Thestrategy that a company adopts is exceedingly vital since it helps indetermining whether the business would be in a position to realizeits competition objectives within its planned period. Sometimes, itis not possible for firms to accomplish or develop a competitive edgeemanating from the decisions that they take. When making a planconcerning the approach to take, it is important for an organizationto review its environment, and establish whether the situation allowsit to realize the goals that it is considering. The purpose of thisreport is to discuss the issues facing , itsenvironment, and recommendations for the company.
TimHorton Inc. became established in 1964 by Tim Horton as a donut andcoffee shop and has become the largest Quick Service Restaurant (QSR)Company in Canada. Tim partnered with Ron Joyce to develop afranchise system of coffee and donut units (Joyce& Thompson, 2013).The organization has approximately 4,772 locations and is stillexpanding its presence in Canada. The entity has a strategic presencein the Persian States. The merchandises of the company are also soldin kiosks in gas stations and other sites in Ireland and the UnitedKingdom. Before its merger with Burger King, in 2013, the entity had$6 billion in system-wide sales (Gray, 2014). The firm serves morethan two billion coffee cups annually, making it the most influentialQSR in the country selling home coffee. has a strongbrand and has captured a major market share while it continues toappeal to more consumers (Weatherby, 2016).
Expansionof a business is one of the strategies that help an organization tomaintain aggressiveness in the market. is consideringgrowing its brand in the few coming years by adding new locations inCanada, in central and priority markets in the U.S., as well as inthe Gulf States. The growth in Canada and the United States willentail new free-standing restaurants having a 24-hour drive-through.The organization is also planning to augment the number of TimHorton’s Café and Bakery locations. Moreover, in an attempt toincrease its presence, the firm continues to hold a business model ofdeveloping non-traditional areas sometimes having scaled down menu indrive-thru only and kiosk facilities. Although the company has beensuccessful in most of its Canadian units, it faces problems with itsU.S. locations due to the crowded and fiercely competitiveenvironment (Globe and Mail, 2015). In 2015, the entity announcedthat it was going to close some of its units in the United States.However, this has been considered as realignment that the company istrying to make in regards to the U.S. operations because it signed adeal with Seven Invest, in 2015, to develop 150 fresh locations inthe Cincinnati region in the coming decade (Globe and Mail, 2015).
Anotherissue that is facing the company is an increase in competition. Asthe rivalry in the business rises, there would be a decrease in themarket share of the firm, which makes the aspect a significant issue.One of its rivals, Starbucks, has focused on an aggressive rolloutacross different parts of Canada, chasing the high-end coffeeconsumer who prefers Frappuccino and lattes. Alternatively, McDonaldshas commenced luring more cost-conscious clients with cheaperofferings and free giveaways (Friend, 2014). Emanating from the stiffcompetition in the market, there is a need for the entity to look forways of maintaining aggressiveness.
Thisdescribes a collection of approaches that managers can use to examinefirm’s environment so as to understand the capabilities of anorganization, its customers, as well as its operation opportunities.In this section, SWOT, PESTEL, and Porter’s Five Forces will beused.
