Bba International Hospitality Management
Marketing Export Plan
International Business Orientation
Exporting FEBO to China Part 1
Table of content Introduction 4 1. Strategic Profile 5 1.1 History 5 1.2 Strategies 5 1.3 What to do in China 6 1.4 Suppliers 6 2. FEBO internal analysis 7 2.1 Product position 7 2.2 Marketing capability 8 2.3 Research and development capabilities 8 2.4 Organisational structure 8 2.5 Human resources 9 2.6 Facilities and equipment 9 2.7 Past strategies 9 3. Target market (external research) 10 3.1 Selection 10 3.2 Operating risks 10 3.3 Market potential 11 3.4 Costs 11 3.5 Potential local and foreign competition 11 3.6 In-depth analysis 12 3.7 Population characteristics and purchasing power 12 3.8 Basic infrastructure including transportation and communication facilities 13 3.9 Cultural factors 13 3.10 Resource 13 3.11 Government restrictions and regulations on trade 14 4. Target group 15 4.1 Market Access Requirements (MAR) 15 5. SWOT analysis 19 6. Critical success factors 21 6.1 The industry 21 6.2 Competitive strategy and industry position 21 6.3 Environmental factors 22 6.4 Temporal factors 22 6.5 Managerial position 22 Conclusion 25 List of reference: 26
Introduction
This report is an export marketing plan, about exporting FEBO to China. The report is divided into two parts. This is the first part which is more about the company at the moment the internal and external analysis. It concludes a strategic profile about the history, the strategies, and what to expect in China. Than as all ready mentioned the internal analysis, what are their capabilities, product position, organizational structure, human resource and their facilities and equipment at the moment. The target market is the external analysis which concludes their market position, risks, cost, purchase power and PESTEL analysis. Then there will be explained about about the target market, what is it now and which segment do they want to reach in China. The report consist about a SWOT analysis from FEBO now and the possible opportunities and threats for the China market. In the critical success factors the industry will be discussed and the competitive strategy and industry position.
The second part is more about the implementation about exporting FEBO to china. The different market entries, sales and marketing plan and the technical aspect. But there over later more.
1. Strategic Profile
1.1 History
FEBO was found in 1941 by J.J de Borst, he started with “Maison Febo” as a bakery in Amsterdam. The founder learned that quality is the key factor of success. So he was always busy with improving the quality of his products. After a while Mr. de Borst decided to expand his assortment with homemade salads and kroketten which were sold as a take away or to eat them straight away. Since, there was a high demand, he decided to close the bakery and continue with a kitchen. FEBO made all the products in its fabric. In addition, shops opened where the products could be sold, through the famous “wall”. Mr. J.J. de Borst did not want to outsource the production because then he did not have control over the quality anymore. Because of this successful concept in 1978 the first franchise settlement was opened in Amsterdam. A few years later other FEBO’s opened their doors in; Purmerend, Hoorn and Hoofddorp. Those neighbor cities of Amsterdam were chosen, to keep the existing target group also called an overflow area. In 1990 the son of the founder took over the company and built a big kitchen in Amsterdam were they produced all the products, they own this kitchen as well to keep their production in their own hands. Later, other franchised FEBO’s opened their doors in the rest of Holland.
Now a day there are 61 branches and 55 of them are franchised. All of those shops need to be modern and to have the same charisma. Hygiene is very important and the counter is the hearth of the shop. Everything is about the product, high quality and quick stock turnover. All the FEBO’s need to be located on A1 locations, and what is more, they need to have a certain surface, minimum of 80m2. (Febo)
1.2 Strategies
Strategy formulation can be analysed through the model of the Strategic lenses. This model suggests that there are 4 ways of formulating and implementing a strategy. Namely those are strategy as design, as experience, as ideas and as discourse. Companies that formulate strategy as discourse are using models and analytical tools to carefully analyze the situation. FEBO is not implementing this way of strategy formulation. It is more using the strategy as experience way, as the strategies and way of doing business are based on past experience. This can be seen yet from the begging, when FEBO expanded from bakery to franchise fast food because of the experience that this is what the customers want. Moreover, strategy as ideas is to be innovative and use the full potential of employees’ ideas. This is also what FEBO implemented, when they found the food walls. The last lens is strategy as discourse and this is to use language to formulate a strategy. This angle of looking at a strategy can be also found in FEBO and more particularly in its logo- The most delicious. This logo passes the strategy of good taste to both its employees and customers. (Johnson et. all, 2008).
At the moment FEBO is number one mark leader of the fast food sector in the Netherlands. This also has to do with their strategy; “Quality stays”. FEBO is continuously busy with improving their receipts and products. Also freshness is one of the strategies, all the products are made the same day as they are sold. The products are made of the best quality of meat, herbs, butter and flower. After they are made they are transport by FEBO`s own trucks to keep the quality high.
What FEBO is also very famous for is the concept of getting food out of the “wall”. This is a typical Dutch, and only at FEBO’s. People have to put some coins in the machines and they can choose their snack without ordering it. This is considered as Smart strategy, because it created a better brand awareness and now everybody recognizes the food out of the wall as part of FEBO.
1.3 What to do in China
This report is analyzing and considering the possibility of export of FEBO to China. FEBO is a typical Dutch fast food chain, where people can 24/7 get food out of the wall. When exporting this to China it is important that the Dutch style identity and the same products, quality and the “food wall” are preserved.
1.4 Suppliers
It is important that the products are kept as much as possible the same as they are in Holland. One of the basic strategies of FEBO’s is freshness, which means that is it not possible to export the products from Holland all the way to China. They need to be made in China, some essential ingredients as herbs can be exported, but products as meat and potatoes have to come from China. Those ingredients have to be prepared according to the typical Dutch receipts. This method also saves money, because the company does not have to fly over all the raw ingredients to make the snacks.
2. FEBO internal analysis
An internal analysis of an organisation is performed to evaluate its current position and recourses and determine the strengths and the weaknesses. In this part of the report internal analysis of FEBO will be done on the basis on evaluating its product position, marketing capability, research and development, organisational structure, human resources, facilities and equipment, past strategies.
2.1 Product position
The current products of FEBO are all fast food, which can be taken from a wall. However, what distinguishes FEBO is that its products are fresh and never a compromise on quality is made. The company is choosing carefully the best suppliers and producing its products every day in a fabric in Amsterdam, in that way there is a direct control on the quality. After being produced in Amsterdam, the food is distributed through the companies own logistic channels to the 61 shops in the Netherlands.
In order to make the product positioning of FEBO clearer, the company will be placed on the strategic clock which can be seen in the graph below. Evaluation will be made on the basis of quality and price.
The product of FEBO is differentiated from the other fast food, but differentiation is not their strategy as they are also keeping the prices low. What the organisation is doing can be named as hybrid as they are offering more quality and low price. The combination of the two is normally difficult to manage and most companies provide either quality or cheap product, but FEBO achieves both by selling big quantities and distributing the costs over a big production.
2.2 Marketing capability
The marketing concept and at the same time advertising promise that FEBO is using is the most delicious. The accent of the company is definitely on the quality of the ingredients and the freshness of the food offered to the customers. FEBO is also having a cheap price, but this is not directly communicated to the customers as sometimes people consider low priced products as low quality products. That is why the marketing capability is all about the high quality and appeal to the customers. This is also the reason why, no matter that it is a franchise company, FEBO apart from know-how and brand is also providing the franchisee with the in-house produced and distributed food on daily basis.
2.3 Research and development capabilities
FEBO extended its range of products throughout the years of its foundation. However, the concept of high quality is something that stays in the company. It is making research and developing only the new products that fit in the major concept. In addition the company is performing a research for every new franchisee and has certain requirements as opening shops only in A1 locations. What is more, FEBO has done a research and provided a map with possible locations for new shops. If a franchisee suggests another location, FEBO will conduct research and evaluate if it is suitable.
2.4 Organisational structure
FEBO was opened as a family business and still the director today is a family member. He is already a third generation running the company. His name is Mr. JR Breast and he is on the top of the organisation. The structure of the company is kept simple with direct relations, so that it can work effectively and quickly. There are several management departments, performing the basic tasks. Namely those are- Quality manager, Franchise manager, Marketing manager, financial manager and Manager company stores. They are all directed and controlled by the director of FEBO. The Franchise manager is working together with a consultant for franchising and the financial manager has financial administration. Moreover, there are two secretaries working in FEBO as well. With this structure every employee has tasks and responsibilities and there is no confusion about who is doing what. The organisational structure of FEBO helps in achieving quick and fruitful relationships with franchisee.
