Nandos Transfer to Brazil - Case Study Example

Nando’s Transfer to Brazil Department TABLE OF CONTENTS Topic page Introduction 3 2. Brands 3 3. Market in Brazil 4 4. Alternative market declined 6 5. Market entry strategy 7 6. Marketing mix 9 7. Reference 11 Introduction Nando’s is a group of restaurants that have their origin in South Africa. They began in 1987. This was when both Robert Brozin and Fernado Duarte purchased a restaurant called Chickenland at Rosettenville in the South of Johannesburg. After the purchase, the name changed to Nando’s after Fernando Duarte. The restaurant has since then been remodeled through several initiatives. As a result, it has emerged to be one of the top performing fast food stores. Consequently, Nando’s restaurant has since grown adversely widening its market locally and abroad. Currently it’s found in over 22 countries and has over 1000 outlets worldwide. These countries include United Kingdom, Australia, Bangladesh, Canada, Fiji, Ireland, Lebanon, Malaysia, Mauritius, Pakistan, USA, New Zealand, Qatar, Zimbabwe, Singapore, Namibia, Zambia, India and Cyprus (Maumbe, 2013). This success has had its ups and downs; the restaurant had previously failed to establish itself in some countries such as Kenya, Nigeria and Israel. The failure has been due to fierce competition from the already established fast food stores while in some countries, it can be attributed to inadequate market. Brands Nando’s specializes in chicken, flamed and grilled with Peri-Peri. This chicken is amazing served in quarters, halves and whole. Other available brands are burgers, salads, pittas, wings and wraps. Having different trends in various countries, food variety may change. Nando’s serves chicken liver in some countries, Espetada which is a large stand with a skewer chicken breast served with grilled peppers, the other major food is chicken and rice served in a traditional Portuguese copper dish. Nando’s unique feature is Peri-Peri. This is a Swahili word for African Bird’s Eye chili, which is indigenous to Africa. Nando’s has a wide range of sauces which include Peri-Peri sauces, cooking sauces and marinades. Nando’s mission is to deliver the ‘Nando’s experience’ to their customers. This has been a key aspect of its success. Centuries-old Portuguese tradition is the base for ‘Nando’s experience’ where pride and passion are significant in food preparation, especially chicken. In Nando’s, they say that it is not a restaurant but a family, a tradition and a way of life. According to Maumbe (2013), in the attempt to discover the ‘Nando’s experience’, residents come to this restaurant where they end up being regular customers. This report looks at the factors considered in the selection of Brazil as the next investment destination for Nando’s. The competitors, policies and other alternative markets declined. The report also focuses on market entry strategy and market mix strategies. It is a comprehensive and comparative study. Market in Brazil Brazil is one of the most influential countries in business not only in the South America but also in the entire world. Its economy is rapidly growing; the large population offers an available labor and market. On the other hand, Brazil’s large population presents an adequate market for businesses such as food chains. Kumar (2005) asserts that the remarkable growth in per capita Gross Domestic Product (GDP) favors foreign investment in Brazil. In turn, significant reduction in poverty and income inequality has contributed positively towards a stable economy. All these factors offer an environment suitable for the establishment of a restaurant as there are factors to catalyze its growth. Brazil being a Portuguese colony, its culture has been influenced by the Portuguese way of life. Brazilians would be pleased with products from Nando’s whose food mainly borrows from the Portuguese tradition. There exist other food stores that sell almost the same food as Nando’s. This makes Nando’s appealing as it would blend with the Brazilian culture. This aspect would create a sense of belonging for the native Brazilian citizens, who would wish to dine at Nando’s. Some of the well-established competitors in Brazil include; Outback Steakhouse who serve steak and seafood, Pizza Hut who major in pizza, and Applebee’s Neighborhood Grill & Bar, which are very popular among the young consumers who enjoy different décor and ambience for meeting with friends. These restaurants accounts for about 44% restaurant value share in Brazil. In this regard, successful entry into Brazilian food production industry would require Nando’s to be in vibrant campaign. Consumer oriented promotions should characterize the campaign to win over and lure a large population to become its customers. Another factor that makes Brazil a suitable destination for investing by Nando’s food chain is its high security levels (International Business Publication, 2010). The buoyant and all-year round tourism has compelled the Brazilian authority to heighten security in the country. There is adequate cooperation between the state authorities and the federal government in ensuring that investors enjoy an ambient environment. There are no incidents of major crimes such as terrorism and highly organized crimes, which could directly hurt the success of a business in the country. Nevertheless, though not rampant, petty crimes particularly carjacking, drug related crimes, homicides, youth crimes and drug trafficking are some of the insecurity concerns that a foreign investor would factor in when investing in Brazil. Nando’s being a dining restaurant would suffer less from these insecurity concerns. This is because crimes occur away from the big cities where Nando’s would be set. Upcoming international events such as the FIFA 2014 World Cup and the 2016 Olympics in Rio de Janeiro will draw visitors to the country. Consequently, there will be an increase in demand for hospitality services and Nando’s investment in Brazil would be timely. With these expectations, the local authorities in collaboration with the federal government have allocated massive resources in infrastructure development and establishment of social facilities throughout the country. This will boost the market for restaurants as they will require