Tim Hortons: A Canadian Company Looking for New Markets - Research Paper Example

Tim Hortons: A Canadian Company Looking for New Markets of the of the No. Executive Summary The researchpaper focuses on the business of Tim Hortons, a fast casual restaurant chain based from Canada. Primary Problem The domestic market demand of the organization has become saturated and it desires to rationally expand its business in the U.S. However, the company is facing several problems in its U.S. business. The strategic alliance between Tim Hortons and Wendy’s International had broken up due to the poor business synergies between the two companies. The company is exposed to high threats of market rivalry in the U.S. The organization shares low brand value in the U.S. restaurant industry and lacks adequate financial reserves to expand in future. Even so, it might face certain internal management issues after Burger King purchases its stock in Canada. Alternative Solutions The company can launch a new organic product range in the U.S. It can revive its existing pricing strategy and introduce a new penetrating pricing policy The organization can increase its promotional activities through social media Recommended Solution and Justification The new penetrating pricing strategy is the best alternative solution for Tim Hortons. Through this, the company will be able to tap the market demand for a larger base of customers. Social media promotional programs of its rivals are already popular. Organic product launch will only enhance the demand for rich consumers in the market. Contents Secondary Problems 4 Implications on the Organization 5 Implications on the Personnel 5 Implications on the Environment 5 Alternative Solutions 6 Recommended Solution 7 Implementation 8 References 9 Primary Problem Saturation of home country demand is the primary business problem of the Canadian fast informal restaurant chain, Tim Hortons Inc. It is a publicly traded organization and was founded in Hamilton, Ontario, in the year 1964 (Time Hortons, 2013). The present headquarters of the organization is located in Oakville, Ontario, Canada. Coffee, cold coffee, donuts, pies, sandwiches, croissants, iced cappuccino, cakes, and muffins are the primary products offered by the company (Time Hortons, 2014). Tim Hortons conducts its business from more than 3000 locations of Canada. It owns the market share of over three quarter coffee purchases in the country (Time Hortons, 2014). The organization has acquired sufficient amount of profitability and revenue from its native Canadian market since 1964(Time Hortons, 2014). However, the Canadian market demand faced by the organization has become saturated at present. The country has become completely inundated with the locations of Tim Hortons selling outlets. Thus, Canadian market expansion and penetration strategies have become unfeasible options for Tim Hortons future business growth (Time Hortons, 2013). The company can experience greater profitability and economic surplus in the long run, by rationally expanding the scale of its business internationalization process in its second best market, the United State (U.S.). Thus, the primary business problem for Tim Hortons can be resolved by solving one basic issue, namely: How can Tim Hortons successfully expand its business in the U.S.? Secondary Problems U.S. is the second best market for Tim Hortons. The company provides its services from more than 587 restaurants located in the country (Time Hortons, 2014). However, the external business and cultural environment of U.S. and Canada are significantly different from each other. Apart from the primal problem mentioned above, Tim Hortons is facing several other secondary troubles in its U.S. trade. Tim Hortons first expanded its trade in U.S. in 1995, by purchasing the market shares of Wendy’s International in the country (Time Hortons, 2014). At that point of time, Wendy’s International was facing severe loss in business. Tim Hortons helped to revive the adverse commercial status of the company. However, exceptional synergies did not develop between the two concerns in U.S. Finally, in 2006 Tim Horton moved away from its partnership deal with Wendy’s International (Time Hortons, 2014). Tim Hortons have also realized that its brand is unknown and less recognized in the northeast and Midwest regions of the U.S. The brand value of the concern is almost null in these markets, though, it owns several retailing outlets in these locations. Tim Hortons faces severe threats of competition in the U.S. market. Unlike its business in Canada, the organization generates very low sales from the U.S. market, compared to the same generated by its most potential business rivals, Wendy’s, Mc Donald’s, Dunkin Donuts, Subway and Starbucks (Canino, 2011). Moreover, the company owns less valuable productive resources in business, compared to that of its prominent business rivals in the U.S. Moreover, the concern might face certain internal management issues after its assets are