Background
Tim Hortons Inc. was first established as a restaurant in Canada in 1964. The company majorly centered on a franchise business, and the outlets were available in the US, Canada, and the Gulf Corporation Council. They were involved in selling products such as baked items, coffee, breakfast, and lunch. The firm emerged as a quick-service (fast-food) type of restaurant where consumers go and either take the food with them or eats there. The amount is first paid, and the food items are distributed to the consumers in this fast-food restaurant. It operates on the contrary to the full-service restaurant. The company has many strategic options to create if it is aiming to resolve shifting consumer trends and growing competition in the restaurant industry (Ivey, 2016).
To have a global presence, it should have financial resources, store saturation, organizational capabilities, brand recognition, and product innovation too with significant competitors in the sector globally such as McDonald’s, Starbucks, and Dunkin’ Donuts who are the leading and popular fast-food providers, for example, donuts, coffee, and sandwiches.
Vision, Mission, and Values of the Tim Hortons Inc
The company’s vision statement state that it aims to be the quality leader in everything they do. It implies the company is more than a fast-food restaurant as seen in its vision. The firm aims to being the leader in the industry and doing more. Apart from preparing better-quality food items, the firm has developed its brands as the leader in the sector. Its persistence to set high standards has induced other associated developments to follow it. The company is engaged in other change-minded initiatives apart from treating consumers to high-quality coffee (Ivey, 2016). They are actively involved in the environmental conservation, empowerment of people, and capacity building of societies. It is evidence that Tim Hortons is a leader since it exemplifies how companies need to be part of the larger plan of creating the actual difference in society.
Tim Hortons Inc.’s vision articulates what the company hopes to become in the future while helping direct its strategies such as expansion into the global presence. The image shows the intent of Tim Hortons to become a global player in the fast-food restaurant industry. By creating clear inspirations, Tim Hortons’ executives hope to motivate workers to act in manners that assist the company in becoming the best globally in the industry (Ivey, 2016).
The survey results of managers demonstrate that establishing an inspiring vision develops a tremendous challenge for managers. Many managers agree that a strong sense of vision statement is a characteristic of a strategic leader. Tim Hortons having a well-created vision workers embrace may thus provide the company a competitive edge over its competitors. The inspirational goal of what Tim Hortons desires to become is the driver for established strategies. Achieving the goals and strategy drives the company toward accomplishing its vision (Ivey,2016). Hence, there needs to be an alignment between Tim Hortons’ vision and the strategies its leaders choose.
The mission statement of Tim Hortons has been essential in its progressive expansion over the period. The corporate mission statement creates the mechanisms of accomplishing the forecasted future reality of Tim Hortons. The mission of the firm adds to this commitment of being a leader in the restaurant industry by stressing superior services and quality maintenance for its consumers. Tim Hortons’ mission is to deliver exceptional quality services and products for their communities and guests through innovation, leadership, and partnerships.
The company’s mission statement helps in capturing its identity and offers answers to the fundamental question. It captures the main elements of the company’s present and past. Mission statement understanding and living their company’s mission assists workers’ satisfaction and engagement. Tim Hortons’ mission statement is reflected in its vision that sets the overall goal of the company as: to be the quality leader in everything the company does. Tim Hortons requires support from its major stakeholders, for example, owners, workers, consumers, and suppliers, if they aim to be successful in the restaurant industry (Ivey,2016).
The company mission statement explains to stakeholders the reasons they must support the firm by creating clear what essential purpose or role the company plays in society. For instance, Tim Hortons’ mission is “to deliver superior quality products and services for our guests and communities through leadership, innovation, and partnerships (Azeem & Hussain, 2018).” The company pursued this mission during its initial days by establishing popular quick-service restaurant stores in Canada, the US, and the Gulf Corporation Council. The company continues serving its mission via different strategic actions comprising offering a wide range of products to appeal to an array of consumer preferences at affordable and attractive prices.
The product line of Tim Hortons contains espresso-based hot and cold specialty drinks, premium coffee, fresh sandwiches, home-style soups, hot breakfast sandwiches, wraps, and freshly baked items. The company also offers products, for example, Christmas hampers, coffee packets, and coffee machines via its grocery outlets and online shop (Ivey, 2016). Tim Hortons’ mission is the umbrella under which all functions of strategic management happen. The company’s strategies and goals align with its vision, mission, and purpose.
Tim Hortons’ core values comprise “making a difference, consumer first, personal excellence, stewardship, and cooperation (Azeem & Hussain, 2018). Since the company opened its first store in Hamilton, the firm has indicated that it values the winning together spirit. In ensuring this is one of the foundations, the company has since proceeded to execute the values to influence its stability and develop a supportive culture. Employees of Tim Hortons are required to embrace and follow the corporate values. Hence, a company needs to consider its values statement when formulating its goals and strategies (Ivey, 2016). If the company’s potential strategy shows some variations or conflicts with its values, there is a need to modify or drop that strategy to ensure the firm conforms to its values as they spearhead the company forward.
