Marketing Strategy for Wendys in Pakistan - Report Example

Recommended Marketing Strategy for Wendy’s in Pakistan [Pick the International Marketing Manager Marketing Executive 21 July 2014 SUBJECT: Recommended Marketing Strategy for Wendy’s in Pakistan 1.0 Introduction This report discusses the attractiveness of Pakistan as a potential new international market for Wendy’s. Wendy’s has a strong international presence in several countries such as New Zealand, Russia, Japan, Singapore, and the UAE (Wendy’s, 2014). However, despite a strong product line the company has concentrated its international expansion within the Americas. This report analyses the Pakistani cultural environment in the light of three cultural factors, i.e. power distance, individualism and tolerance for ambiguity used by Hofstede to analyse national cultures. The analysis would enable management to determine the extent to which the company’s marketing mix should be standardised or adapted to enter the Pakistan market. 2.0 Identification of Target Market Country Pakistan is a large potential market with a population of approximately 180 million. However, due to low income levels, the size of the fast food industry is limited to mainly the urban centres of Karachi, Lahore and Islamabad. According to a report (BrandSynario, 2014), the fast food industry in Pakistan is growing by 20% per annum and is patronized by the upper-middle and upper classes of the country. Since 2000, many other chains have entered the country through franchise agreements, including McDonald’s, Domino’s Pizza, Subway, Hardee’s and Burger King. KFC and Pizza Hut remain the most popular international fast food chains in the country. 3.0 Analysis of Cultural Factors The cultural environment of Pakistan is analyzed in terms of power distance, individualism and tolerance for ambiguity. 3.1 Power Distance According to the Hofstede Centre (2014), Pakistan has a score of 55 for power distance. This shows that deference to authority is valued and accepted in Pakistan. As described by House et al. (2004, p. 536) under the Project Globe, class differentiation is distinct in such societies and power is used as an important instrument to maintain order. Limited upward social mobility is observed and access to economic resources is restricted to a few privileged segments. Access to information is also controlled by the elite. The high power distance is due to the colonial history and feudal culture of Pakistani society (Nasir, 2004). However, as Bashir et al. (2012) explain, an increase in education levels and increased interaction between various cultural groups in Pakistan over the years has weakened the traditional power distance values in the country. Out of the eight factors that shape culture identified by Doole and Lowe (2001, p. 66), language, religion and education play an important role in influencing attitudes towards fast food consumption. Fast food marketing messages in Pakistan are usually bilingual and represent well-educated college and university going youth. They are fluent with modern technology and have a materialistic orientation. As Wendy’s is experienced with operating in the UAE which has a much higher value for power distance and hierarchical relationships, it should be able to adapt its marketing strategies to the needs of the Pakistani consumers. Power distance values in Pakistani culture will affect service delivery methods and staff roles most strongly as Pakistan is also a status-conscious society. This factor would also influence the way in which senior management shapes relationships with local staff. 3.2 Individualism The Hofstede Centre (2014) describes Pakistan as a country with a low degree of individualism. House et al. (2004, p. 30) have coined the term institutional collectivism which reflects interdependence within individuals, group loyalty, deference to seniority and group decision making. On the other hand, individual goals are valued and individual contributions are rewarded in societies with low institutional collectivism (House et al. 2004, p. 459). According to the model adapted by Doole and Lowe (2001, p. 66), the urban Pakistani culture has a distinct social organisation on the basis of education (English and Urdu-medium schooling), material culture (Westernized or traditional), and language (English, Urdu and regional languages). These differences influence whether consumers are well-disposed to fast food consumption. According to Nasir (2004), the country has a high collectivist orientation which is reflected in the strict adherence shown by people to societal norms and standards without much critical reflection. Bashir et al. (2012) also state that despite increasing levels of education, Pakistani culture remains collectivistic mainly due to the benefits derived from group unity and receiving social support and acceptance in exchange for compliance. Appeals to individual tastes and values will not be accepted by consumers in this market. 