completely purchased by Burger King in the long run (Merced, 2014). Implications on the Organization If the primary and secondary business problems of Tim Hortons are not rectified, then the company will face several problems in the long run. Due to demand saturation, Tim Hortons will not be able to familiarize greater revenue and profit from its native Canadian market in future. The company owned larger tangible and intangible resource base when its commerce was merged with Wendy’s International in U.S. After becoming independent from 2006, the company has lost much of its resourceful business assets. Thus, completion of the strategic alliance between Tim Honors and Wendy’s International has reduced the resource strength of the former company. Such outcomes have lowered the growth financing potential of the organization (Pettis, 2013). Furthermore, the company could not popularize its brand name even in the existing U.S. markets. This proves that, future U.S. based business expansion programs of the company can be unfavorable for Tim Hortons. Even so, the company faces severe threats of market rivalry within the U.S. restaurant industry. In the long run, the prospective market rivals of Tim Hortons can significantly lower its market demand share in the country (Pettis, 2013). Furthermore, the brand name Tim Hortons can be overshadowed by the market popularity of Burger King’s brand name, in future. Implications on the Personnel Tim Hortons domestic market (Canada) demand has become inundated. In order to improve its brand value and business returns in the long run, the company needs to successfully expand its business in the U.S. The managers, executives and other employees of Tim Hortons will face several problems if its U.S. expansion projects become unsuccessful. Failure of U.S. business will generate loss and lower the aggregate revenue of Tim Hortons. Under such circumstances, the company will lower the fringe and financial benefits of the employees. In order to introduce certain cost cutting measures, the organization might needs to cut down some of its jobs. Such uncertain outcomes will lower productivity and motivation level of its existing workforce. The managers of the organization will face bigger challenges to manage and accomplish task with the help of such less interested workers. Loss and lack of financial propensity will adversely affect the supply chain management system of the company. The company can face internal workplace management problems after Burger King purchases its brand in the near future. In order to avoid such personnel related business issues, Tim Hortons must try to efficiently materialize its U.S. expansion projects. Implications on the Environment The following table elaborates the environmental features of U.S. through a PEST model. Factor Implication Political The U.S. private and public organizations strictly follow the legal norms of the country’s trading and antitrust policies (Porter, 2002). Economical The revenue and profitability of the profit making concerns in U.S. is dependent on the nations’ disposable income, unemployment, inflation, exchange rate, interest rate and other macroeconomic factors (Canino, 2011). Social The U.S. natives are highly individualistic in nature. These folks desire to personally accomplish tasks, instead of working in groups. The level of uncertainty avoidance in the nation is low and the consumers are indulgent in nature. After recession in 2008, many buyers of U.S. have become rational and less spendthrift. Technological U.S. ranks 7th in terms of the Global Innovation Index (Global Innovation Index, 2014). Technological innovation made in the country can be utilized by its native firms, for attaining operational efficiency. Alternative Solutions The following table elaborates the alternative solutions, through which Tim Hortons can eradicate its primary and secondary business issues. Solution Number Solution Alternative One The company can launch a new range of organic beverages and snacks in the U.S. market. Alternative Two The organization should popularize its brand and products through social media promotional programs Alternative Three The company can introduce a new penetrating pricing strategy in business Alternative One The first recommended alternative solution for Tim Hortons is a type of product diversification strategy. After recession in 2008, the U.S. consumers increased their aggregate fast food consumption. This helped to enhance the revenue for the giant fast food sellers such as Mc Donalds and KFC (Abeles, 2001). However, consumers are now becoming aware about the harmful health hazards caused by the fast food products. Increased health consciousness has augmented the demand for organic food items. Such items contain minimal added flavors and synthetic chemicals. Tim Hortons can introduce a new range of organic food and beverage items. This will help to augment the brand value of the company in the market and facilitate in portraying its social sustainability