|Module Title:||International Marketing|
Learning Outcomes Covered
On successfully completing this module, students should be able to:
Assessment criteria Task
Executive summary - quality of company and product overview that is closely based on the assignment criteria. Convincing, fact based argument provided for the new market entry opportunity.
Background - critique and analysis using marketing tools and models (such as PESTLE or SLEPT, Porter’s 6 forces etc.) of the main factors shaping the competitive environment and the intensity of competitive rivalry in the proposed industry and market.
International marketing strategy - demonstrates sound reasoning and a clear proposition which in particular acknowledges the cultural aspects of marketing the product in the new market.Opportunities and potential threats in terms of market entry specifically relating to this company and product should be clearly identified. The answer should include problem identification, justifications for entering this new market and, make recommendations- to include the marketing mix, type of market entry strategies that will enable the company to respond to the most important threats and opportunities that are identified
Expanding business stores or outlets in the international marketplace has become a key concept of present business world. Organizations have become focused on increasing their competitiveness and market share in not only domestic market, however, in global market too. However, to make a successful move in the international market, a company requires carrying out an intensive survey of the external business environment so that the potential threats and opportunities can be identified properly. Therefore, the present study involves carrying out an analysis of the political, legal, economic condition of Nigeria for identifying the opportunities and threats for Subway. The product to be expanded in the Nigerian market is Submarine Sandwich.
At present day of competitiveness, it has become crucial for companies to think globally for identifying the abroad opportunities in order to increase its customer base and market share in the international markets (Akaka, Vargo & Lusch, 2013).
Therefore, the study would focus on analyzing the Nigerian market for the product Submarine Sandwiches of Subway, which is an American leading fast-food restaurant (subway.com, 2017). However, the company faced several controversies regarding the quality and size of the sandwiches, which reduced its market share in the home country. Hence, the firm seeks to enter in a new emerging market full of opportunities, where it can increase its market share significantly (edition.cnn.com, 2017). Therefore, Nigeria, as an international market is selected for Subway to enter, which has a rising economy with wide opportunities.
The American restaurant Subway and its main product Submarine Sandwich has been chosen for entering the emerging market of Nigeria. The company is selected due to problems faced by the company in the domestic market, which is related to size, quality, franchise relation, vat treatment, trademark cases and so on. For instance, in 2015, contamination of Hepatitis A virus is found in Subway products. All these issues affected the brand image and market share of the company negatively. Hence, to regain its reputation and increase sales rate, the firm needs to expand its business in global emerging markets (Harrington et al. 2017).
The product Submarine Sandwich is chosen, as, this is the main product offered by the company. The emerging economy of Nigeria is selected for expanding the business of Subway, as food is not considered as luxury items and people love to try new types of food items. Although, Submarine Sandwiches can be culturally sensitive product for Nigerian people, however, there is a wide opportunity for the company to gain significant market share if it can make it products positively adopted by the Nigerians. This is because, people from different ethnicity and races live here. Therefore, expanding restaurant business in this country can generate lots of affluence for a company if it contains all necessary equipments and skills (edition.cnn.com, 2017).
Political- In terms of political condition, like in many African societies, extreme bribery prolong to comprise significant challenge to Nigeria, as all major political parties to maintain their competitiveness carry out vote chains and other means of compulsion. Hence, the political condition of the country may possess a critical threat for Subway.
Economic- The economy of the country is probably to be determined by the telecommunication, restaurant and construction industry. Recovery of the international economy, especially the European countries affected the Nigerian economy positively. Moreover, Nigeria has the second largest stock exchange of Africa. Further, the economy of the country is likely to increase$384 billion at the present value by the year 2018 at a CAGR of 6.8% through 2013-2018. The country includes a well developed, transport, legal, communication and financial sectors with more than 154 million populations, which may provide a wide market for the Submarine Sandwiches (Petersen, 2016).
