Executive Summary
Chez Yasmine is a French restaurant chain that has managed to succeed in the local French market and international British market with their product. To further expand, Chez Yasmine has decided to choose one of the following countries in East Asia: China, Indonesia, and Malaysia. The economic and cultural dynamics of all three countries are different and needs to be analyzed before making the final decision over the choice of an expansion market. To expand in International market, Chez Yasmine would need to overcome local competition and find a suitable strategy to expand their business. Different and dynamic factors will be evaluated to understand the suitability and the possibility of success of Chez Yasmine to different international markets. Analysis of the economic and cultural factors determine that China is the most logical and far-sighted choice among the alternatives as the other two countries have several flaws that makes them less attractive solutions for expansion.
Keywords: Chez Yasmine, expansion.
Introduction
French restaurant chain, Chez Yasmine is planning to enter a new market in the Eastern Asia. The restaurant is a family run business with more than 30 years of serving customers in the urban locations of France and Britain. The restaurant has made its name on the basis of their small menu and reputation of offering quality cuisine in reasonable prices. All restaurants of the chain follow the similar décor with wooden furniture, black and white images of Paris’s popular districts, and blue and white tablecloth; giving the visitors the feel of sitting in Paris and enjoying their meals. After its success in the French and British markets, the restaurant is looking to expand and the East Asian countries of China, Malaysia and Indonesia have been chosen as prospective markets. All three markets provides distinct advantages to Chez Yasmine and the report will analyse the markets and choose the market for expansion.
Findings
Key Population Figures
In terms of above economic factors, expanding into China makes sense as the population of 1.3 billion and around 700 million of them concentrated in the urban centers provides great future potential to Chez Yasmine (The World Bank, 2016). Comparing these numbers to Malaysia and Indonesia provides an insight that these countries provide significantly smaller prospective customers, but it important to notice that Malaysia has a high percentage of urban population (The World Bank, 2016). In addition, China is a huge country in terms of land mass with well-developed and interconnected transportation networks to every corner of the country, which Indonesia cannot offer as it is an Island country. Indonesia also lacks behind in terms of per capita income to Malaysia and China.
Comparison - Consumer Confidence
Another economic factor that can be used for comparing the three markets and the potential of expanding into these markets is by analyzing the consumer confidence in the three economies. Consumer Confidence is an economic measure that predicts the consumer confidence or consumer spending or consumer optimism towards an economic activity (Peterson & Bush, 2012 p. 587). Therefore, the higher the Consumer Confidence in an economy, the higher the probability of economic success and acceptability towards economic investments made in the country such as Chez Yasmine. On the basis of the above numbers, the consumer confidence in China and Indonesia outclassed the Malaysian market. This means that making economic investments in the Chinese and Indonesian markets are more suitable in terms of optimism of the economy and probability of Chez Yasmine succeeding in the country.
Comparing Cultures
Indonesia Option
The hectic lifestyle of Indonesian people mean the demand for convenient food is increasing in the country. This has resulted in the outpouring of QSR (quick service restaurants) into the country (Bland, 2013). Many restaurants that exist in Indonesia are full-service and independent business ventures, meaning Chez Yasmine would be able to bring their expertise and build a chain. Apart from Pizza Hut, no other QSR is investing in mass media for promoting their brand and carve out their niche. Restaurant pricing by establishing chains such as Hoka Hoka Bento (140 branches in the country) are at lower rates that the planned menu rates of Chez Yasmine. This means Chez Yasmine can be priced out by competition and might need penetrative pricing at the start.
Hoka Hoka Bento has also adapted their menu to suit the preferences of Indonesian taste and preference of spicy food can be a challenge for Chez Yasmine. But, there is a growing interest in Indonesia for healthy food and Chez Yasmine needs to maximize this opportunity. The rapidly growing middle class means Chez Yasmine’s culture of targeting middle consumers can be effective. Population of business travelers and ex-patriots is increasing in Indonesia and it can provide a suitable target market for Chez Yasmine. Competitive low pricing can be a major challenge for Chez Yasmine as they seek middle income consumers who can be swayed by the affordability of competition. This means that Chez Yasmine might need to reduce their ticket price per customer and menu items might be sold at lower rates, which could end up making the expansion a loss making venture.
One of the biggest challenges for expanding Chez Yasmine in Indonesia would be the geographic limitations of the country. The country is made up several islands and it means there is lack of interconnected transportation network that can be challenging selecting the suitable markets a challenge for Chez Yasmine. Also, expanding the chain beyond the Java Island would be a challenge due to the logistical problems and lack of infrastructure in the less populated islands (Bland, 2013). Opening the chain can be logical in Indonesia only if the focus is on the Java Island and Chez Yasmine needs to keep country as an attractive prospective market for the future, but needs to be avoided for the upcoming expansion move of the Chez Yasmine.
China Option
The Chinese markets already have several QSRs and Yum Restaurants China has already got an established presence in the Chinese fast food market. The market unlike Indonesia is already highly developed in terms of foreign investments in the fast food chain industry. Yum Brands China controls 9 percent of the market share in the Chinese full service restaurant industry of China with their 7,200 restaurants in more than 1100 Chinese cities. In addition, Yum is expected to open around 500 more branches in 2016. The success of Yum Brands is like a positive influx of restaurant chains like Chez Yasmine as it boosts their hopes for the Chinese market. An important facet about Yum Brands’ success has been the presence of Chinese cuisine restaurants in their group such as East Dawning and Little Sheep (Yum Brands, n.d.). This means, Chez Yasmine would need to at least ensure that their menu is suitable for the Chinese market and satisfies customer needs.
