Globalization has changed the nature and scope of strategies and competitiveness for many companies. The increased market liberalization, and fast circulation of information, has encouraged internationalize for many firms. However, exploring new international markets is an expedition involving various risks and involves the transfer of local market information within a diversified firm to help in its expansion into new markets globally.
More often than not the company is set to meet completely new kinds of challenges, which are more those it normally encounters while operating within the local market (Kurtz 2010, 56). These challenges include having to deal with unfamiliar laws and legal practices, having to deal with cultural barriers in the different host countries such as language and business practices and the possible lack of a brand name by the local citizens of the new country (Jakle 1999, 87).
In addition, the company is required to contribute a substantial investment before the business is up and running and to continue maintaining a bit of financial input even after the branches are up and running to expand and solidify its operations. However, to ensure that there is smooth flow of operations, constant supervision and follow-up of international activities, fresh and separate resources will have to be procured.
When a company is about to delve into the global market, it is necessary for it to use a systematic approach. This is because companies that are much more experienced at handling international negotiations and agreements can easily take advantage of lesser experienced companies. Therefore, a firm should closely and carefully assess comprehensive market analyses, look at optional strategies of entering the market as well as various partnership candidates.
For a company to be successful in the international market, it needs sufficient management resources coupled with international experience on negotiations and different forms of partnership. However if a company is already well versed with global agreements and franchising, then it is at a better advantage and a higher chance of success (Plunkett 2007, 54; Schaffer, Agusti & Earle 2008, 15).
For the case of fast food industry, it is equally essential to define the market appropriately. Fast food or quick service food (QSF) refers to foods which are cooked and served fast at home or in cafes (Schlosser 2001, 5).
The food is usually served to the consumers in form of packages for take-away. The outlets which concentrate in serving fast foods are known as fast food restaurants. They can be in form of stands or kiosks that do not necessarily provide cover or seating areas or they can also be within a building such as an eatery or a café. Most fast food restaurants operate through franchising as part of restaurant chains.
According to USA International Business Publications (2007, 81), “These franchise operations work with shipping off standardized foodstuffs to each restaurant from one central location. However, there are also restaurants where customers sit and place their orders which are then brought to them in a more upscale atmosphere”. These restaurants have high sit-in proportions and are also referred to as fast casual restaurants.
Taco Bell, one of the vastly global-recognized companies with franchises in many countries all over the world, is considering venturing into the new market, the Malaysian market. Taco bell embodies fast food restaurants that basically specialize in Mexican foods such as tacos, burritos, nachos and quesadillas delicacies. It is a subsidiary of Yum! Brands, Inc and has more than 5,800 restaurants in the United States alone.
The franchise which serves more than 2 billion clients each year has opened branches in various countries all over the world such as “Australia, China, Mexico, Singapore, and United Arab Emirates as well as in the United Kingdom” (Cavusgil et al. 2002, 54; Cohen 2005, 62). Despite its success in the international market, the restaurant continues to seek expansion and entry into untapped countries. One of these countries that Taco Bell is currently targeting is Malaysia.
With the occurrence of major changes in Malaysia due to rapid urbanization and thus changing of lifestyles, the fast food industry is undergoing tremendous growth. This is because the number of people who are eating out and buying fast foods has drastically grown over the last few years.
This has also caused the consumer’s choices of the types of restaurants they visit to be influenced and thus initiated a prosperous coexistence of traditional restaurants and fast food restaurants in Malaysia. Traditional restaurants are those that cover ethnic operations which mainly cover non-fast food services while fast foods are restaurants that offer quick services with minimum offering of dining facilities.
One of the main players in the Malaysian’s fast food industry is the KFC Holdings, a Malaysia-based investment company which currently holds other international franchises such as Kentucky Fried Chicken and Pizza Hut Chains in Malaysia, Singapore and Brunei. In addition, it also operates a locally grown chain of restaurants which include RasaMas, Ayamas kiosks and the Kedai Ayamas chain of convenience stores (Gomez & Persatuan Sains Sosial Malaysia 2004, 43).
The president of the company, George Ting is currently considering the opening of another franchise brand such as Taco Bell. This would be a good opportunity for the franchise which is the only brand missing from the other major franchises.
The fast food industry is gaining a lot of competition as other popular franchise brands are also being opened in the country. These are brands such as Nando’s, Pizza Hut and McDonald’s. It would be advisable for Taco Bell to open a branch in the country because franchising is quickly becoming a business model for the expansion of food chains in Malaysia. Even the home-grown restaurants are swiftly adapting this model and even expanding into the international market.
Even though setting up of a new restaurant needs a considerable capital lay-out and a large labor force, Taco Bell has a great advantage, since it has a sound financial backup. As other entrepreneurs seek to gather capital and workforce, it is much easier for a company such as Taco Bell due to the already available broad capital base as well as workforce. Thus it makes it easier and faster for the franchise to establish and grow its operations.
