The Case Memo

The Case Memo

To: Sales and Marketing Manager, Tim Horton

From: XXXX

Date: 2^nd February 2020

Subject: Strategies to Mitigate Competition and Internationalization Problems

Description of the challenges

According to the case study, Tim Horton has an aggressive expansion plan into China, which is one of the world’s largest markets. Exploring and expanding to this new market comes with significant challenges that need to be addressed. Based on the case, the primary problem that Tim Hortons will face change in the nature of the market and consumers.  This entails external factors such as culture, believes, values, political environment, social conditions, among others. The market in Canada is entirely different from that in China, which means a significant change in consumer taste and preferences. Furthermore, coffee is not a common product in China, and most consumers are not well aware of its existence in the market. In connection, change in consumer taste and preferences will be a big challenge to the company. Chinese consumers have different tastes and preferences as compared to Canadian consumers. Another challenge Tim Horton’s will face is competition from both local and foreign firms in China. The Chinese market is considered a perfectly competitive market characterized by the free entry of firms in the industry. Consequently, various firms are offering similar products in the Chinese market, which means there is cutthroat competition. Apart from cultural differences, the political environment between China and Canada rough. The relationship between the two countries is not that good, which may affect the business in the country.

Tim Hortons should consider internationalization problems such as trade barriers, exposure to the labor market, financial constraints, productivity, and social issues.  China is one of the forefront countries in technology; Tim Horton’s need to consider technological impacts on its new market. International markets have several uncertainties with a high level of dynamism.  Due to political differences between China and Canada, governments may create a plan of barriers that requires special attention. Political realities and cultural diversities present severe threats to the firm in its bid to expand the market. Due to the challenges expected in the new market, the company needs to have well-organized market entry strategies that will combat competition, change in consumer taste and preferences, and internationalization problems. There are various market entry plans that the firm may exhaust to stabilize in the Chinese market successfully. In order to solve a change in market nature, the firm needs to employ market penetration and development strategies. Further, to solve consumer taste and preference challenges, product differentiation would be appropriate.

Recommendations

Expanding into the Chinese market is a risk but economically desirable and profitable. The firm should address the problems mentioned above and venture into the new market. In order to meet customer expectations, the new firms in China should employ a strategy of product differentiation and branding. This will ensure that products are produced as per the consumer’s taste and preferences. If the coffee produced in the Canadian market are branded to align with Chinese market expectations, then consumers will still buy thinking that they are entirely new products. The coffee in the Chinese market should be differentiated in terms of price, features such as size, shape, ingredients, and origin. The essential part is to differentiate product performance and quality. After thorough market research, the firm needs to produce the standard quality that meets consumers’ expectations.

Competition problems can be solved via the formation of joint ventures. Tim Hortons should form joint ventures with other firms that have been in the market and understands how it operates. For example, it would be productive to form a joint venture with some of the Brazilian firms that have stayed long in the market. Another recommendation is that Tim Hortons should understand the foreign market with the external environment. For example, international trade patterns would help forecast global market problems. It is also essential to study the external environment in China. Factors such as cultural and religious practices have a significant impact on what, when, and how consumers but and utilize coffee products. In this case, the company needs to note that technology in China influence selling and buying.  It is, therefore, necessary that technology is adopted in marketing. Marketing via social media would be strategic in the market. Consumers in China prefer constant communication through technological advancements such as WeChat to help them explain their needs to the service providers.  It is recommended that the firm should embrace technology to align and be relevant to the Chinese market.

Analysis

Tim Hortons company has successfully operated in Canada with profitable standards; therefore, it only needs entry strategies to explore the Chinese market. The above challenges can be solved with both short and long term marketing strategies. Change in buying habits, taste and preferences, unstable political environment, internationalization problems, cultural diversities, and financial constraints are drawbacks that require special attention. Despite all the challenges, the firm should take the risk and explore the market. Expanding into large markets such as China comes with risks that require strategies to mitigate and be successful. There is a need to understand consumers, the market, and the type of products being produced. Competitors also should be understood to identify the reasons why they are benefiting from the market.

Conclusion

Based on the case, Tim Hortons should address the two major challenges, which are competition and consumer culture that influences their buying behavior. Joint ventures and product differentiation would be the best strategies, respectively.

Implementation Program

The first activity would be to perform a market search and know the possible firms to form a joint venture. It is recommended to form a joint venture with McDonald’s at a tune of $ 45000 for two financial years. Product differentiation should be done for the next three years based on price, features such as size, shape, ingredients, and origin. Since the firm wants a faster growth rate

Exhibits

The P-A-S-P model is used for coffee branding.

P- Purpose

A-Ambition

S-Strategy

P-Position

There is a joint venture operating model that should be used between McDonald’s and Tim Horton’s.

Quasi-Independent JV and Interdependent ventures models can be considered for implementation to ensure that the firm succeed in the future.