDonald's success in the 1960s was in large part due to the company's skillful marketing and flex -ible response to customer demand. In 1962, the Filet-O-Fish sandwich, billed as "the fish that catches people," was introduced in McDonald's restaurants.

The Big Mac hamburger debut in 1968

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McDonald's spectacular growth continued in the 1970s. Americans were more on-the-go than ever, and fast service was a priority. In 1972, the company passed $1 billion in annual sales. By 1976, Mc-Donald's had served 20 billion hamburgers, and systemwide sales exceeded $3 billion.

McDonald's pioneered breakfast fast food with the introduction of the Egg McMuffin in 1972 when market research indicated that a quick breakfast would be welcomed by consumers. Five years later the company added a full breakfast line to the menu, and by 1987 one-fourth of all breakfasts eaten out in the United States came from McDonald's restaurants.

M cDonal’s Egg McMuffin

Kroc was a firm believer in giving "something back into the community where you do business." In 1974 McDonald's acted upon that philosophy in an original way by opening the first Ronald McDon-ald House, in Philadelphia, to provide a "home away from home" for the families of children in nearby hospitals. Twelve years after this first house opened, 100 similar Ronald McDonald Houses were in operation across the United States.

In 1975, McDonald's opened its first drive-thru window in Sierra Vista, Arizona. This service gave Americans a fast, convenient way to procure a quick meal. The company's goal was to provide ser-vice in 50 seconds or less. Drive-thru sales eventually accounted for more than half of McDonald's systemwide sales. Meantime, the Happy Meal, a combo meal for children featuring a toy, was added to the menu in 1979.

Surviving the 1980s "Burger Wars"

In the late 1970s, competition from other hamburger chains such as Burger King and Wendy's began to intensify. Experts believed that the fast-food industry had become as big as it ever would, so the companies began to battle fiercely for market share. A period of aggressive advertising campaigns and price slashing in the early 1980s became known as the "burger wars." Burger King suggested to customers: "have it your way"; Wendy's offered itself as the "fresh alternative" and asked of other restaurants, "Where's the beef?" But McDonald's sales and market share continued to grow.

During the 1980s, McDonald's further diversified its menu to suit changing consumer tastes. The company introduced the McChicken in 1980. It proved to be a sales disappointment and was re-placed with series of different chicken sandwiches a year later. Chicken McNuggets were invented by Rene Arend in 1979. They were so good that every franchise wanted them. However, there wasn't a system enough to supply chicken products. The supply problem was solved in 1983, when the McNuggets were made available nationwide. By the end of 1983, McDonald's was the second largest retailer of chicken in the world. In 1985, ready-to-eat salads were introduced to lure more health-conscious consumers. The 1980s were the fastest-paced decade yet. Efficiency, combined with an

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expanded menu, continued to draw customers. McDonald's, already entrenched in the suburbs, began to focus on urban centers and introduced new architectural styles. Although McDonald's res -taurants no longer looked identical, the company made sure food quality and service remained con-stant.

Despite experts' claims that the fast-food industry was saturated, McDonald's continued to expand. The first generation raised on restaurant food had grown up. Eating out had become a habit rather than a break in the routine, and McDonald's relentless marketing continued to improve sales.

In 1982 Michael R. Quinlan became president of McDonald's Corporation, and Fred Turner became chairman. Quinlan, who took over as CEO in 1987, had started at McDonald's in the mailroom in 1963, and gradually worked his way up. The first McDonald's CEO to hold an M.B.A. degree, Quinlan was regarded by his colleagues as a shrewd competitor. In his first year as CEO the company opened 600 new restaurants.

In the mid-1980s, McDonald's, like other traditional employers of teenagers, was faced with a short -age of labor in the United States. The company met this challenge by being the first to entice retirees back into the workforce. McDonald's placed great emphasis on effective training. It opened its Ham-burger University in 1961 to train franchisees and corporate decision-makers. By 1990, more than 40,000 people had received "Bachelor of Hamburgerology" degrees from the 80-acre (320,000 m 2) Oak Brook, Illinois, facility. The corporation opened a Hamburger University in Tokyo in 1971, in Mu-nich in 1975, and in London in 1982.

