PM305 International Marketing and Internal Expansion Strategies
2. Examine and evaluate methods of identifying and qualifying market potential in different parts of the world.
3. Illustrate the nature of overseas distribution systems (including agents and joint-ventures) and demonstrate the marketing implications of differences in culture in consumer behaviour.
Answer:
Introduction:
Asia pacific was considered as fourth fastest growing region in the world in context of fast food industry. In lieu of value growth rates, this industry witnessed various ups and downs over the last decade. Suddenly, a constant positive trend of eating out gives rise to the disposable incomes and overall health of economies.
There are number of countries such as Hong Kong, Japan and South Korea which have high frequency of eating out such as with per capita expenditure almost as high as their Western counterparts. On the other hand, countries like Indonesia, the Philippines and India are eating out on weekly basis but not on daily basis, as compared to western counterparts. Consumers still preferred Asian food because this food is healthy as well as tasty. In 2016, China, Japan and India together achieve 83% of total fast food value sales in the region (Euro monitor International, 2017; IBIS World, 2017)
This report states the internal expansion strategies for Five Guys Burgers in four countries that is Japan, India, China, and Singapore. This paper states various aspects of internal expansion strategies, and lastly paper is concluded with brief recommendations and conclusion.
Macro and competitive factors that affect global fast food industry:
All organization must operate on the basis of their target market, and for this context market refers to the set of all potential buyers and sellers of specific product or service (Kotler, Brown, Adam & Armstrong, 2004). It is necessary for organization to apply marketing management which includes analyze, plan, implement, and control plans which are framed for the purpose of creating, building, and maintaining beneficial exchanges with the target buyers for the purpose of achieving the goals stated by organizations (Kotler, et al, 2004).
PESTEL Analysis:
The most important factor for ensuring effective marketing management is the proper evaluation of environment of marketing. This involves actors and forces from outside marketing which directly affects the ability of marketing management to develop and maintain successful transactions with the target customers. This environment consist various micro and macro-environment factors.
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Political |
Political factors which affects fast food industry changes from country to country, but in all these factors compliance factor is the most important which include regulations related to wages, hygiene, and food quality. These political factors are considered as most important factors which affect the fast food industry, and it is the attitude of the government which ultimately affects the business performance of the organization. |
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Economic |
Recession also affects the growth of fast food industry to some extent, and from the time it passed, spending per consumer has increased. Because of recession, restaurants include cheaper options in their menus and also focus on customer services. Customer service is the most important area which is struggled by the brands at the time of recession for the purpose of retaining customers. It must be noted that delicious food was not sufficient to retain the customers, and because of this it is necessary that Five Guys Burgers supplement the delicious food with low cost and best customer services. |
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Social |
Social context includes the health and lifestyle trends which influence the fast food industry. Increasing awareness of people in context of health also affects the growth of fast food industry. Now people think twice before they eat, and this changed attitude of consumer’s pressure the restaurants to include healthy food options in their menu. It is also recommended to the Five Guys Burgers to include healthy and organic food options in their menu. |
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Technological |
Technological changes already result in number of changes in the way through which restaurants engaged their customers, and they also affect the marketing and advertising methods used by the restaurants. Five Guys Burgers can also use social media channels to engage their customers. |
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Environmental |
Changing approach of government towards the environment pressure the brands to adopt more green approach. In every country quality standards become stricter. However, this greener approach of restaurants also helps them in attracting the customers and gain customer loyalty. |
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Legal |
Pressure imposed on fast food industry because of the changes occurred in legal requirements has risen. Quality of food and nutrition’s areas are the most important areas which are affected by law. Now, it also includes packaging and handling of waste (Pratap, 2016). |
Internal business environment of Five Guys Burgers:
Five Guys Burgers can create value for their organization by using the Porters Value Chain Analysis, and this chain determines the activities which create value for the business. Primary activities that occur continuously within the corporation create value for customers. For this purpose value creating activities of Five Guys Burgers are marketing and selling the product, distributing and storing incoming products, and creating the final product. However, support activities also create value for Five Guys Burgers. Following are some value creating activities of Five Guys Burgers (Pullizzi, 2010):
Marketing and selling- Five Guys Burger are still attached with their roots, and for this they keep the things simple which means good product, reasonable price, and clean place. This organization also relies on online marketing, in other words they rely on social media for their promotional activities.
Distributing and storing incoming products: Five guys Burgers ensures best distribution of their products and also in providing best services to their consumers.
