CROSS-BORDER STRATEGIES

Transcription

1 STRATEGIES AN IMPORTANT ELEMENT OF STRATEGIC PLANNING FOR RESTAURANT INDUSTRY Cross-border strategy is crucial to every globalized 36 company s growth. Thus, strategic planning frequently factors in cross-border strategies for expanding reach and increasing revenues. The business of e-commerce has mostly been confined to national boundaries. However, advances in logistics, shipping and global smartphone penetration have created a perfect setup where e- commerce companies can thrive internationally. And therefore, U.S. retailers like Amazon, ebay, Walmart etc. are exploring new global geographies to grow their businesses. E-commerce companies expand internationally by usually opening local subsidiaries. For instance, Amazon and ebay run separate sites in France, U.K., Japan, Brazil and other markets. This approach to growth is not limited to e-commerce only. Even fast food retail chains have targeted cross border strategies. McDonald s, Subway, Pizza Hut and many others have benefited by going cross-border to drive long-term growth. STRATEGIESS 1

2 Let us take a closer look at the Quick Service Restaurant segment in India. The Indian Quick Service Restaurants segment has been on a roll lately. Factors such as improving job-scenario, rising per-capitaincome, rising need for convenience and increased exposure to global cuisines are driving the sector's overall growth. A report published by CRISIL, a research and ratings firm, in July reveals that the Indian organized QSR segment was worth about $1bn in The report projects that the industry will grow 26% annually over the next three years, and form a $2bn sector by However, some experts have faulted this report for not covering various other QSRs which, too, have a massive presence, such as Cafe Coffee Day, KFC, Barista Coffee Co. etc. This leads to lower projections for the sector. What this means is that the sector already was at the juncture where this report projected it three years later. And this highlights the massive potential of cross-border strategies in QSR segment. Let us take a closer look at McDonald s cross-border growth strategy as they ventured into India. The chain operates through two master franchisees in India which handle particular geographies - Connaught Plaza Restaurants Pvt. Ltd. for the north and east region (McDonald s N&E) and Hardcastle Restaurants Pvt. Ltd. (HRPL) (now under parent company Westlife Development) for the south and west region (McDonald s W&S). STRATEGIES 2

3 While the former is run as a joint venture between McDonald s and domestic partner Vikram Bakshi, who also leads the operations of the business in north and east regions of the country, the latter has now become a full franchisee after the local partner Jatias bought out McDonald s stake in the venture. The two master franchisees collectively operate 368 stores and 30 cafes. Both franchisees collectively garnered sales of about $230 million in FY13, out of which the franchising fee - at a fixed rate of 4% - for McDonald's India aggregates to just $9.2 million. Cross-Border growth strategies require deep understanding and planning. Every geographic region is different and has to be planned in fine detail. For example, the Indian QSR segment has a large vegetarian population. The cookie cutter approach will not work. McDonald s faced a huge protest when they came with the cookie cutter approach for the Indian market. So, here are the five most important elements for a QSR entry for India: 1. Vegetarian Values: It is important for every company to consider the Vegetarian Family Values in the Indian Sub-continent. McDonald s does not have any beef or pork on its menu. 2. Menu Matters: It is important to localize the menu to the local taste. McDonlad s serves an Aloo Tikki Burger a burger with a cutlet made of mashed potatoes, peas and flavoured with Indian spices. The price and the taste, both are important elements. STRATEGIES 3

4 3. Create Culture: Sometimes, you have to drive the cultural change. When McDonald s came to India, they had to start with the message that burger is a meal. There has been a full campaign around it when they started. 4. Franchise Structure: It is important to have a clear strategy on the structure for the entry. Is it going to be asset heavy, or fixed franchise percentage, or a combination approach for the local market? 5. New Markets, New Customers: The kind of customers McDonald's attracts in India are very different from other countries. There are still families with young children who frequent it. But diners also include many young people, aged between 19 and 30, with no kids. McDonald s has plans to open another 1,000 restaurants in the next decade. India with a population of 1.2 billion people has 350+ McDonald s restaurants today, and growing. You can imagine the potential of how cross-border strategy will drive long-term growth for McDonald s. It is not the only one, but there are many that have gained with their respective cross-border strategies for long-term growth. STRATEGIES 4

5 Some US QSR giants have already come to India. Domino s Pizza has more than 500 restaurants across India KFC has more than 300 outlets Dunkin Donuts, which entered in , has more than 30 outlets in India. Burger King has just entered the market. There are enough encouraging examples to boost efforts into having inspired, as well as unique cross-border strategies in place. About DEAL HIGHWAY DEAL HIGHWAY, is the brainchild of a team that boasts a combined experience of over 100 years. The team s mission is to empower customers and merchants in a whole new way through this technology platform. The team will be launching a mobile app soon where the customers will get the best deals in their vicinity. The app empowers the merchants to connect with their most probable customers. The innovative platform aims to build a mutually beneficial relationship between the two. STRATEGIES 5