International Business - Business Opportunity for an American Consumer Product in the Foreign Market - Case Study Example

New Project Table of Contents Executive Summary 3 Introduction 4 Market Size 4 Socio cultural Acceptance 6 Legal Environment 7 Market Competition 7 Economic and political climate for international businesses 8 Product introduction strategy 9 Method for marketing and distribution 10 Managerial and labour climate 11 Financial Viability 11 Recommendations 12 References 13 Executive Summary The world of the 21st century is progressing at a rapid pace. Steady change and continuous development in various markets around the world along with the high level of penetration of advanced and sophisticated communications technology has transformed the globe into a well connected single entity. As a result of this transformation, there has been a surge in free flow of information and easy access to different knowledge sources, thereby resulting in the evolution of well informed consumers. Because of easy access to information and a high degree of awareness, consumers are getting increasingly demanding in nature and are creating the needs for new and innovative products and services. Witnessing the growth of consumer demands as a huge business opportunity, local as well as various international firms are rushing to cater the evolving demands in different markets. In this particular assignment, the focus is on identifying a business opportunity for an American consumer product in the foreign market. Hence, in this case, the fast food brand, Hardees has been selected for launching in India, which is a fast emerging global market in the Asian subcontinent. Introduction The consumer brand, Hardees is mainly an American fast food chain, which has its operations spread in the Midwest as well as the Southern region of the United States. The popular US consumer brand had its origin in the year 1960, when Wilbur Hardee opened his first restaurant in the US. Over the years, the brand has undergone aggressive expansion and hence has increased the number of outlets in various regions across the US (hardeesfranchising.com, n.d.). Currently the brand is owned by CKE Inc, which is a leading fast food operator in the US and has outlets of around 3,450 (Hoovers.com, 2014). The unique selling proposition lies in the fact that the brand offers premium product at an affordable price. The product portfolio of the company is highly diverse in nature and comprises of breakfast items, charbroiled burgers, chicken dishes, side dishes, desserts as well as beverages (hardees.com, 2014). It is important to mention that the American consumer brand already has presence in 30 countries around the world (www.carlsjrfranchising.com, n.d.). Since India is emerging as a strong consumer market with an increasing demand and rising disposable income, hence venturing into the Indian market will present a strong business opportunity for the American fast food brand. Market Size While analyzing the business opportunity that exists for the American consumer brand in India, it is important to study the size of the market. Since the products of the brand belongs to the fast food category, hence it is important to analyze the quick service restaurant (QSR) category of India and its associated trends and growth prospects. It can be said that the QSR segment is a part of the Indian food industry, which has enjoyed strong growth in the recent times, because of strong economic development of the nation along with the rise of disposable income of the Indian consumers. The India Food Services Report of 2013 has pegged the Indian food industry valuation at $48 billion as of the year 2013. The report also forecasted that the industry along with a projected compound annual growth rate of 11%, will reach a market valuation of $78 billion over the next five years (Kumar, 2013). Talking specifically in regards to the QSR category, it can be said that the market research firm CRISIL has forecasted that the Indian QSR category will reach a valuation of around 70 billion INR by 2015-16, by maintaining an average annual growth rate of 27% (crisil.com, 2013, p. 3). Source: crisil.com, 2013, p. 3 Talking in regards to socioeconomic trends that can influence the Indian QSR category, CRISIL has predicted that the growth in the QSR category of the nation will come from fast growing Tier II markets. Analyzing on the lines of annual spends, the firm has forecasted that the annual spend of middle class households of tier II Indian market will grow by 150% to that of 3,750 INR by 2016, while that of tier I markets will grow by above 60% to 6000 INR by 2016. The snapshot below provides a clear picture for the QSR spends of the Indian masses in both the markets (crisil.com, 2013, p. 4). Source: crisil.com, 2013, p. 4 Socio cultural Acceptance The prime offering of the firm for the Indian market are the different kinds of fast food products that currently exists in its American product portfolio. It is important