Porter’s Five Forces identifies the competitive force which directly affects the fast-food industry, and these competitive forces are defined Figure 1 (Ibrahim, 2012):
Global competitive factors:
The fast food industry is considered as highly competitive and fragmented, and in this industry Five Guys Burgers operated from last number of years along with Shake Shack and In-N-Out. All these brands are characterized for using the high quality ingredients at reasonable prices. It must be noted that Shake shack is considered as biggest competitor of Five guys burgers which not only compete with “better burger” companies, but also restaurants in other segments, such as quick service restaurants, and even convenience stores and supermarkets (Elbushra & Kollias, 2016).
SWOT of Five Guys Burgers:
SWOT stands for strength, weakness, opportunity, and threat. Following is the SWOT of Five Guys Burgers and Fries:
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Strength · Customization of burgers is considered as best thing by the Five Guys burgers. · The Murrell family provides franchises only to the applicants who are well-qualified. · They prove their ability by competing with the other fast food outlets such as Shake Shack and McDonalds. · In 2012 this chain is voted as best burger chain, and experience high level of customer retention. · Strict brand control. · They paid their employees higher than minimum wage. · They mainly focus on providing fresh food quality, as they do not have freezers they only have coolers. |
Weakness · This organization shows resistance in expanding and improving their menu. · They cook in peanut oil which is considered as healthier option. · No advertisement. · They only have one healthy option on their menu that is vegetable sandwich. · They have very strict guidelines for their franchisee, and these strict guidelines affect the potential buyers. · They have very high start-up costs for franchisees. |
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Opportunity · They have various opportunities to sell their franchisees. · Organization can focus on developing the kid menu. · Organization can offer more healthy options to their customers. · Organization can focus on advertisement. · Organization can also opt for home delivery. · Organization can also take chance under catering (SWOTanalysis, n.d.). |
Threats · Competitors such as burger king, McDonalds, Shake shack, etc. · Weak economy. · Organization serves the products which have high calorie intake. · Cattle contamination could be a problem since they use specific sources for their beef.
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Potential target markets:
Other than marketing strategies there are some other important areas which must be considered by organization while achieving its goals in international market, and these areas are considered as 12Cs of international market (Figure 3):
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12Cs framework |
India |
Japan |
China |
Singapore |
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Country |
India is the country which is still preferred home cooked food and eats out on weekly basis and not on daily basis. Market and business infrastructure of the India for fast food industry is still less suitable because people still rely on street food and dhabas. |
In Japan usually people preferred their tradition cuisines in comparison of fast food such as their traditional fish and rice-based cuisine (Financial Times, n.d.). |
China witnessed high growth of Fast food industry in last few years, and people of China preferred the fast food because of their busy life, growth in income and standard of living. |
People in Singapore preferred fast food over their local food and home cuisine, and because of this fast food industry in Singapore shows tremendous growth (Zakaria, n.d.). |
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Culture |
Indians mainly rely on healthy food because of their traditional values and norms. |
Japanese consider their traditional food healthy and rely on that food. |
Chinese are more concern about their culture and preferred the taste of their traditional food. |
Customers preferred fast food. |
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concentration |
Fast food market size in India shows the steady growth from the period of 2010 - 2014 i.e., 29.78 percent to 35.18 percent (Kannamal & Suvakkin, 2016). |
Fast food market size in Japan also shows the steady growth from the period of 2010 – 2017, but growth is still slow as it grows only 10% (Statista, n.d.). |
High growth of this industry in last few years. |
Show steady growth in fast food market after 2000. |
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communication |
Communication channels in India are strong and Five Guys can choose various channels to promote their products. |
In Japan, communication channels are week as compared to other countries. |
Strong communication channels. |
Communication channels in Singapore are strong. |
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Channels of Distribution |
India also has strong channel of distribution which facilitates the distribution of products in effective manner. |
Japan still lacks individual distribution channel. |
Strong channel of distribution. |
It has strong channel of distribution. |
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capacity |
India still lack in capacity of consumer to pay and consumer still choose cheap street products. But things are changing from last few years. |
Consumers in Japan are more concern for quality and they are not interested in cheaper products. |
Increase in standard of living and consumers have capacity to spend. |
Consumers are more concern for quality and have good capacity to spend on fast food. |
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Currency |
Indians usually use hard currency to pay their bills. |
Japanese generally use soft currency to pay their bills. |
Prefer both digital payments and hard currency. |
They generally prefer digital payments. |
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Control and Coordination |
There is less control of international marketer in the domestic market of India. Local food shops are more preferred by the consumer. |