3.3 Tolerance for Ambiguity Pakistan has a score of 70 for tolerance for ambiguity (The Hofstede Centre, 2014) which means that people prefer to avoid uncertainty. According to House et al. (2004, p. 618), such societies rely on formal means of communication and are highly resistant to change. Analyzing the religious and educational levels of the target market in Pakistan, it can be said that the target market is not strongly motivated by religion and has had a liberal western education. Hence, they would have a lower desire to avoid uncertainty. Nonetheless, increased competition in the industry has made fast food desirable for other demographic segments who are motivated by religious and traditional ideals. This reflects the need for Wendy’s to be very explicit in implementing its marketing campaign in the country. One of the most important thing is to explicitly state that all products served at Wendy’s are Halal. Low tolerance for ambiguity implies that local consumers expect clear and direct information about the product, price, and distribution from the company. Prices should also be stated in the promotional campaigns because consumers need to know if they can afford the product. 4.0 Strategic Benefits of Standardization/Adaptation International business managers are confronted with a dilemma about standardizing or adapting the marketing mix according to the needs of diverse host markets. This can be explained by the Schramm model of communication (Blythe, 2009) according to which a message is transmitted by the sender to the receiver and is followed by feedback which indicates the success or failure of the message. In deciding between the standardization and adaptation strategies, the management at Wendy’s should choose the option that minimizes the risk of noise and distortion affecting the content and transmission of the marketing campaign to the target consumer. Katsikeas, Samiee, and Theodosiou (2006) explain that finding a strategic fit between the marketing decision and the environmental factors. Either alternative may be chosen depending on the extent to which similarity exists between the environmental factors of the home country and the host country. Greater similarity between home and host countries offers an opportunity for the company to gain strategic benefits from standardizing its marketing strategy (Katsikeas, Samiee, and Theodosiou, 2006). 4.1 Strategic Benefits of Standardization Cheon, Cho, and Sutherland (2007) have developed important findings based on a quantitative study carried out by them. The authors propose that international firms stand to gain more by pursuing a strategy of standardization as opposed to adaptation of their international marketing strategy. At the same time, by standardizing production methods, companies can benefit from the low costs and efficiencies generated by standardized processing technologies. According to Kotler’s levels of the product (Kotler et al., 2009), the core product, generic product, expected product, augmented product and potential product are perceived in similar ways in different markets. Thus the features and needs of consumers in Pakistan and other markets are deemed to be similar. Similar views are expressed by Szymanski, Bharadwaj and Varadarajan (1993) who argue that in the case of western markets such as the United States, United Kingdom, Canada and Western Europe sufficient cultural similarities exist which make standardization of marketing strategies convenient, feasible and strategically advantageous for multinational corporations. Szymanski, Bharadwaj and Varadarajan (1993) suggest that not only the marketing strategies but even the allocation of resources among the four components of the marketing mix may be standardized when expanding to culturally similar markets. In addition to benefiting from similarities in the marketing mix, the corporation can also obtain strategic benefits by standardizing competitive strategies and performance indicators in international markets. 4.2 Strategic Benefits of Adaptation Brei et al. (2011) have been able to collect sufficient evidence to determine a clear relationship between the adaptation-standardization decision and the performance of the company. Adaptation can help to ensure that the preferred and efficient marketing media and symbols are used to facilitate effective delivery of the campaign under the Schramm model (Blythe, 2009). However, Brei et al. (2011) advocate an international marketing strategy based on adaptation instead of standardization, especially when entering a new market. They also argue that price is the first marketing mix element that should be adapted while distribution should be assigned the least priority. 4.3 Benefits of a Contingency Approach Virvilaite, Seinauskiene, and Sestokiene (2011) argue that international corporations should not get stuck in an all-or-nothing situation when confronted with the standardization versus adaptation situation. The authors argue that scientific research is in favour of adopting a contingency approach where the international marketer may choose any position along a standardization-adaptation continuum based on the conditions of the external environment and the resources and competencies of the firm. In terms of the Schramm model of communication (Blythe, 2009), a regional approach could enable the use of a common language, e.g. Arabic in more than one country for the advertising campaign. Similar appeals to popular culture, e.g. football, cricket, etc. could