2.5 Human resources
The employees working in the management of FEBO are professionals and are carefully selected. They all contribute to the process of adding value and producing and delivering high quality products to the customers. The human resources that FEBO employs also include their franchisee and the full and part time employees working in the shops, so that is why the management of FEBO is considering each case separately. An approval to be a franchisee of FEBO is only given to the ones that cover the requirements. Human resource force is important for FEBO because quality products cannot be produced by unqualified personnel.
2.6 Facilities and equipment
The facilities and equipment of FEBO are very important part of the competitive advantage. The walls or vendor machines placed at the shops of FEBO are something unique. They help in delivering fast service to the customers and are even considered as an attraction by the tourists. Furthermore, the shops which are also part of the facilities of FEBO are only in A1 location, which means that a lot of people pass by them and this is an advantage compared to competitors who do not have such good locations or at least not for all of their shops. Very important facilities for FEBO are its fabric and trucks without which the company will not be able to control the quality throughout its whole chain and will be highly dependent on outside organisations.
2.7 Past strategies
FEBO started as a family owned bakery and because of the success and interest it started growing. It can be said that the strategies were not carefully planned, but they emerged from the everyday doing business and from the customer needs. Moreover, as FEBO`s strategy is to produce in-house to keep the quality, this was a strategy that was formulated from the gained experience. The family saw that the customers value the personal touch. That is why no matter that the range of the products is growing and there are more and more FEBO restaurants, the quality is kept high by still holding the production and distribution in house, because the past experience shows that this is the formula for success for FEBO.
3. Target market (external research)
3.1 Selection
The choice of market selection is a key strategic option in export marketing which provide the basic information for export marketing mix decisions. In general, the selection is through identifying and analyzing different possible markets for export market expansion from aspects such as market size, market growth, competitive conditions and government regulations, etc to determine the most suitable target market for the company to export at the current situation. Therefore, the selection for target market can be seen as a really essential process for the exporting and international marketing.
FEBO is a traditional Dutch company. In addition, it is liked by most of people in the Netherlands no matter from which nationality they are. Therefore there are a lot of choices of feasible countries for export marketing. According to Douglas and Craig (1983), by examining the operating risks, market potential, costs and potential local and foreign competition, the list of feasible countries could be evaluated and ranked. As the result, the most suitable market would be selected out. However, it still needs to be further in-depth analyzed later. (Albaum, 1998, P132-133)
For the reasons above, the following part would be the assessment of different choice markets for FEBO’s export marketing later in order to select the most suitable target market for FEBO. The assessment had been divided into three possible options: a Central or Eastern-European country, a North-American country and an emerging Asian country and would be test as the above four aspects according to Douglas and Craig.
3.2 Operating risks
Operating risks, which is also called business risks, mean the risk arising from a computer’s business. To be more specific, it includes risks from the change of people, system and process during the business. What is more, some factors like fraud risks, legal risks, and physical or environment risks also could be involved in operation risks. (Operating risk definition. (n.d))
At this aspect, the three options have almost the same risks if choose to expand because for FEBO the three options are all new markets. If FEBO wants to open new stores no matter in the centre or eastern-European or north-American country or an emerging Asian country, a lots of risks at aspects like manufacturing, transportation or even customers and suppliers would exist undoubtedly. However, among this situation, the emerging Asian country such as China has low labor costs which could also mean low labor risk and can be considered as an opportunity.
3.3 Market potential
Market potential means the potential of the new market for the future development. For instance it could include the potential amount of customers, the potential products demands, and the potential profits.
From this point of view, the Central or Eastern-European market and North-American market are not suitable because the lifestyle of people there is almost the same as in the Netherlands, although the majority of people like fast food so that there are a lot of customers and high products demands, the alternative fast food, competition of FEBO is very high. Therefore it can be predicted that the potential profits can suffer.
However, in an emerging Asian country, like China traditional food still stands in a leading position. Although many fast food companies such as KFC and McDonalds’ become increasingly popular by people there, FEBO still seems a new kind of fast food for the “get food out of wall”. Time saving could attract more potential customers which would lead great potential profits as the result. 3.4 Costs
Simply the costs contain material, time, resource, manufacture and delivery of the products or services of the company. (Cost definition. (n.d.))
Among the three options, only the emerging Asian country like China has low labor costs and low tax, therefore at this point, China accounted for the most of advantages and could be seem as a good choice for FEBO’s export.
3.5 Potential local and foreign competition
The same as what had already been mentioned in the point of market potential, there are too much competition in the Central or Eastern-European market and the North-American market as there are too many similar industries, so FEBO has lower opportunities and higher threats if choose these two options.
On the contrary, China, as a developing Asian country, has scant fast food industries which mean less local competition. Moreover, at the beginning of international business, FEBO could seize the first opportunities and then could be easier foothold in the China market than the other similarly industries or companies which entered later.
To sum up, according to those reasons above which got from careful analysis, the best choice of FEBO’s export marketing could be clearly seen as China.
3.6 In-depth analysis
After market selection, the most suitable option for FEBO’s export marketing is China. For further analysis, a number of variables which could also be called indicators are useful for assessing the export potential of the international market—the China market. In order, to have a more complete and detailed overview of the China market, the potential impact of those variables needs to be examined.
In accordance with Albaum, G., generally speaking, the physical characteristics, political tendencies, socio-culture characteristics and economic factors are the four main elements which would influence the results of in-depth analysis. More specifically, indicators would include a list of for instance the physical geography of the country, the local industries. Since it would be much more difficult and complex to examine every indicator, several relatively important variables are chosen to analysis. Those are the following: population characteristics and purchasing power, basic infrastructure including transportation and communication facilities, cultural factors, resource and government restrictions and regulations on trade. (Albaum, 1998, P136)
3.7 Population characteristics and purchasing power
As all known, China has a large population which can be seen as benefit for export because more people means more demands. Therefore, it will be clear that the first choice for FEBO to export is the bigger cities in China such as Beijing or Shanghai. In those bigger cities, there are more people and especially more rich people who have larger purchasing power in comparison to people in other small cities.
In addition, Big cities have more competition and the majority of people there have a fast pace of life. There is a very high possibility that they would like FEBO’s “get food out of wall” model. As a famous typical Dutch fast food, FEBO could help people save a lot of time from cooking and there is no doubt that it would be accepted and further loved by most people living in the bigger cities of China.
3.8 Basic infrastructure including transportation and communication facilities
Take Shanghai as an example, there are lists of transportation methods that could be choose for transportation such as bus, truck, subway, train and even plane if necessary. For one of FEBO’s strategies of freshness, the bigger cities in China like Shanghai could be ensure the transport the raw materials or final products in time and always keep fresh as their original quality.
Second, the same as Amsterdam and Rotterdam in the Netherlands, the bigger cities such as Beijing and Shanghai in China also have complete and sound communication facilities. The internet system is the bridge between the headquarters and branches both in the Netherlands and China as well as that between stores and distributions or manufactories. In a word, no matter which link has problems, the communication facilities could assume the responsibility for exchange information.
3.9 Cultural factors
For the cultural aspect, people living in bigger cities in China are more likely to want to try international food than those living in small cities. The reason is that there are a lot of foreigners living in the bigger cities in China especially Shanghai and Beijing and the local population there is more opened to European cultures. Since different nationalities are living together, they are influenced by each other and it is obviously that more and more Chinese accept and even love the foreign food.
Usually people that live in bigger cities in China often have less prejudice or fear, furthermore, they have a more modern lifestyles, and they treat foreigners more friendly. Most of them can speak English or other languages so that they would probably prefer to talk with traditional Dutch employees in FEBO’s stores in China about the lifestyle or environment if the Netherland. They will be able to communicate in English.
3.10 Resource
As mentioned above, one of the strategies of FEBO is freshness which means it is not possible to transport the products from the Netherlands to China every day. To address this problem, the products sold in China’s stores need to be made also in China. Therefore only some essential ingredients as herbs still can be exported to keep products of FEBO in China also have traditional Dutch taste and at the same time could save costs.
As China is large and owns many resources, it is believed that most of resources that FEBO needs to make products could be found in China such as meat and potatoes and so on. In addition, human resource is another significant element. The larger population especially in bigger cities of China means that FEBO does not need to worry about labor problems. Moreover, the lower labor costs in China could also help FEBO save money and can be a better option than exporting Dutch employees from the Netherlands.
