Executive Summary
The report presents expansion opportunities for Nando’s in Tenerife, Spain. Nando’s is known for its flame-grilled chicken. The casual dining restaurant now offers its services in more than 30 countries served with over 1,000 retail outlets. Over the year, Nando’s has relied on its peri-peri chicken to expand internationally by focusing on western, Asian, Oceania, Middle East, and Africa countries.
Tourists from the EU member states drive Tenerife’s economy. Besides, crises in other countries have made Spain a better alternative. While the economy has performed dismally since the recession, 2014 marked a significant shift towards recovery. As such, Nando’s can expand into Tenerife and claim some share of the emerging market.
Both PESTEL and SWOT analyses show that Nando’s enjoy some specific advantages, and it can still exploit available opportunities while improving on weaknesses and mitigating threats in the new market.
Most factors favor the company. Nevertheless, Nando must understand Tenerife’s unique culture, food preferences, eating habits, and the best practices in advertisement and promotions.
Overall, it is recommended that Nando’s should expand to Tenerife, but it must focus on mitigating fierce competition from other global brands, such as McDonald’s, Burger King, KFC, and other local casual dining outlets.
Introduction
This report presents Tenerife, Spain as a possible location for Nando’s expansion in the global market. It is generally observed that influences of Spanish on cultures of the Canary Islands are widespread and notable on traditions, customs, and other common cultures found the Islands, including Tenerife (Tenerife 2016).
Tenerife has rich and exciting cultures typically reflecting the Spanish way of life. Spanish cooking significantly influences gastronomy, fiestas, and some holidays, including the Semana Santa or Holy Week (Tenerife 2016). One must observe that Tenerife is a relatively small island located in the Atlantic Ocean, and it is therefore prone to foreign influences as many cultures visit the Island in a year. While Tenerife has experienced different cultures, the natives have always maintained their traditional practices.
Tenerife’s economy is developed on fanciful attributes. That is, its sunny beaches, excellent hotels, and exciting attraction sites among other places of interest have attracted millions of tourists annually. In fact, Tenerife is among the top tourist attraction places for holidaymakers. As such, tourism is the leading sector in Tenerife. It is responsible for a significant share of the Euros going into the country’s economy.
The canaries are also recognized for agricultural activities, but these activities have declined to owe to crop diseases and climate change. Besides, the cochineal industry deteriorated because of fierce competition from synthetic products. Today, Tenerife is known for its fruits and vegetable farming. Bananas and tomatoes are now common on the Island.
Tenerife boasts of a wide variety of foods. Its gastronomy consists of Spanish dishes that have been influenced by Latin American and Africa (Tenerife 2016). Of course, Tenerife has some traditional dishes, and they are available across different hotels and restaurants on the Island. Besides, there are also other exotic dishes in Canarian menus. There are some typical common cuisines on the Island. For instance, stew stuffed with the best cuts of meat, which originate from mainland Spain and South America are popular, as well as fresh vegetables from around the best markets on the Island.
Gofio is considered the staple and main dish of the native people of the Island. Also, other popular dishes include papas arrugadas (wrinkled potatoes), great seafood and fresh fish, and sugary dessert. Tenerife also offers fresh fruits and a local beverage ron miel among others. Hence, the Island has multiple selections of dining options (Tenerife 2016).
From a cultural and economic analysis perspective, tourism-related activities are responsible for Tenerife’s economic prosperity. In fact, Tenerife is recognized for its carnival and other great archeological sites. These traditional celebrations give visitors opportunities to sample various cuisines found in Tenerife (European Commission 2014). According to the European Commission, about 11.5 million tourists visited the Canary Islands in 2014. Tenerife attracted about 4.1 million visitors to those visitors (about 30% of the total number of tourists that visited the Canary Islands). Most tourists to the Islands originate from the UK. In fact, in the year 2014, about 3.98 million tourists came from the UK. Other source countries include Sweden, Norway, and other EU member countries. Overall, cultural, and economic situations present greater opportunities for restaurants and hotels to expand in the Islands.
Market Audit and Competitive Market Analysis
Evaluation of the Product as an Innovation as it is perceived by the intended market – Rogers’ (1962) framework
Relative advantage
Nando’s is perceived as a global brand that is popular in European countries. Now, the brand is making inroads into Asian and Middle East markets. On this note, its planned presence in Tenerife is economically profitable while customers will enjoy their favorite delicacies while on holidays. Hence, Nando’s will offer economic and social advantages to travelers (Rogers 1983).
Compatibility
Casual dining is generally associated with tourists. Nando must have ensured that its practices are consistent with the existing values, experiences, and needs of Tenerife. Nando’s is known for some controversial advertisements. To avoid retribution, the restaurant will ensure that its practices are consistent with the values and needs of Tenerife.