to highlight that because of social and cultural difference of Indian masses with that of the Americans, the taste preferences of the Indian masses varies to a certain extent. Because of the difference of taste preferences, various international fast food brands that have entered the Indian market have adopted the strategy of localization of their food products (Stern, 2010). Hence, for gaining successful entry in the Indian market, the firm has to adapt its food offerings so as to match the taste preference of the Indian consumers. Legal Environment For making a presence in the Indian QSR segment, the firm needs to deal with licensing requirements as well as different kinds of tax regulation. Explaining in details, it has to be stated that the firm needs to obtain multiple licenses ranging from health, food safety, police, no objection certificate (NOC) from the fire department as well as the different state pollution control boards. The firm will also need to manoeuvre the different taxes that are applicable in the Indian business environment like value added tax (vat), excise, service tax and state tax (Shukla and Sharma, n.d., p. 2) Market Competition While analyzing the competition for the Indian QSR market, it is important to mention that the market is dominated by popular foreign brands like Dominos, Pizzahut, Subway, KFC, McDonalds and many others. Source: crisil.com, 2013, p. 6 As of the year 2013, the QSR segment in India is being dominated by multiple foreign brands with around 63% market share (Nayak, 2013). Easy cold storage development along with faster cooking and delivery time has helped the foreign fast food brands to dominate the Indian QSR segment. In regards to statistics, as of 2013, pizzas, burgers and sandwiches comprise around 83% of the QSR segment (crisil.com, 2013, p. 6). While talking on market competition, it is important to highlight that the foreign brands gain an upper hand in this particular segment as they cater to the feeding habits of both the vegetarian and non vegetarian segments through their vegetarian and non vegetarian food products. Domestic fast food brands like Haldirams, Bhikharam and many other mainly target the vegetarian segment through a smaller number of products (Shukla and Sharma, n.d., p. 2). Economic and political climate for international businesses Since, the entry in the Indian market by the American consumer brand will fall in the periphery of international business expansion; hence, an analysis of the economic and political climate in connection with the prospects of the international business in India is necessary. A study conducted by the popular consulting firm, Ernst and Young reveals that despite current setbacks related to corruption and policy paralysis, the Indian economy is projected to grow at 4.5% in 2014 and at 5.9% in the year 2015. Source: ey.com, 2014 The study also reveals that multiple advantages like low labour costs, availability of educated and skilled work force along with good telecom infrastructure has made the nation a highly preferred destination for firms dealing in international business (ey.com, 2014). While discussing the current political scenario of the nation and its possible impact on the scope of international business, it needs to be stated that currently, national polls are being conducted for choosing the Prime Minister. The outcome of the national polls will have a strong impact on the international business prospects of the nation. However, pre poll political sentiment of the masses as well as the corporate sector reveals that the international business is supposed to grow in the upcoming years under the new leadership (Mahajan, 2014). Product introduction strategy While planning the product introduction strategy for the American consumer brand, it needs to be considered that the product portfolio of the firm will be newly launched in the Indian market. A strategic move for Hardee’s will be to introduce a few products of their current American portfolio in the Indian market. A very important aspect that has to be considered in this case is that the products are largely based on American concepts and have been customized in regards to taste for matching the preferences of the Indian consumers. Hence, a mixed approach of market development as well as diversification will greatly contribute in the introduction of the firm’s products in the Indian market. Also, while planning the strategy of introducing the product in the Indian market, it is important to identify the desired target audience. Here, the desired target audience will be mostly urban youngsters with considerable disposable income along with an open attitude towards American and western lifestyle. Method for marketing and distribution While concentrating on the process of marketing and distribution, it needs to be considered that the products of the firm are completely new in the Indian market. Hence, the prime focus of the marketing activities will be to generate awareness as well as interest