Introducing Five Guys Burgers to Kuwait - Assignment Example

Marketing Plan: Introducing Five Guys Burgers to Kuwait BY YOU YOUR SCHOOL INFO HERE HERE EXECUTIVE SUMMARY Five Guys Burger Restaurant is seeking market growth through foreign investment in Kuwait. Research indicates that the economic environment, consumer behavioural components, and competitive industry are quite favourable for market entry. Rising disposable incomes as a result of high public sector wages, lack of competitive presence in the Free Trade Zone, and social aspects of ostentatious consumption are advantageous for building a brand in this country. Based on research findings, it is recommended that the company seek out franchising and joint venture opportunities as a means of market entry and growth over the next five years. Using promotion aligned with psychographic traits related to the consumer behaviour, Five Guys can gain brand recognition and, ultimately, brand preference with its focus on integrated marketing communications and positioning on quality. Table of Contents 1.0 INTRODUCTION.................................................................................................. 2.0 DESCRIPTION AND RECOMMENDATION FOR COUNTRY RECOMMENDATION.................................................................................... 3.0 COMPETITOR IDENTIFICATION...................................................................... 4.0 CULTURE PROFILE............................................................................................. 5.0 COUNTRY-OF-ORIGIN, FOREIGN AND DOMESTIC CONSUMER PREDISPOSITIONS........................................................................................ 6.0 MARKET SEGMENTATION, TARGET MARKETING AND POSITIONING................................................................................................. 7.0 MARKET ENTRY AND EXPANSION................................................................. 8.0 CONCLUSION........................................................................................................ REFERENCES 1.0 Introduction Five Guys Burger Restaurants is a casual, fast food restaurant headquartered in Fairfax, Virginia in the United States. The company maintains a menu that is focused on hamburgers, kosher hot dogs and a variety of different sandwiches. Between 2010 and 2011, the company experienced revenue growth of over 32 percent (York 2012). In the United States, Five Guys Burger is positioned as being a better burger, with a high level of emphasis on quality ingredients to differentiate the business from domestic American competition. However, the U.S. marketplace, in terms of fast food restaurants, is highly saturated and it is difficult to achieve growth in a rapidly maturing market. As a result, Five Guys Burger Restaurants is seeking new market opportunities in foreign markets where there is less competitive saturation and where consumer characteristics are favourable for achieving market growth and building a positive brand reputation. This report identifies potential market opportunities in Kuwait, a developing nation, for Five Guys Burger to establish a potent competitive identity. The report provides justification for market entry in this country, an analysis of competitors in the region, the cultural profile for viable consumer segments in Kuwait, and an appropriate targeting strategy and positioning strategy to achieve the objectives of growth for the company. Additionally, the report provides appropriate recommendations, based on market conditions, for ensuring success in this new foreign investment. 2.0 Description and justification for country recommendation Five Guys differs from its other American competitors, offering only fresh beef and promoting that the company does not maintain any freezers in its restaurants. The company also utilises only peanut oil, which maintains a low level of saturated fats as compared to other lower quality oils and contains important antioxidants that are known to provide beneficial human health outcomes (Chu and Hsu 1999). Using only top quality ingredients is what gives the organisation its reputation for food superiority over other fast food chains. Hence, from a consumer behaviour perspective, Five Guys maintains an impressive quality-focused positioning and food production model that would be deemed relevant and refined in Kuwait culture. From an economic perspective, Kuwait is a small nation, however there is a population density of 2.6 million consumers. The country has experienced a significant economic boom as a result of the oil industry which has provided the country with a GDP of $173.2 billion USD, reflective of a per capita GDP of $45,800 USD, which ranks the country as number 8 amongst all developed nations in the world (IMF 2012). The booming petroleum industry has provided Kuwaiti consumers with substantial disposable incomes and a significant market availability that consists of domestic citizens and a large volume of foreign labourers hailing from around the world. An estimated 93 percent of Kuwaiti workforce members are employed