in trade. Selling organic food will be a type of social marketing strategy of the organization (Tucker, 2010). This initiative will portray the company’s welfare maximizing attitude, along with profit making intensions. Alternative Two The aggregate internet penetration rate of U.S. is high. The country ranks 7 in terms of technological innovations. Most communication gadgets used by the company are internet enabled. Social media is widely used for business-to-business and business-to-consumer dealings in U.S (Abeles, 2001). It is rational for Tim Hortons to promote its products and brand through social media. By doing so, the company will be able to enhance the awareness of the U.S. consumers towards its brand. Moreover, through this strategy Tim Hortons can promote its brand to a large strength of consumers, cost effectively. Alternative Three After the subprime mortgage crisis, the per capita nominal and real discretionary spending power of the U.S. consumers has significantly declined. Many rational buyers of the country desire to purchase less expensive good quality products from the market (Porter, 2002). By implementing the penetrating pricing strategy, Tim Hortons will make its offerings more competitive in the market. Its beverages and snacks will become less expensive compared to the same provided by its potential market rivals such as Mc Donald’s and Starbucks. According to the law of demand, price is inversely related to quantity demanded (Tucker, 2010). Thus, lower prices will surely enhance the demand for Tim Hortons products in the market. Later on, the company can enhance the prices of its popular products by adding on more qualitative features with it. Recommended Solution The new pricing strategy is the best recommended solution for Tim Hortons. In U.S., the trade of the company is subjected to severe threats of market rivalry. At this juncture, penetrating pricing will help Tim Hortons capture a larger strength of potential U.S. demand. Under this regime, the organization will launch new products at relatively low market prices. Eventually, as the products become popular among the consumers, the company can augment its price on grounds of additional features. The above solution is best for Tim Hortons, compared to the other two alternatives. By introducing a new expensive organic product range, Tim Hortons will be able to capture the demand for some elite or high income consumers (Tucker, 2010). Innovative and non imitable social media promotional activities are proficiently executed by the potential market rivals of the company such as Mc Donald’s and Starbucks. Thus, it is feasible for Tim Hortons to launch a new pricing strategy (Casson & Wadeson, 2012). This strategy will help to enhance the market demand for the products of Tim Hortons due to substitutability and price effect. Implementation Period Task Implication Short Term (now to six months) Internal and External Circumstance Analysis For evaluating the need of the new strategy and estimating the capability of the company to execute the strategy Appointing Strategy Executers These professional individuals will guide the strategy execution process Primal Objective Identification To establish specific, measurable, achievable, realistic and time bound strategy based goals Medium Term (now to one year) Plan Requisite Estimation To approximate the requirement of variable and fixed resources, for executing the new strategy Long Term (now to more than one year) Communication Plan The plan will help to promote the new strategy in the market Price Standard Establishment The company will establish the penetrating prices of its new and existing products Very Long Term (over three years from now) New Price Popularization For guaranteeing that consumers are always aware about the new strategy Future Response Estimation For analyzing the benefits of the new pricing strategy References Abeles, T. P. (2001). Impact of Globalization. On the Horizon, 9(2), 2 – 4. Canino, K. (2011). How Trade Deficits Work. New York City: The Rosen Publishing Group. Casson, M. & Wadeson, N. (2012). The economic theory of international business: a supply chain perspective. Multinational Business Review, 20(2), 114-134. Global Innovation Index. (2014). Global Innovation Index. Retrieved from https://www.globalinnovationindex.org/content.aspx?page=GII-Home. Merced, M. J. D. L. (24th August, 2014). Burger King in Talks to Buy Tim Hortons and Move to Canada. The New York Times. Pettis, M. (2013). The Great Rebalancing: Trade, Conflict, and the Perilous Road Ahead for the World Economy. New Jersey: Princeton University Press. Porter, M. (2002). The National Competitive Advantage of Nations. London: The Macmillan press LTD. Time Hortons. (2013). Winning the New Era. Time Hortons. Retrieved from http://www.timhortons.com/ca/en/pdf/Tim_Hortons_2013_AR_full.pdf. Time Hortons. (2014). Time Hortons. Retrieved from http://timhortons.com/ . Tucker, I. B. (2010). Survey of Economics. Connecticut: Cengage Learning. Read More