3.11 Government restrictions and regulations on trade
With China’s accession of WTO, the government pays more attention on international trade than in the past. In addition, Chinese are encouraged to develop international business abroad and the government also welcomes foreign investments in China. Lowering the amount of restrictions on trade and formulating stimulating regulations on trade are what the government already did and would further developed in the future.
Therefore this is a good opportunities for FEBO’s export marketing plan to China. Many encouraging regulations such as lower taxes could also lower the risks of FEBO’s export.
4. Target group
Since the first target market for FEBO’s export plan had been determined as bigger cities in China such as Beijing and Shanghai, the next step is to search for the most suitable location for FEBO’s first store. After a list of researches, the first destination for FEBO’s export would be Shanghai, therefore the following part would be about the situation in Shanghai.
FEBO is a fast food company; so that the target group of it would of course young people as for example students and office people. The young usually like fashion and could easily accept new products. They like foreign foods better than the older people. Therefore the problem is how to attract them come to FEBO.
To address this problem, some research had been done. Through the results, there are a lot of European companies established in every district of Shanghai, so that it can be hardly to circle for a specific district for Europeans. For this reason, the final location of FEBO would be the city centre of Shanghai which also could be seen as the a1 location.
Generally speaking, people come from other places, especially from other countries always choose the most famous food to eat; however, there is another choice, that is to follow with the local people. That is because the natives would choose the best food among the whole city so that there is no doubt that the tourists could find delicious food with the local people. Therefore, to attract more customers, the target group for FEBO at the beginning should be those European people in Shanghai. When people see a lot of European people come to FEBO, then they would come as well.
Furthermore, with a lot of European people, FEBO could have a more European environment as it is expected. 4.1 Market Access Requirements (MAR)
Standardized products and services are considered to be a confidence builder, and that can be perceived as safety, healthy, secure, high quality and flexible. So the standardized products or services are widely accepted, commonly trusted and highly valued. There are several standards for FEBO to export to China. This part will be discussed by different aspects. In this part, PESTEL will be used to analysis these factors.
Political:
It is an important economic development strategy for China to bring more foreign investment, so Chinese government offers more preferential policies to foreign companies. The most relative policy for FEBO is tax; it is lower than in Netherlands. Chinese government announced that foreign companies have to pay 25% of income, which is lower than 25.5% in Netherlands. FEBO will earn more money because of this low tax. And for the new foreign companies, if they want to operate more than ten years, and then in the first two years, they can exempt from corporate income tax. It is a good open policy for FEBO to enter to Chinese market.
Economic:
Source from official says that the economic in China is optimistic. Generally, Chinese economic is increasing rapidly. Ranked seventh in the world GDP, GDP growth rate is the first in the world. It is suitable for FEBO to develop to China.
Social:
Although China has a long history, Chinese people are becoming more open to different cultures than other countries with deeply embedded local customs. Nowadays, the educational level is high, and Chinese people can adopt more foreign customs and values. In some big cities, the pace of life is fast, so people prefer fast-food than traditional one. As it can be seen that McDonald, KFC and many more foreign fast-food stores opened in China, FEBO can be next good choice for them.
Technological:
FEBO has more or less the same technologic as other fast-food stores. But for some sauces and some special traditional Dutch food, FEBO has its own technologic. What is more, FEBO will use this Dutch fast-food technologic also in China.
Environment:
As food industry is famous and quickly developing in China, FEBO can catch up with the situation, and develop to Chinese market. After FEBO set foot in China, there will be more jobs for local people. It will also bring competitive crisis to relative stores, and this will promote the virtuous circle of competition in the market. FEBO can be an environmental company, and will do more changes on environmental item, so it could be more adopted than other non environmental friendly business.
Legal:
FEBO has to obey the laws and relative constraints, some important legal issues are described detailed as below:
* FEBO first has to obtain the certification of International standard organization (ISO), which is the world’s largest developer and publisher of international standard.
FEBO is a Dutch brand, and if it wants to develop to Chinese market, then it becomes an international business.
If FEBO gets the ISO application, it will bring a lot of advantages to the business: * Strengthen quality management and improve enterprise efficiency. If FEBO implement at ISO, it can be scrutinized in according to international standard quality system for quality management. It will greatly improve work efficiency and product qualification rate, and rapidly increase their economic and social benefits. * Access to international trade pass, it is conducive to across international technical barriers. Especially in the “World Trade Organization”, member countries exclude the tariff barriers each other, so certified is the main way to eliminate trade barriers. * To be an invincible position in the competition of product quality. Quality competition has become the primary means of competition in international trade. ISO certification can help FEBO improve the product quality stably.
* What is more, to enter Chinese market, it is essential for FEBO to have Market access barriers for other relative stores. So FEBO has to get certificate from Chinese food industry.
FEBO has to meet China`s health, safety, quality and environmental objectives. As it has been mentioned in the previous part, some essential ingredients as herbs can be exported. So the technical trade barriers of China can help FEBO realize these policy objectives by restricting entry of unsatisfactory products at the border. The barriers can be divided into mandatory approval and voluntary approval.
* Mandatory approval
CCC (China Compulsory Certification) is the fastest way to enter Chinese market. It is a system to replace the Compulsory Supervision System for Product Safety Certification and the Safety License System for Import Commodities. Besides, for the food products, FEBO has to comply with the Chinese GB standard.
* Voluntary approval
FEBO can apply for the CQC(China Quality Certification) Mark certification. This safety products certification system involves hundreds of products divided into over 50 categories, which include protecting consumers’ personal and property safety and safeguard their rights and interests, improving the product quality of domestic enterprises and increasing the product competitiveness in the international market; and also facilitating foreign products accessing into the domestic market. The products categories that not covered under CCC certification can be subject to the CQC Mark certification. So CQC Mark certification can be regarded as the replenishment of CCC certification. There are several items in CQC Mark certification, and what FEBO needs to get are: CQC Safe&Performance Product certification, and CQC Environmental Product Certification. If FEBO can have two powerful certifications to ensure its quality and safety, it will be treated as a European fast-food brand that with very high quality.
Strengths * Number one fast food chain in the Netherlands * 61 shops in all big cities in the Netherlands * A1 locations only * Big target segment * longer opening hours) * Unique “food out of the wall” concept * Large assortment * FEBO mobile * Daily fresh produced products * High owners equality * Own their production (logistics and production) | Weakness * Lot of waste because of large assortment * Lack of control because of all the different franchises * Cost a lot of money / time to manage the hole distribution channel * Only in the Netherlands | Opportunities * Easy expansion though franchising * The pace of life is fast, and people do not have much time to cook and eat. | Threats * Cheap image * People get more aware of healthy food * Not much option for expansion in Holland (, most big towns and cities of Holland already have a FEBO) * Lots of competition fast food restaurants |
5. SWOT analysis
In this chapter the swot analysis of Febo in Holland, will be presented in a table.
After having the current SWOT analysis of FEBO, further opportunities and threats for FEBO in China are formulated.
Opportunities | Threats | * China has joined WTO, it is being economic globalization, and there is a large space market in China. * China is a new market for FEBO development. * As the results show - other fast-food brand has created a score higher than the local business in China * According to the analysis, it will be the golden age in the next 20 years for China’s economic growth; China will continue to grow as one of the most active region of economic growth. So the financial situation is satisfied. * Chinese consumption level and hierarchy of consumption are increasing. * The tax burdens are less than European countries because of China’s open policy. * No special European food in China, especially traditional Dutch food. | * Other fast-food brand has opened chain stores in China and occupied a vast market, like McDonald and KFC. * The gap of brand image in the fast-food industry in getting smaller and smaller. * After China joined WTO, more and more fast-food brands keep their focus on the huge Chinese market. They bring advanced production technology, marketing ideas and service modes. So the relative position of FEBO has a lot of competitors. * New technologies and more modern fast food threaten to displace FEBO and its products. |
6. Critical success factors
In general, Critical Success Factors (CSF’s) are the critical factors or activities required for ensuring the success the business. The term was initially used in the world of data analysis, and business analysis.
Critical Success Factors have been used significantly to present or identify a few key factors that organizations should focus on so that they are successful.
As a definition, critical success factors refer to "the limited number of areas in which satisfactory results will ensure successful competitive performance for the individual, department, or organization”(Critical Success Factors - CSF analysis, (n.d.).
