CinnZeo Strategic Expansion Plan - Research Paper Example

? CinnZeo Strategic Expansion Plan of the of the of the CinnZeo Strategic Expansion Plan I. Objectives and Goals The objectives and goals of a business enterprise would very much depend on its resource base, the vision of its top management, its operating principles, the level of competition and available infrastructure that it finds in different locations of the world. Accordingly a business venture may decide to pull out if its initial experience is not very positive or even negative. Alternatively it may decide to re-enter at another time, depending on the changes in the infrastructure and other conditions, such as the earning and spending capacity, receptiveness of the population for its products and services, and changes in cultural and other demographics that make for more favorable conditions. CinnZeo has entered Saudi Arabia in a modest way and in fact appears to have a planned strategy to cover most of the Middle Eastern region, seeing that it has a presence in Jordan, Syria, Egypt, Dammam, Dhahran, Yanbu and a host of other locations in the Gulf. It is now concentrating on locations within Saudi Arabia and Ha’il city in particular. The remainder of this paper will be geared towards determining whether it would be advisable to expand further in Saudi Arabia, using Ha’il City as an example. II. Demographics The demographics and psychographics of a native population play a very important part in whether a company or a business product or service is welcomed and tolerated in a region or a country. For example, it would be foolhardy to open a liquor store or one that sold pork meat in S. Arabia, or indeed anywhere in the Muslim world, as these products are frowned upon by the followers of Islam. The culture of a region also plays a very important part in the receptiveness or otherwise of a product or service. For example, Saudi women are not allowed to travel unless they are chaperoned by a male, or even to drive a car for that matter. It would thus make more sense for CinnZeo to cater to family style outlets, where there are seating arrangements for the whole family and they can sit in and enjoy to their heart’s delight. An alternative suggestion would be to create roadside cafe style locations where families can sit out, but this would be feasible only in the late evenings and cool of the night- the day heat is too stifling for it to be considered in the daytime (About.com, 1992). As far as the age factor is considered, there are no barriers that cannot be broken with good and culturally sensible advertising. Showing the whole Arab family enjoying mouthwateringCinnZeo creations in the fuzzy warmth of a CinnZeo outlet would give a very positive impression. This can be shot in different backgrounds at various times of the day-in the early morning, at midday, or the late evenings when other people are shown walking or relaxing outside. The CinnZeo logo should be associated with quality and comfort, so that the public is intrigued enough to try it out not only once but more than once. A group of college males, or even females enjoying a late afternoon brunch at a CinnZeo cafe while their driver waits patiently is sure to pique interest among the Arab youth population. Modern Saudi Arabia is full of locals turned into foreign educated graduates who eventually become more used to Western style cultures abroad than their own. They are young and want to enjoy and experiment and get away once in a while. CinnZeo outlets would provide them with a good opportunity. Added to this let us not forget the worker migrants of Saudi Arabia that come from a host of other nations, among them Mexico, Canada and the USA where CinnZeo would already be known and appreciated. This population can therefore form a staple base for CinnZeo products with the local population hopefully not far behind. As regards the locations and ease of access in Ha’il City, this would depend on the already available infrastructure. Locating the CinnZeo flagship outlet in or near a major shopping center such as SamahCenteris sure to reap dividends and also result in good and quick popularity for its products. Another good option is to locate smaller outlets in the areas where the worker migrants are known to be staying, or in posh localities where villa style or community style living is favored.These are largely created to house wealthy Arabs or an expatriate population. This will ensure that some degree of commercial activity is always there for a CinnZeo outlet. Lastly, let us not forget the city centers like Barzan Market, Friday Markets, Ha’il Museumand shopping malls and roundabouts in Ha’il Citythat provide it with so much economic activity. Hungry travelers and shoppers need to be rewarded with CinnZeo outlets that cater to their tastes or at least fill them up till they get back home again. As far as the seasonal effects are concerned, it appears that the local Saudi population is oblivious to the effects of the weather. They like to eat out and spend time out especially in the evenings after a hard day’s work. An outdoor or indoor CinnZeo outlet in or near the Ha’il University that has been upgradedin 2007 would be a welcome choice to grab a late snack and enjoy a conversation as to the day’s activities, trials and tribulations. One can plan other fun filled activities for the weekend. Whatever they decide, the accompaniment of friends and family in the congenial atmosphere of a CinnZeo outlet would be a good choice. III. Activities of Ha’il City The city has been known for its proximity to 11 Arab state capitals. It has an airport that is served by NAS as well as Saudi Arabian airlines. It has a good railway and road transport