Therefore, with the evident growth of the fast food industry in Malaysia, it is imperative for Taco Bell to invest in that market. Additionally, the fast food industry is known to employ low skill people and serve high quality food at a good and reasonable cost. Through promoting the employment of lowly skilled citizens, the organization is able to provide a source of income for people who would not be otherwise, self-sufficient (Gupta and Lehmann 2005, 137).
Opening a franchise restaurant of Taco Bell in Malaysia would be advisable arguing from various perspectives of the industry. First and foremost, Malaysia has a well-to-do economy which is relatively state-oriented and newly industrialized. In 2007, Malaysia’s economy was ranked 3rd largest in South East Asia and 29th in the world.
This means that the citizens have the purchasing power and can afford Taco Bell’s products. In addition, it has had an annual growth rate 5% to 7% since 2007 meaning that urbanization is also on the increase and more people will be depending on fast food rather than traditional foods (PETA 2005).
In regard to the political and legal aspects, although Malaysia provides preferential provisions to its citizen residents over non-residents, “in job market, education, scholarships, business and access to housing and assisted savings, it greatly encourages foreign companies to invest in the country” (Armstrong Kotler & Brennan 2009, 98).
This is aimed at promoting the growth of its economy and provides simple and undemanding laws and regulations for the individuals or/and organizations that want to invest in their market. Adaptability and acceptance by the citizens is also made easier for foreign investors thus making it also easier for an investor to stabilize and grow.
Furthermore, most of the Malays love Western and American food, hence they are willing experimenters and easy to adapt to other cultures. This would be a great advantage to Taco Bell as it introduces its Mexican variety of fast food which is already accepted in the Western and American markets.
They would therefore also be most likely adapted quickly by the Malays. Bringing a new variety of fast food gives Taco Bell a big lead in the fast food industry in a country such as Malaysia. In addition, most Malays are Muslims who prefer eating outside and in large numbers. This culture of eating outside is not much different from carrying take-away and is thus not too much pressure for the Malays and neither is it too big of cultural difference that would be difficult to adapt.
Despite a decline in consumer spending, Malays have tied lifestyles, primarily because of the increasing urbanization; people prefer more home and office delivery packages. This is so because the time-strained urban dwellers and the young generation find home or office-deliveries a suitable alternative. To draw more consumers and grow its operations, Taco Bell should consider offering delivery services, for example “Nando’s introduced Peri Medic delivery in 2009” (Brohé & Howarth 2009, 64).
However, with all the opportunities in the Malaysian market every company needs to have an aggressive marketing and promotion strategy for it to successfully penetrate an untapped market. Especially when introducing new brands or products to the target consumers and the key concept should be the satisfaction of the consumers.
Letchumanan (2008, 25) defines a marketing strategy “as a course that an organization produces that lets the organization concentrate its limited resources on the greatest opportunities and thus increase sales and at the same time achieve a sustainable lead over its competitors in a particular targeted market niche”.
Generally, a marketing strategy comprises development of the production, its promotion and distribution, pricing of the product as well as management of relations between the organization and the workers and clients. Through the marketing strategy, the firm’s marketing goals are also identified together with explanation of how these goals are going to be achieved within a specific timeframe.
Therefore, an organization’s marketing strategy is what establishes its selection of target market sectors, the positioning it will take, the distribution of resources and the manner in which to mix the market.
Marketing is especially important in the fast food industry where there is a direct communication with customers. Since the customer constitutes the source of a company’s revenue, creating good relations is important and ensuring that the customer is satisfied is imperative. Marketing is closely connected with sales which are a major component of the fast food working environment.
So as to successfully implement the marketing strategy, certain tactics and actions are necessary. This is especially when an organization is entering into a new international market. A new market means new preferences, new tax rates, new laws and a new economy. Therefore, as Taco Bell strategizes on how to enter the Malaysian market, it is important to take note of its marketing strategy and how it will affect its financial system and its perception by the target market.
The strategies should be able to integrate the organization’s marketing goals and its policies as well as the laws and regulations of the host country. The mode of entry into a new international market is also an important factor. Robin (2006, 32) defines this “as the channel through which an organization plans to gain entry into the new international market. There are many alternatives of gaining entry into the market such as internet, international agents, strategic alliances or joint ventures”.
For instance, Taco bell should initially begin by introducing a low cost product to the Malaysian market. This will assist in attracting consumers and generating some interest from the target market.
After winning over consumers, a relationship is then established and should from then on be maintained, and it can introduce other high profit products and services that enable the customers to interact more with the low-end products. In addition, the organization can also launch advertisements from a few weeks before they open branches or immediately they do it.
This is done to ensure that the information is able to reach the target market in due time. Advertisements can be done through the media which include television, radio or through the mass media. Most of the people in the big cities and towns, who are the biggest consumers of fast food, also get their information and news through the media. They are therefore more likely to see such advertisements if they are in the media.