According to Rockart and Bullen, there are five key sources involved in critical success factors. To better understand FEBO, it will be analyzed on the five parts.
6.1 The industry
In addition to several common CSF within the same industry, there are also many different and unique CSF for different companies.
FEBO is a leader in the fast food chain within the Netherlands, so that it has some common CSF like other fast food companies, for instance low price, flexibility and convenient, customer orientation and high quality.
Apart from these, FEBO has the unique CSF to be the most famous one among others with its “get food from the wall”. Because of the revolutionary way of getting the food quickly and easily, FEBO is so successful in the Netherlands.
6.2 Competitive strategy and industry position
Different strategies are used to deal with different situation, and different value/ price position could lead to different markets. Therefore, different strategy and position would gain different market shares and risks at the same time for the company. For example, the values of the company, or the target market and target group the company choose will all impact the CSF’s of that company at a given point in time.
FEBO position itself as fast food so that it needs to deliver tasty food to the customers while the service should be quick at a reasonable price and available at any time. Only achieved these can FEBO stand out among the fast food industry. FEBO achieves this with the CSF of holding production and distribution channel in house.
6.3 Environmental factors
The environmental factors mean that any changes in economic, regulatory, political or demographic would affect the CSF of the company. (Critical Success Factors, Guide on How to Write University Essays and Dissertations(n.d.))
This aspect of factors could not be controlled by FEBO, but since FEBO wants to export to China market, so that it already gained a lot of advantages at this point. For instance, China has many regulations to encourage the foreign investments. In addition to that, China is a developing country so that the political development and economic performance of China is very promising. Therefore these all could be seen as the CSF’s for FEBO in the future.
6.4 Temporal factors
These usually relate to short-term situation and are influenced by some specific events. These kinds of factors often result in internal organizational needs and changes.
A temporary CSF for FEBO can be finding a suitable A1 location and reliable franchisee at a certain destination. This is a CSF which has to be given great attention when expanding to China, because without a good franchisee and good location, there is no way that the shop is successful.
6.5 Managerial position
It is an additional aspect and is important when considered from an individual’s point of view. It highlights individual contribution for the CSF’s of the company. It is normal that the company would be wholly successful if it has many successful managers in different specific area and take good control of each department.
At this point of view, FEBO’s CSF are manufacturing managers took the responsibility of provide good quality of products, and the store managers did well in building good relationship with customers with offering kinds of services.
Strategic capability applied to FEBO
The capabilities of a company can be broadly grouped into four categories- Threshold recourses, threshold capabilities, unique resources and core competences. Each of them will be explained and applied to FEBO (Johnson et. all, 2008). * Threshold recourses
Threshold recourses are tangible or intangible assets that the company needs to have in order to fulfil the minimum customer requirements. If a company does not have those resources, the customers will not buy from that brand. However, as this is the minimum and every company in the same business needs to have the same to survive, these recourses do not create competitive or superior advantage (Johnson et. all, 2008).
FEBO has the threshold physical resources of having a fabric, machines and shops for selling. Without this the company will not be able to deliver its offering to the customer. Moreover it has the financial resources of its franchisee and company equity. The human threshold recourses of FEBO comprise of the managers who direct the franchisee and the franchisees and their employees at the shops. These all are the minimum resources and without having them, FEBO cannot exist. However, just the presence of these resources is not important. The customer expects that they are deployed in the right way to deliver value. * Threshold competence
Threshold competences are the abilities that are necessarily to satisfy the basic needs of a customer in this case, the minimum expectations from a fast food restaurant (Johnson et. all, 2008).
As FEBO is in the business of fast food shops, the threshold competence that it needs to posses in order to have customers is to deliver tasty food to the customers. Moreover, the service should be quick at a reasonable price and available at any time, because that is what all the fast food restaurants are doing. * Unique resources
Unique resources are those tangible and intangible assets that the company posses and are better or different from the competitors. Those resources give competitive advantage (Johnson et. all, 2008).
In the case of FEBO the most obvious unique resource it has are its vending machines in the shops. Those are easily recognisable by customers as being part of FEBO and deliver superior- quicker service. In addition, a unique intellectual resource is the brand of FEBO. It is already for a long time in the market and customers know it and value it. The business system of FEBO can also be regarded as a unique resource as the company is keeping production and distribution in house by having its own fabric and trucks. Those are things that are usually outsourced in the fast food industry. * Core competence
Core competences are the abilities of the personnel to deploy the resources in a way that delivers more value than competitors. The core competences are the key to achieving competitive advantage as they are more difficult to imitate (Johnson et. all, 2008).
The core competence of FEBO is to in-house produce and distribute its high quality food quickly to all its A1 shops in Holland. The achievement of quality and at the same time speed makes it possible to sell fresh products in the shops. What is more, the high quality is achieved by using only the best suppliers and carefully choosing the franchisee that represent the brand. So, the core competence of FEBO is embedded in its supply chain. The whole functioning of the operations of FEBO, synchronizing the work of quality suppliers, employees and machines in the fabric, quick logistics, A1 shops and skilled franchisee add to the process of delivering the best quality to the customer. Through the big volumes, FEBO is also keeping the prices of its products down.
Conclusion
The idea behind the report is to analyze the possibility to expand FEBO to China. To sum up, FEBO opened as a bakery and the experience showed the successful strategy of producing in house and franchising shops for fast food. The main strategy of the company is resolved around quality and freshness.
FEBO is implementing the hybrid quality/price strategy and it is marketing proposition is the “most delicious”. The structure of the organisation is flat, which makes it effective. FEBO possesses the key facilities- vendor machines and own production.
The reasons why to chosen target market is China is because, the labour cost are low, fast food popularity is increasing, Government is stimulating international investments through low taxes, the competition in the fast food is not that fierce yet, the country has the basic recourses to produce FEBO`s products and because of the large population, the target market is also expected to be bigger.
More specifically Shanghai is chosen for the first shops as it has good transportation and communication connections and the people in the city are more open to different cultures, which also have a fast pace of life and tend to eat fast food, moreover, a bigger proportion of the population is speaking English. In addition, the early adopters of FEBO in Shanghai will be targeted to be the European people. When there are enough European customers this will built trust in the local Chinese population and they will perceive it as exotic and quality food.
In order to enter the Chinese market, FEBO has to obtain ISO, China Compulsory Certification and China Quality certification. Having these will make it easier and cheaper for the company to begin business in China and the local population will see it as a quality chain.
The critical success factors for FEBO were found to be the get food out of the wall, tasty food with high quality and good choice of franchisees who keep the traditional way of business and the image of FEBO.
And last but not least, the unique resources and core competences of FEBO are the walls, the brand name, the business system, quality and speed at the same time and the coordination of the whole supply chain.
List of reference: 1) Albaum, G., Standskow, J. Duerr, E. Dowd, L., International marketing and export management, Prentice Hall, 3rd edition, 1998
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3) China Market Access: How to Succeed in this Growing Market. (n.d.). Bureau Veritas : QHSE-SR Management, Inspection, Certification, Training & Consulting. Retrieved December 12, 2010, from http://www.bureauveritas.com/wps/wcm/connect/bv_com/group/Home/About-Us/Our-Business/Our-Business-Consumer-Products/our+services/services+and+solutions/china%20market%20access
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6) Critical Success Factors - CSF analysis, formulation and construction. (n.d.). Rapid Business Improvement Review - Organizational Diagnostic tool - BIR/ change tools/ health check/ diagnostic/ organizational development/ RapidBI. Retrieved December 12, 2010, from http://rapidbi.com/created/criticalsuccessfactors
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International Business Orientation
Exporting FEBO to China Part 1
Table of content Introduction 4 1. Strategic Profile 5 1.1 History 5 1.2 Strategies 5 1.3 What to do in China 6 1.4 Suppliers 6 2. FEBO internal analysis 7 2.1 Product position 7 2.2 Marketing capability 8 2.3 Research and development capabilities 8 2.4 Organisational structure 8 2.5 Human resources 9 2.6 Facilities and equipment 9 2.7 Past strategies 9 3. Target market (external research) 10 3.1 Selection 10 3.2 Operating risks 10 3.3 Market potential 11 3.4 Costs 11 3.5 Potential local and foreign competition 11 3.6 In-depth analysis 12 3.7 Population characteristics and purchasing power 12 3.8 Basic infrastructure including transportation and communication facilities 13 3.9 Cultural factors 13 3.10 Resource 13 3.11 Government restrictions and regulations on trade 14 4. Target group 15 4.1 Market Access Requirements (MAR) 15 5. SWOT analysis 19 6. Critical success factors 21 6.1 The industry 21 6.2 Competitive strategy and industry position 21 6.3 Environmental factors 22 6.4 Temporal factors 22 6.5 Managerial position 22 Conclusion 25 List of reference: 26
Introduction
This report is an export marketing plan, about exporting FEBO to China. The report is divided into two parts. This is the first part which is more about the company at the moment the internal and external analysis. It concludes a strategic profile about the history, the strategies, and what to expect in China. Than as all ready mentioned the internal analysis, what are their capabilities, product position, organizational structure, human resource and their facilities and equipment at the moment. The target market is the external analysis which concludes their market position, risks, cost, purchase power and PESTEL analysis. Then there will be explained about about the target market, what is it now and which segment do they want to reach in China. The report consist about a SWOT analysis from FEBO now and the possible opportunities and threats for the China market. In the critical success factors the industry will be discussed and the competitive strategy and industry position.