system and 3 highways that connect it to Madinah, Buraydah and Jouf in the North of the Kingdom. Besides this it is connected to Highway 65 that bears most of the traffic. This entire infrastructure provides jobs and earnings for the local and migrant workers. However, there is a major difference between the jobs for migrant workers and the employment of the citizens. The citizens are well supported by their government and are usually employed either in government positions or in their own private practices. All other types of employment are for the migrant workers. There are local businesses and shops that cater to the various needs of the community and also offices and commercial areas that indulge in business activities. The majority of these businesses are owned by Ha’il citizens but serves as a source of employment for foreign workers. The city is also known for its artifacts and areas of historical importance.Ha’il serves as a major pit stop for those who are on a journey to the Holy Land. The racing season brings out a taste for cars ever since the FIA approved the Ha’il City Racing circuit back in 2008. Income & Spending Patterns Given that the Governorship of Ha’il City is under the Bin Abdul Aziz family, there are few economic worries for the local population. The local economy is functioning well, while education has been facilitated by the Ha’il Community College which is now a University sponsored by King Fahd University of Petroleum and Minerals. Saudi locals have subsidized living and other amenities and are almost guaranteed jobs in the local economy and Government, so they do not have to struggle much and can live relaxed lifestyles. The majority of the citizens may be considered middle-classed. If they are interested in CinnZeo products, they would think nothing of spending money and would even order home or use the take away option, which CinnZeo must consider for further success in Saudi Arabia. Among the more recent trends and changes that have been noticed here especially among the local population is that of the younger, Western educated locals who are in Ha’il on vacation or have completed their education. They are influencing their families to get out of the house and partake of the outdoors and Western lifestyle. CinnZeo would serve to add a mix of Western influence by serving this population. They have come to enjoy some of the Western styles and may appreciate access to this type of business. CinnZeo has arrived at a very good time to take advantage of the situation. IV. Industry Profile An industry may be considered as a group of firms in the same line of business or having the same activities, products and services and indeed serving the same group of customers. In the industrial world, industry output is usually classified by its Standard Industrial Classification or SIC. We will first arrive at the major industry classification as Food Retailer for example, and then move on to Breakfast and Bakery Items as a minor classification that further defines the type of work that CinnZeo is involved in. As concerns the local competition in Ha’il City, among the coffee shops there is only Makani Cafe, Al Mustaqbal Cafe, Al Leel Cafe and Layali Cafe. CinnZeohas the ability to easily establish itself as a premium foreign brand. It has already a regional presence in the Gulf in Jordan, Egypt, Syria and other states which will be appreciated (Yoolk, 2011). V. Strategic Entry In terms of a choice for strategic entry, CinnZeo should adopt a combination of Premium Pricing strategy with exclusivity in brand advertising. Compared to the local varieties, it will be regarded as the foreign brand. For the locals and expatriates and migrant workers may not buy because of higher prices, it can include a value priced strategy for its most commonly ordered items. Yet, a premium pricing can still be obtained for choice items. In this way it will be retained in the eyes of the higher class Arab and expatriate population as well as the middle class locals and migrant worker population. In fact the migrant population from Mexico, Canada and USA will most likely already know CinnZeo as a familiar brand and will be the stable population that orders from the outlet or chooses to eat there. With luck and the proper advertising, the local population will not be very far behind (Kotler, 1992).Proper handling of marketing methods and brand strategies that are focused on the local market can help CinnZeo grow in popularity. CinnZeo should also keep its full range of products on offer for the different types of nationalities that stay and work here. It should also consider orders by credit card or cash on delivery options as these are popular in the Gulf. Quite obviously, it has carried out a feasibility study before coming to Saudi Arabia and must have got some positive signals. As regards local competition among the coffee shops, as noted above there is hardly any that will pose a challenge (Evans & Berman, 2007). Concerning the best Marketing and Advertising strategies, it is recommended that use of internet advertising would be a definite plus for the young population.Of the total Saudi Arabian population, 38% use the internet (Saudi Arabia Internet Usage, n.d.).It is recommended that advertisements be posted in Arabic for locals including gossip columns and blogs. For the migrant population, this can be replicated in English as well as advertised via flyers, billboards and in magazines. Gifts for kiddies and volume discounts can also be offered depending on size of purchases. Regarding Organization and Staffing, this can pose particular problems in regard to the time taken to process visas, as well as the type, duration, and number of visas granted. One way