Market Entry Analysis - Oporto Fast Food Restaurant - Essay Example

Oporto Fast Food Restaurant Executive Summary The concept of globalisation has led to organizations spreading their wings across geographical boundaries. The study deals with the concept of global market expansion and the marketing strategies that must be followed by an organization so as to be successful in the global arena. The firm chosen for the study is Oporto Restaurant which is a restaurant chain based in Australia. In order to find out the best strategies for expansion an environmental analysis covering political, social, economical, technological, legal and environmental factors for the two countries has been carried out. This would shed light as to which country would offer greater prospects for the Australian firm. A firm intending to expand into international markets must understand its present strategies. An analysis of the elements of marketing mix has been undertaken in this study to analyse its currents marketing strategies. The study also undertakes a SWOT analysis of the firm. Table of Contents Company Background 4 Elements of Marketing Mix 4 Market Analysis through PESTLE framework 5 Industry Analysis through Porters Five Forces 8 Decisions based on which the most appropriate country has been chosen for the product 9 Recommended Market Entry Strategies 10 References 10 Appendix 13 Company Background Oporto restaurant is an Australian based chain of restaurants, which has its specialties in Portuguese style of chicken preparations. The firm was established in the year 1986 by Mr. Antonio Cerqueira and presently operates in both dine in and take away formats. Presently Oporto restaurant has its branches spread across Australia, China, New Zealand and the United Kingdom (Oporto-a, 2010). Elements of Marketing Mix Marketing mix implies a firm’s strategies with respect to product, price, place, promotions people, process and physical evidence. Product Oporto Restaurant is a specialist in Portuguese Chicken preparations. The firm claims to be the best in the industry with respect to Portuguese chicken preparations. The Bondi Burger is the main product offering of the restaurant chain. The other products of the chain include rolls, salads, rappas and grilled chicken (Oporto-b, 2010). Price Oporto follows a mixed pricing strategy. Most of its products are ‘take-away’ in nature. The firm also has a premium priced unit (banquets) to cater to the premium segment of the target market. The firm intends to target a large customer base due to which it follows a mixed pricing strategy. Place Oporto is primarily based in Australia where majority of its outlets are located. Overseas locations include UK, China and New Zealand. Promotions The promotional strategies of Oporto include advertisements of various media channels which include both the print as well as the electronic media. Most of their promotional stuffs revolve around promoting their unique Portuguese recipes for burgers, rolls etc. The company started promotional campaigns like “Go otropo”, “Fiesty” and chicken BLT Rappa (refer appendices) (Oporto, 2010). People The people aspect includes all the people associated in the restaurant/firm who are responsible for providing service to the customers. Oporto has ensured that it has well trained staffs that cater to the varying needs of the customers. Process The restaurant claims itself to be one of the best in providing quality products to its customers. The firm has ensured strict quality standards for the foodstuffs that are provided at the restaurant. Physical Evidence The restaurant has many formats like dine in, take away etc. The firm has ensured a dynamic ambience for its customers especially in the banquets format that caters to the needs of the premium customers (refer appendices for a view of the interiors of the banquets). Market Analysis through PESTLE framework A market analysis has been done for the two countries in order to highlight on the marketing environment of the two. This has been done using PESTLE analysis. PESTLE analysis focuses on the “potentially relevant factors in the external environment” (Institute of Leadership and Management, 2007, p.23). Political The Brazilian political scenario is characterised by a diverse socio-economic culture. The country’s government has been increasing its participation in the economy and has tremendous respect for its investor’s contractual rights (EDC-a, 2010, p.2). On the other hand political condition in Russia is not very sound. The recession has had a drastic effect on its economy which is still on its path of recovery. The political power remains highly centralised in the hands of the President and his administration which influences all domestic as well as foreign policies in the economy. Since investment and trade matters forms strategic aspects of the domestic and foreign policies, these are taken care of by the government; this leaves little room for the private sector to operate freely. Thus the fast food restaurant in Australia