INTRODUCTION

India is one of the hot places in the world for the business for a multi national firm.

Many firms have moved to India to enjoy their low labor cost in the service industry. Along with

the service industry, many American fast food companies have moved to India because of its

growing economy, growing fast food industry and urbanization. Many American fast food

chains have moved to India during past few years and have been enjoying profits. This provides

us an opportunity, as a late mover, to enter the Indian market with a Mexican food chain,

Taco Bell.

Taco Bell Corporation (Taco Bell) based in Irvine, California, is a subsidiary of Yum!

Brands, Inc and the nation’s leading Mexican-style quick service restaurant chain. Originated by

Glen Bell, Taco Bell® became a reality on March 21, 1962. The first Taco Bell® restaurant was

built in Downey, California, and the first franchise was sold in 1964.

Taco Bell serves tacos, burritos, signature Quesadillas, Grilled Stuff Burritos, nachos, and

other specialty items such as the Crunch wrap Supreme, in addition to a wide variety of Big Bell

Value Menu items. Taco Bell serves more than 2 billion consumers each year in more than 5,800

restaurants in the U.S. In 2005, Taco Bell generated sales of $1.8 billion in company restaurants

and $4.4 billion in franchise restaurants. More than 80 percent of our restaurants are owned and

operated by independent franchisees. There are currently more than 278 restaurants operating in

Canada, Guam, Aruba, Dominican Republic, Chile, Costa Rica, Guatemala, and Puerto Rico,

Ecua.

Taco Bell went public in 1969 and was acquired by PepsiCo in 1978. In October of 1997,

PepsiCo spun off KFC, Pizza Hut and Taco Bell, thereby forming Tricon Global Restaurants,

Inc., the world’s largest restaurant company with revenues in excess of $22 billion.

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 In May of 2002, Tricon Global Restaurants, Inc. changed its name to Yum! Brands, Inc.,

after acquiring Long John Silver's and A&W All-American Food Restaurants.

Taco Bell employs more than 143,000 people in company-operated and franchised units,

and corporate offices across the United States.

At the end of 2005, Taco Bell system sales reached $1.8 billion in company and $4.4

billion in franchise sales.

Nearly 150 million people see a Taco Bell commercial once a week – more than half of

the U.S. population. Over 2 billion tacos and 1 billion burritos of all varieties are served in Taco

Bell restaurants each year.

In an average year in the U.S., Taco Bell consumers, company and franchise restaurants,

consume:

- 3.8 billion corn and flour tortillas

- 62 million pounds of pinto beans

- 295 million pounds of seasoned ground beef

- 106 million pounds of cheese

Indians living in the U.S. favor Taco Bell more than any other fast food chains. A survey

carried out shows that, out of 40 people, who experienced food at KFC, McDonald’s and Pizza

Hut in India, 22 people preferred Taco Bell. One of the reasons for this preference is that

Mexican foods consist of many similar ingredients as Indian foods such as, vegetables, beans and

tortilla. Mexican foods are some what being served in selected restaurants throughout India.

However, due to a lack of proper preparation and knowledge, these restaurants are not able to

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serve suitable Mexican foods. This provides a great opportunity for us to take Taco Bell

franchise to India with proper supply chain, and modification in food in order to better meet local

taste.

GROWING ECONOMY OF INDIA

India is the world’s second largest populous country with a population of 1.07 billion.

With a total GDP of around $570 billion, it is the 12th largest economy in the world. Recently

India’s economy and its urban middle class has been growing tremendously, mostly due to

changes in foreign direct investment and exchange policies, significant reduction in tariffs and

trade barriers, modernization of financial sectors and adjustment in monetary and fiscal policies.

Even though 25% of the population lives below poverty line, middle class of 320-340 million has

enjoyed disposable income with improving economy. Growing foreign direct investment and

increasing consumer and investor confidence has contributed to sustain rapid growth. In the year

2004, real GDP growth was reported at 8.17% compared to 7.2% in 2003.

THE INDIAN FOOD SERVICE INDUSTRY

India has very diverse population with each region having different food traditions and

preferences. Indian consumers stick to their basic food habits when traveling to the other parts

of the country. Most of the restaurants in India serve regional foods. However, some regional

foods such as samosa and chola bhatura from north India, dosa and sambarvada from South India

are very popular among Indian consumers. Therefore, they are available at most of the

restaurants throughout India.

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 According to a survey done by Garvin School of International Management, Indians

prefer to eat home-cooked food because they are fresh, healthy and inexpensive. However,

success of 22,000 registered restaurants, more than 100,000 road side stalls, and food canteens

prove that Indians like to enjoy restaurant foods. According to the minister of commerce and

industry, Indian fast food industry has been growing at more than 37% per year. Since the

concept of fast food chain is fairly new in Indian markets, it has a great potential for growth.