to circumvent this problem is to hire migrant workers who already have some experience in the baking and restaurant sector. They can be given training to enhance their skills and indoctrinate themselves to CinnZeo culture and standards (Werther& Davis, 2005). As far as recruiting Saudis is concerned, this does not appear to be a very promising option, as most locals work in the Government or have private businesses. They are well looked after by the Saudi authorities and do not want to mix with the migrant workers. They are given housing facilities as well as a stipend or allowance and many other benefits. Employment at CinnZeo will not be very attractive to them. Feasibility Overall, CinnZeo’s investment into Ha’il is a very smart move on behalf of the company. The market is ripe for a coffee shop with a western flavor. There are many Saudis who have developed a taste for western goods. They can serve to boost the clientele, extending it to other citizens who have not had much experience with western business. The potentialcustomers in the area have sufficient funds to purchase CinnZeo products on a regular basis. While the company may not be able to expect to employ many Saudis, or any at all, there is a decent population of foreigners and migrant workers who can fill these positions. The only perceived issues that the company may experience are that of the Visas which are required for the workers that will comprise the total or majority of the workforce in Ha’il. However, this issue can be easily addressed. Financial Forecasting If one wants to open up a CinnZeo franchise, the initial cost would be between $20,000 and $40,000 for the first year of development and setup. Kiosks can be built for as low as $100,000 while it would cost more than $200,000 to set up a full sized cafe. CinnZeo charges a development fee of $15,000 for design and operations expertise. After that there is a royalty fee of just 7 percent of sales. There is no license fee. (CinnZeo website, 2011). 6 months 12 months 18 months (all figures in SAR 000s ) Revenues 300 450 600 Expenses 150 300 400 Profit/ Loss 150 150 200 A Brief SWOT Analysis As far as CinnZeo’s strengths go, it is a foreign based concern with 10 years of success in Canada. It has already some experience of setting up shop abroad like in Mexico and Chile. It has a special home based recipe that cannot be easily replicated. It likes to transfer its experienced staff overseas to make them part of its success story. In terms of its weaknesses there is a lack of experience with operating in different cultures and regions. The Arab culture, being Eastern, is very different from the West in various elements. But CinnZeo has already invested heavily in the region and is considered a good foreign brand in comparison to the local coffee shops. Culturally sensible advertising will pay dividends and create a following. It can charge premium prices or what the traffic will bear. It will, however, be subject to the same rules and regulations as others for the inspection of inventories, processes and health and safety standards(SFDA, 2011) which falls under the control of the Ministry of Health (MOH, 2011).The company should take additional steps to ensure a smooth adaptation to these requirements. VI. Findings and Recommendations In view of all the above, I would recommend thatCinnZeo should definitely expand in Ha’il City, Saudi Arabia. It should open a minimum of one large outlet and two smaller outlets in Ha’il City.The biggest outlet should be opened at the SamahCenter which should be a combination indoor and outdoor shop with also option for drive through and take away at one end. This is likely to earn good revenues. A smaller, second location could be established in the Barzan Market area. Here there are always manypotential customers who come to shop here regularly. The additional location could be established at an opportune location close to the railway terminals, Highway 65, or any of the other three highways that connect Hail City with the Northern regions of Saudi Arabia. Car travel and long drives along these routes produce lots of hungry customers. VII. Conclusion In this way we have determined that CinnZeo should continue to invest in HailCity in Saudi Arabia. Such investment has the potential to prove very lucrative. We have drawn up the expansion plan, looked at SWOT and also recommended places for the proposed location of the outlets.It is determined that this expansion can be completed with very few challenges. References About.com (1992). The Climate of Saudi Arabia. Accessed on 29 July 2011. CinnZeo website (2011). Investing in a Canadian Franchise. Accessed on 29 July 2011. Evans, J. & Berman, B. (2007). Marketing in the 21st century. Atomic Dog Publications.Accessed on 29 July 2011. HailCity (2011). The Official Hail city website at http://www.hail.gov.sa/Accessed on 29 July 2011. Kotler, P. (1992). Marketing Management. Irwin/ McGraw Hill.Accessed on 29 July 2011. MOH (2011). The website of the Ministry of Health, Saudi Arabia at www.moh.gov.sa.Accessed on 29 July 2011. Porter, M.(1980). Competitive Strategy. The Free Press.Accessed on 29 July 2011. Accessed on 29 July 2011. Saudi Arabia Internet Usage and Telecommunications Report. (n.d.). Internet World Stats - Usage and Population Statistics. Retrieved August 4, 2011, from http://www.internetworldstats.com/me/sa.htm SFDA (2011). The website of the Saudi Food and Drug Authority at www.sfda.gov.sa.Accessed on 29 July 2011. Werther, W. & Davis, K. (2005). Human Resources and Personnel Management, 11th ed. Irwin/ McGraw Hill.Accessed on 29 July 2011. Yoolk (2011). Coffee shops in HailCity at the Yoolk website, S.Arabia. Accessed on 29 July 2011. Read More