Braille menus were first introduced in 1979, and picture menus in 1988. In March 1992, Braille and picture menus were reintroduced to acknowledge the 37 million Americans with vision, speech, or hearing impairments.

Reference: http://en.wikipedia.org/wiki/History_of_McDonald%27s

McDonald’s in India

McDonald’s entered India in 1996. McDonald’s India has a joint venture with Connaught Plaza Res-taurants and Hard Castle Restaurants. Connaught Plaza Restaurants manages operations in North India whereas Hard Castle Restaurants operates restaurants in Western India. Apart from opening outlets in the major metros, the company is now expanding to Tier 2 cities like Pune and Jaipur.

McDonald Financial Profile:

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Revenue USD $ 24 billionOperating Income USD $ 7.5 billionNet Income USD $ 4.5 billionTotal Assets USD $ 32 billionTotal Equity USD $ 14.5 billion

McDonald Initial Market Positioning:

McDonald’s is one of the most successful companies on the planet, but it started out as a small busi -ness. They ultimately achieved their growth and their success by focusing on who they wanted to be - a family friendly, kid-oriented fast food restaurant offering low cost meals that taste great.

Only after they decided who they wanted to be did they get started on the “what” – they developed ads that targeted kids, sold franchises in urban areas located close to schools and family neighbor -hoods, and so on. (They also included indoor playgrounds at many of their locations, a dead give-away that they are catering to children as part of their marketing strategy.) All of these tactics helped to communicate to the market who McDonald’s is and what they stand for in the market.

To put it into “marketing speak”, when McDonald’s decided to be the family friendly low cost restau-rant in the fast food business, they were deciding on what market position they wanted to own within the fast food market.

Perhaps the best way to describe McDonald’s market position is to illustrate all of the market posi-tions they could have gone after, but decided not to:

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a) McDonald’s could have been a fast food restaurant with better quality food than all of their com-petitors, but at slightly higher prices and that would take slightly longer to prepare

b) They also could have been the fast food restaurant with the widest menu offering the most choice to their customers

Or c) They could have targeted the adult market instead of focusing their marketing efforts on children and families But they did none of those things. They looked at the market and decided that the best opportunity for their business was in attracting the business of families with children – and so they took up that “position” in the market.

Now bear in mind, McDonald’s didn’t just wake up one day and “decide” on their market position. They did plenty of research on the market and identified the most profitable market for their prod -ucts, then refined their marketing and operations to deliver on what their chosen market would want.

Clearly, their decision was a success for them. However, even though McDonald’s dominates the fast food category, there are plenty of alternative market positions available to other businesses in that market.

While you might think that all burger places are the same, from a marketing standpoint, they couldn’t be more different.

Burger King has started to establish themselves as the choice of the young adult market, notably among young males. Watch their advertising – you don’t see nearly as many ads featuring kids or families. Instead, their focus is on the teenage crowd and up.

Burger King is simply playing the market position game. Since McDonald’s has the kids and families market wrapped up, Burger King took aim at a different part of the market, and has found success by tailoring their menu and marketing to a different market segment. They are attempting to secure the position of “choice of teens and young men”.

Wendy’s has taken up a position in another part of the market, targeting adults. Notice their menu is quite different than that of Burger King or McDonald’s. Wendy’s offers substitutions on their menu to accommodate health conscious eaters. You can have a baked potato instead of fries, for example. And you can purchase a lunch sized salad if you want to skip the burger altogether. (Unlike McDon-ald’s where they might grudgingly give you a salad instead of fries, Wendy’s actively promotes their healthy choices.) Their market position is clear: healthier fast food.

COMMON POSITIONING FACTORS

So how could such a business be positioned to actually mean something in a crowded marketplace? Well, you could start by leveraging some of the market positioning factors outlined previously:

Price – You could scan the market to determine what your competitors charge and simply charge less, giving you ownership of the “low-price” position

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Level of Service – You could offer more services than the competition, or you could do the opposite and offer fewer services allowing you to specialize in certain types of consulting.

Geography – Thanks to the Internet, you could be a consultant to anyone in the world, or you could choose to offer your services on an in-person basis within a defined geographic area.

Quality of your Service – What credentials and experience do you bring to the table that would allow a customer to judge the quality of your consulting services? Are you better equipped or less equipped than your competition in this area?