WESTERNIZATION

Most high-income Indians tend to live in urban areas. Since 1975, urban population has

increased from 21% to 28% in 2004 and is expected to reach 36% in 2025. Also, the number of

dual income house hold has been increasing gradually. Traditionally, Indian wives stayed home

and took care of children and prepared meals for other family members. Since, “husbands and

wives both work fulltime, there has been dramatic change in the way Indian working wives shop

and organize family meals.” Therefore demand for packaged and prepared foods is increasing

in these urban areas.

Growing urbanization and high income has shifted traditional Indian food habits. High

income people are now more open towards trying different variety of foods such as, international

cuisine, including fast foods. This change in perception has resulted in growing numbers of

American fast-food chains in India. Companies like McDonald’s and Pizza Hut has opened over

100 restaurants each in last ten years.

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CULTURAL DIFFERENCES

Christianity and Catholicism are the major religions throughout the United States

population. However, the majority of the population in India is Hindu and Muslim. As the

religion differs in the two countries, so do their eating habit. In the United States, beef is a

popular and common ingredient found on fast food menu. Accordingly, many Taco Bell

products such as soft taco, burrito, and wrap are made with ground beef. However, the Hindu

population does not eat beef and the Muslim population does not eat pork. The statistic shows

that only 17% non-vegetarians are beefeater. In order for Taco Bell to be successful in India,

these alternations need to be made to the Indian menus. The company can follow the example of

McDonalds by substituting pork and beef ingredients with lamb, chicken, or turkey.

Taste is another difference between Indian and American customers. Many fast food

restaurants in the United States only marinade chicken with garlic and onion which does not give

the food a strong flavor. However, KFC learned from experience that the same recipe does not

work for Indians. Kentucky Fried Chicken (KFC) was a little slow to start business because the

restaurant’s food did not suit the Indian tastes. Indians generally consume foods with a

considerable amount of spice; therefore, in order to succeed in the market, Taco Bell should

change its recipe and increase the level of spiciness to fit the Indian tastes. Since the current

American menu only contains a few spicy items, the restaurant needs to provide a greater variety

to the Indian consumer. At the same time, Taco Bell also needs to understand regional

differences in taste in India. The southern part of India prefers less spicy food, but the northern

part prefers it spicier. Therefore, the company also needs to adjust products to satisfy our

customers based on location.

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 Americans and Indians also have different perceptions of fast food. In the United States,

fast food means serve food fast, so most of the fast food restaurants have drive thru. Fast food is

relatively cheap compared to other restaurants in the United States. However, in India, fast food

is not a cheap expense for a family and not all Indians can afford fast food. People prefer

cooking at home because it is fresher, healthier and more affordable. Fast food is a luxury meal

for most of India. Therefore, they will prefer sit in fast food restaurants and enjoy their time there

rather than take out.

SOURCES OF MATERIALS

The best, cheapest and plentiful production inputs and materials can only come from

within the country itself. Trying to import goods and materials is simply mismanaged finances

because of taxes and shipping costs. Following McDonalds lead, Taco Bell could locate smaller

farms and dairies to supply its materials to the store. Using internal sources not only cuts costs

for the corporation, but also helps the smaller company grow in productivity and sales. This

could lead to long term benefits for the rural region near the farm because income would be

higher and therefore the standard of living would rise. Although McDonalds may be a

competitor, their strategy is almost a sure guarantee for saving costs for the corporations.

McDonalds’

• Fresh lettuce comes from Delhi, Pune (Maharashtra), Nainital, and Ooty
(Uttar Pradesh);
• Cheese comes from Dynamix Dairies located in Baramati (Maharashtra);
buns come from Cremica Industries in Phillur (Punjab) and Shah Bector
and Sons in Khopoli (Maharashtra);
• Pickles come from Global Green Company in Hyderabad (Andhra
Pradesh); sauce comes from Bector Foods in Phillur (Punjab);

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 • Chicken patties, vegetable patties, pies, and pizza puffs come from
Vista Processed Foods in Taloja (Maharashtra) (Exhibit 10).
The entire supply distribution is the responsibility of AFL Logistics Ltd., a joint
venture between Airfreight and Coughlin in the U.S., and Radhakrishna Food land
Pvt. Ltd. in Thane, Maharashtra.

According to The Garvin School of International Management, 95% of McDonald’s raw

materials come from those 38 supplies listed above. This style of management is called supply

chain management. The goals of supply chain management are mainly to

“Reduce inventory, increase the transaction speed by exchanging data in real-time and

increase sales by implementing customer requirements more efficiently.”

COMPETITION AND STRATEGY TO BEAT THEM

India has a rapidly growing market for any corporation to enter. Many companies like

McDonalds and Subway have already settled in India. Taco Bell is under the Yum! Corporation

which also owns “Pizza Hut” and “Kentucky Fried Chicken” (KFC). Therefore, competition

is not greatened by those restaurants, but rather it is a stepping stone for Taco Bell. Instead of

trying to find new prime locations throughout India, Taco Bell can set up restaurants with the

already established Pizza Huts and KFCs. The biggest competitor that Taco Bell has in the same

market is McDonalds. McDonalds entered the Indian market with a very well planned strategy,

which is where a lot of their success has come from. Their strategy makes them Taco Bell’s

biggest competitor.