Tim Hortons has grown as a fast-food restaurant beyond its borders from 1964, currently a global chain having stores in over 14 countries comprising many branches in the United States (Dubas, 2017). The progress has been successful through its vision and mission statements. Tim Hortons’ vision statement highlights its unwavering commitment to being the leader in the restaurant industry. The mission statement adds to the dedication by stressing the superior quality and service maintenance for its consumers. It is supported by the company’s core values (Ivey, 2016). Hence, Tim Hortons’ goals and strategies should be aligned with its vision, mission, and core values to ensure success in its activities.
Before the firm’s merger in 2013 with Burger King, it had 6 million dollars in the comprehensive system sales (Azeem & Hussain, 2018). Currently, Tim Horton serves over two billion coffee cups annually and he is regarded as the most dominant QSR (quick-service restaurant) and the nation’s out-of-home sales business. Having the strong brand acknowledgment, it has attracted a significant market share while appealing to customers over 75 percent of coffee consumed and purchased out of home, 27 percent QSR share dollars, and 42 percent (Ivey,2016). QSR share traffic seems to be attained by the firm as per the annual report of 2013(Ivey, 2016).
Besides being famous Canada’s QSR brand, Tim Hortons emerged as the state institution congratulated by citizens. In reality, no retail business or food service in Canada has experienced such psychological and social impact on families and individuals across Canada. In the earlier five decades, Tim Hortons has become the iconic brand that continues to captivate ad grow in the minds and hearts of loyal customers such as politicians who visit the coffee shop for their photos to be captured during the election campaigns. Every morning, many Canadians visit Tim’s to get the coffee, as they believe that starting a day with Tim’s hot cup coffee is a vital part of their daily duties (Ivey, 2016). Many workplaces perform coffee runs as the staff member makes the order then runs out making the payment at a nearby Tim Horton.
Tim Hortons Inc. Current Strategy and the Components Strategic Alignment
Acquisitions and mergers strategy: Consequences of M & A, Burger King, and Wendy
In 1992, the industry watchers identified Charlottetown’s Danny Murphy, the Island of Prince Edward for instituting the first combo restaurant of Wendy’s-Tim Hortons in Montague P.E.I. When Murphy the owner of Tim Hortons and all Wendy’s restaurants in the entire province, proposed the TDl (Tim Hortons Donut Ltd) idea was excellent, but when he accepted financing the business, the firm permitted him to continue. Other Canada’s Tim Hortons franchisees later adopted the concept to serve while attracting more consumers within one region.
The achievement of Murphy and the attendance of Dave Thomas, the chairperson of Wendy, at the PEI’s grand opening led to the QSR merger concept between the Canadian and American firms. On 1995 August 8, Wendy’s international amalgamated with Tim Hortons. Initially, Tim’s thought that the union would help the coffee image to extenda, more robust existence in the US. However, the partnership for different reasons confirmed an unsuccessful coalition. In 2005, Wendy’s began selling 15 to 18 percent of shares in the first public offering that ended in the 2006 march (Ivey,2016). The remainder of Tim Hortons shares was traded, and in 2006 September, the company became a split corporation TDL.
From 2006 to 2013, Tim Hortons proceeded in adding locations, increasing revenues, and improving the menu in the Gulf Stats, the US, and Canada. Nevertheless, in 2014, the significant and most historic corporate change started to unfold. Tim Horton’s consistent revenue expansion, solid brand identification, and market dissemination attracted the Brazilian’s multi-billion dollar international investment company. The 3G Capital Partners LP that acquired in 2010 Burger King showed its interest in acquiring TDL. In 2014 December, 3G Capital procured Tim Hortons Inc. for $11.4 billion and placed TH and BK under RBI (restaurants brands international).
The acquisition was viewed as the strategy part for both companies to enlarge their brands internationally, mainly in the productive US market. The observers and media reporters concur that the investors viewed Tim Hortons’ achievement in the morning breakfast and coffee category in expanding TH and Burger King globally and in North America (Ivey,2016). The acquisition formed the chain alliance of burger-coffee to contend in the expanding QSR and breakfast market against key competitor McDonald’s that recently began offering the daily breakfasts at the regions of US.
In 2004, 3G capital was founded, having offices in Rio de Janeiro and New York partnered with Warren Buffet’s Inc. of Berkshire Hathaway that offered 3 billion dollars to finance the acquisition of Tim Hortons. Buffet, who bought shares worth 8.4 million valued at 330 million dollars, saw the merger of TH-BK traded as RBI being the sound market investment. In 2014 December, the RBI and 3G capital completed the transaction of acquiring Tim Hortons while collaborating with BKW inc. (Burger King Worldwide). RBI emerged as the new international fast food restaurant leader with two renowned brands. The company boasts a combined 23 billion dollars in sales and 19000 restaurants situated in 100 nation-states (Ivey,2016). It has over 450,000 workers and serves daily 11 million consumers.
