A Case of the Expansion of Quaker Steak and Lube - Report Example

International Marketing: A Case of the Expansion of Quaker Steak and Lube from the United s into Brazil Contents Introduction 3 Company Profile 3 Expansion Plan 3 Profile of Brazil 3 Structural Analysis 4 Marketing Mix 5 Product 5 Place 5 Price 5 Promotion 5 Justification of Market Entry 5 Risk Analysis 5 Recommendations for Market Entry 6 Bibliography 7 Introduction This report involves the formulation of a strategic marketing plan for Quaker Steak & Lube, an American fast food company that specializes in selling chicken wings, beef, potato chips and salads. The report will examine the first phase of a global expansion plan for the company that will target a group of continental giants that will culminate in a global expansion in the next five years when Phase 2 of the plan can be implemented. Company Profile Quaker Steak and Lube commenced operations in 1974 and it was aimed at getting people to grill their own meat (Quaker Steak and Lube, 2012). The company provides various opportunities to grill consumers’ meat with numerous forms of spices and this is served with various fast foods including salads and potato chips. The menu involves various kinds of combinations that are based on numerous Hispanic and other exotic cuisines and spice types. This includes starters, main means and desserts as well as drinks that are specifically made for customers of diverse backgrounds. Quaker and Lube opened up for franchising in 1997 and they continue to use vintage cars as means of advertising and promoting their products in the various outlets they have (Entrepreneur, 2014). The company currently has 65 branches and they are all located in North America, with 64 located in the United States and located in Canada (Boye, 2014). Thus, they have no global and international marketing plan, save for a plan primarily focused on the United States. The main competitive advantage enjoyed by Quaker Steak and Lube lies in the fact that they provide specialized services and products that are unique and distinct. And the marketing approach used by the firm is unique and distinct from what competitors offer. The presentation of various adverts steeped in automobile types that are paralleled with the American car industry. Each of the franchises has an average of $1 million in liquidity and $3 million in asset base (QSR Magazine, 2011). This means that the firm has an average of $65 million in liquidity and $200 million in assets. Expansion Plan As a strictly American entity, Quaker Steak and Lube has the potential of being exported to different parts of the world. However, for the sake of convenience, the expansion must be in two different phases. The first phase will have to focus on entering regional hubs that will aid further expansions in the second phase. Thus, for the creation and attainment of a logical procedure, Quaker Steak and Lube (QSL) will consider expanding to Brazil in order to gain access to Latin America as a prelude for expansion to other parts of the world. The core of the expansion will be from the company owned consolidated fund that includes money from their central operation and the 33 branches owned by QSL (Entrepreneur, 2014). Profile of Brazil The expansion location will be analyzed in this section in order to identify the opportunities for the growth and expansion of QSL. Brazil is the largest and most populous nation in Latin America (Hamilton & Webster, 2012). Brazil has most of the international food brands including MacDonalds and KFC, and the country is still opened to various local fast food chains (Harrison, 2013). Brazil has embarked on a national policy that is steeped in urban infrastructural growth based on safety, security and inclusion (Lohmann & Dredge, 2012) The business customs of Brazil are steeped in the business practices of Southern Europe (Harrison, 2013). The traditions are based on Catholic practices and this implies that most of the activities in Brazil. Also, the diversity that comes with European, Native American and African activities and processes creates a cosmopolitan atmosphere for the Brazilian business culture and systems. Brazil has a population of about 190 million and this includes people of a wide racial diversity (Hamilton & Webster, 2012). Portuguese remains the most popular language although a growing trend towards the speaking and usage of English in the commercial environment is growing. Taxation in Brazil is progressive in nature and the poor pay less, whilst the rich and super-rich pay a lot of taxes (Harrison, 2013). The corporation tax in Brazil is fixed at 34% on profits made within the economy (Harrison, 2013). The Gross Domestic Product of Brazil is over $2.2 trillion and the GDP per capita for Brazil stands at US$11,200 which makes it an above-average economy with a growing and thriving middle class (Lin, Edvinsson, & Chen, 2014). Brazil’s growing middle class implies that there is a major market for various products and services including the steaks and meat of Quaker Steak and Lube. Structural Analysis The main market structure in the United States seems to be feasible in Brazil because there are many extremely wealthy businessmen and potential shareholders who can acquire franchises in QSL in Brazil fairly easily. This is because most of the wealthy Brazilians have the propensity to acquire franchises and this means that the mixed franchising method and procedure can be applied to Brazil. Thus, 60% of the restaurants and outlets in Brazil could be owned by the American QSL whilst 40% could be opened to franchisees who can acquire different stakes and pay franchise fees each year. The Brazilian Reais is a somewhat volatile currency and it has inflated throughout 2014 due to various changes in economic activities. Therefore, there is the need for some degree of hedging to be put in place to ensure that investments and profits are hedged from the impacts of the volatility in the currency. Brazil is heavily connected to the worldwide web and there are numerous portals and outlets for Internet throughout the economy. Hence, there is a major e-commerce system that works reasonably well in Brazil and as such, there can be various online sales systems and structures that can be employed to promote and enhance e-commerce. Regional and global trade integration in Latin America is championed by Brazil. Hence, there is a good chance that Brazil could be a major launch-point for the growth of the business into the rest of the region. This will mean that Brazil could have 5 branches each in the major cities of Sao Paulo, Rio De Janeiro and Brasilia. This is because these major cities have