would find a more flexible environment, free of restrictions in Brazil than in Russia (EDC-b, 2010, p.2). Economic The Russian economy has undergone dramatic changes after the Soviet Union collapsed. For a long period of time it remained globally isolated. The economy has been undergoing privatisation in all sectors, with a few exceptions in the defence and energy sector. The excessive reliance on exports makes the country vulnerable to the booms and depressions in the global economy (Central Intelligence Agency-a, 2010). Brazil, on the other hand is characterised by well developed agricultural, manufacturing and services sector. The Brazilian economy has surpassed all the other countries in South America and has made its presence felt in the global market. It has achieved macroeconomic stability which favours the establishment of new firms in the economy. Thus, Brazil forms a more stable economy between the two (Central Intelligence Agency-b, 2010). Social The present social structure of Brazil is divided into the upper class of wealthy people and the lower class of poor. There is growing emergence of the new classes in society. This new class is catalysing the process of emergence of the modernised society. The society is gradually transforming itself from an agrarian one to a modernised one (Wellims, 1970). The Russian social structure, on the other hand mostly comprises of an agrarian society, which is in the process of modernisation. It is still in an unstable state. This makes it unfavourable for the establishment of new firms, in comparison to Brazil (Chernov, 1923). Technological Brazil is a leader in the field of science and technology in South America, and has emerged as a world leader in fields such as agricultural research, bio-fuels, remote sensing and oil production in deep sea. (U.S Department of State-a, 2010). The Russian education system has also been progressing fast. It has produced a literacy rate of 100%. While establishing a firm, one of the key factors determining the decision of investors is technological condition of the nation. Keeping this fact in mind, Brazil would be better choice for investing than Russia (U.S Department of State-b, 2010). Legal Foreign Direct investment constitutes an important chunk of the revenue of Brazil. Foreign investments do not require government approvals and authorisations. Also the nation does not specify any minimum investment that firms need to invest. (Lex Mundi, 2006, p.6). The legal conditions in Russia are also favourable for making investments. “The law on Foreign Investments guarantees foreign investors the right to invest and to receive revenues and profits from such investments, and sets forth the terms for foreign investors’ business activity on the territory of the Russian Federation” (Baker & McKenzie, 2009, p.6). There are laws to protect foreign investors in Russia, but the nation encourages investments in certain specific sectors only, such as heavy industries and infrastructural projects. The idea of establishing a fast food restaurant would not be a favourable one. Brazil on the other hand has a more flexible approach towards foreign investors. Environmental Russia continues to be in the process of establishing its position in the world. Although it’s foreign policy towards Europe and United States have improved, this bond has been put on test on many occasions. The Brazilian economy on the other hand has a more friendly relationship with nations. This makes it a popular place of investment for investors. Industry Analysis through Porters Five Forces The project tries to bring out and analyse the competitive forces that works for the Oporto Fast Food Restaurant. These forces have been discussed at length as below; Risk of entry of potential competitors: In the search for growth opportunities and new markets, a number of fast food companies in US are trying to expand their operation in Latin America. This means that Oporto has to face fierce competition from them. Intensity of rivalry existing among companies in the industry: Few of the established fast food restaurants in Brazil are McDonalds and Burger King. McDonalds has established itself in the market since 1879 and has several units across the nation. The bargaining power of buyers: Since there are too many similar companies in the same industry, it is likely to have a strong customer base as well. Consequently, intense rivalry among competitors strengthens the bargaining power of customers (BNET, 1993). The bargaining power of suppliers: The Brazilian fast food market has been showing significant rise in sales. The industry’s sales have grown by 15% during the second quarter of 2010, amounting to $173.4 million. An increase in sales calls for an increase in the number of suppliers, consequently weakening their power to bargain (Trading Markets, 2010). The closeness of substitutes of the product: All fast food restaurants offer certain common items in their menu, and so does Oporto. But recently, it has introduced new flavours which have not been