International Marketing Assignment: Market Strategy Of Kilimanjaro Restaurant
Question
Task:
Write report on international marketing assignment exploring the marketing plan of Kilimanjaro restaurant who are planning to enter the market of UAE.
Answer
Executive summary
This report sheds the light on the marketing plan of Kilimanjaro restaurant by the senior marketing consultant as they are planning to enter the market of UAE and start the business of the Café there. This report will be providing a Pestle analysis that will help in understanding the external environment and it will also help in understanding how the factors of the external environment of UAE can affect the coffee shop business of Kilimanjaro restaurant. As the report goes on, it will be shedding the light upon the new market entry modes and it will provide a recommendation for the company so that they can select the most effective market entry mode and the justification has also been provided for the better understanding. It will provide an in-depth discussion about the market opportunities and threats and from there it was identified that they have a market full of opportunities in UAE however the biggest threat they have is competitors like Starbucks. The report will also provide the analysis of market segmentation for Kilimanjaro restaurant and from there it was identified that they should demographically segment their market for reaching the potential target audience. At last, by using Porter's generic strategies it was recommended that they should use the differentiation strategy for achieving the competitive advantage in the market as a new market entrant and a conclusion has been provided for summing up the key points of the report.
Introduction
Kilimanjaro restaurant is a well-known restaurant chain based in Nigeria and they have more than 42 outlets there. They are running their business successfully since the inception and they have decided to enter a new market with the business of the coffee shop. Coffee is a famous beverage in UAE and that is one of the reasons Kilimanjaro restaurant planned to expand its business here. This report will be providing the market entry strategy based on analysis like Pestle and analysis of the entry modes and market segmentation for providing the best strategy for the company so that they can successfully enter the UAE market and run the business of the coffee shop.
Pestle analysis
A pestle analysis can be done in this current context for understanding the external factors that might have an influence on the market expansion strategy of Kilimanjaro restaurant. The Pestle analysis of the UAE market is as provided below.
Political Factors: Political factors include various influences from the political leaders and political sources that might leave an impact on the business. Starting a coffee shop or any other kind of business in the UAE requires a lot of research about the political background of the company so that the business can be stable enough to survive and earn the profit. The political leaders play a major role in UAE as it was seen that they have over-ambition and UAE usually comes up with political changes for making the country more stable politically (Perera, 2017). Recently Britain made their exit from the European Union and that led to some crisis regarding product pricing in the UAE and other countries of middle-east. These are some of the political factors that Kilimanjaro restaurant has to keep on mind before entering the UAE for new market expansion.
Economic Factors: The economic factors are one of the major determinants of how a business would run in a country and while expanding the market, the economic factors have to be analysed and taken under consideration (Perera, 2017). The economic factors of a country include the rate of global trade, GDP of the country, and the growth of GDP in the country. It was observed that UAE has an economy that is mixed in nature and the investors who belong to foreigners are more interested in investing in global trade and travel-tourism business. It was also found that UAE has a freedom score of 77.6 and there is still unemployment in the country. Moreover, the current GDP of the country decreased by 34.3% in the year 2020. So, these factors need to be taken into consideration before starting a business in the UAE.
Social Factors: UAE is a country where most of the population belongs to the Islam region and as the country belongs to middle-east, those people lead a western lifestyle. UAE is an Arab country and all the people living there are very much conscious about their health, well-being, and safety (Matias, 2016). These people have the purchasing power which was found to be average and they have a mixed culture in the lifestyle they lead. In Arab and UAE coffee is very famous and the people belonging here are big on of coffee and dates in general. So, this can be a very good opportunity to start the business of coffee shops in UAE as the people of UAE will be interested in taking the services (Matias, 2016). So, it can be said that Kilimanjaro Restaurant has a very good opportunity and the social and cultural factors will leave a positive impact on their business and profitability in the long term.
Technological Factors: UAE was found to be a country with technological advancement and they put the innovation and technology together for bringing up new products (Nestorovi?, 2016). They have highly technologically advanced buildings, shops, and even vehicles so, here the changes in the technological environment is higher comparing to any other country. It can be said here, Kilimanjaro restaurant has to keep up to the technological changes and they have to react to all the technological changes if they want to establish and expand their business in UAE. The technological factors can leave a positive impact on the business if those are handled properly.
Legal Factors: There are various legal factors in UAE that might influence a new business and that can leave an impact on the business. There is an agreement in UAE which is known as "Free Trade Agreement in Arab" and that allows a business in trading freely in some of the countries like Syria, Morocco, and Iraq. UAE has a "Multilateral” and “Bilateral” agreement and the agreement is done between the GCC countries (Abdelaa et al., 2019). UAE comes up with various changes in the rules of Visa approval and it is mandatory to have an approved license from the ministers of the country to open and run a business there. The approval usually comes from the “health ministry and municipality” and it is applicable for opening a coffee shop as well (Abdelaa et al., 2019). Some of the taxation policies have been changed and that are applicable for all the products that are available in the country and the changes in the taxation policies have increased the payable tax for the companies as well.
