Market Entry Into Kenya for a Food Franchise

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BNU5013 – International Management Strategies

Post-Module Assignment for Prof. Minyuan Zhao

The topic for our team presentation was the expansion of Global Franchise Architects (GFA) into Kenya. The group selected this company as we had just completed a communication strategy for them on how to expand in India, and one of our colleagues who is from Kenya thought that it might be a viable option for GFA to expand into Kenya.

This paper will attempt not to repeat any facts stated already in the presentation, unless required to highlight a specific point. At a high level the group agreed, by a democratic process, to the consensus that GFA should not expand into Kenya, but I would like to disagree with that assessment after further research and analysis on my own.

The key strengths of GFA are:
1) Operational excellence: This helps the investor to get a high Return on Investment (ROI) 2) Portfolio of 9 brands: Having multiple brands provides the investor to open combined stores with different brands or pick and choose the brands that they want to focus on.

The main highlights that make Kenya an attractive market are: • Positive GDP growth
• Lower interest rates- cheaper credit access
• Inflation down (< 5%)
• Market: 4 major cities opportunity
– Nairobi (4M), Mombasa (1.5M), Nakuru (1M), Eldoret (.8M) – Majority Western style taste, entrenched “eating out” culture – High proportion of young and out-going population. • Competition

– 2 international (South African) food franchisers + local brands. – All have limited menus, not well managed and expensive.

While risks entering Kenya are:
• High oil prices
• Exchange rate fluctuation
• Political stability

The first thing that one needs to look at while deciding to enter a market is whether there is a demand for the product being sold and the spending capacity of the consumers. In the last year the Kenyan economy has been recovered from a slump and is currently booming. At the same time the fast food business has been growing with increased consumer spending (1). A new entrant can take advantage of the vacuum created by the closure of fast food stores due to the post-election violence and global economic slowdown.

The second thing is how a company can differentiate itself from its competitors. GFA relies on its operational capabilities along with locally sourced produce to provide a high ROI. There are a few ingredients that are flown in from the central kitchen in Thailand like cheese to maintain a consistent standard of quality but the rest all are procured locally. With the recent explosion of high quality local produce (2) the franchisee would not have to rely on exported goods alone which result in higher cost of goods sold and lower profits.

CAGE Analysis:

While performing CAGE analysis to determine if GFA should enter Kenya or not the first thing compared to was the current operation in Sudan. Some things that stood out during this analysis were the similarities between how Starbucks launched and operated in China, a tea drinking country with low copyright protection.

Cultural:
• International food tastes in major cities like Nairobi and Mombasa and the willingness to pay a premium for Western products • Presence in Sudan cannot be leveraged due to differences in culture and local food preferences

ADMINISTRATIVE:
• Lack of TM protection e.g. Brand Pizza Inn operated by a different owners of Pizza Inn U.S

GEOGRAPHIC:
• Local Procurement of 65% of COGs, Rest would need to be shipped from Thailand • Easily accessible from India and Bangkok by sea and air. • Eastern and Central Africa’s financial and communication hub

ECONOMIC:
• $838 GDP per capita, very low $ but users in city willing to pay a premium for western products • Agricultural based economy, ensuring good supply of...
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