The second part is more about the implementation about exporting FEBO to china. The different market entries, sales and marketing plan and the technical aspect. But there over later more.
1. Strategic Profile
1.1 History
FEBO was found in 1941 by J.J de Borst, he started with “Maison Febo” as a bakery in Amsterdam. The founder learned that quality is the key factor of success. So he was always busy with improving the quality of his products. After a while Mr. de Borst decided to expand his assortment with homemade salads and kroketten which were sold as a take away or to eat them straight away. Since, there was a high demand, he decided to close the bakery and continue with a kitchen. FEBO made all the products in its fabric. In addition, shops opened where the products could be sold, through the famous “wall”. Mr. J.J. de Borst did not want to outsource the production because then he did not have control over the quality anymore. Because of this successful concept in 1978 the first franchise settlement was opened in Amsterdam. A few years later other FEBO’s opened their doors in; Purmerend, Hoorn and Hoofddorp. Those neighbor cities of Amsterdam were chosen, to keep the existing target group also called an overflow area. In 1990 the son of the founder took over the company and built a big kitchen in Amsterdam were they produced all the products, they own this kitchen as well to keep their production in their own hands. Later, other franchised FEBO’s opened their doors in the rest of Holland.
Now a day there are 61 branches and 55 of them are franchised. All of those shops need to be modern and to have the same charisma. Hygiene is very important and the counter is the hearth of the shop. Everything is about the product, high quality and quick stock turnover. All the FEBO’s need to be located on A1 locations, and what is more, they need to have a certain surface, minimum of 80m2. (Febo)
1.2 Strategies
Strategy formulation can be analysed through the model of the Strategic lenses. This model suggests that there are 4 ways of formulating and implementing a strategy. Namely those are strategy as design, as experience, as ideas and as discourse. Companies that formulate strategy as discourse are using models and analytical tools to carefully analyze the situation. FEBO is not implementing this way of strategy formulation. It is more using the strategy as experience way, as the strategies and way of doing business are based on past experience. This can be seen yet from the begging, when FEBO expanded from bakery to franchise fast food because of the experience that this is what the customers want. Moreover, strategy as ideas is to be innovative and use the full potential of employees’ ideas. This is also what FEBO implemented, when they found the food walls. The last lens is strategy as discourse and this is to use language to formulate a strategy. This angle of looking at a strategy can be also found in FEBO and more particularly in its logo- The most delicious. This logo passes the strategy of good taste to both its employees and customers. (Johnson et. all, 2008).
At the moment FEBO is number one mark leader of the fast food sector in the Netherlands. This also has to do with their strategy; “Quality stays”. FEBO is continuously busy with improving their receipts and products. Also freshness is one of the strategies, all the products are made the same day as they are sold. The products are made of the best quality of meat, herbs, butter and flower. After they are made they are transport by FEBO`s own trucks to keep the quality high.
What FEBO is also very famous for is the concept of getting food out of the “wall”. This is a typical Dutch, and only at FEBO’s. People have to put some coins in the machines and they can choose their snack without ordering it. This is considered as Smart strategy, because it created a better brand awareness and now everybody recognizes the food out of the wall as part of FEBO.
1.3 What to do in China
This report is analyzing and considering the possibility of export of FEBO to China. FEBO is a typical Dutch fast food chain, where people can 24/7 get food out of the wall. When exporting this to China it is important that the Dutch style identity and the same products, quality and the “food wall” are preserved.
1.4 Suppliers
It is important that the products are kept as much as possible the same as they are in Holland. One of the basic strategies of FEBO’s is freshness, which means that is it not possible to export the products from Holland all the way to China. They need to be made in China, some essential ingredients as herbs can be exported, but products as meat and potatoes have to come from China. Those ingredients have to be prepared according to the typical Dutch receipts. This method also saves money, because the company does not have to fly over all the raw ingredients to make the snacks.
2. FEBO internal analysis
An internal analysis of an organisation is performed to evaluate its current position and recourses and determine the strengths and the weaknesses. In this part of the report internal analysis of FEBO will be done on the basis on evaluating its product position, marketing capability, research and development, organisational structure, human resources, facilities and equipment, past strategies.
2.1 Product position
The current products of FEBO are all fast food, which can be taken from a wall. However, what distinguishes FEBO is that its products are fresh and never a compromise on quality is made. The company is choosing carefully the best suppliers and producing its products every day in a fabric in Amsterdam, in that way there is a direct control on the quality. After being produced in Amsterdam, the food is distributed through the companies own logistic channels to the 61 shops in the Netherlands.
In order to make the product positioning of FEBO clearer, the company will be placed on the strategic clock which can be seen in the graph below. Evaluation will be made on the basis of quality and price.
The product of FEBO is differentiated from the other fast food, but differentiation is not their strategy as they are also keeping the prices low. What the organisation is doing can be named as hybrid as they are offering more quality and low price. The combination of the two is normally difficult to manage and most companies provide either quality or cheap product, but FEBO achieves both by selling big quantities and distributing the costs over a big production.
2.2 Marketing capability
The marketing concept and at the same time advertising promise that FEBO is using is the most delicious. The accent of the company is definitely on the quality of the ingredients and the freshness of the food offered to the customers. FEBO is also having a cheap price, but this is not directly communicated to the customers as sometimes people consider low priced products as low quality products. That is why the marketing capability is all about the high quality and appeal to the customers. This is also the reason why, no matter that it is a franchise company, FEBO apart from know-how and brand is also providing the franchisee with the in-house produced and distributed food on daily basis.
2.3 Research and development capabilities
FEBO extended its range of products throughout the years of its foundation. However, the concept of high quality is something that stays in the company. It is making research and developing only the new products that fit in the major concept. In addition the company is performing a research for every new franchisee and has certain requirements as opening shops only in A1 locations. What is more, FEBO has done a research and provided a map with possible locations for new shops. If a franchisee suggests another location, FEBO will conduct research and evaluate if it is suitable.
2.4 Organisational structure
FEBO was opened as a family business and still the director today is a family member. He is already a third generation running the company. His name is Mr. JR Breast and he is on the top of the organisation. The structure of the company is kept simple with direct relations, so that it can work effectively and quickly. There are several management departments, performing the basic tasks. Namely those are- Quality manager, Franchise manager, Marketing manager, financial manager and Manager company stores. They are all directed and controlled by the director of FEBO. The Franchise manager is working together with a consultant for franchising and the financial manager has financial administration. Moreover, there are two secretaries working in FEBO as well. With this structure every employee has tasks and responsibilities and there is no confusion about who is doing what. The organisational structure of FEBO helps in achieving quick and fruitful relationships with franchisee.
2.5 Human resources
The employees working in the management of FEBO are professionals and are carefully selected. They all contribute to the process of adding value and producing and delivering high quality products to the customers. The human resources that FEBO employs also include their franchisee and the full and part time employees working in the shops, so that is why the management of FEBO is considering each case separately. An approval to be a franchisee of FEBO is only given to the ones that cover the requirements. Human resource force is important for FEBO because quality products cannot be produced by unqualified personnel.