Target Market – Do you have a defined target market for your product or service? McDonalds was clearly targeting families and the youth market. Geico.com targets cost conscious consumers who are willing to accept over the phone service instead of in person service from their insurance com -pany in exchange for a discount on their premiums.

While being a marketing consultant is hardly unique, you could manipulate the factors listed above to create a compelling offer for clients.

EXAMPLE – DEFINING YOUR MARKET POSITION

For example, you could determine that a market opportunity exists in providing marketing consult -ing services in your local market, aimed specifically at small retail stores. This would effectively shut out your online competition, since it is much more likely that a local small business owner would do business with a consultant who was an expert in the local market before hiring someone found via the Internet.

In doing this, you would take up the market position as “the marketing consulting choice for local retailers”. (To focus on this market, you would need to establish the size of the market and deter-mine whether there was enough business potential to keep you going. Or you could plan to service this market for the first year of your business, then expand to focus on non-retail businesses, or to focus on neighboring communities.)

A MARKET POSITION DEFINES WHO YOU ARE – AND WHO YOU AREN’T

1) lesson from McDonald’s – you can’t please everybody so don’t bother trying.

Despite their incredible growth over the years, McDonald’s has pretty much stuck to their original game plan. Get families and children into the store, keep the menu short in order to prepare meals quickly, offer food at the lowest possible price, and so on.

Sure they have made attempts to go after health conscious customers by offering more low-fat menu items as the market for healthier food has grown, and they’ve had some success doing so. But in the immediate future, these tactics can’t replace the dollars they earn from their core customers – families and the youth market.

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Even the mighty McDonald’s realizes that you need to take up a market position to have any chance of succeeding in business today. You must stand for something and make it known to the market what you stand for, or else you will easily be forgotten.

2) lesson from Wendy’s and Burger King – find market positions that aren’t taken…and take them!

Just because some other company is dominant in your market doesn’t mean that there aren’t some great marketing opportunities for your business. BK is using their marketing and advertising to win back young males and teens from McDonald’s. Wendy’s is using a healthier more flexible menu to target health conscious adults who want the convenience of fast food.

In both cases, they are still in the fast food business, but they are focused on a particular part of the market. Their “market position” is designed to establish them as an alternative to the leader, Mc-Donald’s.

Think of the marketing process like this:

What market position do you want to establish?

▼

Who are your customers in this market position?

▼

How do you reach them to tell them about your market position?

▼

What do you tell them when you do reach them?

Your market position is the foundation for everything else you do. All of the ads you run will serve to promote your position to the right audience, and will help to establish your business in the minds of customers because you stand for something.

Reference: http://www.marketingyoursmallbusiness.com/MarketPositioning6.htm

McDonald Advertising:

McDonald's has for decades maintained an extensive advertising campaign. In addition to the usual media (television, radio, and newspaper), the company makes significant use of billboards and sig -nage, sponsors sporting events ranging from Little League to the Olympic Games, and makes coolers of orange drink with their logo available for local events of all kinds. Nonetheless, television has al-ways played a central role in the company's advertising strategy.

To date, McDonald's has used 23 different slogans in United States advertising, as well as a few other slogans for select countries and regions. At times, it has run into trouble with its campaigns.

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McDonald Global slogan: “Things that make you go mmmm”

“ I m lovin it”(2003-present)

Creative Ads from McDonald’s:

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Segmentation Strategy:

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 chil-dren McDonalds has Happy Meal with which toys ranging from hot wheels to various Walt Disney characters are given (the latest in this range is the toys of the movie Madagascar). For this, they have a tie-up with Walt Disney. At several outlets, it also provides special facilities like ‘Play Place’ where children can play arcade games, air hockey, etc. 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. In

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addition, facilities like Wi-Fi are also provided to attract students to the outlets like the one at Vile Parle in Mumbai.