Based on the statement of RBI, 3G explained that in 1964, Tim Hortons was founded operating in the fast service food business, having 4,590 restaurants where 56 located in Gulf states, 869 US and 3665 Canada. BKW Inc. was established in 1954, having 14000 locations, serving 11 million consumers daily in a hundred territories and countries globally. In 2010, Brazilian investors purchased Burger King for 24 dollars per share or 4 billion dollars, including firm debt (Ivey,2016). Jointly, BK and TH generate 23 billion dollars in broad system sales annually and have the same business models since the restaurants are operated and owned by independent franchisees.
The shareholders and executives saw the gains from the merger that could assist the icon in capitalizing and expanding on BK’s 14000 place in the US and globally (Ivey,2016). Secondly, the coalition offers TH financial strength in expanding rapidly and strategically in global markets. The market of Canada seems to attain its peak in growth, and thus TDL saw the chance for the firm of Canada to strengthen and grow its brand. Besides, 3G capital saw the prospect for BK to increase its brand while capturing the growing breakfast business and early morning coffee founded by the new partner for over 52 years. Large franchises for fast food like McDonald’s have applied their breakfast menu and coffee to increase personal store sales, expand the brand, and launch new locations (Ivey,2016). With the new pact, coffee restaurants and burgers aim to take on a similar strategy that has permitted the stock price of McDonald’s to increase considerably for the last decade.
Currently, RBI operates separately the two businesses, but in the future BK stores might be united with TH in a similar building. Customers might witness BK selling TH products the same to coffee kiosks situated in MacDonald’s. The stocks of RBI are sold under the QSR symbol and traded on TSX (Toronto Stock Exchange) and NYSE (New York Stock Exchange). Common shares seem to trade for 50 Canadian dollars and 38 US dollars. The firm is offering a modest share for its shareholders although many analysts anticipate the distribution to rise following the first purchase. The purchase worth 8.4 million dollars QSR shares by Warren Buffet valued at 330 million dollars and the nature proof of recession for fast food seems to be the best indication that RBI is a resonance investment (Ivey,2016). Before the Canadian icons purchase, 3G was involved in several significant brand acquisitions.
Before approving the 12.5 billion dollars merger between TH and BK, the government of Canada required the firm to consign to certain situations. The new fused corporation known as RBI committed to maintaining the levels of front-line staff at the restaurants of TH, however, the pledge failed to include workers at corporate regional offices, head office, and in Canada’s distribution centers (Ivey,2016). Financial data and future growth might indicate if the brand of Tim Hortons will grow and prosper globally and in North America due to its merger with BK and purchase by 3G capital.
Alignment Between The Values, Mission, And Vision And The Organizations Current Strategy
The current acquisitions and merger strategy align with Tim Hortons’ values, vision, and mission. TH is mainly located in Canada where its American stores are situated in a certain region. After the 3G capital merger, they will start using their resources like BK headquarters situated in Miami Florida. They might start the aggressive push in the Western and South parts of the US. Besides, the successful entrance into the market of the US will hinge on the capability of forming similar connections with American customers, which they have with the customers of Canada.
They outrival with the pricing of their products mainly in comparison with star bucks and premium coffee shops. Tim Hortons seems to express their urge of decreasing the time that customers spend lining in restaurants, however; Starbucks is successful for being viewed as a destination for people. Starbucks is seen as a place where people visit to sit working on the laptops (Ivey,2016). Citizens regard coffee shops as the second office thus; Tim Hortons should apply the strategy. Since TH is priced cheaper compared to Starbucks, having shops might siphon off consumers from Starbucks.
Current Strategy of Tim Hortons
During the franchising, the charges of Tim Hortons range from 543,333 dollars to 1,079,573 dollars as set up fees and the franchisee sales of 24 percent thereafter for new equipment, rent, and marketing budget contribution (Ivey,2016). Since TH supplies properties to the franchisees, many of the firm’s assets are invested in real estate. Part of the real estate seems to b owned though many are leased. TH owns 769 assets for franchisees, 2326 properties leased to franchisees, runs and owns 18 stores.
Currently, TH concentrates on enhancing sales of the same-store by leveraging the marketing advantages and strengths. The firm proceeds in making menu innovations while increasing hot and cold beverage variety. The actions are anticipated in ensuring the consumers’ base is not bored with similar products while attracting new customers (Ivey,2016). Additionally, market investment and advertising play a vital function in reinforcing TH’s attractive price towards value position while increasing the firm’s brand equity.
New Markets Expansion
TH plans to undertake rapid intercontinental expansion out of the United States. This has begun in Ireland and Dubai.
Cost leadership integration and differentiation
The products of Tim Hortons are priced low than the goods of the competitor. The firm applies the advantages of low cost as the competitive advantage source. TH does not wish to sacrifice its quality as offering the finest coffee of Arabica and striving for improved quality consumer service is its objective. Therefore, TH enjoys the advantages of products with high quality sold at a lower price (Ivey, 2016). The firm has attained effectiveness in fulfilling the integrated differentiation and cost strategy through the roasted coffee integration and distributing many products. It permits the firm to capture the value chain.