for the products among the Indian target audience. For the purpose of creating awareness as well as tickling the interest of the consumers, a mix of traditional as well as online tactics can be applied. Traditional promotion tactics can range from advertisements in the print media, billboards, as well as television channels which has high viewership among the focused target audience. Online tactics for value communication to the target audience will comprise of connecting with the target audience through online networking sites like Facebook, Twitter. Other online marketing efforts will include conduction of online contests as well as mobile based promotional campaigns. For focusing on developing the distribution channel for the firm’s products, it is important to focus on the locations which have a direct connect with the firm’s intended target audience. Talking on this note, it has to be stated that since the target audience for the products are urban youngsters, hence the distribution outlets for the firm’s products needs to be located in the various malls, multiplexes and shopping districts in the Tier I and Tier II cities, which have a high footfall of the youngsters. Managerial and labour climate In discussing the managerial and labour climate, it has to be considered that the QSR segments of the food industry offer a combination of product and service. Because of the emerging nature of the market, a considerable amount of skilled as well as semi skilled manpower is available for fulfilling the managerial as well as labour requirements of the QSR industry. It is important to state for the purpose of attracting manpower for this segment, the focus should be on the factors of training, compensation as well as development of a brand image in the nation. Financial Viability In discussing the financial viability of an international business in the Indian market, attention has to be given on the lines of currency translation as well as profit repatriation for the international firms. Talking on the lines of currency translation, it can be said that owing to current economic performance of India and the US, the Indian currency is comparatively weak valuation as compared to the US currency. This difference in currency valuation of the two countries greatly enhances the prospects of international business in India. Now talking in regards to the scope of profit repatriation, it needs to be mentioned that the Reserve Bank of India (RBI) allows international firms to repatriate profits, without any need for permission from the RBI. However, the repatriation is allowed after the payment of the dividend distribution tax to the government (ey.com, 2012). Recommendations The recommendations for Hardees’ while entering the Indian market are as follows Launch the products in the Tier I markets of India which has a high percentage of young population with high disposable income. Customize the products in regards to Indian tastes so as to match the consumer taste preferences Develop a strategy to tackle the competition of the foreign brands in the QSR segment of India. Focus on entering the Indian market with limited number of products. Spread awareness as well as curiosity for the products, in the traditional as well as online marketing channels so as to generate sales for the products. References hardeesfranchising.com. (n.d.) History. Retrieved from: http://www.hardeesfranchising.com/brand Hoovers.com. (2014) CKE Inc.Company Information. Retrieved from: http://www.hoovers.com/company-information/cs/company-profile.CKE_Inc.f1736b61e3b34a6c.html Hardees.com (2014) Menu & Nutrition. Retrieved from: http://www.hardees.com/menu/nutritional_calculator_landing www.carlsjrfranchising.com. (n.d.) Development Map. Retrieved from: http://www.carlsjrfranchising.com/international/development crisil.com. (2013) Crisil Opinion. Retrieved from: http://www.crisil.com/pdf/research/CRISIL%20Research_Article_QSR_17Sep2013.pdf Nayak, D. (2013) India’s Fast-Food Market Set to Bulge. Retrieved from: http://blogs.wsj.com/indiarealtime/2013/09/19/indias-fast-food-market-set-to-bulge/ Shukla, R. and Sharma, V. (n.d.) The Rise of the Quick Bite. Retrieved from: http://www.technopak.com/files/QSR_Market_in_India.pdf Stern, S. (2010) Fast-food chains adapt to local tastes. Retrieved from: http://edition.cnn.com/2010/LIVING/homestyle/04/08/fast.food/ Kumar, P.K. (2013). QSR: Giving expressions to changing food habits. Retrieved from: http://www.hospitalitybizindia.com/detailNews.aspx?aid=18240&sid=5 ey.com. (2014) India 2014: Enabling the prospects. Retrieved from: http://www.ey.com/Media/vwLUExtFile/india-attractiveness-survey-2014/$FILE/ey-info-enabling-the-prospects.jpg Mahajan, A. S. (2014) Falling in line. Retrieved from: http://businesstoday.intoday.in/story/global-investors-gear-up-to-working-with-narendra-modi/1/205364.html ey.com. (2012) Repatriation of funds. Retrieved from: http://www.ey.com/IN/en/Services/Tax/Doing-Business-in-India-2012---Repatriation-of-funds Read More