Tim Hortons - Research Paper Example

of the of the Number VRIO Analysis Contents VRIO Framework 2 PESTEL Analysis of Qatar Market 4 Business Strategy for Global Expansion 7 VRIO Analysis Introduction Tim Hortons is a restaurant chain, catering in Canada and the U.S. It is headquartered in Ontario, Canada. The major products from the company include premium coffee, specialty teas, soups, flavored cappuccinos, wraps, baked goods, sandwiches, and donuts. The fast food retail chain has a total of 4014 outlets. 99.6 percent of these outlets are franchised. They made revenue of 2, 8521 million dollars and their net profit was 382 million dollars for the financial year of 2011. Tim Hortons has surpassed MacDonald’s as Canada’s largest food service operator (“Annual Report”). The company has nearly twice as many outlets in Canada as McDonald's. The company aims to offer premium quality services and products for its loyal customers through innovation, leadership, and partnerships. VRIO Framework The VRIO framework can be considered as an internal analysis strategy specializing in the evaluation of tangible and intangible resources and capabilities of an organization (Lin, Tsai, Wu and Kiang 1396-1411). These resources and capabilities are generally analyzed on the basis of four factors. Valuable – a resource is considered as valuable if it is able to utilize an opportunity or decrease external threat to the focal organization (Meso and Smith 224-234). Rare – A resource is considered to be rare if it is not possessed by other competitors in the market and provides a competitive advantage to the firm. Inimitable- A resource will provide a superior competitive advantage to a firm if it cannot be imitated or it is very difficult to imitate the resources. It defines the uniqueness of the resource of the focal firm. Organized to exploit – It refers to the ability of the organization to exploit the resource or capability. Tim Hortons’ brand portfolio, which consists of premium range of coffee, cold drinks, and sandwiches are valuable resources of the company. These resources enhance the overall competitive strength of the company Tim Hortons is presently the largest casual food restaurant chain in Canada. This has given a global recognition to the restaurant chain. Apart from their primary operations, the company also sells Christmas hampers, coffee packets, and coffee machines through its online website and grocery stores. The brand’s strong presence across various geographic areas in Canada has helped to increase the domestic growth as well as the international demand. The strength of Hortons’ brand portfolio is rare. The company is known for providing the finest quality of Arabian coffee which is rare and unaffordable by most of its counterparts. The brand differentiates itself by giving a greater emphasis on healthier and traditional home cooked foods rather than giving emphasis on burgers and other fast food products. The brand has created an opportunity for their customers that is inimitable to a competitor. The business competes in a sector which is highly competitive and falls into a quick service restaurant segment. As the brand produces low cost fast food, it competes with big fast food chains such as McDonalds and Subway. The products from the fast food retail chain are priced lower than competitors’ brands. The culture and offerings provided by the fast food brand has given a fulfilling experience to its customers. These services communicate their continuous brand images and committed values. The organization disperses the value of its brand by creating an extraordinary experience, committing passion, aligning corporate responsibility, continuous innovation of products and services, and creating inspiration. The company also strives to provide the highest customer service by utilizing its efficient human resources. As an emerging corporation, the company is seeking opportunities in emerging markets and is currently ready to expand its markets into international boundaries. This strategy is an essential action against competitors to capitalize on the emerging markets of the world. The brand promotes its values accentuating its modern technology to appeal to the sophistication, urbaneness, and savvy ideals appreciated by consumers. The brand has exploited these strengths to evolve against competitors and build its expansion strategies within the global marketplace aggressively. The brand portfolio of the company emits its strong brand values and capabilities of the global presence. PESTEL Analysis of Qatar Market PESTEL analysis is done to find out the viability of doing a business in Qatar. Political The government of Qatar is comparatively liberal and forward looking. The political reforms which took place after the new ruler came into power are considered to be a major step towards civil liberty and democracy. Foreign companies were allowed to enter the market to bring out competition. The state is free of taxes like income tax, general sales tax, and federal-level corporate tax, which makes it a lucrative business market for the company. Economical The economy of Qatar is highly robust. The country has maintained buyout growth rates. The social as well as technological sectors are improving. Petroleum products contribute a half of the Qatar’s GDP, 70% of its govt. revenue and 85% of its export. The government has increased spending for job creation and infrastructure, and there is a wider scope for private sector investment (Weerakkody et al. 180-190). This opens up big opportunities for Tim Hortons in establishing its business in this region. There has been a rise of opportunity in the retail sector as more and more