Tim Hortons Current Performance Assessment
The company has increased its market share and sales by strengthening the brand, enhancing its service while expanding the menu offering. TH is capable of accomplishing this by adding other stores in each local mainly in smaller communities of Canada where this coffee icon lacks its presence. Tim Hortons on PEI has strategic locations in rural O’Leary Kensington and the Cavendish’s seasonal kiosk. Despite new category and restaurant trends, there seems to be steady growth in coffee sales and QSR breakfast across northern America (Schnarr, 2014). It indicates that Tim Hortons and its American and Canadian competitors are involved in the business that shows the prospect for expansion across demographic types.
With the trends of QSR indicating a strong breakfast and coffee market, TDL published the strategic plan of five-year from 2014 February many months before sale by 3G capital. The strategic plans for 2014-2018 concerned three pillars that are; Canada, Lead, Grow and defend, United States; Must-Win Battle, and International grow, expand and learn. Its major objective was to grow a brand by 800 locations addition in Northern America and globally (Schnarr, 2014). Thus, the strategic pillars must be critical aims for any new firm if it should grow amidst rising competition from foreign and domestic firms.
Main Decision Point, Problem, or Issue Encountered by Decision-Makers
In any acquisition or merger, there exist risks that TH and BK will have to tackle even if their combined assets and strengths might be the powerful player within the most competitive QSR market globally and in Northern America. The risks might be probably sustained by Tim Hortons that seems independent of its sales of restaurant coffee in Canada. The challenge might be if the brand can capture international and US loyalty and demand similar to Starbucks and McDonald’s. The coffee market of the US is more competitive with Dunkin Donuts, Starbucks, and McDonald’s (Schnarr, 2014). Nevertheless, studies indicate the availability of improvement chance mainly in coffee products.
Furthermore, McDonald’s presumes that it acts as the global leader in the sector of QSR restaurant, all citizens, income, or culture is its potential consumers. It also assumes that it entails full resources and capacity of moving in any coffee retail or QSR space it admires. It takes risks by launching new locations in new countries and existing markets. In 1990 January 30, it instituted the first restaurant during the era of Soviet in Moscow, Russia (Schnarr, 2014). In 2016, it planned to add 1500 locations in South Korea, Hong Kong, and China.
In 2015 December 9, the world front player QSR started flexing its tactical and financial in competing with Tim Hortons and others through the opening of the first stand-alone McDonald’s café in Canada having an all-day breakfast in union station of Toronto, the high traffic venue of transportation in the downtown city. The second location being opened near the office tower of Toronto might prompt other traditional restaurants to start providing all-day breakfasts. The developments are a serious and direct challenge towards the control of Tim Horton’s breakfast and coffee market (Ivey, 2016). The executives of TH might not manage sitting idle but will re-invigorate the firms’ plans and assertively respond to objectives and strategies of the most recognized and largest restaurant firm globally.
External Analysis
PESTLE Analysis
Political factors
The fast-food industry cannot be capable of gaining success, trust, and good reputation or image if it cannot consider political aspects as part of its strategy. The political sector comprises the needs of the organization to follow the provided regulations and policies of the government to be regarded as an authorized and legal business organization. The political aspects influencing the quick-service industry may differ from nation to nation. Compliance is the most significant aspect. Internationally, quick-service brands need to comply with the requirements. The industry experiences regulations associated with hygiene, wages, and food quality that must comply with the companies (Ivey,2016). The minimum wages criteria may vary from nation to nation. In countries in which wage rates are high, labor costs are also high. Besides, packaging regulations have transformed.
Economic aspects
The global economic crisis affected the quick-service restaurant industry to some level. On the contrary, since it was conceded, expenditure per consumer has improved. Many restaurants have comprised cheaper alternatives in their menus and enhanced consumer service. Consumer service is the critical area as fast food brands strived during the economic crisis to keep their consumers. Many modifications comprising improved health consciousness influenced fast-food sales. Hence, delicious food was inadequate to draw consumers (Ivey, 2016). Therefore, fast-food brands supplemented this with low costs and improved convenience to encourage consumers.
Economic aspects are a critical influence on the quick-service restaurant industry. The sector illustrated excellent capability to adapt in a time of changing consumer and market trends. For the industry to better change to low economic activity and recession, brands comprised low-priced commodities. They improve the range of items on their menus. However, the individual expenditure size on fast food has mostly relied on the economic situations in particular markets. For instance, in the United States, over 200000 restaurants feed over 50 million citizens daily. With the growing economic activity internationally, the expenditure on fast food might improve further in the future.
Socio-cultural factors
Lifestyle and health trends also promote the quick service restaurants industry. The increased health consciousness has influenced the entire food sector. It comprised fast food, snacks, and beverages, and other foods. Currently, people think before eating anything. The change of consumer attitude compelled the restaurant brands to comprise low-calorie alternatives in their menus. Social health perception has transformed greatly. Media played a critical role in establishing this view. The quick-service restaurant industry has experienced heavy criticism for only targeting young kids.