Environmental Factors: Just like all the countries that belong to the middle-east, UAE also has a very hot climate and by keeping that on mind they take care of all the pollution that might rise form the industry. They do it for keeping the rainfall normal and maintaining the waste and the pollution level is important and mandatory for all the businesses in the UAE (Soltwisch, 2015). Here, Kilimanjaro restaurant has to be careful as they have to meet these criteria and they have to manage effective waste management. They also have to come up with recycling policies so that pollution can be kept under control (Soltwisch, 2015). The level of carbon emission also has to be kept down and they have to come up with a packaging model that will help them in keeping all the waste under control and they can easily meet the environmental criteria which is important for all the businesses in UAE.
Opportunities and threats
Opportunities: There is a huge opportunity for Kilimanjaro restaurant as they are planning to open a coffee shop at UAE and it was also found that if they can properly create the strategy, they will be able to expand their business in UAE. It was already found that a huge population of the UAE loves coffee and proper market research is needed for understanding which areas to penetrate at first. Initially, it was found that college students and office goers can be potential audiences, and customers and the university areas can be potential areas to penetrate first (Pandey, 2018). Kilimanjaro restaurant can collaborate with the universities so that they can make their coffee available at the college canteens or they can create the strategy to provide some offers to the students so that they can visit their stores and they can bring more potential customers as well. Targeting the malls and other places where the tourists gather would also be profitable for Kilimanjaro restaurant and they can also plan to target some of the most famous places in Dubai which include Burj Khalifa, Dubai Mall, and so on. They can adopt various marketing and pricing strategy and as UAE is a new market for them, it will be beneficial for Kilimanjaro restaurant if they adopt the penetration pricing strategy rather than skimming pricing strategy and they can also select the means of social media marketing which will be beneficial for them (Pandey, 2018). They can collaborate with the local delivery partners for expanding the delivery services and as they already have a mobile application, they can promote that as well which will be beneficial for them as they can even get the feedback from the customers.
Threats: The biggest threat as a new market entrant for Kilimanjaro restaurant is huge competitors like Starbucks, Tim Horton, and Costa Coffee, and so on. These are some of the well-established coffee shops and some of them have global popularity. The local people of UAE have the preference and they often visit this place so, standing out and giving competition to these coffee brands can be a little bit tactful for Kilimanjaro restaurant. They need to create the proper strategy for standing out in the market of UAE so that they can eventually expand their business there. Getting proper investment for the business might take up some time too so that is another area of threat for the company as they are new in the UAE market (Pandey, 2018). They need to design their operational management properly and that will also take up some time because without a proper operational design it is not easy to run a business and Kilimanjaro restaurant might face all these problems at first when they enter the market but eventually if they create the proper strategies and create a stable marketing plan, these issues will be mitigated and they will get the stability in their business.
Modes of entry into international business
There are various modes of new market entry that are chosen by the companies and that includes modes like strategic alliances, licensing, franchising, wholly-owned subsidiaries, joint ventures, acquisition and merging, and foreign direct investment (FDI) (De Villa et al., 2015). These modes of market entry can be evaluated for choosing a proper mode of new market entry for the company Kilimanjaro restaurant as they are planning to open coffee shops in UAE.
Strategic Alliances: Strategic alliance is a famous mode of new market entry where the company collaborates with a local partner. The strategic alliance is established based upon a contractual agreement that has similarities in their business objectives. The advantage of this mode of market entry is that it provides a reduced risk in the business and the cost is also shared between the partners. Moreover, it makes the new business looks like a local entity which creates reliability among the local people about the business (Swoboda et al., 2015). The major disadvantages of this mode of entry include sometimes there can be conflicts and integrated issues among the partners.
Licensing and franchising: Licensing is a contractual agreement where the company provides its intellectual property and patent for a fee in the foreign countries and a licensor can acquire them as the company has provided the rights. Franchising at the same time is a form of licensing where the company sells its trademark and intangible property in return to loyalty. The advantages of licensing and franchising include low chances of risk and it provides fast entry to the company that is entering the market (Hollender et al., 2015). The disadvantages of this mode of entry include that the company might have less control over the franchise and sometimes there is a huge chance that the licensor might become a competition itself for the licensee.
Wholly-Owned subsidiaries: Wholly owned subsidiary is also known as Greenfield venture which is also highly adopted by the companies as the mode of new market entry. It is a form of foreign direct investment or FDI and in this method, the company directly enters the market and use their knowledge and expertise for building the business at that particular country (Hernández and Nieto, 2015). The advantages of this method include that the company will have the maximum control over their operations and their business and they will be able to provide employment to the local people and they can gather the knowledge from there as well. The disadvantages of this mode of new market entry include it is a matter of slow entry, it is costly and there is a high risk in choosing the mode of entry as the company will be starting the business on their own in an unknown country (Ang et al., 2015).