Natural competition occurs between the brands under the Yum! Corporation, but that can

almost be looked at like practice competition. The brands like Pizza Hut, KFC and Taco Bell can

all compare sales and revenue and see which strategy seems to be working the best. Then they

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can try to implement that strategy across the whole Yum! Corporation. With this practice, they

can compete directly against McDonalds and other such competitors.

Other competitors are local street vendors that sell their product at a much lower price than the

corporations in the area. The markets for Taco Bell, McDonalds and such restaurants are limited

to the upper middle class and high class because fast food chains are seen as a luxury, not a

commodity in India.

TARGET MARKET

Since fast food is a relatively expensive product in India, Taco Bell targets middle class

who have higher purchasing power. Their lifestyle and eating habits are changing rapidly. They

are dinning out more and willing to spend money on good quality food. Taco Bell plans to open

our first outlet in an metropolitan city. Metropolitans are the most flourish cities in India. Most

of India’s rich and upper middle-class population lives there. Also, compared to burgers, tacos

are a relatively new product to Indians. People who live in metropolitans have been exposed to

western culture; they are more willing to try a wide variety of foods.

Furthermore, there are thousands of tourists from the world that visit India each year, and

tourists are always more willing to spend money on their vacation. Also, the working groups in

Metropolitans are young, rich and westernized. When they do not have time or skills to cook,

fast food restaurant is a good choice for them. Metropolitans like Mumbai, Bangalore, Delhi and

Hyderabad has a big potential market. It is a great place to start any new business and captures

the customer’s awareness.

In addition, the company would like to target children and family customers. Since new

Taco Bell opens in a metropolitan city, there are many young working parents. They are in higher

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income group and willing to spend money with and for their children. Although children do not

have purchasing power, they are an important marketing dining decision in their family. They

can pull their parents to restaurant they enjoy. Also, they are the future customers. If Taco Bell

starts to establish a relationship with them now, then they will become loyal customers in the

future. Once the brand image is formed, it can stay for a lifetime. So children are a huge

potential market for our company.

CHALLENGES

McDonalds is a U.S. based fast food restaurant and Taco Bell’s biggest competitor in

India. The companies have similar target market and customers. The competitor entered the

Indian market earlier than Taco Bell. They already have significant experience in the Indian fast

food industry. McDonalds and Pizza Hut are the two most well-known fast food restaurants in

India now. They have strong brand awareness from local community and a large group of loyal

customers. Therefore, seeing that McDonalds has captured the largest market share is not

surprising. Taco Bell is a late enterer, so the company has to face intense competition with

market leader McDonald and other strong competitors. In addition, consumers are lack of our

company’s brand awareness which create a barrier to get into the market.

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OVERCOME STRATEGIES

As a new player in the India fast food industry, understand consumers’ behavior helps us

develop good business strategies. According to the survey done by ACNielen India, the result

indicate 66% Indians consider hygiene and cleanliness is the most important criterion for

selection the fast food restaurant. 24% of Indians use the quality of service as a decision-making

criterion and 22% rely on their perception of whether a brand offers them healthy food options

(Urban). Therefore, developing hygiene, good customer service and healthy image are critical to

Taco Bell Mumbai. A good advertising campaign is required. First of all, building a good quality

and healthy American style fast food restaurant image for Taco Bell Mumbai. Secondly, creating

a friendly and cleanliness eating environment that gives consumers a good impression, so

employee training is a good option to go with. Employees will be trained to create a warm and

friendly atmosphere in the restaurant, and learnt to communicate with customers due to provide

an excellent customer services.

Surprisingly, price is not the most important criterion in deciding the purchase of a fast

food brand. Consumers in urban India are willing to pay a higher price to buy their lifestyle.

However, our company would like to capture both upper and lower middle class customers. So

using purchasing power parity strategy help us set the product price more affordable. We do not

want to give customers an expensive perception. Affordable impression can help us generate

more customers as well as sales.

As we mention before, lack of brand awareness is our big weakness. Not like McDonald

a well know brand. Taco Bell is a new name for Indians. Getting attention from target customers

is important. However, making customers to move a first step to try new product is difficult.

Therefore, Taco Bell needs a good advertising campaign. We are going to advertise on local TV

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and newspapers. Offering grand opening special discount can encourage customers to try our

products. Also, food sampling is always a good way to capture customers’ attention, and children

just love to try new food. Since taco is relatively new concept compare with burger to Indians

Taco Bell Mumbai provides food sampling. Since we attract customers to try our products, our

company has confident customers will buy our products again.

Children are the targets in the fast food industry. Overcome our weak market power; we

have to get their attention away from our competitors. First of all, Taco Bell offers special

children menu which is more colorful and fun to children. Little surprise, such as toys or gifts

may come with the children meal. Also, Taco Bell offers birthday party in later time since

birthday party is a good time to gather our target customers and let them have fun. Happy

experience can make them come again and solid our relationship.

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