Furthermore, the attack on junk food resulted in the public adopting low-calorie foods. The changing socio-cultural trends influence the entire industry’s sales. The fast-food industry has been accused of the main reason behind surging childhood obesity. This has led to the adoption of measures such as indicating nutritional content on the label and minimizing calories in the products. Besides, cultural aspects play a significant role as some cultures do not support fast-food consumption. However, most cultures are adopting fast-food brands with alterations to suit domestic preferences. In addition, the lifestyles of people have experienced a major transformation during the COVID-19 pandemic (Ivey,2016). Many people commenced working from their homes in this time of pandemic and the majority of the fast-food consumers orders their foods from home or picks order whereas driving through because of the pandemic.
Technological Factors
Technological aspects are a significant force driving the quick-service restaurant industry‘s growth. The industry does not rely only on its food quality and menu attractiveness. Consumer convenience and customer service are also key aspects influencing sales. Technological aspects have transformed the way fast-food brands serve and connect with their consumers. Besides, they influence the advertising and marketing of fast-food brands. Online ordering and social media have transformed the customer service style. Social media sites became the most significant venue for connecting with consumers. The utilization of digital kiosks and displays influenced ordering and labor costs. Technology has been confirmed to be something essential.
It has assisted fast-food brands to serve consumers through innovative and creative ways (Ivey,2016). The companies have emerged innovative in other fields also. They connect their consumers on social media while collecting feedback via several channels. Stiff competition is also experienced in the industry which makes technology a critical aspect for quick-service restaurants to gain a competitive edge over others in the market.
In the case of the current COVID-19 pandemic that has left several industries comprising the fast-food industry stumbling, technology has increased all the more significant for businesses to sustain themselves during the pandemic and ready themselves in the post-recovery situation. Whereas many restaurants adopted majorly drive-through models in the pandemic, digital technology played a critical role in assisting the food industry change to the new model. However, once this pandemic has been controlled, people may still order from their homes in large numbers and this technology can be the key driver of sales and demand for the quick service restaurants (QSR) brands (Ivey,2016). The significance of digital technology on the QSR industry improved suddenly.
Environmental factors
The fast-food industry has been affected greatly by the sustainability aspect. The changing government regulations and rules compelled the QSR brands to implement a greener approach. Food-associated regulations increased stricter. Whether the United States, Europe, or the UK, the quality standards have emerged stiffer globally. The US Food and Drug Administration (FDA) also strengthened its rules. Waste management and targeting kids were areas in which QRS brands were compelled to alter their approach. The green practice has assisted QSR brands to enjoy enhanced consumer loyalty. Sustainability also emerged as an essential requirement for the industry.
Legal factors
The QSR industry legal factor has been a crucial change occurring during recent years. The pressure because of changing legal compliance and requirements has emerged. Nutritive value and food quality are the key areas influenced by this law. Other than it, waste management and packaging are also affected. Generally, the law enacted new demands on the QSR industry. The entire industry transformed its approach to sales and marketing. QSR brands must comply with legal modifications.
Specifically, they must market responsibly to children below 13 years of age. Notwithstanding being aware of their health, consumers love their preference or flavor; hence, they cannot keep their craving for taste. Therefore, there are a few aspects about fast food that can never change; they will continue tinkling our taste buds. Further, food is the basic need for humans (Talwar, 2018). The understandable human being weaknesses will persist to assist the growth of the QSR industry. Sustainability, compliance, and hygiene are some of the aspects that cannot be neglected in the industry.
Strategic findings based on PESTLE analysis of the Quick Service Restaurant (QSR) industry
Opportunity
Some of the strategic opportunities discovered in the QSR industry are: the income level of the younger generation is higher than before. Besides, their purchasing power has improved and the restaurants may take advantage of this opportunity and enhance their consumer base by acquiring the consumer groups by service their interesting food quality and menus. Further, different working hours of consumers may assist their sales growth and may serve other than the normal working hours. QSR industry can benefit from the technology that permits them to allow consumers to place the order online before arrival and it minimizes the rushes inside the outlets and improves sales.
Some of the strategic threats this industry faces are; there are no entry barriers to new industry players in the market and due to it anybody may commence their QSR brand and this decreases the market share of the current players such as Tim Hortons in the market. There are also risks for the need for change for new menus for the youthful generation; hence, when new players emerge with new menus and food quality the youthful generation is drawn to it and the consumer traffic footsteps declining yearly.
The driving force also emerges with new consumer-based with varied needs. Technology adoption has reduced the workload and enhanced efficiency in the industry. The key success aspect in the QSR industry is quality service, quality of food, and customer feedback that are also aligned with the mission, vision, and values of Tim Hortons. Tim Hortons needs to offer or serve the service as per the taste and needs of the consumer and not as per the” restaurant’s ideas and concepts for it to continue surviving in the QSR industry.
Industry analysis
Porter’s five forces
The five factors or force that affects the performance of a company in the industry or business circumstance is the buyers’ bargaining power, the suppliers’ bargaining power, the competitive rivalry in the industry, the substitute products’ threat, and the new entrants’ threat.