expansion. Nando’s should take this opportunity to venture in this fast growing economy. These events will raise the country’s profile; hence it will experience rapid acceleration in economic growth. It is evident that Nando’s restaurant has to venture into this market early before full exploitation in the recent future is paramount. It will be expensive to invest after such events have passed. This is because there will be fewer catalysts for fast economic growth than in the current situation. This is where investors are coming into Brazil in large numbers in anticipation of these events. The United Nation Conference on Trade and Development (UNCTAD) World Investment Report for 2012-2014, Brazil ranked as the fifth-most attractive country for Foreign Direct Investment (FDI). Brazil is the largest FDI recipient in South America. This can be attributed to Brazil’s openness to foreign investments. This encourages foreign investors to choose Brazil as an investment destination. Foreign ownership limitations in Brazil apply only to some industries. In the domestic airline, foreign ownership is limited to twenty percent. On the other hand, this law completely exemptsthe hospitality sector from the foreign ownership limitation. As a result, the country’s foreign investment policy does not affect foreign investments in the sector directly. This is an indication that Nando’s restaurant’s venture into Brazilian economy would be faced with minimum opposition. Brazil has not been left behind in technological advancement. With the increased use of smartphones around the country, it is now easier to reach out to the locals and market the restaurant. Nando’s online platform gives it a good position to exploit the available market through the internet. In essence, through the internet, the restaurant can reach a large variety of Brazilian population with very little cost of marketing as compared to some other countries where less people have internet connections (O’Regan and Kerin, 2008). In such countries more extensive marketing strategies would be adopted. That is, the use of the national television, which will affect the business negatively, as it will increase the production cost thus rendering the restaurant less competitive. Alternative market declined The perceived successful establishment of Nando’s restaurant in Brazil will not be the same for the other American countries, such as Mexico, where the restaurant has not been established. For instance, Nando’s would have been less successful in Mexico. It would prove to be difficult for the food store to make any successful attempt at luring Mexicans to dine at Nando’s. This is because, in Mexico, there are other restaurants that have successfully won the hearts of Mexicans by serving traditional Mexican delicacies. Mexico is a country that is very proud of its roots. Mexicans are very conservative. It would be futile to try changing their diet. For a foreign food store to be successful in Mexico, it has to conform to Mexican way of life. Nando’s largely Portuguese menu would gain little success in Mexico. Additionally, the restaurant would face very stiff competition from the many existing restaurants such as Chronic Tacos enterprises Inc., Pancher’s Mexican Grill and Barberitos Franchising Inc. These are the popular restaurants that serve the best Mexican food. They have evolved with the Mexicans culture, to suit the demands of the locals. According to O’Neil (2013), insecurity in Mexico is another factor that would hamper the successful introduction of Nando’s in Mexico. It is characterized by drugs related crimes. These crimes are organized by drug trafficking cartels, fighting to get control of various cities or sections of the cities. These cartels make the running businesses in Mexico very difficult. Many require businesses operating in their ‘regions’ to remit a set amount of money to them regularly. The continuous war between drug cartels and the government or among them has proven to be a challenge for running businesses in the country. Despite the fact that there are safe parts of the country in which business can be successfully carried out. The chance for success of Nando’s is minimal since there are no considerable returns. Corruption and impunity in Mexico has crippled the state and rendered it to some extent incapable of providing basic safety for the majority citizens. There are inadequate police forces and a judicial system that is not experienced in most parts of the country. These coupled with the problems of extortion, kidnapping and assault, economic growth has been minimal especially in the middle-sized business where Nando’s would be categorized. Therefore, it would prove difficult for Nando’s restaurant to experience success in this country. In addition, incidences of violence discourage foreign investors preventing the establishment of new firms or factories, which would provide additional market for the restaurant (O’Neil, 2013). The above reasons make Mexico fail to be a successful candidate for investing by Nando’s restaurant, built on a culture of ambience and homely environment. Market entry strategy A well-executed market entry technique will be the surest way for a manager to ensure control of the new market and guarantee success in the new business venture. Seeking entry into the Brazilian market, it is inevitable for Nando’s to carryout extensive market assessment in order to device the best market entry strategy. Research ought to be done on the following factors; competitor profiling, channel analysis, risk analysis, entry barrier analysis, demand forecasting, cost driver analysis, regulatory environmental mapping and consumer behavior surveys. Through competitor profiling, Nando’s will get an insight of the other restaurants. The form of food they serve and hours that they run their businesses. The personnel they employ in terms of age and sex and target population would be considered (MacFie and Jaeger, 2010). This insight will be crucial in the development of SWOT (strengths, Weakness, Opportunities and Threats) analysis. Research on the aspect of the Brazilian economy that would pose as barriers to entry into the market should be conducted. In this case, Brazil’s economy shows less resistance to entry of new investor. The