As stated above, consumer’s mainly preferred local food and because of this they give preference to local shops, and because of these international marketers have less control over international market. |
High control over market by international marketers. |
International marketers have good scope of control over the market of Singapore. |
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Commitment |
They are less committed to quality and preferred cheap products. |
They are more committed to quality and do not preferred cheap products. |
Preferred cheap products. |
They are not committed more towards quality and preferred cheap products. |
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choices |
In India various choices are available for international marketers, as they can target number of markets such as young generation, people with health consciousness. |
In japan, international marketers can target the market on demographic basis, age basis, and also on the basis of health. |
Targets markets are young generation, and families and salaried people also. |
Targets markets are young generation, families, kids, and travellers. |
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Contractual Obligations |
Credit ratio in India is high which means this country accepts long term credit period in business. |
Credit ratio in Japan is not high, and country does not accepts long term credit period in business |
Less credit ratio. |
High credit ratio. |
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Caveats |
Local risk in this country is high as compared to other countries (Marketing for excess money, 2009). |
Local risk in this country is also high. |
Local risk is low (. |
Local risk in this country is also Low. |
Hofstede model:
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Source: Hofstede insightsModel |
India |
Japan |
Singapore |
China |
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Power distance states less equal societies. |
Score-77 Less equal society. |
Score- 54 Less equal society |
Score- 74 Less equal society |
Score- 80 Less equal society |
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Individualism states degree of interdependence |
Score-48 They prefer to belong from larger social framework.
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Score-46 They prefer to belong from larger social framework. |
Score-20 People belong to groups. |
Score-20 People belong to groups. |
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Masculinity |
Score-56 Society is masculine
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Score- 95 One of the most masculine societies. |
Score- 48 More feminine society |
Score- 66 Society is masculine
|
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Uncertainty avoidance states threated of unknown situations |
Score- 40 Low preference to avoid uncertainty. |
Score- 92 Most uncertainty avoiding countries on earth. |
Score- 8 High preference to avoid uncertainty. |
Score- 30 Low preference to avoid uncertainty. |
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Long term orientation |
Score- 51 Connected more with the past
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Score- 88 Connected more with the past
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Score- 72 More connected with cultural values. |
Score- 87 More connected with cultural values. |
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Indulgence |
Score- 26 Restraint culture. |
Score- 42 Restraint culture. |
Score- 46 Restraint culture. |
Score-24 Restraint culture (Hofstede Insights, n.d.). |
Chosen country:
It is recommended to Five Guys Burgers to expand their business in Singapore because of the high growth of fast food industry in this country. After considering the above factors it is easy to conduct business in Singapore and achieve growth. Following are some modes of entry which are stated below:
- Direct Export: organization can choose the option of direct exports, and option includes the common scenario because in this firm receives the orders from an overseas buyer and sell the products directly to that buyer. Advantages of this option include high return, low cost, freedom to determine the pricing strategy, etc. disadvantage of this option includes firm will need to spend more time and resources. However, this option is not suitable for the Five Guys burgers because it is not possible to export the fast food from overseas to the buyer. This is less suitable option for perishable goods (Export.gov, 2017).
- Branch: when business of the firm reaches the profitable stage and firm get aware from the market conditions then firm can choose to expand their business by establishing branch and subsidiary of the firm. This option is not suitable at the initial stage, because it requires sufficient knowledge of target market and financial and manpower resources. Therefore, this option is also not suitable for Five Guys Burgers.
- Licensing- firm can also choose the option of licensing by provide license of trademark, patent, products, etc. However, this option is less suitable for Five Guys burgers because it is more risky in comparison of other models.
- Franchising: franchising is the practice which is considered as another successful business model. As a franchisor organizations can build chain stores for the purpose of distributing their goods. Success of the organization depends on the franchisees and this option is considered as most suitable option for the organization who wants to distribute their goods in different markets. Only disadvantage of this model of the business is success depends on the franchisees which means it is required that franchisor provides training and resources to the franchisee.
After considering the above facts, franchisee is considered as best option for five guys burgers because it reduce the risk of failure and help them in understanding the market for further expansion.
Socio-cultural factors of Singapore:
People of Singapore live high quality life and this helps the Five Buys Burgers in establishing its business here, and it is also a tourist based country and fast food consumption by tourist is high.
4Ps of marketing mix are stated below:
- Product- Burgers and fries are the main products of the Five Guys Burgers and it also provides some substitute products such as sandwiches, drinks, etc.. It mainly includes hotdogs, burgers, fries, milkshakes, and sandwiches (Five Guys Burgers, 2017).