2.6 Facilities and equipment
The facilities and equipment of FEBO are very important part of the competitive advantage. The walls or vendor machines placed at the shops of FEBO are something unique. They help in delivering fast service to the customers and are even considered as an attraction by the tourists. Furthermore, the shops which are also part of the facilities of FEBO are only in A1 location, which means that a lot of people pass by them and this is an advantage compared to competitors who do not have such good locations or at least not for all of their shops. Very important facilities for FEBO are its fabric and trucks without which the company will not be able to control the quality throughout its whole chain and will be highly dependent on outside organisations.
2.7 Past strategies
FEBO started as a family owned bakery and because of the success and interest it started growing. It can be said that the strategies were not carefully planned, but they emerged from the everyday doing business and from the customer needs. Moreover, as FEBO`s strategy is to produce in-house to keep the quality, this was a strategy that was formulated from the gained experience. The family saw that the customers value the personal touch. That is why no matter that the range of the products is growing and there are more and more FEBO restaurants, the quality is kept high by still holding the production and distribution in house, because the past experience shows that this is the formula for success for FEBO.
3. Target market (external research)
3.1 Selection
The choice of market selection is a key strategic option in export marketing which provide the basic information for export marketing mix decisions. In general, the selection is through identifying and analyzing different possible markets for export market expansion from aspects such as market size, market growth, competitive conditions and government regulations, etc to determine the most suitable target market for the company to export at the current situation. Therefore, the selection for target market can be seen as a really essential process for the exporting and international marketing.
FEBO is a traditional Dutch company. In addition, it is liked by most of people in the Netherlands no matter from which nationality they are. Therefore there are a lot of choices of feasible countries for export marketing. According to Douglas and Craig (1983), by examining the operating risks, market potential, costs and potential local and foreign competition, the list of feasible countries could be evaluated and ranked. As the result, the most suitable market would be selected out. However, it still needs to be further in-depth analyzed later. (Albaum, 1998, P132-133)
For the reasons above, the following part would be the assessment of different choice markets for FEBO’s export marketing later in order to select the most suitable target market for FEBO. The assessment had been divided into three possible options: a Central or Eastern-European country, a North-American country and an emerging Asian country and would be test as the above four aspects according to Douglas and Craig.
3.2 Operating risks
Operating risks, which is also called business risks, mean the risk arising from a computer’s business. To be more specific, it includes risks from the change of people, system and process during the business. What is more, some factors like fraud risks, legal risks, and physical or environment risks also could be involved in operation risks. (Operating risk definition. (n.d))
At this aspect, the three options have almost the same risks if choose to expand because for FEBO the three options are all new markets. If FEBO wants to open new stores no matter in the centre or eastern-European or north-American country or an emerging Asian country, a lots of risks at aspects like manufacturing, transportation or even customers and suppliers would exist undoubtedly. However, among this situation, the emerging Asian country such as China has low labor costs which could also mean low labor risk and can be considered as an opportunity.
3.3 Market potential
Market potential means the potential of the new market for the future development. For instance it could include the potential amount of customers, the potential products demands, and the potential profits.
From this point of view, the Central or Eastern-European market and North-American market are not suitable because the lifestyle of people there is almost the same as in the Netherlands, although the majority of people like fast food so that there are a lot of customers and high products demands, the alternative fast food, competition of FEBO is very high. Therefore it can be predicted that the potential profits can suffer.
However, in an emerging Asian country, like China traditional food still stands in a leading position. Although many fast food companies such as KFC and McDonalds’ become increasingly popular by people there, FEBO still seems a new kind of fast food for the “get food out of wall”. Time saving could attract more potential customers which would lead great potential profits as the result. 3.4 Costs
Simply the costs contain material, time, resource, manufacture and delivery of the products or services of the company. (Cost definition. (n.d.))
Among the three options, only the emerging Asian country like China has low labor costs and low tax, therefore at this point, China accounted for the most of advantages and could be seem as a good choice for FEBO’s export.
3.5 Potential local and foreign competition
The same as what had already been mentioned in the point of market potential, there are too much competition in the Central or Eastern-European market and the North-American market as there are too many similar industries, so FEBO has lower opportunities and higher threats if choose these two options.
On the contrary, China, as a developing Asian country, has scant fast food industries which mean less local competition. Moreover, at the beginning of international business, FEBO could seize the first opportunities and then could be easier foothold in the China market than the other similarly industries or companies which entered later.
To sum up, according to those reasons above which got from careful analysis, the best choice of FEBO’s export marketing could be clearly seen as China.
3.6 In-depth analysis
After market selection, the most suitable option for FEBO’s export marketing is China. For further analysis, a number of variables which could also be called indicators are useful for assessing the export potential of the international market—the China market. In order, to have a more complete and detailed overview of the China market, the potential impact of those variables needs to be examined.
In accordance with Albaum, G., generally speaking, the physical characteristics, political tendencies, socio-culture characteristics and economic factors are the four main elements which would influence the results of in-depth analysis. More specifically, indicators would include a list of for instance the physical geography of the country, the local industries. Since it would be much more difficult and complex to examine every indicator, several relatively important variables are chosen to analysis. Those are the following: population characteristics and purchasing power, basic infrastructure including transportation and communication facilities, cultural factors, resource and government restrictions and regulations on trade. (Albaum, 1998, P136)
3.7 Population characteristics and purchasing power
As all known, China has a large population which can be seen as benefit for export because more people means more demands. Therefore, it will be clear that the first choice for FEBO to export is the bigger cities in China such as Beijing or Shanghai. In those bigger cities, there are more people and especially more rich people who have larger purchasing power in comparison to people in other small cities.
In addition, Big cities have more competition and the majority of people there have a fast pace of life. There is a very high possibility that they would like FEBO’s “get food out of wall” model. As a famous typical Dutch fast food, FEBO could help people save a lot of time from cooking and there is no doubt that it would be accepted and further loved by most people living in the bigger cities of China.
3.8 Basic infrastructure including transportation and communication facilities
Take Shanghai as an example, there are lists of transportation methods that could be choose for transportation such as bus, truck, subway, train and even plane if necessary. For one of FEBO’s strategies of freshness, the bigger cities in China like Shanghai could be ensure the transport the raw materials or final products in time and always keep fresh as their original quality.
Second, the same as Amsterdam and Rotterdam in the Netherlands, the bigger cities such as Beijing and Shanghai in China also have complete and sound communication facilities. The internet system is the bridge between the headquarters and branches both in the Netherlands and China as well as that between stores and distributions or manufactories. In a word, no matter which link has problems, the communication facilities could assume the responsibility for exchange information.
3.9 Cultural factors
For the cultural aspect, people living in bigger cities in China are more likely to want to try international food than those living in small cities. The reason is that there are a lot of foreigners living in the bigger cities in China especially Shanghai and Beijing and the local population there is more opened to European cultures. Since different nationalities are living together, they are influenced by each other and it is obviously that more and more Chinese accept and even love the foreign food.
Usually people that live in bigger cities in China often have less prejudice or fear, furthermore, they have a more modern lifestyles, and they treat foreigners more friendly. Most of them can speak English or other languages so that they would probably prefer to talk with traditional Dutch employees in FEBO’s stores in China about the lifestyle or environment if the Netherland. They will be able to communicate in English.
3.10 Resource
As mentioned above, one of the strategies of FEBO is freshness which means it is not possible to transport the products from the Netherlands to China every day. To address this problem, the products sold in China’s stores need to be made also in China. Therefore only some essential ingredients as herbs still can be exported to keep products of FEBO in China also have traditional Dutch taste and at the same time could save costs.
As China is large and owns many resources, it is believed that most of resources that FEBO needs to make products could be found in China such as meat and potatoes and so on. In addition, human resource is another significant element. The larger population especially in bigger cities of China means that FEBO does not need to worry about labor problems. Moreover, the lower labor costs in China could also help FEBO save money and can be a better option than exporting Dutch employees from the Netherlands.
3.11 Government restrictions and regulations on trade
With China’s accession of WTO, the government pays more attention on international trade than in the past. In addition, Chinese are encouraged to develop international business abroad and the government also welcomes foreign investments in China. Lowering the amount of restrictions on trade and formulating stimulating regulations on trade are what the government already did and would further developed in the future.
Therefore this is a good opportunities for FEBO’s export marketing plan to China. Many encouraging regulations such as lower taxes could also lower the risks of FEBO’s export.
4. Target group
Since the first target market for FEBO’s export plan had been determined as bigger cities in China such as Beijing and Shanghai, the next step is to search for the most suitable location for FEBO’s first store. After a list of researches, the first destination for FEBO’s export would be Shanghai, therefore the following part would be about the situation in Shanghai.