Anarea of strength for the company is in product marketing. Marketingpenetrates every facet of the firm and is not mutually exclusive fromstrategic planning, financing, and human resources. Marketing is astrength because the entity has successfully created a strategygrounded on the four principles of marketing price, promotion,place, and product. Product marketing is a field of strength sincethe corporation effectively progresses to provide a basic menu ofcoffee, a variety of flavored cold and hot beverages, soups, muffins,donuts, and sandwiches while maintaining a resilient, positiveconsumer response. In the marketing of its products, the company hasensured that prices are controlled, where price increases arelimited. Since its establishment, has been effectiveat selling its products at a charge that is affordable to allCanadians without regard to their earning (Hunter, 2012). The coffeeand lunch combos are the same value across Canada and tend to appealto a broad customer demographic irrespective of their cultural,social, economic, or professional status. There is no entitlement ordistinction to individuals who opt to expend their income at TimHorton Inc. Furthermore, the entity has been in a position to carve aniche in the quick service market leading to an increase in thecustomer base. In promoting its commodities, the firm has employedcontemporary marketing and technology to appeal to everyone. Apartfrom having strength in marketing, the corporation has the ability tocontrol its financial decisions and its sources of resources. Thecompany has been in a position to finance its operations as well asexpansions through raising resources in the capital markets andissuing equity stocks in the Toronto Stock Exchange (TSX). Besides,the firm has strength in having consistent operations, which hasassisted in ensuring that it stays ahead of its rivals and increasingthe market share. Before its merger with Burger King, theorganization embraced a consistent operations and supply chainstrategy despite the economic downturns and upturns, without makingmajor changes in prices or quality.
Onearea of weakness is human resources. The employees of the companyearn low wages that comprise no tips, which makes the entity to facechallenges of filling job vacancies when there is demand for labor(Weatherby, 2016). This emerges as a condition that is present at QSRestablishments in Canada. Also, the firm has a shortage in workers atsome locations in Canada. Another weakness is a lack of concreteinitiative by executives in developing and embracing an aggressiveglobal expansion plan. News reports have indicated that the firmsigned deals in late 2015 to develop sites in Cincinnati andColumbus. Although the corporation has closed some units in theUnited States, it still shows determination to have locations in theregion. However, the company has not made any progress to establish aglobal presence in key developing countries such as China, Russia,India, and Brazil (Weatherby, 2016). Several competitors such as theStarbucks and McDonalds have a solid as well as an expanding presencein different nations. This is to show that has failedto show any efforts to direct and grow the firm in challenging anddynamic areas of the globe.
Opportunitiesto the corporation can be found in consumer demand for more flavoredunsweetened and sweet beverages, as well as healthier menu items. Itis feasible for the firm to have expansion across the United Statesand Canada as the demand for coffee, tea, sandwiches, and healthyfood items increases. Besides, the opportunity for growth of theentity emerges from changes in population, economics, socialbehavior, technology, and globalization. Canada’s growingpopulation with the 250,000 fresh immigrants who come to the countryannually can help in the expansion of the company’s market share.Also, the favorable economic environment in Canada offers a vitalopportunity for the business to develop its operations (Hunter,2012).
Severecompetitive forces within the QSR industry emerge as the mostsignificant external factors that can influence the future operationsand potential growth of the company, and its rivals globally.Emanating from the friendly environment of Canada, rival entitiessuch as Dunkin Donuts, Starbucks, and McDonalds continue to growtheir brands in the country a move that offers stiff struggle inbusiness for the company. This is still the case in the internationalmarket (Joyce& Thompson, 2013).Another threat originates from the animal rights activists. The useof antibiotics and growth hormones in the production and treatment ofchickens, pigs, and cattle has raised controversy and the manner inwhich companies like responds may influence itsfuture operations. The use of technology seems as an important factorin capturing the attention of the young generations, who have thepotential of contributing to the company’s success. Failure to usetechnology can thus be viewed as a threat to the future of theentity. Furthermore, volatility in the demand and supply of labor inthe market also poses a threat to the organization’s undertakings.
Thepolitical climate of a country is essential to the operations ofbusiness. When there is peace in the society, entities have afavorable environment to undertake their daily transactions, whichenable them to achieve their targets. However, in situations ofpolitical turmoil, it is hard for businesses to carry out theiroperations a move that hinders the attainment of their objectives.Thus, a company is likely to be successful when there is stablepolitical setting. In Canada and the United States, where the companyoperates, there is stability in the political area, which impliesthat the situation is excellent for to conductbusiness.