- Places- products of five guys burgers are available in the restaurants off five guys burgers located worldwide, and they also deliver their goods on order of their customers.
- Promotion- company used various techniques of promotion strategy and these tools includes advertising, sales promotion, personal selling, public relations.
- Pricing strategy- Five guys burgers mainly use bundle pricing strategy which include both cost and profit.
Conclusion:
After considering the above facts, Global fast food restaurant industry has managed to grow from last five years despite the fact of weak global economy and increase of awareness of health risk in the society such as risk related to diet high in fat, salt, and sugar. Therefore, Five Guys Burgers can choose Singapore to expand their business because of the high growth of fast food industry in this country.
References:
Elbushra, M. & Kollias, K. (2016). Shake Shack: Strategy Analysis & Report. Available at: https://static1.squarespace.com/static/57dcd53ec534a555a9f80fb9/t/57f1bc0fcd0f681fb4a6c6d9/1475460112354/Strategic+Business+Plan+-+Shake+Shack+Burger.pdf. Accessed on 19th December 2017.
Euromonitor International, (2017). Fast Food in Asia Pacific is on the Rise. Available at: https://blog.euromonitor.com/2017/10/fast-food-asia-pacific.html. Accessed on 19th December 2017.
Export.gov, (2017). Singapore - 1-Openness to, and Restriction Upon Foreign Investment. Available at: https://www.export.gov/article?id=Singapore-Openness-to-Foreign-Investment. Accessed on 19th December 2017.
Financial Times. US fast-food chains return to Japan amid McDonald’s backlash. Available at: https://www.ft.com/content/a3ebd55a-ea47-11e4-a701-00144feab7de. Accessed on 19th December 2017.
Five Guys Burgers, (2017). Menu. Available at: https://www.fiveguys.com/Menu. Accessed on 19th December 2017.
Hofstede Insights. Country Comparison. Available at: https://www.hofstede-insights.com/country-comparison/china,india,japan,singapore/. Accessed on 19th December 2017.
IE Singapore. Entering your selected market. Available at: https://www.iesingapore.gov.sg/-/media/IE-Singapore/Files/Export-Overseas/Export-Guide/Export-Guide-07-08-13-Step-3-Entering-your-selected-market.ashx. Accessed on 19th December 2017.
IBIS World, (2017). Global Fast Food Restaurants: Market Research Report. Available at: https://www.ibisworld.com/industry-trends/global-industry-reports/hotels-restaurants/fast-food-restaurants.html. Accessed on 19th December 2017.
Ibrahim, E. (2012). International Marketing. Available at: https://angelajohndotme.files.wordpress.com/2012/10/fast-food-industry.pdf. Accessed on 19th December 2017.
Kannammal, G. & Suvakkin, M. (2009). Emerging Marketing Strategies of Fast Food Industry in India. Available at: https://www.internationaljournalssrg.org/IJEMS/2016/Special-Issues/NCEBSED/IJEMS-NCEBSED-P110.pdf. Accessed on 19th December 2017.
Kotler, P. (2000). Marketing Management (The Millennium Edition). New Jersey: Prentice Hall
Kotler, P., Brown, L. Adam, S., Armstrong, G. (2004). Marketing (6th ed.).
Marketing for excess money, (2009). International Marketing Strategies. Available at: https://cashflow4real.wordpress.com/2009/07/14/28/. Accessed on 19th December 2017.
Pratap, A. (2016). Fast Food Industry PESTEL Analysis. Available at: https://www.cheshnotes.com/2016/09/fast-food-industry-pestel-analysis/. Accessed on 19th December 2017.
Pullizzi, J. (2010). 7 Content Marketing Tips from Five Guys Burgers and Fries. Available at: https://contentmarketinginstitute.com/2010/04/7-content-marketing-tips-from-five-guys-burgers-and-fries/. Accessed on 19th December 2017.
Statista. Sales of fast food restaurants in Japan from 2010 to 2020 (in billion U.S. dollars). Available at: https://www.statista.com/statistics/660110/japan-fast-food-restaurant-sales/. Accessed on 19th December 2017.
SWOTanalysis. Five Guys SWOT Analysis - Strengths, Weaknesses, Opportunities, Threats of Five Guys. Available at: https://www.swotanalysis24.com/swot-f/40898-swot-analysis-five-guys.html. Accessed on 19th December 2017.
Zakaria, R. Marketing Mix For Fast Food Industry. Available at: https://www.academia.edu/5294783/ISSUE_MARKETING_MIX_FOR_FAST_FOOD_INDUSTRY. Accessed on 19th December 2017.
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