Reference: http://yoginvora.wordpress.com/2009/05/14/mcdonald%E2%80%99s-behind-the-golden-arches/

Analysis Of the product & Generic Competition to the brand:

McDonald’s Indian Menu:

Vegetarian Non Vegetarian

Mc Veggie Chicken Maharaja Mac

McAllo Tikki Mc Chicken Burger

Paneer Salsa wrap SahiChcken McCurry

Chripsy Chinese Wrap chicken Mexian

McCurry Pan Fillet-O-Fish

Pizza Mcpuff

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http://www.mcdonaldsindia.com/images/Nutrition-Information.pdf

Competitor of McDonald’s:

McDonald’s competes with fast food chains like Pizza Hut, Domino’s Pizza, Papa John’s,Jumbo King, Nirula’s and KFC in India.

Strategy adopted over time by the brand to tackle the Competition:

McDonald’s introduced their newest strategic plan in 2008, which they called “Plan to Win.” The ob -jective of this plan was not to be the biggest fast-food chain but to be the best fast-food chain in the world. To do this, McDonald’s implemented what would be known as the 5 P’s. They are Price, Pro-motion, Place, Products, and People.

The main objective of the “Price” strategy was to make it very affordable for a family to go out for breakfast, lunch or dinner and not break the bank in doing so. McDonald’s achieved this by making happy meals for children that were of right portion, right price, along with the everyday value meals and dollar menu items. There are over 10 items on the dollar menu all day which makes it very easy for customers to swing by for a quick bite to eat. McDonald’s also runs many different specials for breakfast where they will make different breakfast sandwiches 2 for $3. By doing this it allows for parents to feed two children for the piece of one. It also allow for more hungry people to make sure they will be full after they have eaten two sandwiches.

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The second Strategy is Promotion. Advertising through television, radio, and billboards are great ways that McDonald’s promotes their products and service. Over the years McDonald’s has used several slogans to leave an impression in people’s heads. Some of these include “It’s a good time for the Great Taste of McDonald’s,” “Food, Folks, and Fun,” “We love to see you smile,” and the most recent slogan, “I’m Lovin’ it.” All of these slogans have been used over the years to promote McDon-ald’s and by doing so people remember the name and have become accustomed to visiting nearby locations.

Another strategy that McDonald’s used over the years was to promote their figure head, Ronald Mc-Donald. Ronald is the made up character behind McDonald’s corporation for the past 50 years. He was originally introduced in 1963 and resembles a clown character that is considered #2 only to Santa Claus for the most recognized name in children’s eyes. There has also been a television show called, The Wacky Adventures of Ronald McDonald,” which have variously been released between 1998 and 2003. This show was great promotion for children and McDonald’s because it only happened a very limited amount of times so kids were so excited when they actually got to experi -ence it and it allowed for McDonald’s to expand revenues.

McDonald’s continues to promote by using several athletes and celebrities to endorse their products. During the 2008 Olympics in Beijing, McDonald’s featured nine Olympic and Paralympic Athletes on their cups and packages. McDonald’s also held a Marketing Campaign in Australia where there people could decide the name of a new burger about to be introduced. By doing such things McDonald’s is creating a better brand image and thus making greater profits.

The third Strategy is Place. Place has been considered the most important “P” of the 5 P’s over the years because without numerous locations throughout the world it would be impossible to reach the 52 million customers a day and would make it hard for McDonald’s to be the world leader in the fast-food industry. Nearly 50% of the U.S. is less than three minutes away from their nearest McDon-ald’s. This is a perfect example of why McDonald’s is the leader in customer satisfaction. What kinds of people want to drive long distances just to get some quality food at a great price? Not only is Mc-Donald’s a great place to take yourself or your kids for a deal, but it also allows for kids to enjoy a playground area at several locations around the world. By offering the attractions of swings, slides and ball-pits McDonald’s is helping to promote exercise and nutrition in children’s diets.

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The forth strategy is Products range. McDonald’s offers such a large variety of products that it al-lows for almost all people to be satisfied. Products range in the food department from burgers to chicken sandwiches to chicken nuggets to apple pies to soft serve ice cream to apple slices. Along with the beverages, which range from soda to milk to apple juice to water to coffee. It is also import -ant to point out that McDonald’s now is introducing a Vegan Menu as well as a vegetarian Menu in parts of the world. Another point of interest is that in places such as Europe you can also sit down with your food and enjoy a beer. This is something that hasn’t been implemented in the U.S. but it could be a potential possibility in the future. By having such a wide variety of product choices Mc -Donald’s has made it hard for people to not dine-in or eat-out at one of their locations.