Buyers’ bargaining power (high)
The consumers have a high power of bargaining in the place in which there are several QSR brands since they may select from one of among many. For instance, when the queue is long at one store, a buyer may likely go to another store across the street (Önören et al., 2017). The high bargaining power of buyers’ determinants is high in the industry because there are many sellers to cater to the consumers. However, the high buyers’ bargaining power is a problem for the QSR brands operating at a place.
Suppliers’ bargaining power (low)
The prime suppliers in the QSR industry are dairy produce, dough, coffee, and meat vendors. Their power of bargaining is low because there would be many suppliers of these products. The low power of ’”suppliers’ bargaining determinant here is the lack of differentiation among the products of suppliers. Many reliable suppliers are existing in the market. Therefore, it is an advantage for QSR brands in the industry.
Competitive rivalry (High)
The fast-food industry has many competitors. There are giant QSR brands like Starbucks, KFC, and McDonald’s and smaller and medium brands comprising local bakeries and restaurants selling a range of quick-eats and snacks. The high competition determinant is the high number of eateries that sell quality food items. The circumstance is a demerit to the quick-service restaurant eatery. With the low product differentiation between competitors as they have low switching costs for alternating suppliers. QSR brands also competed with gas stations and grocery stores (Önören et al., 2017). The variances in the product price for the customer lower and any food item not order in large quantities reduces the competitive rivalry.
Substitute products’ threat (high)
Restaurants, café, and other eateries can sell the types of food items sold by QSR brands such as sandwiches and burgers. Hence, the substitute products’ threat is high for the quick-service restaurant industry. The high substitutes’ threat determinant is lack of differentiation among the food items and menus available that create a disadvantage for QSR brands. The aspect that increased substitutes’ threats is that it was easier for a person to find other alternatives for getting a quick snack or a cup of coffee, either at a grocery store, at home with the reusable pod, another fast-food restaurant, or a gas station restaurant.
New entrants’ threats
An entrepreneur needs a sophisticated set of permission to start up a restaurant. Besides, good infrastructure should be established. Then, there is the activity of developing unique products to differentiate the restaurant from its competitors that can comprise multinational chains. Hence, any business entrepreneur might baulk at the venture of entering this industry. The determinant of low new entrants’ threat is the requirement of several permissions and the developed products. Hence, it is an advantage for the QSR brands (Önören et al., 2017). However, the large QSR brands were capable of obtaining economies of scale from larger production that slightly lowered the new entrants’ threat due to cost leadership advantage.
The strategic significance of the findings from the industry analysis
From Porter’s analysis, we infer the following competitiveness scenario in the QSR industry: high buyers’ bargaining power that presents a disadvantage to the fast-food brands such as Tim Hortons. However, there is also low suppliers’ bargaining power creates an advantage to the industry. The industry also experiences stiff competition among its competitors creating a disadvantage to industry players.
There is also a high substitutes’ threat that presents a disadvantage to industry’s brands such as Tim Hortons and KFC; although, the low new entrants’ threat creates an advantage to industry’s players. There are three disadvantages and two advantages (Önören et al., 2017). Hence, unless a QSR brand such as Tim Hortons is capable of creating unique products and establish reputable hygiene and service, it will not experience growth in the business.
Furthermore, the availability of many sellers presents opportunities as the sales do not require being reliant on a specific seller. Besides, there are consumers with varied tastes and different levels of income that the QSR brands may exploit in the market of fast-food eateries. However, the threat presented to QSR brands is new players may easily enter the market and the threat of new substitute products may easily devastate the current player in the market (Önören et al., 2017). On the contrary, the QSR industry driving force is the taste that can facilitate companies to capture the market fast along with the products’ price brand. The fast-food” ’industry’s key success aspect based on the analysis findings is focusing on quality, delivery price, and time( Dubas, 2017). The survival tactic in the fast-food industry is one has to remain watchful of the competitors’ menus and consider their sales.
Internal Environment Analysis for Tim Hortons
SWOT analysis
The internal environment analysis will be performed using SWOT analysis as the strategic planning tool where managers can perform a situational analysis of Tim Hortons. It is a critical tool to assess the present strengths (S), Weaknesses (W), Opportunities (O), and Threats (S) that the company is experiencing in its existing business settings. The SWOT analysis promotes the company to recognize the internal strategic aspects such as weaknesses and strengths and external strategic aspects such as threats and opportunities. It results in a SWOT matrix (2X2 matrix). Through the SWOT analysis, Tim Horton’s managers are capable of developing four types of strategies for the company (Önören et al., 2017). These include: SO (strengths-opportunities) strategies, WO (weaknesses –opportunities strategies), ST (Strengths-threats) strategies, and WT (weaknesses-threats) strategies.
Strengths
Tim Hortons is among the leading companies in the QSR industry having several strengths that facilitate it to flourish in the market of fast-food eateries. The strengths assist to protect the market share in the current markets and penetration of new markets (Dubas, 2017). These are some of the strengths Tim Hortons has:
The company has successful at going to market strategies for its food items:
- Better returns on capital invested – the company has been successful at the implementation of new projects and earned good returns on the capital employed by establishing new streams of revenue.