Regulatoryfactors with respect to stern regulations in the food industry poseproblems to businesses that exist, as well as new entrants. Atdifferent levels, the governments have enacted laws and continue tomake others, which target at regulating operators in the sector. TheCanadian Food Inspection Agency (CFIA) has the role of overseeing 14groups of Acts and policies. However, there are other nine Acts notunder CFIA control, which are closely associated with the foodindustry such as Environmental Assessment Act, Employment Equity Act,and Canadian Human Rights Act (Weatherby, 2016). As more consumersdepend on food prepared out of their homes, food policies willcontinue to be strengthened and enforced. Reports indicate that sternlaws in the fast food industry, in the recent years, have made ithard for organizations to operate. For instance, in 2015, Ontarioissued its Healthy Menu Choices Act that required food service firmshaving 20 or more locations to post calories on their menus by thestart of 2017. Therefore, the legal environment for the food industryis challenging, but it is not only meant for , but forall firms operating in the field.
Theeconomic influences of a country are exceedingly critical indetermining how successful organizations are going to be. When theconditions are favorable, firms have the tendency of realizing theirobjectives. However, in unfriendly economic situations, businessesusually have difficulties in attaining their goals. In itsoperations, is impacted by economic factors such astaxation, consumer demand, and inflation. The economic performance ofCanada and the United States, where the company operates, hassupported the achievement of the entity. Nevertheless, indicatorssuch as job security, unemployment, and inflation are likely to havean effect on the future performance of the company.
Thedevelopments in the social environment are very vital in influencinghow is likely to plan its business strategy for thepurpose of the current and future operations. External pressures toget involved in social and environmental responsibility have impacted and other similar firms that operate in the foodindustry. For instance, in the company’s 2014 Sustainability andResponsibility Performance Report, the entity integrated socialresponsibility, individual well-being, and environmentalsustainability into its strategic approach and business model. Inaddressing the needs of the society, the corporate reduced the amountof water used at the head office by about 35%. Social changes in thefuture are also going to influence the model that the firm willassume in order to achieve success.
Changesin technology have facilitated in making things easier in the QSRindustry. Indeed, it has assisted firms to engage with consumers in abetter way. Most services such as contacting consumers and bookingreservations are now done through technological devices a move thathas enabled companies operating in the food industry to enhance theirservices (Hunter, 2012). The rate of technological advances in theareas that the entity has its operations is exceedingly high, whichimplies that the firm is in a position to acquire efficiencies.Therefore, it can be indicated that the company operates in anenvironment that is friendly technologically. Furthermore, in thefuture, technology will emerge as a significant factor that will havea major impact on the performance of the food industry.
Theenvironment is a crucial element in the undertakings of anorganization. The company conducts business in the United States andCanada, where there is a mixture of cultures. The culturalenvironment is favorable for the firm since different groups supportthe food industry, which is a member. Also, thelocations of the company units are well-placed for access andconvenience. The shops of the organization are situated in placesthat can easily be accessed for the provision of services forinstance, the stalls are found in supermarkets and petrol stations,where people can easily seek anything that they desire. These pointsprovide a favorable distribution for the organization, which is acritical aspect for realizing success in the business. Therefore, theenvironmental factors are conducive for the firm’s undertakings.
Threatsof New Entrants
Inthe QSR industry, where operates, there is acontinuous threat from new firms entering the market. This is madeeasy by the low entry barriers to the business. Provided an entityhas sustainable financing it can easily venture into the foodservice industry. Moreover, the unending competitive structure of theindustry places restaurants in a situation where the operating costsare high while sales increases and profit margins are low. Theseoutcomes make it hard to attract investors who prefer to have anappealing yield, solid growth dividend, and minimum risk on theircapital. In an attempt to stay aggressive against new entrants, thecompany has a tendency of controlling its operating costs andmaintaining a high level of efficiency through large scale productionat central bakeries, regional distribution centers, and outsourcing(Joyce& Thompson, 2013).Since there are low costs to enter the market and the exit costs arealso low, the threat of new entrants into the industry can beconsidered to be high.
