Introduction
Tim Hortons is currently the leading publicly traded restaurant in Canada and also the fourth largest traded restaurant china in North America when it comes to market capitalization. Tim Hortons are the greatest market share in breakfast and snacking and number two market share in lunch day part in Canada. However, the company needs to pay more attention to their growth and development in other markets globally in order to be a true spearhead in the industry. The success of the company is attributed to the fact that it enjoys it inhabits a smaller market when compared to markets in US, India and China (Weatherby, 2016). In India and China, there has been an increasing trend of coffee drinkers hence Tim Hortons expansion in China will play to their advantage. This type growth has been seen in McDonalds, which is the equivalent quick service restaurant industry to Tim Hortons. Even with the motivation that Tim Hortons should expand its market to China, financial challenges are likely to hinder their progress. This is because financial investments and cash are key to developing the brand image in China (Weatherby, 2016). It is in this regard that the company should have a strategy of entering into the market since they already have a good foundation in terms of leadership structure in Canada and market share.
The global market is gaining popularity owing to the overcrowded market and less profit within the local setup. However, before companies can operate in the global market, they need to come up with entry strategies to remain competitive in the foreign country. As attributed by Koch (2001), global market expansion needs a detailed understanding of the foreign market with the external environment being considered as a major barrier. In an attempt to increase the conditions of making profits, the company needs to have various strategies that are aimed at boosting the performance. However, it is important to note that there are various challenges that are likely to face internationalization of Tim Hortons including trade barriers, exposure to the labor market, financial constraints, productivity and technological issues hence limiting the effectiveness (Koch, 2001). Currently, there is limited information on the strategies that can be used in order to gain the international market, hence the focus of this study. Even though this area has been covered by other researchers, the internationalization process will always have a new dimension due to the changing business strategies.
2.1 Research Objectives
Entering into new market may is always a challenging task for companies. However, with the right strategy and ability to react accordingly can help in making the difference on success or failure. This research will look into the Market Entry and Operational Strategies, of Tim Hortons to Chinese market
- To analyze the motivation for overseas expansion of Tim Hortons
- To understand the entry strategy of Tim Hortons in Chinese Market
- To analyze the barriers to the operation of Tim Hortons in China
- To explore measures to address the barriers faced by Tim Hortons in China
Literature Review
The motivation for overseas expansion
The position of China in terms of market share has been growing in the global strategy. The 21st century has seen the country having rapid growth in terms of economy, increasing diverse links, quality of life, modern life, coffee and gradual fashion. There is an increasing number of coffee consumers that has led to the increase of potential consumers in the market. Coffee industry is joining the 25% growth rate while the café on the other hand becoming a highlight of the urbanization progress and economic growth. Based on surveys, 32% of urban residents in China are drinking coffee. According to the market and consumer data provider; Statisca, coffee and tea consumption in China is expected to rise to 750,218 metric tons by 2020 from 693,748 in 2015.
Understanding the entry strategy of Tim Hortons in Chinese Market
It is important to understand the decisions that influence the choice of entry mode into the market. According to De Villa et al. (2015), there are two key areas that have been identified: internal and external criteria. The key external criteria that should be considered are
Market size and growth:
– Larger markets imply that there are major resource commitments in the form of joint or wholly owned business subsidiaries.
Risk:
– Risk factors are related to the political and economic environment that is likely to have an impact on the business.
Government regulations:
– The regulations that have been set out by the government in the market destination should be looked into as part of the entry strategy.
Local infrastructure:
– This is related to the transport and communication network in the country. The combination determines the market attractiveness of the business.
In terms of the internal environment, there are various factors that influences market entry including
Company objectives:
– Proactive companies chose for entry modes that gives them flexibility and control that they need so as to achieve their goals
Need for control:
– It is aimed at controlling amount of foreign operations and it is an element of marketing mix.
Flexibility:
– This entails being flexible to joint ventures or licensing when exit barriers exist.
Analysis of the barriers to the operation
Barrier to entry should not prevent companies from entering into the market forever. Barriers to entry take place when a situation occurs resulting into inception and maintenance of market concentration. De Villa et al. (2015), a business can keep a price level above the average production costs in the long run. There are various criteria of barriers to entry in business including the size of the entity, intention of the entity and methods of inception. The most frequent barriers are
Product differentiation:
– This deals with the sale of similar products by the competitors in a manner that customers can recognize it easily.
Economies of production scale:
– It is related to experiences that businesses should produce certain products and sell them at cheaper prices without a loss
Capital barrier:
– This is related to incurring high initial costs when starting up a business activity.
There are also other barriers that should be analyzed during market entry including entering into long term contract between buyers and seller, state protection, and establishment of oligopolistic groups.
Exploring the measures on how to address the barriers to market entry
It is difficult tohave one strategy of overcoming barriers to market entry. It is important to identify barriers prior to developing a product and how to overcome the barriers. De Villa et al. (2015), failure to understand how to overcome the barriers may result into failure for the market to adopt the products thereby causing the business to fall. Addressing the barriers require the business need to decide on the barriers that lie on their ways to market entry (Hohenthal et al., 2015). Early identification can help in understanding how to overcome such barriers.