FEBO is a fast food company; so that the target group of it would of course young people as for example students and office people. The young usually like fashion and could easily accept new products. They like foreign foods better than the older people. Therefore the problem is how to attract them come to FEBO.
To address this problem, some research had been done. Through the results, there are a lot of European companies established in every district of Shanghai, so that it can be hardly to circle for a specific district for Europeans. For this reason, the final location of FEBO would be the city centre of Shanghai which also could be seen as the a1 location.
Generally speaking, people come from other places, especially from other countries always choose the most famous food to eat; however, there is another choice, that is to follow with the local people. That is because the natives would choose the best food among the whole city so that there is no doubt that the tourists could find delicious food with the local people. Therefore, to attract more customers, the target group for FEBO at the beginning should be those European people in Shanghai. When people see a lot of European people come to FEBO, then they would come as well.
Furthermore, with a lot of European people, FEBO could have a more European environment as it is expected. 4.1 Market Access Requirements (MAR)
Standardized products and services are considered to be a confidence builder, and that can be perceived as safety, healthy, secure, high quality and flexible. So the standardized products or services are widely accepted, commonly trusted and highly valued. There are several standards for FEBO to export to China. This part will be discussed by different aspects. In this part, PESTEL will be used to analysis these factors.
Political:
It is an important economic development strategy for China to bring more foreign investment, so Chinese government offers more preferential policies to foreign companies. The most relative policy for FEBO is tax; it is lower than in Netherlands. Chinese government announced that foreign companies have to pay 25% of income, which is lower than 25.5% in Netherlands. FEBO will earn more money because of this low tax. And for the new foreign companies, if they want to operate more than ten years, and then in the first two years, they can exempt from corporate income tax. It is a good open policy for FEBO to enter to Chinese market.
Economic:
Source from official says that the economic in China is optimistic. Generally, Chinese economic is increasing rapidly. Ranked seventh in the world GDP, GDP growth rate is the first in the world. It is suitable for FEBO to develop to China.
Social:
Although China has a long history, Chinese people are becoming more open to different cultures than other countries with deeply embedded local customs. Nowadays, the educational level is high, and Chinese people can adopt more foreign customs and values. In some big cities, the pace of life is fast, so people prefer fast-food than traditional one. As it can be seen that McDonald, KFC and many more foreign fast-food stores opened in China, FEBO can be next good choice for them.
Technological:
FEBO has more or less the same technologic as other fast-food stores. But for some sauces and some special traditional Dutch food, FEBO has its own technologic. What is more, FEBO will use this Dutch fast-food technologic also in China.
Environment:
As food industry is famous and quickly developing in China, FEBO can catch up with the situation, and develop to Chinese market. After FEBO set foot in China, there will be more jobs for local people. It will also bring competitive crisis to relative stores, and this will promote the virtuous circle of competition in the market. FEBO can be an environmental company, and will do more changes on environmental item, so it could be more adopted than other non environmental friendly business.
Legal:
FEBO has to obey the laws and relative constraints, some important legal issues are described detailed as below:
* FEBO first has to obtain the certification of International standard organization (ISO), which is the world’s largest developer and publisher of international standard.
FEBO is a Dutch brand, and if it wants to develop to Chinese market, then it becomes an international business.
If FEBO gets the ISO application, it will bring a lot of advantages to the business: * Strengthen quality management and improve enterprise efficiency. If FEBO implement at ISO, it can be scrutinized in according to international standard quality system for quality management. It will greatly improve work efficiency and product qualification rate, and rapidly increase their economic and social benefits. * Access to international trade pass, it is conducive to across international technical barriers. Especially in the “World Trade Organization”, member countries exclude the tariff barriers each other, so certified is the main way to eliminate trade barriers. * To be an invincible position in the competition of product quality. Quality competition has become the primary means of competition in international trade. ISO certification can help FEBO improve the product quality stably.
* What is more, to enter Chinese market, it is essential for FEBO to have Market access barriers for other relative stores. So FEBO has to get certificate from Chinese food industry.
FEBO has to meet China`s health, safety, quality and environmental objectives. As it has been mentioned in the previous part, some essential ingredients as herbs can be exported. So the technical trade barriers of China can help FEBO realize these policy objectives by restricting entry of unsatisfactory products at the border. The barriers can be divided into mandatory approval and voluntary approval.
* Mandatory approval
CCC (China Compulsory Certification) is the fastest way to enter Chinese market. It is a system to replace the Compulsory Supervision System for Product Safety Certification and the Safety License System for Import Commodities. Besides, for the food products, FEBO has to comply with the Chinese GB standard.
* Voluntary approval
FEBO can apply for the CQC(China Quality Certification) Mark certification. This safety products certification system involves hundreds of products divided into over 50 categories, which include protecting consumers’ personal and property safety and safeguard their rights and interests, improving the product quality of domestic enterprises and increasing the product competitiveness in the international market; and also facilitating foreign products accessing into the domestic market. The products categories that not covered under CCC certification can be subject to the CQC Mark certification. So CQC Mark certification can be regarded as the replenishment of CCC certification. There are several items in CQC Mark certification, and what FEBO needs to get are: CQC Safe&Performance Product certification, and CQC Environmental Product Certification. If FEBO can have two powerful certifications to ensure its quality and safety, it will be treated as a European fast-food brand that with very high quality.
Strengths * Number one fast food chain in the Netherlands * 61 shops in all big cities in the Netherlands * A1 locations only * Big target segment * longer opening hours) * Unique “food out of the wall” concept * Large assortment * FEBO mobile * Daily fresh produced products * High owners equality * Own their production (logistics and production) | Weakness * Lot of waste because of large assortment * Lack of control because of all the different franchises * Cost a lot of money / time to manage the hole distribution channel * Only in the Netherlands | Opportunities * Easy expansion though franchising * The pace of life is fast, and people do not have much time to cook and eat. | Threats * Cheap image * People get more aware of healthy food * Not much option for expansion in Holland (, most big towns and cities of Holland already have a FEBO) * Lots of competition fast food restaurants |
5. SWOT analysis
In this chapter the swot analysis of Febo in Holland, will be presented in a table.
After having the current SWOT analysis of FEBO, further opportunities and threats for FEBO in China are formulated.
Opportunities | Threats | * China has joined WTO, it is being economic globalization, and there is a large space market in China. * China is a new market for FEBO development. * As the results show - other fast-food brand has created a score higher than the local business in China * According to the analysis, it will be the golden age in the next 20 years for China’s economic growth; China will continue to grow as one of the most active region of economic growth. So the financial situation is satisfied. * Chinese consumption level and hierarchy of consumption are increasing. * The tax burdens are less than European countries because of China’s open policy. * No special European food in China, especially traditional Dutch food. | * Other fast-food brand has opened chain stores in China and occupied a vast market, like McDonald and KFC. * The gap of brand image in the fast-food industry in getting smaller and smaller. * After China joined WTO, more and more fast-food brands keep their focus on the huge Chinese market. They bring advanced production technology, marketing ideas and service modes. So the relative position of FEBO has a lot of competitors. * New technologies and more modern fast food threaten to displace FEBO and its products. |
6. Critical success factors
In general, Critical Success Factors (CSF’s) are the critical factors or activities required for ensuring the success the business. The term was initially used in the world of data analysis, and business analysis.
Critical Success Factors have been used significantly to present or identify a few key factors that organizations should focus on so that they are successful.
As a definition, critical success factors refer to "the limited number of areas in which satisfactory results will ensure successful competitive performance for the individual, department, or organization”(Critical Success Factors - CSF analysis, (n.d.).
According to Rockart and Bullen, there are five key sources involved in critical success factors. To better understand FEBO, it will be analyzed on the five parts.
6.1 The industry
In addition to several common CSF within the same industry, there are also many different and unique CSF for different companies.
FEBO is a leader in the fast food chain within the Netherlands, so that it has some common CSF like other fast food companies, for instance low price, flexibility and convenient, customer orientation and high quality.
Apart from these, FEBO has the unique CSF to be the most famous one among others with its “get food from the wall”. Because of the revolutionary way of getting the food quickly and easily, FEBO is so successful in the Netherlands.
6.2 Competitive strategy and industry position
Different strategies are used to deal with different situation, and different value/ price position could lead to different markets. Therefore, different strategy and position would gain different market shares and risks at the same time for the company. For example, the values of the company, or the target market and target group the company choose will all impact the CSF’s of that company at a given point in time.