be used in campaigns for markets where these sports are popular. Unlike Katsikeas, Samiee, and Theodosiou (2006), Virvilaite, Seinauskiene, and Sestokiene (2011) do not find a conclusive relationship between the choice of standardization and adaptation, and the performance of the company. They argue that company performance both affects and is affected by the decision of the international marketer to standardize or adapt the international marketing strategy of the firm. 4.4 Implications for the Marketing Mix Ruzevicius and Ruzeviciute (2011) explain the strategic benefits of using the standardization or adaptation approaches to international marketing strategy development. The authors explain that each approach has its benefits and drawbacks; hence, international marketers should opt for the strategy that fits the environmental context of the target market. Separate channels should be made for each host market. Ruzevicius and Ruzeviciute (2011) focus on advertising and argue that when marketing a product in culturally dissimilar markets, corporations can pursue standardization of the central theme which should be based on universal values and ideals. According to Kotler’s (Kotler et al., 2009) levels of product the core benefit (hunger, socialization, relaxation), generic product (burger, fast food), and expected product (fresh ingredients, safe environment) should be similar while the augmented product (additional features, side orders) and potential product (spin-off products, special offers, seasonal offerings) should be customized according to the target market. At the same time, marketers should accommodate adaptation in their advertising campaigns by customizing the persuasive appeals, images and execution methods according to the sensibilities and local customs. Vasile (2008) argues with reference to the question of standardization or adaptation in international advertising strategy by stating that the decision is based on a consideration of environmental factors as well as motivational factors. Vasile (2008) states that two firms in the same industry and entering the same host country may arrive at a different decision based on their evaluation of environmental and motivational factors. A similar approach has been identified by Poulis and Poulis (2013) according to which international firms consider multiple contextual factors as opposed to a single criterion of similarities between home and host countries. Dimitrova and Rosenbloom (2010) discuss the standardization/adaptation issue from the perspective of the distribution function in international marketing strategy. They argue that in comparison with other three elements of the marketing mix, it is more difficult to achieve standardization in international distribution or placement which makes it necessary to accommodate an adaptation approach with regard to distribution. Dimitrova and Rosenbloom (2010) explain that as a result of “culturally distant distribution behavior” (p. 170) multinational firms are unable to standardize distribution channels in the short term. Furthermore, the distribution structures in each country are different and beyond the ability of a single firm to change them. Moreover, financial intermediaries in each country perform specialized roles unique to their particular business environment. Therefore, international firms are expected to adapt rather than standardize their distribution strategies according to the environment of each host country. 5.0 Conclusion and Recommendation On the basis of the foregoing discussion, it may be concluded that Pakistan shares a number of cultural features common with some markets already being served by Wendy’s especially the UAE. Pakistan is a deeply collectivistic society and has little tolerance for ambiguity, although higher than for the UAE. Power distance is a smaller part of the culture compared to UAE but it does exist. These factors have been shaped as a result of the religious characteristics of Pakistani society, low education levels and traditional norms and values which uphold respect for authority and acknowledge the influence of other social groups such as families and peers on individual decisions. It is recommended that Wendy’s enter the Pakistani market because the fast food segment is experiencing rapid growth and fast food consumption has become part of the urban culture in Pakistan. The product strategy should be adapted to accommodate local preferences for spicy flavours and Halal food. The price should also be adjusted to lower levels because Pakistan remains a low-income country. Discounts can be offered during the Ramadan festival. Central themes in the marketing campaign such as taste should be standardized while the campaigns should be communicated in the local Urdu language. The distribution strategy should be adapted by sourcing ingredients from local suppliers. References Bashir, M., Jianqiao, L., Abrar, M., & Ghazanfar, F. (2012). The organization’s cultural values: A study of public sector universities in Pakistan. African Journal of Business Management, 6(10), 3686-3693. Blythe, J. (2009). Key Concepts in Marketing. Sage Publications. BrandSynario. (2014). 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