A-Introduction
In East Asia, China is the world’s most populous country in the world. The population of the country is 1,403,500,365. The gross domestic product of the country is $25.238 trillion, according to 2019 estimates. Entering into China is effective for a multinational firm due to its potential retail market and promising return on investments.
B-Situation Analysis
The situation analysis of the company depicts the current state of the business. It seems interesting to illustrate some facts and insights regarding the Chinese market to shape strategies for Tim Hortons. Country, competitive and brand analysis can help the management of the company to derive several insights. Based on managerial cognition, the management can develop and maintain a comprehensive marketing plan. It seems the marketing research for the company to understand the new market and reduce the business risk.
1-Country Analysis
i-Trade and economic situation
Recent developments show the increasing growth rate of Chin in the first and second quarter of 2018. China, due to its rapid economic growth and development, has become the second largest economy in the world. Business investments are in the limelight, and it is strengthening the trade and economy effects.
a-Facts
In 2018, the first quarter shows a 6.8% increase in the gross domestic product. The value of the gross domestic product is 41,896.1. China is the largest merchandise exporter according to the world trade organization by USD 2,263 billion exports.
b-Implications for your product’s marketing strategy
The marketing of Tim Horton, consisting of coffee and donuts, can be enhanced in China. The economic growth and trade opportunities can help the firm reach target customers through better distribution channels.
ii-Political situation
a-Facts
The political system of China is stable. However, in 2018, the firm can face internal and external uncertainties. The political tension between ten ewe congress government of China and Trump can accelerate these uncertainties.
b-Implications for your product’s marketing strategy
China has a strong business structure, and it can be run successfully even impaired political. Tim Horton can be streamlined in the country because coffee or donuts business rarely alters due to this factor. It is a fact that political stability is a big support for new and existing businesses due to the stabilized political system, the firm can fight in the competitive market and adopt the aggressive approach to gain some predictable outcomes
iii-Legal/regulatory situation
a-Facts
The business rules and regulations in China are quite tough as compared to other countries. To start the food business in this country, it is necessary to integrate with some effective environmental regulations, shaped by the Chinese government. Staff should be trained by the Food and Drug Administration (CFDA), controlled by the Chinese government.
b-Implications for your product’s marketing strategy
This business regulation when starting the business in this region is mandatory. In the marketing process of Tim Horton, the management of the company must have to streamline the integration with Food and Drug Administration (CFDA), which can make coffee and donuts reliable for the customer.
iv-Social and cultural forces
a-Facts
It has been revealed that the literacy rate in this country is over 95%. Behavior and family trends are based on the decision-making process. People are religious and educated. In China, 420 million people use the internet. Society is moving towards modernism (Globalist, 2014).
b-Implications for your product’s marketing strategy
As mentioned, people are educated and internet users, the firm can target these users by making several segmented the marketing process can be conducted through the social media channels and online platforms as well. Quality of coffee and donuts can be promoted through information to target educated customers.
v-The situation concerning other environmental variables
a-Facts
Companies, operating in China, are looking to produce environmentally friendly products and reduce environmental impact. Environmental sustainability is a prominent variable, and it contains some spikes, which increase or reduce the impact on the environment. However, Chinese environmental regulations are tough, which regulate local and multinational firms. In a decade, sources of pollution are increasing, and it caused a 50% increase (Kuo, 2018)
b-Implications for your product’s marketing strategy
The situation with respect to environmental variables can create an impact on product marketing. For Instance, the quality measure for Tim Horton is the environmental impact. When using traditional and modern media channels to advertise the product, the firm should tell the environmentally friendly characteristics.
2-Market Structure and Competitive Analysis
i-Description of the market – size and growth
a-Facts
The coffee market in China is growing. The compound annual growth rate (CAGR) of the Chinese coffee market is 6.5%. According to estimation, the coffee business will reach a billion in 2022. In 2015, Nestle held a market share of 70%. Now, the size has been increased due to the inclusion of Starbucks, Dunkin Donuts, Seattle, and Nestle.
b-Implications for your product’s marketing strategy
Based on these competitor’s actions, the firm can shape several marketing strategies to enhance the visibility of positioning ad customer conversion.
ii-Factors affecting the size and growth of the market
a-Facts
Factors affecting the size and growth of the market are the entry of new arrivals, business expansion of local and multinational firms, and the increasing populations of target customers in China.
b-Implications for your product’s marketing strategy
The market strategy of Tim Hortons can be shaped according to customer segments. Each customer segment may be attracted by a different marketing technique.
iii-Description of major competitors – market share and growth, the source of competitive advantages and disadvantages, prospects
a-Facts
Top five coffee competitors in China are Starbucks, UBE, Costa Coffee, White bread McDonald, and Zhejiang Liangan. Market share of Starbuck is 31.5%, UBL 22.5, Zhejiang Liangan 7.7, White bread 5.5, and McDonald 6.1. The sources of the competitive advantage are quality and differentiation, and in future, these sources can generate more leads for companies.
b-Implications for your product’s marketing strategy
Differentiation can be the prominent element of the marketing strategy to sustain an intense rivalry and increase the market share.