number of hotels and fast food outlets are being established in the market. Social With the help of revenues from oil and other welfare development programmes, the standards of living of the people are growing very fast. The literacy rate is more than 85 percent, and the government is expecting to change the economy from a petroleum based economy to a knowledge based economy. The religion followed is Islam and is considered to be strict. There are many restrictions in terms of food and clothing, and the company will require to strictly follow the guidelines and norms of the society for a successful establishment of the business. Technological The telecommunication system of Qatar is advanced. The country is able to modernize its infrastructure with the latest technological advancement. There is a high penetration of technology among individuals and the usage of the Internet is high as well. A relatively young population ensures that the technology used is the latest and continuous. The technologically advanced environment of the market suggests that the company will have to induce high-quality and advanced technology to provide satisfaction to its target customers as well as to gain a sustainable advantage over its competitors. Environmental The company is becoming aware of many environmental factors such as green building, carbon emissions, etc. Natural gas, oil, and related industries are the major industries in the economy of Qatar, but these are the industries which generate the highest amount of carbon emissions and pollutions. The government is trying to decrease the impact of pollution by implementing advanced technologies in the factories, and by applying a cleaner energy supply chain. The company will need to strictly follow the rules of carbon emission and other legal regulations for establishing any business in the country. Since it is a desert land, water consumption and conservation of water is a key issue. This will have a great impact on the business of Tim Hortons as it is a food business. Legal Based on the modern Islam law, the legal system of the state is fixed (Sadah 155-165). Intellectual property rights and foreign investment policies are aligned with the World Trade Organization and other international law agreements. This makes the law proceedings, especially for business matters, very smooth and organized. This will be beneficial for the company in case of any legal issues regarding the business. Business Strategy for Global Expansion During the 1970s the company started expansion along the border areas of the U.S.; during the 1990s the organization started more aggressive expansion, acquiring former locations of other fast food chains. Tim Hortons has over 600 stores in the U.S. and plans to open more than 300 in the next 3 years. Tim Hortons plans to undergo rapid international expansion outside of the U.S. (“Annual Report”). Many organizations initiate business expansion in international markets through direct exports, which means selling of products or services to customers of other countries (Johnson and Colin 153). This strategy is more attractive and viable when the organization has a lesser global reach. Organizations can also opt for establishing a subsidiary in the foreign market. For the present coffee brand, establishing a subsidiary in the new market will be the best option. The brand will need to choose a strategic approach while choosing the subsidiary format for its international expansion. A subsidiary can be of four types, depending on the risk. These can be wholly owned subsidiary, joint venture, full or partial acquisition (“Selling Internationally”). New franchises may not prove to be successful and cause a loss to the company. It is critical that Tim Hortons keeps assessing the suitability of its strategic initiatives. The company’s franchising model is built on its strong brand value. The brand not only focuses on maintaining its value, but also ensures that its brand is protected. For example, if an individual gets food poisoning in the restaurant this would ruin the brand that has spent so much effort, time, and money to develop it. Another critical issue that could affect the brand seriously is poor customer service. Thus, the brand needs to be sure that its values and core strategies are intact while initiating business in a new market. For these reasons the company can opt for a wholly owned subsidiary. This will help restore the company’s confidence in the employees as well as it will give a positive effect on the high brand value of the company. Works Cited “Annual Report”. Timhortons. Tim Hortons. 2012. Web. 18 May 2013. Johnson, Debra and Turner Colin. International Business: Themes and Issues in the Modern Global Economy. London: Routledge, 2010, Print. Lin Chinho, Hua-Ling Tsai, Ya-Jung Wu, and Melody Kiang. “A Fuzzy Quantitative VRIO-Based Framework for Evaluating Organizational Activities.” Management Decision. 50.8 (2012): 1396-1411. Print. Meso, Peter and Robert Smith. “A Resource-Based View of Organizational Knowledge Management Systems.” Journal of Knowledge Management. 4.3 (2000): 224-234. Print. Sadah, Muhammad Abu.” International Arbitration Contract Principles: Analysis of Middle East Perceptions.” Journal of International Trade Law and Policy. 9.2 (2010): 148 – 174. Print. “Selling Internationally”. internationalexpansion. International Expansion. 21 May 2012. Web. 18 May 2013. Weerakkody, Vishanth, Ramzi El-Haddadeh and Shafi Al-Shafi. “Exploring the Complexities of E-Government Implementation and Diffusion in a Developing Country: Some Lessons from the State of Qatar.” Journal of Enterprise Information Management. 24.2 (2011):172–196. Print. Read More