in the public sector, which provides very lucrative salary structures (Ramadhan, Hussain and Al-Hajji 2013). Kuwait has also set up a Free Trade Zone in Shuwaikh, which provides foreign businesses with corporate tax exemption for a period of 10 years (Singh 2010). The Free Trade Zone in Kuwait is very close to the Iranian border and a major international airport. This can potentially provide Five Guys with considerable volumes of domestic and non-domestic customers hailing from different international regions. The Free Trade Zone is also located near the Shuwaikh Port, a major seaport servicing a well-developed industrial and urban region. Kuwait University is located in this region, which can provide Five Guys Burgers with a variety of youth consumers hailing from the home country and other international regions. Additionally, this zone maintains many commercial centres which promote consumerism, making this an ideal environment to secure tax exemption and also gain a higher volume of potential consumers. Moreover, Kuwait is considered to be a developing nation, hence this is not a saturated market in the fast food industry. Foreign franchises are just now entering this market as a result of tax incentives and other government-supported foreign direct investment strategies, making this an ideal environment for establishing brand recognition without concern about consumer loyalty to major fast food restaurants that dominate the saturated competitive environment in the U.S. Michael Porter, a renowned business theorist, suggested that competitive rivalry is one of the most fundamental threats to a business stemming from the external market (Thompson, Gamble and Strickland 2005). By operating in a non-saturated market where existing competitors have not had considerable tenure to build a potent and loyal brand identity, through creative marketing Five Guys can be less considerate of undoing years of brand loyalty that is a common phenomenon in the United States markets in the fast food industry. 3.0 Competitor identification As previously indicated, Kuwait is not a heavily saturated market in terms of fast food company competitors. McDonald’s, the company’s main competitor, maintains a presence in Kuwait. McDonald’s provides hamburgers and French fries in the same capacity as Five Guys Burger along with a plethora of other menu items, hence catering to a broader mass market population. McDonald’s is, however, of substantial competitive threat due to the company’s supply chain philosophy for the procurement of beef that is considered acceptable to Kuwaiti Islamic consumers. Nearly all consumers in Kuwait are of the Muslim faith, a religion which forbids followers to consume meat that has not been slaughtered in the name of Allah, foods considered to be halal, or acceptable for consumption (Caner and Caner 2009). McDonald’s has gained brand prominence by establishing a supply chain structure with halal foods producers in the Middle East that meet all Islamic consumption regulations. McDonald’s now provides 100% halal beef patties in its hamburgers in the country which makes the brand viable for the breadth of Islamic consumers in the country (McDonaldsArabia.com 2014). Porter (1987) indicates that threat of new market entrants poses a significant competitive threat to businesses. In the last three years, there has been new entrants that include Mooyah Burger, Fries & Shakes and Tim Horton’s. Though these international fast foods brands do not have strong brand recognition in the nation, they provide competitive products that could undermine gaining market share for Five Guys. Mooyah Burger allows consumers to customise their unique hamburger combinations and is considered to be a part of the better burger segment of fast food (Kaminski 2014). Mooyah, as a new market entrant, positions itself as having top quality ingredients, hand-cut fries, and garden fresh toppings that are aligned with the same business philosophy of Five Guys. The supply chain model and quality-focused positioning provides a potential substantial competitive threat by Mooyah. Tim Horton’s, a North American based food company, is another new market entrant. Though this company does not offer hamburgers on its menu, it does provide high quality sandwiches and wraps that are also positioned in terms of quality. This company entered the Kuwait market through a joint venture with the GCC Apparel Group (PR Newswire 2013). Tim Horton’s represents a competitive threat not only by providing substitutes for hamburgers in the Kuwait market, but also through the marketing knowledge and experience held by leadership at the Apparel Group. This could give Tim Horton’s a significant competitive marketing advantage through this joint venture. As indicated, since the Kuwaiti fast food market is a fledgling market, there are no statistics on current market share trends or estimated growth rate. The market is currently in the introduction phase along the corporate life cycle model. However, early adopters along this model are known to have strong competitive advantages over late entrants