3-Company and Brand Analysis
i-Firm’s strengths and weaknesses vis-à-vis entry into the foreign market
a-Facts
Market share, brand image, and the strong financial condition can be the strengths of the company in both China and Canada. Major weaknesses are the limited product line, and declining profitability and sales. Similarly, the firm can face it in Canada and China (Martinez, 2014).
b-Implications for your product’s marketing strategy
By using these strengths, the firm can also derive its marketing strengths such as investment in media channels. Weaknesses of the company should be eliminated by embracing opportunities.
ii-History of the brand and prospects, if applicable
a-Facts
The brand was founded in 1964. In 1990, the management changed its name and started growing in different regions. In 2014, the company merged with burger king of the company or brand in China in the limelight due to the merger or acquisition options.
b-Implications for your product’s marketing strategy
In the future, the company may contain the strategic alliance or merger with Chinese coffee chains and combine the marketing strategy to maximize the result.
C-Conclusions/Indicated Action
Business in China is challenging due to high competition. An adequate marketing strategy is needed to streamline products in the market. The market analysis can be used in making marketing strategies. A merger or strategic alliances are prominent options to increase the market share and be relevant in the competitive market.
D-The Marketing Plan
1-Marketing Objective
The objective of Tim Hortons is to increase its market share by 10%. The aim of the company is to beat Starbuck, which exists strongly in the Chinese coffee market.
The marketing objective of the company is to increase sales by 15 to 20% in the next 2 years.
2-Marketing Strategy
i-Identification and description of the target market (core consumer)
Target customers of this company are young adults, teenagers, and senior citizens. However, the company can make different segments in Chin. For Instance, in the corporate sector of China, executives use to take coffee and donuts. Thus, these are target customers for this brand. On the other hand, the target customer of the company is the student. Different educational institutions, students (Young, teenagers) can be grabbed by the company. Instead of focusing on the customer demographics, the behavioral segments can be shaped to attract each group of customers and streamline sales.
ii-Product positioning statement
Tim Hortons offers high-quality coffee and donuts to inspire the human spirit and change the coffee and delicious food experience.
The firm aims to position us better in the minds of customers. The most important thing is to create value for customers. Based on market competitiveness and brand analysis, the firm has managed to develop its positioning statement. The positioning statement is aligned with the vision, mission, and other business objectives.
iii-Marketing mix
a-Product
Tim Hortons is coming up with different products. These products are coffee, tea, soups, salads, beverages, sandwiches, breakfast, snacks, hot bowls, and catering. The product strategy is to make different product segments along with sustained quality and measures. The element of the differentiation is also in the limelight, which can be done through quality, design, pricing, and packaging (Joe, 2014).
b-Promotion
The promotional activities are to be enhanced through modern media channels. Social media channels are to be used to advertise different products of this brand. Attractive visualization and stimulation along with some effective online contents are valuable promotional tools for the company to get products famous and reliable the return on investment. However, the management of the company cannot ignore traditional media channels for promotions. The Internet is the best source or option for the management of the company. However, the firm has to target a group of senior citizens, who like to watch television. Moving forward, the company can enhance the promotion process in different local and international food events in China. Discounted offers on festivals are also a key option that can attract customers. Through promotion, the firm wants to shape the eating habits of customers in this market, and it can make the difference (Westman & Sowyrda, 2015).
c-Price
The company may introduce or initiate the penetration pricing strategy in the Chinese market. It is a fact that competitors and local coffee giants are depicting high prices to generate revenues and profitability and create the perception of higher status. However, Tim Hortons wants to penetrate regarding pricing. The intention is to sell coffee and other products at low prices and increase sales. Also, it is a better technique to grab the customers in initial quarters (Baker, 2014). Penetration pricing strategy is a great tool for this company to target low- and moderate-income people. People can be attracted by the low price. However, the quality of the product is not to be compromised.
d-Distribution
The firm will use direct distribution. For Instance, in urban areas, especially in major cities, the firm must have to open coffee shops to reach the target audience. The most important thing is to idealize the location strategy, examine the maximum number of customers or visits at a single location, and open a store to justify the sales targets or objectives (Baker, 2014).