- Excellent performance in new markets- The firm has established expertise at entering new markets and creating success with them. The expansion has assisted the company to establish a new stream of revenue and diversify the economic cycle risk in the markets where it does its business.
- Robust distribution network- for many years the company has established a reliable network of distribution that may reach most of its potential customers.
- Robust brand portfolio – for many years the firm has invested in establishing a robust brand portfolio. Brand portfolio is meaningful when the company needs to expand into new products offering.
Product innovation- Tim Hortons has experienced a successful reputation in the development of new products.
Highly skilled labor force- the company has improved its workforce through learning and training programs (Talwar, 2018). They have invested massive resources in the development and training of their workers leading to a workforce that is highly skilled and inspired to accomplish more. High Customer satisfaction level- Tim Hortons with its committed customer relationship management unit has been capable of achieving a high customer satisfaction level among its current consumers and strong brand equity among the potential consumers.
Weaknesses
Tim Hortons’ can improve on its weaknesses areas. Strategy is concerning the weakness and making decisions are the areas in which the firm may enhance using the SWOT analysis and establish its strategic positioning and competitive edge.
The products’ marketing leaves much to be desired. However, the product is a success based on sales even though its unique selling proposition and position are not defined which may result in attacks in the segment from its competitors.
Tim Hortons has limited success outside its core business- although the company is among the leading companies in the fast-food industry (Azeem & Hussain, 2018); it is experiencing challenges in shifting into other product sections with its current organizational culture. Low investment in research and development in terms of fastest-growing industry players- Although Tim Hortons spends above the industry’s average on R&D, it has failed to compete with the industry’s leading players in terms of innovation. It has witnessed mature companies looking forward to inventing products based on tested characteristics in the market. The high attrition rate in Tim Hortons’ workforce- compared to other companies in the QSR industry, the company has a higher rate of attrition and has to spend much compared to its competitors on the development and training of its workers.
There are also gaps in the range of products sold by Tim Hortons. The lack of choice may provide a new competitor a grip in the market. Tim Horton’s organizational structure is compatible with the existing business model; hence, restricting expansion in the adjacent product units (Azeem & Hussain, 2018). The net contribution percentage and profitability ratio of the company is below the QSR industry average.
Opportunities –External Strategic Aspects
Economic improvement and increase in consumer spending, after the recession period and slow rate of growth in the QSR industry present an opportunity for the company to capture new consumers and improve its market share. Declining transportation costs due to lower shipping prices may also reduce the cost of Tim Hortons’ products (Talwar, 2018); hence, offering a chance for the firm either to increase its profitability or pass on these benefits to the consumers to achieve a market share. Lower inflation rate: the low rate of inflation results in stability within the market supporting credit at the lower rate of interest to Tim Hortons’ consumers.
The core competencies of the organization may be the success in the same other product areas. A comparable example might be the GE healthcare study that assisted it in establishing better oil drilling machines. New environmental regulations and laws- present new opportunities that establish a level playing ground for all QSR industry players (Ivey,2016). It depicts a great opportunity for the company to drive home its competitive edge in advanced technology and attain a market share in the new category of products. The market development may result in competitor’s advantage dilution and facilitate Tim Hortons to improve its competitiveness compared to the other competitors in the industry.
The new tax policy may significantly affect the way of conducting business and may open new avenues for developed players, for example, Tim Hortons to improve its profitability.
New consumers from online platforms- for the past few years Tim Hortons has invested a huge sum of capital into the online channel. It is an investment that has created new sales streams for the company (Ivey,2016). In the future, the firm may leverage this avenue by understanding its consumer better and serving their needs utilizing big data analytics.
Threats
The growing trend towards isolationism in the US economy may result in similar responses from other governments; hence, negatively affecting global sales. The increasing liability laws in various nations are different and the company can be exposed to different liability claims provided the alteration in policies in those global markets. Increasing strengths of domestic distributors also create a threat in some markets as the stiff competition is creating higher margins for the domestic distributors. Tim Hortons is operating in many nations exposing the company to currency fluctuations, mostly in the volatile political atmosphere in many markets across the globe.
Advanced technologies established by competitors might pose a serious threat to the company in the medium and long term future. Stiff competition – stable profitability has surged the number of industry players over the past years that has put pressure on the profitability and sales.
Increasing pay level mostly movements, for example, $15 per hour and growing prices in China may result in serious pressure on the company’s profitability(Ivey,2016). Low quality and counterfeit product imitation is a threat to the company’s product mostly in the developing markets and low-income markets.
The strategic significance of SWOT analysis findings on Tim Hortons
Opportunities are Tim Hortons should try to enhance its operations in terms of quality, efficiency, customer responsiveness, and innovation. The company can aim to leverage its marketing strength to improve sales growth by factoring in the use of advanced technology, promotional, and marketing initiatives to appeal to the customer needs (Talwar, 2018). The company also needs to find ways of embracing integrated cost and differentiation strategy in some ways to attract consumers. It is specifically significant in the current marketplace as stiff global competition from overseas firms, and rapid technological transformations permit competitors to establish strategies giving firms with a superior type of differentiation or cost leadership advantage.
