Business Report Tim Horton Incorporated
Introduction
The report chosen to be discussed for this paper was the one about Tim Hortons Incorporated. Tim Hortons Café and Bakeshop (THCB) is one of the fastest growing rivals in the fast food, café, and restaurant industry, one that is heavily dominated by McDonald’s Corporation. It has been a long time since a rival of the same caliber and sophisticated came this close to overthrowing the king of fast food chains, McDonald’s Corporation, from its throne. Having originated from Canada, the company has more stores in Canada than McDonald’s. It is important to note that the largest percentage of the company’s income comes from its Canadian operations and so completely withdrawing out of this market and focusing more on operations in another unconquered market is out of the question. This paper focuses on the feasibility of Tim Hortons Inc. venturing into the German market.
There are numerous factors that an investor or an owner of a company can look at during the planning stages of an expansion program. The first and most important thing of course would be the acquisition of a target; this involves setting the scope on what country to target for an expansion, what market segments to focus on, and what the actual products and or services would be brought in. That just covers the initial stages of the planning phase of an overseas expansion program for a domestically well-known company. After the initial stages, the time to assess the actual possibility of success based on the consumer preferences and expectations and then the level of competition in the target country often follows. For starters, one has to be able to answer why a particular country was chosen over the others. Germany has the biggest, wealthiest, and most stable economy among all the countries in the European Union . The European Union would be a juicier target for a company that is hungry for foreign expansion such as Tim Hortons Incorporated. However, this market may be too large and complex for a relatively inexperienced company with overseas operations to conquer. A well-balanced approach when it comes to risk management must be sought here because the company is not exactly in a state where it has nothing to lose should its planned expansion programs fail to bear fruit, which given the level of competition in the fast food, café, and restaurant industries in other countries, is not a farfetched outcome. This means that the most sensible option for the company would be to expand to one country at a time.
Now why target the broader European Union market and start with Germany. For starters, the European Union is one of Canada and the United States’ biggest trading partners, closely rivaling China. The company already has an established foothold in Canada and the U.S. and so it only makes sense to target the markets that are not so foreign when it comes to Canadian business culture—i.e. the European Union. Germany is on the top of the list because of the high level of disposable income that its citizens have. A higher level of disposable income is generally good for newly-established businesses because that means that the citizens have more opportunities to spend on discretionary products and or services such as the ones that would be offered by THCB. According to a report published by OECD Better Life Index, Germany has an “average household net adjusted disposable income per capita of USD 31,925 a year, more than the OECD average of USD 29,016 a year” . This can practically be used as a measure of whether the consumers in a target market can actually afford to spend heavily on the products and services being offered by the company. In Germany’s case, the answer is a yes. In fact, compared to other markets, it can be theorized that Germans can buy as much coffee and other products from THCB as they want because they simply can afford to. This considerably lessens the risk that the new foreign expansion venture for THCB would fail.
Products and Services
The company has 3,665 branches in Canada, 869 in the United States, and 56 in the Persian Gulf region. The company’s main products include baked goods, coffee, beverages, and pastries. In its home market (i.e. Canada); the company holds the top spot for baked goods with a 76% market share. It is also the market share leader in the coffee industry with a 62% share. The question now is whether it is feasible for Tim Hortons Incorporated to duplicate the success that it experienced in its home market in a more highly competitive environment such as Germany.
Competition
Unfortunately for THCB, almost all logically thinking businessmen already know how lucrative a target Germany can be. It is home to some of the largest fast food, café, and restaurant brands in the international market and so setting up shop and establishing a customer base in this market can become a challenge; however, it definitely is not impossible. According to a report published by Euro Monitor International, “McDonald’s remained the uncontested leading player in fast food in Germany in 2015, accounting for 31% of the channel’s total value sales at GBO level despite the comparatively weak performance registered by the company towards the end of the review period” . Another worthy competitor in the German market would be Starbucks and Burger King . It is important to note that THCB’s products and services actually covers a lot of segments; this makes the company a hybrid one because it operates in more than one industry. This can be both an advantage and a disadvantage—an advantage because this makes the company flexible when it comes to making product and service-related updates and changes; and a disadvantage because it basically translates to the truth that the company lacks specialization and so it would be hard for the consumers to establish a stronger brand identity. A strong brand identity is important for newly established companies in a foreign market.
Conclusions
One thing that the company can be assured of is the fact that there will always be someone who would patronize their products and services in Germany simply because of how rich and capable the people there are especially when compared to other countries. Germany is one of the wealthiest countries in Europe and among other countries that have fully-developed economies. The real question, however, is how well it would fare against the incumbent companies in the industries that it targets in the German market. This is also why the country is home to some of the biggest players in the restaurant, fast food, and café management industry. Giants like McDonald’s, Burger King, and Starbucks have long realized the potential of this market as a hub for their respective products and services. This (i.e. competition) is so far the biggest challenge that the company has to overcome in order to accomplish its expansion goals in Germany. So, is it a feasible option? The answer is a yes. However, succeeding surely would not be easy.
References
Euro Monitor International. (2016). Fast Food in Germany. 01-34.
Organization for Economic Cooperation and Development. (2016). OECD Better Life Index. Retrieved from: http://www.oecdbetterlifeindex.org/countries/germany/.
The Local Germany. (2014). German Fast Food Goes Upmarket. Retrieved from http://www.thelocal.de/20140515/german-fast-food-goes-upmarket.
World Economic Forum. (2016). What is Germany's Role within the EU. WEF, Retrieved from https://www.weforum.org/agenda/2015/09/what-is-germanys-role-within-the-eu/.