as the literature indicates that consumers often maintain more favourable impressions of the early entrant (Grewel, Cline and Davies 2003; Kardes and Kalyanaram 1992). It is postulated that consumers maintain longer-term memories associated with perceived attributes of early entrants which creates a preference for early entrants over that of later entrants to the market (Kardes and Kalyanaram). This provides significant advantages for Five Guy if the organisation can effectively promote its attributes and business ideologies through integrated marketing communications in terms of establishing brand recognition. It is estimated that the Kuwaiti fast food industry will continue to grow over the next five years as a result of the Free Trade Zone initiatives and GCC businesses that are actively seeking out joint venture opportunities with international fast food companies or other relevant partnerships. In 2005, the Middle East franchising industry saw a 27 percent growth rate, with fast foods encompassing 40 percent of the market (Chaudhry 2006). Established companies in Kuwait such as the Apparel Group are recognising the vast market opportunities for entering into franchising deals and joint ventures for foreign fast food company launches in Kuwait, establishing the probability that new market entrants will begin to flood the Free Trade Zone in the next five years. 4.0 Culture profile In Kuwait, sudden prosperity as a result of the petroleum industry has changed consumption behaviours. As consumers who believe themselves cosmopolitan and sophisticated, consumers seek out products that are impressive and superior as a means of impressing important social reference groups in Kuwaiti society (Rice 1999). Kuwait is a collectivist culture, one in which loyalties to in-group members is a paramount social belief and where the opinions and values of the social environment strongly dictate decision-making (Cheung, et al. 2008). Kuwaiti consumers often use products and brands that have prestigious characteristics as a means of enhancing their social status. There is willingness for those who prescribe to the importance of ostentatious consumption to make purchasing decisions by observing others and seeking advice and opinion from reference groups (Bearden, Netemeyer and Teel 1989). These aspects of consumer behaviour and collectivist attitudes maintain considerable advantages and opportunities for Five Guy. With a positioning strategy that focuses on quality, the company can establish a premium brand identity that would be deemed sophisticated and prestigious to the Kuwaiti consumer segments that value premium products. As a result, if the company is able to build a sense of brand preference in Five Guy, the likely outcome will be social conformity and similar preference along the collectivist model of socialisation. The Kuwaiti consumer culture is quite different from that of the United States. Five Guy caters to a smaller segment that maintains premium demands in fast food consumption. As a highly individualistic nation, social sentiment is not nearly as important when making consumption decisions. Therefore, there is less predictability that premium-focused consumers that have loyalty to Five Guys Burger will engage in extensive word-of-mouth or attempt to build social communities around a brand profile. This is likely the rationale for why Five Guys has been unable to achieve significant market share and growth in the United States because it services a smaller, niche-variety market segment. Consumers in the fast food industry in the U.S. are price-sensitive, which has led to the development of many different value menu products at a low price in order to attract mass market consumers (Muhlbacher, Dahringer and Leihs 1999). Consumers, due the low switching costs for defecting to other competitors, have very high bargaining power in the market and therefore can dictate pricing structures on products. In Kuwait, with high consumer incomes and the need to gain prestige through consumption of premium brands, pricing is not as much of a consideration as in the United States competitive industry. 5.0 Country-of-origin, foreign and domestic consumer predispositions A 2007 study found that Kuwaitis have a largely favourable impression of American products and American businesses (Meyer, Rizzo and Ali 2007). Of those polled, 46 percent of respondents maintained a very positive perspective of the United States (Pew Research Centre 2007). This is largely due to the fact that, as a liberator in the Gulf War, the United States has become the foremost importer of American-made products which has given U.S. brands high visibility and stature. This has paved the way for Five Guys’ main competitors entering this fledgling industry that have business presence and headquarters in the United States. Major sandwich companies, Subway and Quizno’s, have also recently entered the market, but do not maintain competitive presence in the Free Trade Zone. There is no research supported evidence of ethnocentric bias when it comes to consumption and brand attitudes in Kuwait. Ethnocentrism states that consumers will have preference for domestic brands as they believe their own country provides superior products compared to other foreign countries (Klein, Ettenson and Morris 1998). Because Kuwaitis have a rather favourable opinion of brands from the United States (Maher and Carter 2011), there is no predictable threats of consumer animosity or ethnocentrism that could complicate market entry and achieving brand successes in Kuwait. Culture and brands from the United States have been deeply imbedded in Kuwaiti culture since the early 1990s, creating positive relationships and building familiarity. 