FEBO position itself as fast food so that it needs to deliver tasty food to the customers while the service should be quick at a reasonable price and available at any time. Only achieved these can FEBO stand out among the fast food industry. FEBO achieves this with the CSF of holding production and distribution channel in house.
6.3 Environmental factors
The environmental factors mean that any changes in economic, regulatory, political or demographic would affect the CSF of the company. (Critical Success Factors, Guide on How to Write University Essays and Dissertations(n.d.))
This aspect of factors could not be controlled by FEBO, but since FEBO wants to export to China market, so that it already gained a lot of advantages at this point. For instance, China has many regulations to encourage the foreign investments. In addition to that, China is a developing country so that the political development and economic performance of China is very promising. Therefore these all could be seen as the CSF’s for FEBO in the future.
6.4 Temporal factors
These usually relate to short-term situation and are influenced by some specific events. These kinds of factors often result in internal organizational needs and changes.
A temporary CSF for FEBO can be finding a suitable A1 location and reliable franchisee at a certain destination. This is a CSF which has to be given great attention when expanding to China, because without a good franchisee and good location, there is no way that the shop is successful.
6.5 Managerial position
It is an additional aspect and is important when considered from an individual’s point of view. It highlights individual contribution for the CSF’s of the company. It is normal that the company would be wholly successful if it has many successful managers in different specific area and take good control of each department.
At this point of view, FEBO’s CSF are manufacturing managers took the responsibility of provide good quality of products, and the store managers did well in building good relationship with customers with offering kinds of services.
Strategic capability applied to FEBO
The capabilities of a company can be broadly grouped into four categories- Threshold recourses, threshold capabilities, unique resources and core competences. Each of them will be explained and applied to FEBO (Johnson et. all, 2008). * Threshold recourses
Threshold recourses are tangible or intangible assets that the company needs to have in order to fulfil the minimum customer requirements. If a company does not have those resources, the customers will not buy from that brand. However, as this is the minimum and every company in the same business needs to have the same to survive, these recourses do not create competitive or superior advantage (Johnson et. all, 2008).
FEBO has the threshold physical resources of having a fabric, machines and shops for selling. Without this the company will not be able to deliver its offering to the customer. Moreover it has the financial resources of its franchisee and company equity. The human threshold recourses of FEBO comprise of the managers who direct the franchisee and the franchisees and their employees at the shops. These all are the minimum resources and without having them, FEBO cannot exist. However, just the presence of these resources is not important. The customer expects that they are deployed in the right way to deliver value. * Threshold competence
Threshold competences are the abilities that are necessarily to satisfy the basic needs of a customer in this case, the minimum expectations from a fast food restaurant (Johnson et. all, 2008).
As FEBO is in the business of fast food shops, the threshold competence that it needs to posses in order to have customers is to deliver tasty food to the customers. Moreover, the service should be quick at a reasonable price and available at any time, because that is what all the fast food restaurants are doing. * Unique resources
Unique resources are those tangible and intangible assets that the company posses and are better or different from the competitors. Those resources give competitive advantage (Johnson et. all, 2008).
In the case of FEBO the most obvious unique resource it has are its vending machines in the shops. Those are easily recognisable by customers as being part of FEBO and deliver superior- quicker service. In addition, a unique intellectual resource is the brand of FEBO. It is already for a long time in the market and customers know it and value it. The business system of FEBO can also be regarded as a unique resource as the company is keeping production and distribution in house by having its own fabric and trucks. Those are things that are usually outsourced in the fast food industry. * Core competence
Core competences are the abilities of the personnel to deploy the resources in a way that delivers more value than competitors. The core competences are the key to achieving competitive advantage as they are more difficult to imitate (Johnson et. all, 2008).
The core competence of FEBO is to in-house produce and distribute its high quality food quickly to all its A1 shops in Holland. The achievement of quality and at the same time speed makes it possible to sell fresh products in the shops. What is more, the high quality is achieved by using only the best suppliers and carefully choosing the franchisee that represent the brand. So, the core competence of FEBO is embedded in its supply chain. The whole functioning of the operations of FEBO, synchronizing the work of quality suppliers, employees and machines in the fabric, quick logistics, A1 shops and skilled franchisee add to the process of delivering the best quality to the customer. Through the big volumes, FEBO is also keeping the prices of its products down.
Conclusion
The idea behind the report is to analyze the possibility to expand FEBO to China. To sum up, FEBO opened as a bakery and the experience showed the successful strategy of producing in house and franchising shops for fast food. The main strategy of the company is resolved around quality and freshness.
FEBO is implementing the hybrid quality/price strategy and it is marketing proposition is the “most delicious”. The structure of the organisation is flat, which makes it effective. FEBO possesses the key facilities- vendor machines and own production.
The reasons why to chosen target market is China is because, the labour cost are low, fast food popularity is increasing, Government is stimulating international investments through low taxes, the competition in the fast food is not that fierce yet, the country has the basic recourses to produce FEBO`s products and because of the large population, the target market is also expected to be bigger.
More specifically Shanghai is chosen for the first shops as it has good transportation and communication connections and the people in the city are more open to different cultures, which also have a fast pace of life and tend to eat fast food, moreover, a bigger proportion of the population is speaking English. In addition, the early adopters of FEBO in Shanghai will be targeted to be the European people. When there are enough European customers this will built trust in the local Chinese population and they will perceive it as exotic and quality food.
In order to enter the Chinese market, FEBO has to obtain ISO, China Compulsory Certification and China Quality certification. Having these will make it easier and cheaper for the company to begin business in China and the local population will see it as a quality chain.
The critical success factors for FEBO were found to be the get food out of the wall, tasty food with high quality and good choice of franchisees who keep the traditional way of business and the image of FEBO.
And last but not least, the unique resources and core competences of FEBO are the walls, the brand name, the business system, quality and speed at the same time and the coordination of the whole supply chain.
List of reference: 1) Albaum, G., Standskow, J. Duerr, E. Dowd, L., International marketing and export management, Prentice Hall, 3rd edition, 1998
2) CCC US OFFICE - China AQSIQ, CCC Mark, CCC Certificate, 3C Certificate - Your fastest way to enter China Market. (n.d.). CCC US OFFICE - China AQSIQ, China CCC, CCC Mark, CCC Certificate, 3C Certificate - Your fastest way to enter China Market. Retrieved December 12, 2010, from http://www.ccc-us.com/otherservices.htm?gclid=COaLkoKwy5ICFRmiiQodBRGdmA
3) China Market Access: How to Succeed in this Growing Market. (n.d.). Bureau Veritas : QHSE-SR Management, Inspection, Certification, Training & Consulting. Retrieved December 12, 2010, from http://www.bureauveritas.com/wps/wcm/connect/bv_com/group/Home/About-Us/Our-Business/Our-Business-Consumer-Products/our+services/services+and+solutions/china%20market%20access
4) Cost definition. (n.d.). BusinessDictionary.com - Online Business Dictionary. Retrieved December 12, 2010, from http://www.businessdictionary.com
5) Critical Success Factors. (n.d.). Guide on How to Write University Essays and Dissertations. Retrieved December 12, 2010, from http://university-essays.tripod.com/critical_success_factors_csf.html
6) Critical Success Factors - CSF analysis, formulation and construction. (n.d.). Rapid Business Improvement Review - Organizational Diagnostic tool - BIR/ change tools/ health check/ diagnostic/ organizational development/ RapidBI. Retrieved December 12, 2010, from http://rapidbi.com/created/criticalsuccessfactors
7) Homepage. (n.d.). Homepage. Retrieved November 24, 2010, from http://www.febodelekkerste.nl/
8) ISO - International Organization for Standardization. (n.d.). ISO - International Organization for Standardization. Retrieved December 12, 2010, from http://www.iso.ch
9) Johnson, G., Scholes, K., & Whittington, R. (2008). Foundation of strategic capability. Exploring corporate strategy: text and cases (8. ed., pp. 95-99). Harlow: Financial Times Prentice Hall.
10) Operating risk definition. (n.d.). BusinessDictionary.com - Online Business Dictionary. Retrieved December 12, 2010, from http://www.businessdictionary.com/definition/operating-risk.html
11) 2) Strategic Management :: The Areas That Most Businesses Should Analyze. (n.d.). Strategic Management :: . Retrieved November 24, 2010, from http://strategy-formulation.24xls.com/en126
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