E-Financial P&L Statement
Revenue and key Costs:
The revenue of the Chinese Coffee industry for 2018 is shown in the table in the appendix. This figure is used for the evaluation of the key figures for revenue and costs for the venture of Tim Horton in Chinese Coffee Industry. The market share of the Chinese Coffee Market for 2017 is used for the evaluation of the market share or revenue of Tim Horton for the year 2019. It has been assumed that Tim Horton will gain at least 10% of the market share. It concludes the value for revenue of Tim Horton for 2019. For 2020 to 2022 we have assumed that the overall industry revenue will increase by the CAGR of 6%. The market share for 2020 for Tim Horton is assumed at 10%, for 2021 at 13% and for 2022 at 15%. The Cost of Sales for Tim Horton has been assumed at 60%. From the 40% Gross Profit, the operating expenses are assumed at 25% yielding the net income of the company in the Chinese market. The analysis and evaluation show profitable projected profit and loss statement as shown in the appendix. The components of the profit and loss statement are similar to the commonly used statement formats by companies. The details are attached in the appendix for reference.
F-References
Baker, M. J. (2014). Marketing Strategy and Management. Macmillan International Higher Education.
Globalist, T. (2014, December 9). 11 Facts: China’s Improving Literacy Rate. Retrieved from https://www.theglobalist.com/11-facts-chinas-improving-literacy-rate/
Joe, M. (2014). Marketing Plan for Costa Coffee. GRIN Verlag.
Kuo, L. (2018, March 31). China ‘environment census’ reveals 50% rise in pollution sources. Retrieved from https://www.theguardian.com/world/2018/mar/31/china-environment-census-reveals-50-rise-in-pollution-sources
Martinez, P. (2014, June 19). Tim Hortons: Strengths, Weaknesses, Opportunities, Threats. Retrieved from https://www.fool.ca/2014/06/19/tim-hortons-strengths-weaknesses-opportunities-threats/
Mordor Intelligence. (2017, December). China Coffee Market – Growth, Trends and Forecasts (2017 – 2022). Retrieved October 11, 2018, from Mordor Intelligence: https://www.mordorintelligence.com/industry-reports/china-coffee-market
Statista. (2018). Coffee China. Retrieved October 11, 2018, from Statista: https://www.statista.com/outlook/30010000/117/coffee/china
Statista. (2017). Specialist coffee shop market share based on sales in China in 2017, by sales. Retrieved October 11, 2018, from Statista: https://www.statista.com/statistics/880921/china-coffee-shop-market-share/
Westman, J., & Sowyrda, P. (2015). Launching New Products: Best Marketing and Sales Practices. Business Expert Press.
G-Appendix
| Key Data | ||
| China Coffee Industry Revenue | $ 2,087 | million |
| Industry Participants | Market Share | Market Volume | |
| Starbucks | 80.70% | $ 1,684.21 | million |
| McCafe | 8.40% | $ 175.31 | million |
| Costa Coffee | 5.20% | $ 108.52 | million |
| Pacific Coffee | 3.50% | $ 73.05 | million |
(Statista, 2017)
| Key Data | |
| Assuming that Tim Hortons gain 10% market share | 10% |
| CAGR per year for coffee industry of China until 2022 | 6.50% |
(Mordor Intelligence, 2017)
| Projected Revenue of Coffee Industry of China based on CAGR% | ||
| China Coffee Industry Revenue 2019 | $ 2,222.66 | million |
| China Coffee Industry Revenue 2020 | $ 2,367.13 | million |
| China Coffee Industry Revenue 2021 | $ 2,520.99 | million |
| China Coffee Industry Revenue 2022 | $ 2,684.86 | million |
(Statista, 2018)
| Potential Profit & Loss Statement | ||||
| in millions | 2019 | 2020 | 2021 | 2022 |
| Revenue | $ 222.27 | $ 236.71 | $ 327.73 | $ 402.73 |
| Cost of Sales | $ 133.36 | $ 142.03 | $ 196.64 | $ 241.64 |
| Gross Profit | $ 88.91 | $ 94.69 | $ 131.09 | $ 161.09 |
| Operating Expenses | $ 22.23 | $ 23.67 | $ 32.77 | $ 40.27 |
| Net Income | $ 66.68 | $ 71.01 | $ 98.32 | $ 120.82 |
| Revenue Growth in Projected Five Years | |
| Revenues Growth- 2020 | 6.50% |
| Revenues Growth- 2021 | 38.45% |
| Revenues Growth- 2022 | 22.88% |
| Assumptions: | |
| Market Share- 2019 | 10% |
| Market Share- 2020 | 10% |
| Market Share- 2021 | 13% |
| Market Share- 2022 | 15% |
| Cost of Sales | 60% |
| Operating Expenses | 25% |
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