The final strategy is targeting People. This is unlike most ordinary Marketing Mix’s. The main ob-jective when talking about the People aspect is to discuss both customers and employees, because if the employees aren’t happy, they will be more likely to take out their anger on the customer. This would result in bad service and publicity. McDonald’s does a lot of internal as well as External Mar-keting. They have found that it is extremely important to show employees the proper respect and courtesy that they deserve and by allowing for them to give input about things they think should be improved or worked on is a great way of keeping everyone happy. If customers didn’t feel a great sense of appreciation when they walk into a location they are much less likely to come back and be repeat customers. By doing research and taking surveys, McDonald’s executives are finding out what people want and making sure that customers and employees are completely satisfied.

We also created a SWOT analysis for McDonalds: Such strengths include: Strong Brand name, Cus-tomer Intimacy, Product Innovation and Supplier Integration. We believe these are the main strengths of McDonalds. However, weaknesses include Low depth of food because though there is a variety it still isn’t extremely large at every location and it is mostly fast food which doesn’t bring the best quality. We also decided that healthiness of the food was a weakness. This is because though it is quick and convenient we all know it isn’t the best choice to eat. For opportunities we focused on the prospect of the McCafe branching out to its own section with fancier snacks and drinks. This would also bring McDonald’s a new product line. McDonalds also has a few threats, such as its com-

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petitors, like Burger King. Also, the threat of customer wants changing and trying to adapt to the

new customers would be seen as a threat.

Reference: http://kevconrad.files.wordpress.com/2011/02/final-paper.pdf

Distribution Strategy of McDonald’s –

McDonald's Corporation is the world's largest chain of hamburger fast food restaurants, serving more than 58 million customers daily. In addition to its signature restaurant chain, McDonald’s Cor-poration held a minority interest in Pret A Manger until 2008, was a major investor in the Chipotle Mexican Grill until 2006, and owned the restaurant chain Boston Market until 2007.

A McDonald's restaurant is operated by either a franchisee, an affiliate, or the corporation itself. The corporation's revenues come from the rent, royalties and fees paid by the franchisees, as well as sales in company-operated restaurants. McDonald's revenues grew 27% over the three years ending in 2007 to $22.8 billion, and 9% growth in operating income to $3.9 billion.

McDonald's primarily sells hamburgers, cheeseburgers, chicken products, french fries, breakfast items, soft drinks, shakes, and desserts. In response to obesity trends in Western nations and in the face of criticism over the healthiness of its products, the company has modified its menu to include alternatives considered healthier such as salads, wraps and fruit.

McDonald's distribution channel and the way in which this fast-food restaurant chain gets its products to the market. In the theory of the Marketing Mix, place (distribution) determines where the product will be sold and how it will get there. In fact, as noted on www.mcdonalds.com, McDon-ald's is the leading global foodservice retailer, with more than 30,000 local restaurants serving nearly 46 million people each day in 121 different countries. Approximately 80 percent of all McDonald's restaurants company wants to be the first in the market and establish the brand as rapidly as pos-sible by advertising very heavily. This effective distribution strategy (place) has helped McDonald's develop a strong market share in the fast-food market around the world. McDonald's has pre-de-termined the locations for many of its stores to help reach a variety and diverse population. Conclu-sion. In conclusion, McDonald's has an intensive distribution process which is a credit to their Mar-keting department. As businesses and other organizations move forward, the challenge of making-theirproducts.

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Summary : McDonald’s is the world leading food service organization.With the expension of McDon-ald’s into many international market, the company has become a symbol of Gloablization & the spread of the American way of Life.

In light of Evidence we as a team has gathered that McDonald’s will continue to grow well in the Fu -ture Because:

McDonald’s provides value to the customer

McDonald’s will push the key area to the next level,Quality,Service ,Cleanliness and Value

McDonald’s Listen their customer thoughts & suggestion.

McDonald’s open for almost 18hours a day and Saturday & Sunday open for 24hours a day.

McDonald’s will enter in theme park concept with Disney.

Bibliography:

http://www.mcdonaldsindia.com/

http://www.google.com/

http://en.wikipedia.org/wiki/Main_Page

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