Methodology
3.2 Research philosophy
There are two research philosophies that can be used in research including positivism and interpretivism (Demos 2013). Determining the correct research philosophy depends on the research objectives as well as the magnitude of the research. Positivism looks at perceiving and describing actualities based on the objectives. Positivism believes in the view that the observations made should be recurring and the researcher should be in a position to alienate the phenomena being observed. Clarke (2009) opined that Positivism is a biased approach that accommodates the interests of individuals during the observation of a phenomenon.
Interpretivism, on the other hand, believes that individuals have the ability to interpret various phenomena around them (Demos, 2013). The researcher cannot manipulate the realities and holds to the view that realities are there. As alluded by Rolinson (2011), it is not right to manipulate the realities or accommodate the interests of individuals in research as it will affect the credibility of the research being conducted. It is based on these assertions that the current research will rely on interpretivism research philosophy. Using interpretivism is important in that it does not constrain the researcher in gathering data.
3.4 Research design
Research design is the arrangement of variables that helps in collection and analysis of data in a manner that research purpose can be achieved. Selection of the design depends on the research objectives, variables, participants, research setting and data analysis methods. This research will use qualitative research design. This is due to the fact that qualitative research looks into the deeper analysis of attitudes and feelings of the respondents which are key in analyzing the data that has been collected. A qualitative design is based on making inferences based on the perspectives hence it is important to get much data or information during data collection so as to help in later analysis. Apart from the case study, there are various qualitative research designs that can be used in the research.
3.3 Research approach
Choosing the research approach is important as it will help in determining the reasoning that the researcher will use to back up the methodological process being used. According to Bryman (2016), it involves broad assumptions to be used based on the collection of data, analysis, and interpretation. The main approaches that can be used are deductive and inductive research approaches. Ketokivi and Choi (2014) defined deductive research as a research approach that tests the already existing theories while inductive approach develops its theories. The deductive approach also has a general conclusion from the theory statement while inductive approach uses specific observations in coming up with the broader generalization of the research issue. The aim of the deductive approach is to test a hypothesis based on the prevailing theories and then proceed to accept or reject the hypothesis (Bryman, 2016).
Inductive approach, on the other hand, begins with a comprehensive observation of two factors before looking into the non-configurative ideas and generalization. Using inductive approach requires the researcher to begin by looking at the research topic, to empirical generalization and finalize with the primary relationship between the existing factors. This research will employ inductive research approach in order to evaluate market entry and operational strategies, of Tim Hortons to Chinese market
3.5 Research strategy
According to Bryman and Bell (2015), research strategy helps the researcher in coming up with the methodology of the research that can be used to collect data. Some of the key research strategies that can be used by the research are a survey, case study, and grounded theory. For this study, a case study research will be conducted. A case study is important in that it allows the researcher to gain in-depth information on the underlying issues that are to be evaluated in the study. According to Bryman (2016), a case study approach offers great insights that may not be achieved by other strategies. Case study will be used in this study as it allows the researcher to gain in-depth information on the main issues under evaluation. Additionally, it is good in answering the questions such as how or why when collecting in-depth data in a natural setting.
3.7 Data collection method
This is an important part of the research as it helps in making inferences on the research findings. There are two methods of collecting data namely primary and secondary data collection method. This research study will employ the use of primary data collection method due to the research that is to be addressed (Vaske, 2011). For this study, data will be obtained using semi-structured questionnaires from the chosen participants. The research will interview 3 middle-level managers of the company and 3 employees who have experience of not less than 2 years. Having a smaller sample size will help the researcher in gathering a lot of data that can help in drawing up the conclusions and findings of the research topic by use of secondary data (Babbie 2015).
3.8 Data analysis
As outlined by Stemler (2001), content analysis of data will be used by the use of the coding rule to come up with contextual analysis. The 3 middle-level managers will be coded as M1, M2, and M3 and their interview questions as Q1, Q2, and Q3 while the responses will be coded as MIQ1 to represent M1’s response to Q1. Employees will be coded as E1, E1 and E3 and questions as E1Q1, to represent E1’s response to Q1.
3.9 Research ethics
Research ethics are the acceptable standards and norms that the researcher should employee when conducting research (Bryman and Bell, 2007). The researcher will seek consent from the management to collect data. The researcher will maintain a high level of privacy and anonymity of the participants together with the data collected from them. Safeguarding the privacy of the respondents is aimed at removing the possible fear of the respondents from participating in the study. Also, the interview questions will be designed in a manner that guards personal information while at the same time observing the language being used. The information or data collected will strictly be used in addressing the research questions.
3.10 Limitations of the study
Being that the study will involve a case study, it is limited by the fact that it will rely on one company. This implies that it may not represent the actual phenomenon in other retail companies. The research is also limited by the fact that the number of participants is few.
3.11 Summary
The chapter has tackled the research methods, strategies and the techniques that will be used to meet the research objectives. This research will employ interpretivism as the research philosophy and inductive method as the research approach. The results from this study will help managers on how to enhance their strategies and operations. This research not only helps the company but rather other leaders in organizations can also benefit from the analysis.
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