Recommended mode of market entry for Kilimanjaro Restaurant: As Kilimanjaro restaurant is opening a coffee shop at UAE it is recommended that they should choose to license and franchising as the preferred mode of new market entry. It can be said that all the other coffee shops that exist in UAE and are the potential competitors of Kilimanjaro restaurant, use this method for their business, and using the franchising mode will give them the fast entry to the market that they require. They can tie-up with the local entrepreneurs and expand their business by opening franchises (Vargas-Hernández and Martínez, 2016). It will be very beneficial for them as it will be a matter of lower risk factors and they will be earning the profit through the royalty. Moreover, their brand name will be highlighted and they can come up with various offers like free trials of some of their food items which will be very helpful in attracting the franchisors and customers both for establishing the business in the new market.
Market Segmentation
Market segmentation is a process of differentiating the market and potential customers or target audiences based on factors like area, gender, age, lifestyle, income level, and so on. This is a major area of marketing and the market segmentation has to be done properly for Kilimanjaro restaurant if they want to reach to the potential customers effectively which will help them in surviving in the market of UAE (Venter et al., 2015).
Market segmentation of Kilimanjaro restaurant:
The market segmentation of Kilimanjaro restaurant can be done based on three major factors- demographic segmentation, geographic segmentation, and behavioural and psychographic segmentation.
Demographic segmentation is done based on age, gender, income level, social class, and so on. The advantage of this type of segmentation is that it becomes very easy for the marketer to identify the target audiences and the disadvantage of this type of segmentation is that it is hard for the marketer to gather the understanding of the target audiences (Camilleri, 2018). The demographic segmentation of Kilimanjaro restaurant would be the teenagers and the middle-aged people who belong to an average income level or current student and both men and women are their potential target audience.
Geographic segmentation is done based on geographic areas like country, state region, and so on. In terms of this new market entry of Kilimanjaro restaurant, they do not have any particular geographic segmentation for reaching out to the target audience.
Behavioural and psychographic segmentation is done when the marketer wants to understand the lifestyle of the target audience so that their actions can be understood and it can also be understood how they are reacting to a product or their buying habits (Cross et al., 2015). The advantage of this type of segmentation is that the needs of the customers can be easily understood however, the disadvantage includes that it is not easy to predict customer behaviours. Kilimanjaro restaurant can use this type of segmentation for predicting customer behaviours as well.
Recommended market segmentation and target audiences for Kilimanjaro restaurant: Kilimanjaro restaurant can rely on the demographic market segmentation as they can easily identify whom they want to target and that will be effective or not. From the demographic segmentation, it can be identified that their target audiences are college goer students, office workers, and other teenagers and middle aged people: both male and female and they are targeting the people with average income group as it will be effective for them if they chose penetration pricing strategy.
Porter’s generic strategy
Porter's generic strategy is a framework that is used so that the companies can identify a niche in the market from where they can get a competitive advantage. It includes three generic strategies named “cost leadership”, “differentiation” and “focus”. They help the business in finding the proper niche and these are called generic strategies as they can be applied to any product or services belonging from any industry (Islami et al., 2020).
Figure 1: Porter’s Generic Strategies
(Source: Viltar, 2017)
The cost leadership strategy: This is one of the three generic strategies and this is one of the popular strategies that is used by the companies for achieving a competitive advantage. It suggests that reducing costs can be used for maximizing the profit and keeping the pricing strategy to penetration. It also suggests that the market shares can be used by charging a lower price and making the profit from the sales (Islami et al., 2020).
The differentiation strategy: Differentiation strategy is all about making the products different and more attractive than the competitors by increasing the quality and functionality of the products (Omsa et al., 2017). A good research and innovation process is required for adopting this strategy and the company must have the ability to deliver high-end goods and services.
The focus strategy: It helps the companies in understanding the dynamic patterns of the market so that the needs of the customers can be fulfilled with unique products. It focuses on one particular segment and helps in being better than the customers in that particular niche (Viltar, 2017).
The recommended strategy for Kilimanjaro restaurant: It is recommended for Kilimanjaro restaurant that they use the differentiation strategy as it would help them in bringing up attractive products that will attract the target audiences. It will also help them in creating a brand value and the customers would stay brand loyal if they provide them with high-end quality products and services. As it is recommended for Kilimanjaro restaurant to adopt the differentiation strategy, it is very important that they choose effective marketing and pricing strategy so that the target audiences understand the quality of the products they are offering to them. It is also important that they choose the pricing strategy properly as well for reaching out to the target audiences.
Conclusion
On completion of the report, it can be said that the plan of opening a coffee shop in the UAE and entering the new market can be beneficial for Kilimanjaro restaurant as the market of UAE has a lot of opportunities and potential scope for the company. There are a few external forces that the company has to manage properly and it was suggested that they should use franchising as the mode of new market entry. It was also suggested that they should segment their market based on demographic factors and they should also consider the differentiation strategy which is extracted from Porter's generic strategy for successful new market entry and expansion of the business.
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