While many international fast food chains have failed in China, the success of Yum Brands is based on their continuous expansion and improved brand awareness in the Chinese market. This is a learning opportunity for a restaurant chain like Chez Yasmine as they would need to implement similar measures to succeed in China. Another element to be learned from Pizza Hut’s success has been their ability to adapt to the needs of Chinese customers by adding products that suit Chinese needs. With the reduction of government regulations, several restaurant chains have started to move into the Chinese market. This means Chez Yasmine would need to adapt their menu and strategy to better suit the needs of Chinese customers. There is an increasing need for high quality restaurants in China due to the rise of middle class population and herein lies the opportunity restaurant chains like Chez Yasmine.
Another aspect of the Chinese restaurant market that needs to be considered is the small decline in the market share of western restaurant chains. Especially, as the Chinese customers feel that Chinese restaurant chains are cleaner and safer than the western restaurants. This has happened because there have been reports covering the poor hygiene of western chain restaurants. The health conscious nature of the Chinese customers is an attractive proposition for Chez Yasmine as their food can suite the needs of middle class customers who like to eat fresh and high quality food. In the last few years, the market trends show that Chinese fast food chains are biting into the market share of the western fast food chains (Abkowitz. & Burkitt, 2014). This can be a challenge for Chez Yasmine as they would also face intense competition from the local restaurants in China.
Malaysia Option
In the last few years, the Malaysian restaurant market has witnessed a growth in the number of bars and cafes. This has led to increased competition between the full service chains. QSR brands such as Pizza Hut and KFC has maintained their growth prowl in the Malaysian market due their strategy of opening new branches in the country (Euromonitor, n.d.). Due to the intense competition, many restaurant chains in Malaysia have resorted to adding both local and western food items on their menu. This move indicates that Chez Yasmine would need to counter their menu and offer more products to meet the needs of the Malaysian customers. Restaurant chains such as Old White Town Coffee that specializes in selling local favorite rice and noodles also sell western cuisine and hot beverages to attract potential customers.
One of the main competitors in the Malaysian market for Chez Yasmine can be the Setter Recipe Chain that specializes in the selling light meals, cakes, western dishes, Asian classics, and pastries. Chez Yasmine offers a small menu and competing with such a local powerhouse that carries local and international menu items can be challenging and overbearing in the long term.
The Malaysian customers are also attracted to the offers and discounts provided by the local restaurants, which can be a demotivating factor for Chez Yasmine in the long term. Dining out has become very common among the middle class population of the country with the rising population in the urban areas and increasing per capita income of the Malaysian households (Cardas Research, 2015).
In addition, convenience, healthy food, and experiencing social attractions have become an interesting factor in attracting many Malaysians to restaurants (Cardas Resreach, 2015). Another challenge for Chez Yasmine can be the Malaysian customers preferring their local cuisine over western food. This means Chez Yasmine would need to account for local taste and would need to ensure the Malaysian taste is added to their menu. There is a long history and strong culture of eating street food in Malaysia, meaning Chez Yasmine would also need to compete with the street vendors. Small family restaurants have maintained their market presence and present another competition for Chez Yasmine due to their authenticity. But, Chez Yasmine can take respite in the Malaysian tourist culture that brings many locals to the Europe, where they might develop a liking to French cuisine and increase the possibilities of success for Chez Yasmine.
Conclusion
Recommendations
After considering all the factors, China and Indonesia seem like a better fit for Chez Yasmine over Malaysia. China and Indonesia are both attractive markets with some common benefits such as rising middle class population, need for convenience food, attraction to healthy food, high number of tourists and ex-patriots, etc. But, China provides several advantages that dwarf the Indonesian market and helps in identifying its limitation. One of the reasons is the impact of competition on the Indonesian market will likely drive the price down for restaurant food. This is not true for the Chinese market as restaurant chain businesses can target different markets in China due to the sheer size of the market. Another reason is the logistical challenge as Indonesia is a country of Islands and apart from Java Island there is a lack of infrastructure and inter-connected transportation network. In China’s case, the country is a huge in terms of area, which is well connected through infrastructure and transportation system and has several urban well populated cities. The size of the urban population in China means that even a minimum level of success in China can easily outperform a major success in the Indonesian market. China also the smarter solution as Chez Yasmine would be investing in a well-developed market where they can prepare their product and develop their strategy on the basis of market research and success factors defined by other restaurant chains. Finally, the per capita income of Chinese population in urban centers is more than double of Indonesia’s and it means Chez Yasmine would not need to reduce the price of their menu items to gain the attention of potential Chinese customers. In summary, the Chinese market is better suited to the Chez Yasmine business expansion into the East Asian market.
Reference List
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Euromonitor. (n.d.). FULL-SERVICE RESTAURANTS. Available: http://www.euromonitor.com/full-service-restaurants. Last accessed 7 January 2017.
Peterson, G. W., & Bush, K. R. (2012). Handbook of Marriage and the Family (3rd ed.). New York, NY: Springer.
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