explored by its competitors. Decisions based on which the most appropriate country has been chosen for the product During the course of the project it was found the Brazil happens to be the more appropriate country for expansion of the company in comparison to Russia. This may be concluded from a number of aspects. Firstly, Brazil offers a very flexible legal system with a view to attract foreign investments. This has made it a popular place of investment by foreign nations. The Russian economy, on the other hand is characterised by a more stringent legal system. Brazil also has favourable relationship with other nations. Recommended Market Entry Strategies The Brazilian economy is characterised by a diverse social structure. The economy is divided into the class of poor and the rich. The firm is recommended to tap the growing urban class of people. Tapping the ever growing modernised society successfully would yield enormous revenues for the company. Success of the company would depend on developing a favourable relationship with the suppliers. The same is recommended in case of the customers and employees. Since the market is already flooded with similar companies offering similar product, the company is recommended to resort to extensive advertising and media intervention as a measure to penetrate into the market. Lastly, the company is recommended to highlight on its unique characteristics to draw customers, instead of entering into fierce competition. References Baker & McKenzie. (March 2009). The Foreign Investment Law. Doing Business in Russia. Retrieved on September 3, 2010 from http://www.bakermckenzie.com/files/Publication/5eae51a5-c461-458f-807e-2f81378eff4e/Presentation/PublicationAttachment/d7f9c7d3-8364-4f0f-9ade-368bfd061aa3/bk_russia_dbi_2009.pdf BNET. (September 1993). Brazilian Market Beckons US Fast-food Arms. Retrieved on September 3, 2010 from http://findarticles.com/p/articles/mi_m3723/is_n9_v5/ai_14298025/ Central Intelligence Agency-a. (August 19, 2010). Economy Overview. The World Factbook. Retrieved on September 3, 2010 from https://www.cia.gov/library/publications/the-world-factbook/geos/rs.html Central Intelligence Agency-b. (August 19, 2010). Economy Overview. The World Factbook. Retrieved on September 3, 2010 from https://www.cia.gov/library/publications/the-world-factbook/geos/br.html Chernov, V. (1923). The Disintegration of Social Classes in Russia. Retrieved on September 3, 2010 from http://www.jstor.org/pss/20028270 EDC-a. (August 2010). General Political Environment. Brazil. Retrieved on September 3, 2010 from http://www.edc.ca/english/docs/gbrazil_e.pdf. EDC-b. (August 2010). General Political Environment. Russia. Retrieved on September 3, 2010 from http://www.edc.ca/english/docs/grussia_e.pdf. Institute of Leadership and Management. (2007). Pestle Analysis. Marketing for Managers. Elsevier. Lex Mundi. (February 2006). Legal Aspects of Doing Business in Brazil. Retrieved on September 3, 2010 from http://www.lexmundi.com/images/lexmundi/PDF/guide_brazil.pdf Oporto Restaurant (2010). Promotions. Retrieved on September 03,2010 from http://www.oporto.com.au/promotions/. Oporto Restaurant-a (2010). About us. Retrieved on September 03,2010 from http://www.oportohartford.com/about.html Oporto Restaurant- b (2010). Menu. Retrieved on September 03,2010 from http://www.oporto.com.au/menu/. Oporto Restaurant-c. (2010). Banquets. Retrieved on September 03,2010 from http://www.oportohartford.com/banquets.html. Trading Markets. (August 18, 2010). Brazil Fast Food Releases 2Q 2010 Results. Retrieved on September 3, 2010 from http://www.tradingmarkets.com/news/press-release/bobs_yum_brazil-fast-food-releases-2q-2010-results-1120147.html Wellims, E. (1970). Social Differentiation in Colonial Brazil. Retrieved on September 3, 2010 from http://www.jstor.org/pss/178149 U.S Department of State. (February 5, 2010). Environment, Science, and Technology. Background Note: Brazil. Retrieved on September 3, 2010 from http://www.state.gov/r/pa/ei/bgn/35640.htm U.S Department of State. (June 14, 2010). People. Background Note: Russia. Retrieved on September 3, 2010 from http://www.state.gov/r/pa/ei/bgn/3183.htm Appendix SWOT Analysis Internal Factors External Factors Internal Strengths (S) Internal Weaknesses (W) External Opportunities (O) 1. Oporto’s unique food items with unique flavors, which have not been explored by its competitors. 1. Being a new market entrant, it is yet to yet to build relationship with suppliers, customers and employees External Threats (T) 1. Entry of foreign competitors into the Brazilian market. 1. Existence of already established fast food companies, like McDonalds, Burger King and KFC. 2. The domestic market already saturated with companies from the same industry. Fig. 1: The Go Otropo promotional campaign. (Source: Oporto, 2010) Fig. 2: The Fiesty promotional campaign. (Source: Oporto, 2010) Fig. 3: The Fiesty promotional campaign. (Source: Oporto, 2010) Fig. 4: The interiors of the restaurant(banquets) (Source: Oporto-c, 2010) Read More