Complexity
Nando’s is not a complex restaurant to understand. Its dishes consist of a flame-grilled peri chicken. Besides, it also offers burgers, salads, pitas, wings, and wraps. These foods are not complex commodities to offer in Tenerife.
Trialability
Although chicken is a popular delicacy globally, some individuals or tourists will have to ‘taste’ it first before buying. Hence, Nando’s should offer free dining during the launch to convince such customers on the quality of its foods.
Observability
With the flame-grilled chicken served in different sizes, customers can observe and understand the Nando’s products. In fact, Nando’s ensures that its chicken visually appeals to customers.
There are most likely to be no major problems and resistance to Nando’s acceptance based on the preceding evaluation. Most tourists that frequent Tenerife originates from the UK. In the UK, some of these tourists have already experienced Nando’s. Hence, the brand will be well-received among tourists from the EU.
While these elements of innovation favor Nando’s, it must however recognize that entry into foreign markets has its challenges (Sahin 2006).
The market
Description of the market
Geographic regions
Nando’s is currently available in more than 30 countries with nearly 1,000 outlets. These markets are mainly located in the UK, the US, Canada, Africa, Asia, and the Middle East regions and, thus, it is now perceived as a global brand. An entry in Tenerife will be a boost to the brand.
Spain currently enjoys the tourism boom because of troubles in the Middle East, North Africa, and Russia among others (USDA Foreign Agricultural Service 2015).
Forms of transportation and communication
While Nando’s originated from South Africa, it now focuses on the developed western countries and other emerging economies, which have advanced transportation and communication networks. These channels allow for quick distribution of its products (Gioeli 2014).
Consumer buying habits
Increasing demands are responsible for most quick-service players’ rapid growth. Consumers now expect higher-quality healthy products served in a fast-casual setting (Soler, Gil, & Sánchez 2002). It is currently observed that the growing demand for flame-grilled chicken will not end soon (Jennings 2016). Nevertheless, shopping habits among consumers have changed as they now focus on fresh, better quality, and products with great tastes.
It is imperative to note that flame-grilled chicken offers a distinct taste that differentiates Nando’s chicken from its competitors (Wolf 2014).
Distribution
Nando’s generally relies on its retail outlets to distribute the product. Nando’s also uses franchise to distribute its flame-grilled chicken globally (Nando’s 2016; Luxenberg 1985).
Advertising and promotion
Nando’s advertisement messages are meant to evoke a response. The most common advertising media are traditional media, consisting of television ads, online promotions, and magazines.
Nando uses different sales promotion techniques, including vouchers and discounts, buy 3 get 1 free, free food sampling, bring a friend promotion, and the use of loyalty cards among others (Haggerty 2013; Brown 2013). In fact, Nando’s black card offers free food for life its holders (Nando’s 2016).
Pricing strategy
Nando’s pricing strategy is based on affordability relative to its competitors (Warner 2006). The price offered however depends on the location of the retail outlet. That is, developed countries attract high price tags than countries like Africa. Nando’s considers other variables, such as raw materials, labor costs, and even the disposable incomes in some countries for price markups. Also, the discount is based on promotional approaches, including ‘buy three get one free’, and free meals for life among others.
Comparison of Nando’s and the competition’s product(s)
Competitors’ products
In Tenerife, Spain, Nando’s will have to compete with global brand names, such as MacDonald’s, KFC, and Burger King, as well as other local casual fast-food restaurants, including Bar Restaurante Vietnam, Chipssy, Casa Peter, and Enjoy Urban Diner among others. Their products are nearly similar with minimal differentiation in terms of tastes and size, but local restaurants offer more varieties with traditional recipes (Pollan 2009).
Prices
Nando’s offers relatively affordable prices compared to other global brands, such as MacDonald’s, KFC, and Burger King. However, it will have to understand the local Tenerife market to develop its pricing strategies (Lichtenberg 2012).
Promotion and advertising channels
Television commercials, magazines, and the Internet have become the major tools for promotion and advertising for the casual dining industry.
Distribution
All these restaurants use the same means of distribution – retail outlets strategically located in popular streets.
Market size
Estimated industry sales
Estimated sales for Nando’s for the planning year
After the entry, Nando’s will claim about 0.5% of $17 billion noted in 2014.