Social- Social condition of Nigeria is poor as per the record of US Department of State. The most crucial issues related human rights include arbitrary arrests, judicial corruption, extrajudicial killings and so on. Even though, education system is present, however, it is not compulsory. Around 25 to 30% women are homemaker, who are not permitted to go out for work and are bound to run the house, cook foods and take care of the children. The traditional food items of these people include Maafe, which is a stew made of beef, goat or chicken, prepared with onion, peeper, tomato, and groundnut sauce. Hence, while making Submarine Sandwiches for the Nigerian people, the company must use this food items so that cultural sensitivity of sandwich can be reduced properly. While offering products, the company must consider the two major religion of the country including Islamic and Christianity in order to respect both the religions equally (Dauda & Ismaila, 2013).
Technological- Nigeria has a developed technology. The country has launched four satellites into the space. Besides, this encourages the vehicle manufacturing companies like Nisan to set up their factory in the country, which indicates an effective communication and transportation system all over the country. Hence, it would help the Subway to open their store in the country that would be supported by good communication and transportation system (Dauda & Ismaila, 2013).
Legal- The tax laws in Nigeria have become very strict. Hence, legal issues may act as a critical threat for Subway, if the company fails to comply with tax laws properly. Before, opening an account in Nigerian bank, Subway has to register in Federal Island Revenue Service. It would issue a tax identification number, which would be required while opening a bank account in the country (Skarmeas, Zeriti & Baltas, 2016).
Environmental- Every state of Nigeria is provided with the right of issuing policies and laws for protecting environment. In this context, the Federal Government of Nigeria has an important role to play. Therefore, before entering in the market, Subway needs to aware of all the legal requirements regarding environmental protection, so that it would not have to pay any kind of penalties to the Nigerian government.
Figure 1: PESTLE analysis
(Source: Skarmeas, Zeriti & Baltas, 2016)
Porter’s 6 forces-
Competition- Competitive rivalry within the restaurant industry generally is of price war among the other players. Consequently, it increases the cost of conducting business activities. Hence, in order to gain a competitive position within the Nigerian, fast food industry, Subway has to provide tough competition to the existing fast food companies like Mario’s Pizza And Fast Food (Ray’s Inn), Mcdonalds, Magrellos Fast Food, Chicken republic, Sizzlers Fast Food and so on. Subway should focus on devising a competitive pricing strategy and offers best quality of foods so that it can attract a large number of customers (Achumba, Ighomereho & Akpor-Robaro, 2013).
Barriers to new entry- For the emerging economy of Nigeria, there is a huge opportunity for the fast food companies to expand their business. Hence, it would be low for Subway and with effective international marketing strategies; the company would be able to expand its stores in the Nigerian market successfully. Apart from that, the brand name and popularity of Subway would help it to set up a thriving business into the restaurant industry of Nigeria (Adeoye & Elegunde, 2012).
Buyers’ power- This would remain high, as, there are so many other well-established restaurants in Nigeria, which offer delicious foods to the people. Therefore, to reduce the buyer power, the company would have to adopt the product differentiation strategy and they have to make their submarine sandwich in such a way that can be appeared as exceptional as compared to other companies’ foods. In this context, the company needs to consider the cultural sensitivity so that it can maintain the culture of the people while preparing its food items.
Suppliers’ power-Suppliers’ power would also be high, as, they supply products to other fast food companies of Nigeria too. Therefore, it is essential for Subway to develop an effective relationship with the Nigerian suppliers so that they do not delay in supplying products and supply the best quality of goods at a reasonable price.
Threat of substitutes- This would be moderate for Subway. There are other fast food companies those can offer similar products to Subway to give the company a tough competition. However, matching the standard, quality and taste of Submarine sandwiches for those companies would be a challenging task.