international connections and tourists are more likely than not, to visit them. Hence, there could be a feasible market for at least 15 branches of QSL in these three cities. Other cities can have a further 5 branches of QSL and this will bring the total to 20 for the first 5 years of expansion into Brazil. Marketing Mix Each branch can sell the standard volume for a small branch of QSL in the United States. The main marketing mix will be as follows: Product The products on offer will be at the same level as the products sold in the United States. However, various Brazilian spices must be investigated and studied in order to integrate them. The products must be presented in Portuguese so that the average Brazilian shopper can get a fair idea of the product and offerings available so they can make a purchase. Thus, the product must blend elements of the Brazilian culture like the farofa and other meals that will make it look more like a local cuisine. Place The products of QSL in Brazil must be sold through high end destinations and expensive points in the three cities and other cities. This should include major malls in the prime locations of cities so they can target tourists and the young middle class members of the Brazilian societies. Price The price should be quite high as a means of promoting the products in an environment of ostentation. This is because expensive products with an American dimension will present the products to be rare and unique. This will help to promote the products and enhance results. Promotion The promotions should be done through mass communication, but this must be done through the presentation of adverts through channels of expensive programs that showcase high end products. This includes telenovelas and other activities of repute and importance in Brazil. Justification of Market Entry The main reason for the expansion into Brazil is the possibility of expanding into the rest of South America and subsequently into the BRICS bloc, which include Brazil, Russia, India, China and South Africa. This will pave the way for the expansion of the QSL brand into different regions of the world and this can potentially make the brand a global brand with a presence in all the continents and regions of the world. Risk Analysis The largest risk to this expansion drive is the language barrier that comes with operating in a Portuguese country. Portuguese countries like Brazil have their own popular brands that they are connected with. Hence, there is a major issue that might come with the anti-American sentiment which is growing in other parts of the world and can potentially stand in the way of this expansionist plan. There is the risk of regulatory and taxation rigidities that might stand in the way of the expansion into Brazil. This is because in Brazil, the idea is to maintain a welfare state whereby the poor are protected from the negativities and challenges of exploitation. Therefore, in spite of the fact that Brazil is not likely to expropriate QSL’s investments like a rival nation like Venezuela, there is the risk that Brazil might set up policies that might not be friendly to the organization and this might come in the form of high taxes and unfair regulations. Taxes at 34% are generally high, and as such, QSL might want to consider other approaches and views of conducting business. Recommendations for Market Entry In order to prevent the effects and impacts of these barriers on QSL’s expansion into Brazil, there is the need for the firm to set up important processes and important systems that will ensure that they overcome the different challenges. First of all, language barriers must be overcome by the positioning of QSL as a local Portuguese brand and a local entity. This will include the presentation of the brand in a positive light to ensure that all the matters and issues that are presented in their marketing and signage is translated to Portuguese and an emphasis is placed on the fact that QSL is a Brazilian owned and controlled entity. To this end, there must be Brazilian investors involved in the firm’s activities and there must be important arrangements to include Brazilian managers and board members to provide a localized face for operations. Secondly, QSL must position itself as a major luxury or high-end brand. This is because in cases where they are presented as an ordinary every-day brand, they are going to face challenges which include major competition from many cheap eating places. So the emphasis of QSL should be on ostentation and internationalization. This should encourage high spending to attain higher levels of profitability which will in turn lead to better results and higher levels of profits. Higher profits will mean that the company will not feel the high effects of taxes. And this will mean they will retain a high level of profits that can be distributed to shareholders. Thirdly, QSL Brazil must capitalize on the advancement in electronic commerce and this will mean the company will be able to offer their services online through a network of online marketing systems and a competent delivery process that will enable the company and its units to provide services to consumers in various metropolitan areas of Brazil. This will lead to better results and more convenient services to all and sundry. Finally, the global plan must be emphasized in QSL Brazil’s operations and this must be presented as a means of communicating with consumers by letting them understand that Brazil is a major and leading country. Through this, they can promote the Brazilian brand and attain brand convergence so that consumers and investors become interested in supporting QSL Brazil to attain growth and higher earnings in their operations. Bibliography Boye, K. (2014). Youngstown State University. New York: College Prowler. Entrepreneur. (2014, February 4). Quaker Steak and Lube. Retrieved from Franchises/Food/Misc Full Service Restaurants: http://www.entrepreneur.com/franchises/quakersteakandlube/329446-0.html Hamilton, L., & Webster, P. (2012). The International Business Environment. Oxford: Oxford University Press. Harrison, A. (2013). The Business Environment in the Global Context. Oxford: Oxford University Press. Lin, C. Y., Edvinsson, L., & Chen, J. (2014). National Intellectual Capital. New York: Springer. Lohmann, G., & Dredge, D. (2012). Tourism in Brazil: Environment, Management and Segments. New York: Routledge. QSR Magazine. (2011, October 19). Quaker and Lube Stake. Retrieved from Restaurant Franchising: http://www.qsrmagazine.com/content/quaker-steak-lube Quaker Steak and Lube. (2012, December 4). History. Retrieved from The lube: http://thelube.com/history/ Read More