Government participation in the marketplace
Agencies that can help
- Ministry of Health, Social Services, and Equality
- Spanish Consumption, Food Safety, and Nutrition Agency
- Ministry of Agriculture, Food and Environmental Affairs
- The Mercantile Register
- Help Desk for Entrepreneurs for filing the Single Electronic Document (DUE) (The World Bank 2016)
- Town Council
- Dirección General Trabajo
Regulations
Nando’s will not face major obstacles because Spain largely uses the EU rules and regulations, but some laws defined to meet local conditions are necessary to follow (Kapelko, Lansink, & Stefanou 2015).
PESTEL Analysis
Political
Spain is politically stable. The country’s tourism boom has resulted from other politically unstable countries in the Middle East, North Africa, and Russia’s economic crisis.
Economic
The country is slowly emerging from its worst economic crisis of 2008 to 2013. Since 2014, the country has focused on a recovery path, and the trend is expected to continue. Hence, Spanish consumers will spend more on foods.
Social
Social activities, including festivals and other forms of celebrations, are responsible for attracting a large number of tourists to the country. Nando’s will benefit from these social activities.
Technology
Modern restaurants are technology-driven to cut costs and enhance efficiency. Nando’s must acquire the necessary technologies to compete effectively in Spain.
Environmental
Environmental affairs have become critical factors for consideration among tourists. Nando must be environmentally friendly by engaging in real conservation efforts and limit any possible pollutions. Food must meet all required standards under the law based on sourcing and preparation.
Legal
No major obstacles are observed in Spain to bar Nando’s entry. It must however under the EU laws and regulations (Nando’s operates in many EU member states), as well as local laws and bylaws (Hvam 1999).
SWOT Analysis
Preliminary Marketing Plan
Mode of entry
Effective entry into the Spanish market needs local representation and personal contact.
Marketing objectives
- Target markets: tourists, women at workplaces, younger consumers, households with children, and single individuals (Beck 1998).
- Expected sales: 0.5% of the noted $17 billion and other sales from convenience, fast service, and self-service
- Profit expectations: about 20% of the revenues
- Market penetration and coverage: to reach about 30% of the market within the first six months
Product/service adaptations
Quality: Nando’s must maintain the quality of its flame-grilled chicken and improve tastes with Spanish ingredients
Physical and/or mandatory requirements and adaptation: Nando will consider legal, economic, political, technological, and climate issue in Spain. Packaging, eco-friendly label, food, and cultures will play critical roles in adaptation (Rao 2010).
The product line
Nando’s will offer flame-grilled peri chicken, burgers, pitas, salads, wings and wraps, and other chicken-related products. It should also include other popular local Spanish dishes.
Branding policy
Nando’s branding will reflect norms, values, and behavior patterns of the local markets and targeted tourists.
Promotion Strategy
Promotion options
Nando’s will adopt personal selling driven by employees, sales promotion, and advertising, including mobile and online.
The objectives for using these promotional tools
- To reach different target market segments;
- Create massive awareness;
- Let consumers sample free meals.
Advertising and media strategy
Nando’s is a global brand. The company will use both local and global campaign strategies to reach all local consumers and global tourists.
Promotion strategy and target markets
Some promotions will be defined to appeal to local Spanish consumers while global promotions will target tourists from the EU and other locations.
Distribution Strategy
Distribution strategy
Nando’s will use retail outlet chains spread in strategic streets to reach the maximum possible customers.
Infrastructure environment impact
This will promote ease of access for both locals and tourists.
The specific types of distribution
Nando’s will consider restaurants with tables, self-service, fast service, drive-through, and vending machines on a large-scale distribution strategy
Export as a mode of entry
Spain generally relies on exported food products. Air transport and port will be the most preferred means because of convenience.
Documentations and regulations
- Bill of Lading and/or Airway Bill.
- Commercial Invoice.
- Phytosanitary Certificate and/or Health Certificate when applicable.
Channel partners
Nando’s will offer attractive profit margins for potential franchisees and partners.
Market problems
Nando will face the possible presence of unregulated competitors and poor quality chicken products at low costs.
Pricing Strategy
Costs
All costs and profits will be considered in a low-cost strategy.
Market factors
Competition, product suppliers, consumer habits, and labor costs will force Nando’s to find the perfect balance in pricing.
Competitive factors
Nando’s will adopt low prices to fight fierce competition from major rivals.
Government policies and pricing strategy
There are no government controls on prices.
Exchange rates
A strong Euro will favor Nando’s, South Africa.
Proposed pricing strategy
Low prices to acquire market share quickly.
Conclusion
The report presents expansion opportunities for Nando’s in Tenerife, Spain. The report shows that Nando’s is favored because of its presence in other EU member states. As such, the company will not face unfamiliar legal environments, tourist cultures, behaviors, and spending patterns. It should only work on product customization and better pricing strategy to launch in Spain.
Reference List
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