TheBargaining Power of Buyers
Thepower of consumers can exist as a strong force that can influence QSRprofits. In a situation where there is a small number of businessesin an industry, customers are likely to have low bargaining powersince it would be difficult to determine the price of services orproducts offered by the entities. However, when the number of firmsis large, it is feasible for buyers to dictate the price at which toobtain services or commodities because they can leave one businessand go to another and receive a similar merchandise or service at aprice that they are comfortable with. In the QRS industry, there aremany organizations offering similar products. This implies that thebusinesses will do anything in an attempt to attract more customers,including lowering prices and giving free takeaways. Thus, customerscan take advantage of the broad range of venue and menu options.However, although there is a stiff competition that gives the buyersome powers, and other vast entities possess somebargaining powers with clients since coffee is sold almost everywhereat a common price (Joyce& Thompson, 2013).Therefore, the buyer power in the industry can be indicated asmedium.
Theexistence of a substitute to a product or service offers a threat.Recent studies on the expansion of the tea sector in Canada andacross the world reveal show tea and flavored tea beverages may beconsidered as the most serious threat to the hot coffee cup that ispopular in the country as marketed by and some of itsrivals. Originating from the idea that there exists a substitute forcoffee, but not a perfect one, it can be argued that the threat ofsubstitute is medium in the industry.
TheBargaining Power of Suppliers
Thisis an important force in the structure of the industry since it hasthe potential of adversely or positively influencing the profitmargins. Suppliers have the ability of impacting the availability andcosts of commodities and services they charge to firms. In the caseof the industry that operates, the company is anindustry leader (Weatherby, 2016). This makes it difficult forsuppliers to have significant control of prices. Emanating from theposition of the firm, the company has the capacity to negotiate theprice that it would pay to the suppliers. Therefore, it can be arguedthat the bargaining power of suppliers is low in the industry.
Rivalryis another substantial aspect that has an influence on theattractiveness, profitability, and sustainability of an industry.Since the capital requirement for the establishment of a firm in thefood industry is not large, more companies can be attracted to thebusiness. As a result, there is stiff competition in the industry.However, large companies seem to benefit from their alreadyestablished brands and ability to lower prices. Thus, the rivalry inthe industry can be considered to be high.
Thecompany integrates cost leadership and differentiation strategies inits business. The products of are usually pricedlower compared to the competitors’ commodities. Thus, the entityutilizes low-cost advantages as a source of competitive advantage.Besides, the company does not sacrifice quality in order to offer lowcharges but strives to provide the highest quality service to itscustomers (Joyce& Thompson, 2013). has been in a position to attain efficiencies in anattempt to fulfill the integrated cost and differentiation approach.Apart from using the integrated tactic, the firm also employsfranchising as a business strategy.
Theentity has continuously shown its intention to locate innon-traditional places and developing shops in universities,hospitals, and sports venues. The company has taken initiatives tocreate restaurants in the rural areas for instance, it hasestablished its kiosks in Prince Edward Island, where there are localcommunities. The merger amid the business and Burger King providesthe organization with more marketing leverage, capital, and prospectsof putting up additional locations in the Persian Gulf States andother areas of the world. For example, Burger King is aggressivelyexpanding in Spain and France which presents a noble opportunity for to have an established presence in Europe (Gray,2014). Therefore, I recommend that the company should stick to itsexpansion plan by taking into considerations the opportunitiespresented by the merger. This would help the firm to increase itsglobal locations, which would add to its brand recognition.