Internet marketing is also another form of marketing products. This can be done through the organization’s website as an early announcement. The current world is internet savvy and most young people survive on the internet and do almost everything they need via internet.
Thus marketing through the internet can be used to target young people who are also great consumers of fast food products. Furthermore, the company should introduce a sort of promotion especially after the higher-margin products are introduced. The promotions could be offers such as buy-one-get-one-free or giving out raffle tickets. This is to ensure that the company does not lose its attraction to the consumers. It also encourages them to keep coming back as well as maintenance of the working relations (Adams 2007, 65).
However, before venturing into the new market, Taco Bell needs to take a look at who the competitors are in the market. Here is a preview of Taco Bell’s main competitors: First,KFC, this is the largest quick service restaurant in Malaysia and it opened 20 new restaurants this year only. It opened its doors in 1973 and today it has a network of more than 390 restaurants in Malaysia. It is well known for its finger licking chicken.
Second, McDonald Malaysia, this is the second largest Quick Service Restaurant in the industry. It was established in 1982 and has expanded its chain outlets to 172 and continues to expand at about 10 to 15 outlets per year. McDonald Malaysia has over 7,000 locals on its employee list. Another major competitor is Subway, which was established in 2007 and is fast penetrating the market. As of 2009, Subway had 35 outlets, with a target of about 5 new outlets annually. Subway is synonymous for its sandwiches.
Burger King is ranked fourth by number of restaurants in “Malaysia’s fast food market, after KFC, McDonald’s and Pizza Hut.” It has more than 50 outlets and through its franchisee, Cosmo Restaurants Sdn Bhd, it plans to open up more than 50 stores nationwide in the next five years. Another competitor is Carl’s Junior, it opened its first outlet in Malaysia in August 2007 and has expanded its network of outlets to 45 with a plan of opening five outlets annually.
Although it seems that specific quick service restaurants are on every corner, and many keen competitors, there are still big opportunities to grow the franchise business. The industry is very vibrant and is expected to grow rapidly over the next five years, with new entrants in the market intensifying competition, and price wars among others. The industry has drawn many business entities in the area and to remain in business, a company needs to engage in extensive brand building programs.
Other distinguishing competitive factor is the “product promotion and social engagement, which is expected to increase the consumption of quality of foods” (Bramhall 2008).
This could provide a competitive edge for new entrants due to the increased lifestyle diseases, for instance high blood pressure, and heart complications among others. It also expected that the consumption of low fat foods and stores selling such foods is expected to rise. Taco Bell needs to do market segmentation in marketing its products; this involves dividing the target market into market segments.
A market segment is a sub-set of a market including individuals or businesses with common traits, which make them to require similar treatment in terms of quality of products. A perfect market segment should meet the following characteristics: “it is distinct from other segments (different segments have different needs), it is homogeneous within the segment (exhibits common needs); it responds similarly to a market stimulus, and it can be reached by a market intervention” (Ritzer 2004, 45).
The aim of segmenting a market is to enable the firm’s marketing or promotion plan to center on the sub-set of interests, which are probably going to buy what the firm is offering. Successful implementation of market segmentation will guarantee high returns for the marketing expenses. Depending on whether the firm is targeting individual customers or businesses, there are various things to take into consideration when segmenting its defining market.
As mentioned earlier on the Malaysia is a multicultural market, and is experiencing tremendous growth and has a lot of potential for new entrants in to the fast food industry. Because of to the rising consumer standards and purchasing power of the Malays that have led to an increase in the demand for high end services, this provides an opportunity for new entrants like Taco Bell.
Thus for Taco Bell to achieve a commercial advantage before the immense competition, it needs to develop various ways of imagining market segments and adopt a product differentiation approach to exploit these segments. These segments can be split along age lines, gender, price and interest lines (Goldstein 2007, 13)
Once Taco Bell has segmented its market, it needs to target the market segments. Target market also known as “target audience,” this is a group of customers, which the firm has decided to focus its marketing plan and its products. For Taco Bell to penetrate the market it needs to adopt a marketing mix strategy, which has a well-defined target market and considers the marketing mix variables, that are, “product, place, promotion and price” (Aaker Brumbaugh & Grier 2000, 127).
Taco Bell’s main target market can be the young urbanites that are hungry for fast foods and have the money to spend on quality products. After Taco Bell has segmented the market and defined a market target, the market segments are then subjected to positioning; this is ascertaining the perception of the customers of the products offered (Warner 2005, 230).
Although the Malaysian fast food industry offers a lot of opportunities for Taco Bell, the management should also be certain to face a lot of threats from rivalry to products competition. Thus, for Taco Bell to gain a competitive edge against its competitors it has to adopt effective production and marketing strategies that distinguish it from the other players in the market, for instance promoting health conscious products, participating in promotions, and opening outlets.
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