Environmental Analysis and Current Strategy Tim Hortons’ Alignment with Realities of the External and Internal Environments
From the environmental analysis of Tim Horton’s realities of the external and internal atmosphere are the company needs to improve in all aspects of the environment. In the industry analysis, the company should consider ways of overcoming the increasing competition in the QSR industry as the competitive rivalry is high. The faces threats from substitute products hence there is a need to increase its product quality and service quality while improving on delivery time and place (Ivey,2016). The company has economies of scale that enhance its barrier to new entrants but should look for ways of increasing its buyer bargaining power.
Also, environmental issues such as green policy affect their packaging and waste management, consequently creating an opportunity to diversify its products in new products adhering to green approach (Talwar, 2018). The implications are Tim Hortons has to take advantage of the technological developments to increase its competitive advantage in creating unique and quality products that can offer its differentiation strategy advantage in the market. The current strategy of Tim Hortons’ such as expansion into new markets and increasing growth sales is in line with the realities of external and internal environments. The environment allows the company to diverse ways of competing in this atmosphere as exhibited by the PESTLE analysis and SWOT analysis.
Relevant Strategic Alternatives or Possibilities
If TH hopes to thrive globally, it should express the willingness of differentiating itself from other coffee restaurants that have been established. The firm’s present business model seems to be more flourishing in Canada, even though it should be optimized and re-evaluated to race with nine businesses in America. The fast market of service restaurants is more competitive thus; Tim Hortons may not depend on its brand name in attracting consumers. The manner of attracting consumers according to regional selections might be an issue for management going forward. In other means, it is the last problem’s continuation.
By tackling the past problem, TH might expand SSS while driving consumer traffic to the stores as it appears to be more leveraged (Ivey,2016). In addition, amongst items believed management might address are expanding cash flow, reducing long-term commitments, and getting new means of increasing foot traffic. Acquiring new markets seems to be a motivated but easy goal to be accomplished by management. The major asset, which Tim Hortons boasts of, is the pricing advantage. By placing themselves as the cheaper option to Dunkin and Starbucks plus the McDonald’s substitute, Tim Hortons has the self-confidence of capturing market share from the more established rivals of America.
Identify Gaps
This part uses the TOWS matrix to identify the gaps the current internal and external environment (Ivey,2016) and provide strategic options or alternatives for Tim Hortons.
The strategic findings are using the TOWS matrix for Tim Hortons is the company should adopt new strategies to survive in the QSR industry due to increased competition and other aspects (Ivey, 2016). Further, the company can incorporate differentiation and integrated cost strategy to become a competitive and leader in the industry as it aims to expand to a global scale.
Risk Assessment Based on the Threats and Opportunities Identified in the TOWS Matrix
To complete risk identification, the response plan and risk management team should be defined (Ivey, 2016). Because risks may be either an opportunity or a threat to the company’s project strategy, potential risk responses are as follows:
Recommendation
It can be recommended that Tim Hortons’ excellent cause of action may be to utilize its merger with Burger King and the 3G acquisition to continue the expansion of its global business and pursuit of global markets. However, the company should consider expanding more in the developing markets that present an enhanced economy for investments. It will permit the company to shun the ceiling for its success that is bound to occur if they limit themselves to the US or Canada only and enhance their competitiveness level relative to its key competitors such as Starbucks, KFC, Dunkin, and McDonald’s.
Further, the company will be in a position to enhance its brand consciousness in the global market and develop familiarity with potential customers. However, it is a process that may consume time and dedication, Tim Hortons’ may finally be capable of expanding, as they have desired to while promoting itself via local success in Canada. The procedure will consume time, preparation, and market research to enter global markets, compete, and excel, although this will generate results and develop a more level for the companies on the global scale.
Conclusion
Tim Hortons has accustomed itself well to existing socio-cultural, environmental trends in the industry. Acquiring new markets seems to be a motivated but easy goal to be accomplished by management. The major asset, which Tim Hortons boasts of, is the pricing advantage. By placing themselves as the cheaper option to Dunkin and Starbucks plus the McDonald’s substitute, Tim Hortons has the self-confidence of capturing market share from the more established rivals of America. The company needs to embrace modern technology to take advantage of the market and maintain consumer loyalty bonuses.
References
Azeem, P. M., & Hussain, M. (2018). Making sense in marketing–sensory strategies for international quick service restaurants. Adhyayan: A Journal of Management Sciences, 8(1). Web.
Ivey. (2016). Ivey Publishing – Product view. Ivey Publishing – Ivey Business School.
Dubas, M. K. (2017). An exploratory analysis of quick service restaurants using tidy verse tools in R. Innovative Marketing, 13(2), 23-40. Web.
Önören, M., Arar, T., & Yurdakul, G. (2017). Developing competitive strategies based on SWOT analysis in porter S five forces model by DANP. Journal of Business Research – Turk, 9(2), 511-528. Web.
Talwar, J. P. (2018). It’s hard to get these kids to smile: Managing the fast food personality. Fast Food, Fast Track, 97-117. Web.