Complementary products- The effect of complimentary products can be both positive and negative on the company’s profitability (Czinkota & Ronkainen, I2013). For instance, the complimentary food item of submarine sandwich is salad. If the price of the vegetables for making salad like salad leaves, black olives, jalapenos, capsicums and so on remain low, then it would be profitable or the business. On the other hand, increasing the price of these products would eventually increase the cost of making submarine sandwiches, which would have a negative impact on the profit margin f the company.
Figure 2: Porter’s six forces analysis
(Source: Adeoye & Elegunde, 2012)
Product- The main product of the Subway in the Nigerian fast food market would be Submarine Sandwiches. Apart from that, there would various types of sauces and six types of bread for vegetarian and non-vegetarian customers. This would provide the chance of making own SUB sandwiches to the Nigerian customers. The different types of submarine sandwiches that would be available in the Nigerian market include Veggie Delite, Subway Club and Subway Melt. However, the company should not forget the cultural sensitivity of the Sandwiches among Nigerian people. Hence, to make the product adopted, the company needs to prepare the submarine sandwiches in such a way that includes the traditional dishes of the Nigerian people so that the people and their culture may feel valued and respected (Harrington et al. 2017).
Place- Subway has earned a distinct place of being the top franchise by means of growth in all over the world. This firm has become the biggest restaurant operator, which has around 42673 franchises in 108 countries. Subway has been expanding a number of restraints in non-conventional locations and this atypical action has confirmed to be a champion. The company mainly focuses on opening its outlets in the areas, where people are calorie conscious. Hence, in Nigeria, the company would open their outlets in the most developed cities like Abuja, Ibadan and Jos, where the people are calorie conscious. Moreover, the teenagers of those areas would also remain the targeted customers of the Company, to whom the company would reach with the help of social media platforms and through advertisement campaigning in schools and colleges (Samiee, Chabowski & Hult, 2015).
Price- Usually, Subway maintains a premium price for its products. If its price is compared with McDonalds, the price of Subway is higher. However, offering foods with low calorie makes the price reasonable. Moreover, the company thrives to maintain a better quality of the products by making its prices higher. Therefore, the submarine sandwiches in Nigeria would also maintain a premium price, which would provide an exclusive image to the brand name of Subway. Apart from that, the size of the sandwiches is large too. Therefore, usually it would be at balance with other competitive companies.
Promotion- Subway applies various types of promotional strategies for promoting its products effectively. For instance, the slogan ‘Eat Fresh’ indicates all the products of the company are made with fresh ingredients and re baked freshly. Hence, using the same slogan in Nigeria would be helpful for the company in attracting customers. Apart from that, the company can take the help of charitable trusts and non-for-profit organizations for carrying out an awareness campaign related to the importance of education and health. This would provide insignificant brand recognition to the company through which, the company can establish a positive brand image among the customers of Nigeria (Schlegelmilch, 2016).
Figure 3: Marketing Mix of Subway
(Source: Schlegelmilch, 2016)
Market entry strategies-
Subway would apply the franchising market entry strategy for entering in the Nigerian market, as this is an effective strategy for the companies, which conduct a repeatable business model such as, food outlets, which can be transferred into other markets easily. However, for using the franchise model, two stipulations are needed. First is the firm wants to franchise should have a strong brand identity or a creative business model. Another is the company may foster its future competition within its franchisee (Doole & Lowe, 2012). Subway has a strong and premium brand image that can use the company in the restaurant industry of Nigeria. According to Hooley, Nicoulaud & Piercy (2011), the market entry strategy of franchising reduces the risk of business failure considerably, as the business is expanded on a confirmed idea. Moreover, the products of the Subway do not need to be tested, as they are already recognized. Further, the company would receive continue support and advice from the franchisor, who would offer a complete package of training, business set up and the process of running business successfully within the Nigerian market.
After analyzing the external business environment in Nigeria, it can be inferred that opening a restaurant outlet in that country can be highly promising for Subway. Therefore, with proper skills and equipment, the company can run the business successfully in the Nigerian market and the string brand image of Subway would play a curial role in providing them effective customer base and market