6.0 Market segmentation, target marketing and positioning Psychographic segmentation is most viable for Five Guys in the Kuwaiti market. Because of the importance of social sentiment and ostentatious consumption characteristics of the majority of Kuwaiti consumers, it is important to identify their beliefs and attitudes. The VALS 2 model identifies the two key market segments most likely to favour the premium qualities of the Five Guys brand: Innovators – those with high resources that are concerned with image and esteem. The innovator has very sophisticated tastes. Strivers – Moderate resources, but are motivated by emulating social members who are aspirational who consume products that will show off a better social status. Because Kuwaiti consumers, 93 percent, have high incomes stemming from the public sector and with a strong propensity to consume premium products, this market should be targeted. The target market, therefore, will be urban markets that share the psychographic values and beliefs of the innovator and striver group. Because Five Guys will maintain its premium positioning strategy for top quality, relevant promotions will include emphasis on this differentiation characteristic of the brand whilst also using social vocabulary and aspirational actors to gain consumer interest and attention. 7.0 Market entry and expansion The franchising opportunities in Kuwait are extensive with many organisations seeking franchise contracts with American brands. Effective market entry should consist of contracting with major organisations, such as the Apparel Group and M.H. Alshaya Company which have significant experience operating American-based brands in Kuwait and other Middle Eastern countries. The advantage of franchising is that the investor is much more motivated to achieve revenue results (Welsh, Alon and Falbe 2006). Furthermore, by recruiting host country investors in the franchise, they will have more familiarity with the Kuwaiti culture and much fewer financial resources will be required for the launch (Stanworth, Price and Purdy 2001). The disadvantage of franchising as a market entry strategy relates to agency considerations, such as control of management (Brickley and Dark 1987). By not having domestic expatriate managers operating the new restaurant, it creates more difficulty to ensure that the franchise is complying with mandates for brand-building, advertisement, service and general process aligned with Five Guys’ ideology. Hence, joint ventures for market expansion, upon establishing the initial franchises, could give the company more control over business activity to ensure the brand is aligned with strategic mission and positioning strategy. This joint venture will provide, over the next five years, with better procurement opportunities for domestic raw materials and provide considerable expertise in marketing to Kuwaiti citizens for competitive advantage. It will be an imperative, as a strategic recommendation, to procure halal beef and promote this in order to gain the interest of nearly every consumer in the country that is Islamic. Consumers will reject products that are not halal in Muslim faith. Joint ventures will provide knowledge of distribution and supply chain absolutely critical to ensuring halal certification and standards on all beef products. Because of the high costs of procuring products outside of Kuwait, the business will require reliance on companies familiar with distribution strategies and opportunities in the country to assist in reducing costs of procurement. Furthermore, it is recommended that promotion must be adapted to culture, which is ostentatious in consumption behaviours and demanding of premium products. Because of the social dimensions that are so relevant to consumer decision-making, all advertisements will feature aspirational social actors engaged in social discussion about the premium quality of Five Guys to entice more socio-psychological responses and demand. Television advertisements will be developed under this premise pre- and post-launch of the company to build brand recognition. Literature states that consumers have very potent brand attachments when they perceive the product can improve their social expansion (Zhang and Chan 2009). 8.0 Conclusion The Kuwait market is ideal for building a solid brand without consideration of consumer loyalties toward a saturated group of fast food competitors. 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