most significant barrier that Nando’s would face is from the already established competitors in the country. The solution would lie in the restaurants ability to produce unique and consumer oriented food, to lure consumer to Nando’s. Cost driver analysis focuses on those factors that contribute to the total cost of production. The standards of living of the Brazilian population influence the cost of production to a large extent, (International Business Publication, 2010). It is the population that provides with the market and also labor. As stated previously, Brazil has a large population that provides readily available market and labor. Having been successful in more developed countries such as England whose labor market is comparatively scarce; Nando’s would settle down easily and avail its products at a consumer friendly prices. Demand forecasting and consumer behavior analysis are considered. This guides the restaurant’s management in the long term production plans, which do not directly affect the pricing of the products. Nevertheless, these factors will come in handy in prioritization of potential market opportunities and mapping the restaurants internal capabilities to conquer these markets. Based on the market and internal capability assessment, Nando’s will have a position to evaluate and prioritize the viable market entry strategy. With Brazil’s well established democracy, enforced financial discipline, high purchasing power and the fact that it’s rated as an investment grade country, franchising will be the most suitable market entry strategy. This is a more daring strategy, but with Nando’s mission statement; to deliver the ‘Nando’s experience’ to their customers, franchising is the market entry strategy to use. Through franchising, Nando’s will get position to give consumers a real ‘Nando’s’ experience. This opposes market entry strategies such as licensing and piggybacking. This is one of the rationales of franchising in that the product will not be affected by effects of licensing. Nando’s production method may be licensed to another food chain before it takes control of all aspects of the business. Being a rather radical mode of market entry, challenges inhibit the success of franchising (Glickman, 1997). Nando’s products will receive mixed reactions from the consumers as they have not been inexistence, in the Brazilian market. Nando’s will face skepticism, and curiosity from some consumers to experiment on the new product in the market. Marketing mix In marketing putting the right product in the right market at a suitable price and the right time is a very critical thing. In consideration is the creation of a product that people will want. This will be in point of sale where people would wish to visit regularly, feeling safe and cared. The price will be in a way that clients feel not exploited as they get the value of their money. At this time, the clients will feel the need to buy. Customers should have access to the right information in order to have an idea of what to expect in the premises and the quality of products offered. When planning on getting in Brazil, Nando’s will have to consider marketing mix theory. Therefore, Nando’s will take in consideration the 4ps in the marketing strategy. These include; the product to be introduced in the market, the location of setting up the premises, the prices of the food stuffs and the channel to be used in marketing (O’Regan and Kerin, 2008). A unique feature of Peri-Peri chicken bindsNando’s to success as customers seek for that uniqueness in what they take. Nando’s will offer a place where in the company of friends, one may consider popping in to treat their friend in unfamiliar, but enticing product. Chilli flavored food, marinades, cooking sauces and the Peri-Peri Essence which have been the stronghold products in the success of Nando’s. The mission of delivering the Nando’s experience will provides the clients that urge to get the experience the Nando’s way. Price of the products is essential in introducing a new product in the market. In setting the price, Nando’s will consider the following; the value of the product, the sensitivity to the customers, the discounts that should be offered to trade the customers in the market and the comparison of its products to those of competitors. Failing to take consideration of the pricing of the competitors can be a dangerous approach in a new market as this may lead to low customer turnout. Nando’s should consider the location where buyers will look for the products and other variety available in it. The general outlook of the premises and its accessibility will be a critical point of consideration (O’Regan and Kerin, 2008). Giving the customers knowledge about the Nando’s, is a noteworthy step towards the attainment of the core goal. Having appropriate marketing messages in the market, clients will have information about Nando’s existence. The channel used is very important in this case. Adverts in the press, TV, radio or billboards, will be effective. The use of social media is also very imperative. This is bearing in mind that the major target of the Nando’s is the young people who are very active in social media. These includeFacebook, twitter and flicker. The time for advertising is also crucial; for example intensive advertisement should be carried before the FIFA 2014 World Cup so that the visitors will have made forehand decision in dining at Nando’s. Bibliography Glickman, G. (1997). Franchising. NewYork: M. Bender publishing International Business Publication. (2010).Brazil: doing business and investing in Brazil guide. Washington, D.C: International Business Publication, USA Kumar A (2005) Access to financial services in Brazil.Washignton, D.C: World Bank. Maumbe, B. (2013). The rise of South Africa’s quick service restaurant industry. Journal of Agribusiness in Developing and Emerging Economies. MacFie H and Jaeger, S.R. (2010). Consumer-Driven in Food and Personal Care Products. Burlington: Elsevier Science. O’Neil. K.S (2013) Mexico Makes It: A Transformed Society, Economy and Government. Available at http://www.cfr.org/mexico/mexico-makes/p30098 O’Regan R and Kerin A R (2008) Marketing Mix: new perspective and practices. Chicago, III: American Marketing Association. Read More