Incase is to compete against the trend of food servicerestaurants in North America, it will need to develop outlets thatare beyond the scope of the QSR coffee bakery idea while stillemphasizing on its central business. It is recommended that thecompany should continue utilizing its current strategy that focuseson cost leadership and differentiation to ensure that it continues toprovide quality products, and the same time competing in price. Thiswould provide the entity with an excellent chance of maintainingaggressiveness in the industry. However, it is also critical for TimHorton Inc. to apply innovations in its operations since it wouldassist in matching products with customer demands. In terms of menu,the firm would need to enhance its offerings such that it containsorganic, fresh, local, non-genetically modified wheat products, andpoultry, beef, pork, as well as dairy commodities produced withoutusing hormones or antibiotics. The business can also start theinitiative of purchasing poultry and other animal meats from farms,where animals are treated and raised in friendly conditions. This canbe integrated into the entity’s marketing program in order to reachall areas of the company’s operations.
Furthermore,if the company is to gain a solid footing and develop a competitiveedge in the vast U.S. market, it needs to maintain and reinforce itsbrand, while offering a high quality of service as it implements thestrategic successes it has accomplished in Canada. In order to expandin the US, it should respond to the values as well as demands of theAmerican buyers. Stores may grow their basket size to existingconsumers and add fresh ones by providing healthier alternatives inits beverage and food menu. In Canada and the United States, thereare a large number of individuals who are diabetic, but Tim HortonInc. does not do anything about them. It is recommended that theentity should provide a menu that takes the considerations of thesepeople. This is likely to portray the company as a firm that valueshealthy lifestyles.
Inaddition, the company can concentrate on building moredrive-throughs. It has emerged that the entity will be successful inselling its commodities in drive-thru locations. Thus, in case thefirm is in a position to establish drive-thru locations, wherecustomers can obtain the products without the need of coming out oftheir cars, the company will be capable of serving more customers.Therefore, it is recommended that the organization should establishmore drive-throughs in the locations where it is going to put up newshops. These locations should be operational for 24 hours as per thecompany’s plan. Moreover, another recommendation is that thecompany should focus on increasing more franchise businesses, whichwould assist in its expansion plan. Besides, through the franchises,the business would be capable of increasing its global presence.
Theculture that a company promotes is exceedingly vital to the needs ofthe people and consumers will usually love to identify with a culturethat is being promoted by a recognized brand. is awell-known entity that focuses on promoting the Canadian culture.Indeed, it has been in a position to attain success in Canada due toits focus on the Canadian culture. Because there are many people inother areas of the globe that would like to have more of the culture,it is recommended that the company should concentrate on carrying itsbusiness with an emphasis of being an ambassador for the Canadianculture. This would be an important consideration for the entity asit would attract consumers in different regions of the world whowould like to identify or desire to know more about the Canadianculture a move that would increase the customer base as well asaggressiveness of the company.
Ability to control its financial decisions
High consumer demand for more flavored unsweetened and sweet beverages
Favorable economic environment
Severe competition in the industry
Animal rights activism
Use of technology
Low wages that comprise no tips
Shortage in workers at some locations in Canada
Lack of concrete initiative by executives in global expansion
of Porter’s Five Forces
Bargaining Power of Suppliers
Threat of new Entrants
Bargaining Power of Buyers
Threat of Substitutes
Friend,D. (2014). TimHortons celebrates 50 years, but faces new challenges beyond coffee.TheGlobe and Mail. Retrieved fromhttp://www.theglobeandmail.com/report-on-business/tim-hortons-celebrates-50-years-but-faces-new-challenges-beyond-coffee/article18725394/
Gray,J. (2014). BurgerKing and Tim Hortons, a beneficial marriage.The Globe and Mail Report on Business.
Hunter,D. (2012). DoubleDouble: How Tim Hortons Became a Canadian Way of Life, One Cup at aTime. Toronto,Ontario: HarperCollins Publishers Ltd.
Joyce,R., & Thompson, R. (2013). Alwaysfresh: The untold story of Tim Hortons by the man who created aCanadian empire.Toronto, Ontario: HarperCollins Canada.
TheGlobe and Mail (2015). TimHortons closes several US outlets.The Globe and Mail Report on Business.
Weatherby,J.G. (2016). TimHortons: A Situation Analysis.Charlottetown: University of Prince Edward Island.