Introduction
When operating a business, managers constantly adapt to the changing market factors to further satisfy the customers’ needs. A group of both current and potential customers is called the target market that also changes over time. Thus, managers continuously accommodate and adjust the marketing mix, which consists of the 4Ps: product, placement, promotion, and price (Lamb, et al., 2018). Fortunately, these are the factors that business managers can control and make suitable for the current market trends. However, there exist certain external factors that are beyond the managers’ control and can directly influence the expansion of the business to the global market. The purpose of this presentation is to analyze the external marketing environment in order to estimate the potential of the Persimmon Bakery business to become a part of the Canadian marketplace.
External Marketing Environment
As mentioned above, the external marketing environment influences the potential of the business to succeed in the global arena. It happens primarily because these external factors shape the target market in terms of people’s needs, incomes, tastes, interests, and more (Lamb, et al., 2018). Thus, when expanding the existing business to another country, the owners must consider such aspects of the external marketing environment as cultural, demographic, economic, political, technological, and geographical factors. The Persimmon Bakery business under my ownership is located in Cherry Hill, NJ, and is operating in eight different regions of the U.S. as well. Our bakery specializes in bread and sweets from around the world, and we have gained the trust and appreciation of our American customers who enjoy the cultural variety of our products. However, we have been contemplating whether we should franchise our business in Canada, as we have received a number of requests from the customers and business partners.
The Cultural Factor
The idea of franchising is an excellent opportunity for us to expand and grow globally, extending the target market. However, we must apply the basic principles of environmental scanning, which implies analyzing the external marketing factors mentioned above to estimate the potential risks and, therefore, decide on the feasibility of entering the Canadian market (Lamb, et al., 2018). The first factor to consider is the cultural one. Indeed, cultural identity plays an essential role in shaping and structuring the target market’s values, behaviors, and lifestyle. Canada is a country famous for one of the highest living standards, with the Canadian citizens primarily aiming at high-quality products and services. Most of the population values their time and money, being confident in their stable income and demanding decent, respectable customer support. In the Canadian market, it is necessary to keep in mind the customers’ hectic pace and high living standards (Commisceo Global Consulting, 2017). Thus, Persimmon Bakery will need to provide fast but effective services with high-quality products. We regard it as an outstanding opportunity as in the US we are working with the same social group and will maintain our usual revenue levels after entering the Canadian market.
The Demographic Factor
The demographic aspect includes factors that can help us determine the marketing strategies that will work for the wide variety of the Canadian population. However, the diversity of the Canadian population makes it challenging to work out a unified strategy that will satisfy every layer of the citizenry (Commisceo Global Consulting, 2017). Canada is the second biggest country in the world in terms of area, and it is highly heterogeneous, with a variety of different cultures, religions, languages, education levels, and such (U.S. Department of Commerce, 2018). Nevertheless, the Canadian population is not very big, and the country often faces a shortage of skilled workers. It makes the country a point of attraction for immigrants from all over the world, who ensure the consistent growth of the country’s population and often start off as semi-skilled workers at local stores and restaurants. Thus, our bakery can expect reasonable employment rates with the staff ready to work hard and receive decent wages.
Moreover, the variety of cultural and ethnic groups will attract many of their representatives to our bakery, where we sell sweets and delicacies from different countries worldwide. This will make people strive to buy products from their native lands and feel at home. A high concentration of immigrants may also give our bakery an opportunity to incorporate innovations into the product menu. As South Asian and Chinese immigrants cause almost half of the population growth, we can include more Asia-inspired offerings to attract this part of the population to our business. Additionally, Canada has one of the highest rates of citizens with college or university degrees, who then obtain high-paying jobs and high standards of living. Thus, people of high social position who can afford to spend money on their favorite sweets and bakeries will be likely to visit Persimmon Bakery and boost our sales rates.
The Economic Factor
Regarding the economic factor of the external marketing environment, Canada has a highly developed economy, making it one of the wealthiest cultures in the world. The Gross Domestic Product per capita in Canada was at 51588.80 US dollars in 2019. The GDP per Capita in Canada is equivalent to 408 percent of the world’s average (U.S. Central Intelligence Agency, 2018). However, due to the Coronavirus pandemic and the massive lockdown, many businesses were not operating properly or closed whatsoever, making the Gross Domestic Product per capita get to the level of approximately 50100 US dollars by the end of 2020. Nevertheless, Canada’s GDP per capita is projected to trend around 51100.00 USD in 2021 and 51600.00 USD in 2022, according to the analytics expectations. Also, the GDP growth has been relatively stable for the past years, averaging 1.9 percent (U.S. Central Intelligence Agency, 2018). The Canadian economy is strong enough to get out of the pandemic without too much loss.
Speaking of unemployment, its rate is relatively low in Canada, reaching approximately 10 percent (U.S. Central Intelligence Agency, 2018). It is essential to keep in mind that the unemployment rates are much higher in rural provinces rather than in central ones, especially the regions boarding with the United States. It was estimated that around three-quarters of the Canadian workforce is operating in the service sector. In contrast, the rest of the country’s employment accounts for the industry and agriculture sectors. Taking this into account, it will create an excellent opportunity for our service-oriented business to once again attract employees and ensure the stable employment of our workers, as we are strongly oriented on customer service and customer support for maintaining long-term clients. Additionally, one of the main positive aspects of our expanding business would be the close connection of the Canadian and US markets on a global trade scale, which was the result of the 1989 Canada-US Free Trade Agreement and the 1994 North American Free Trade Agreement.
The Political Factor
From the point of view of the political factor, Canada is a stable and safe country. The crime rates in Canada are relatively low, and the policing services prove to be safe and trustworthy. Additionally, Canada is ranking number 10 in the “Environment Subindex” (World Economic Forum, 2020). All that makes Canada a desirable state to start a business. According to the World Bank, Canada is ranking 23 in the “Ease of Doing Business”, as well as ranking 3 in the “Starting Business” column, meaning that it is a fast and user-friendly process that takes just a few days. However, in “Registering Property,” Canada ranks 36, as it is a very difficult process in the country to deal with (The World Bank Group, 2020). Thus, even though the general political and economic environment in Canada is promising, the Canadian government will have to be more proactive in making the process of registering property more accessible. For now, this becomes a strong negative point for our business prospects in Canada.
The Technological Factor
The technological factor plays an essential role in shaping the target market. Canadian economy does not at all lack technological advancement, which is one of the most rapidly growing sectors in the country. The technology sector provides Canadian citizens with a high-quality education, high-paying jobs, and other services, making the country socially and financially stable. As for the year 2019, Canada is ranking number 14 in NRI, which is still a good indicator of the country’s perspective to become one of the leading nations in effectively combining technology and its citizens’ well-being in the long run (World Economic Forum, 2020). Canada has slightly given up its position compared to such technologically promising countries as the United States and some other Northern and Western European countries. Thus, it makes Canada a preferred state to expand the business and advance our services even further.
The Geographical Factor
Lastly, it is essential to analyze the geographical factors of the external marketing environment. It gives us a clear picture of the country’s population spread so that we can estimate the best location for the potential franchise. As stated before, Canada is the second-largest country in the world but with a rather spread-out population density. The central provinces, including Ontario and Quebec, are of the highest economic development and wealth, particularly in the big cities (U.S. Central Intelligence Agency, 2018). Higher incomes, social statuses, and good education are characteristics of these regions. On the contrary, the rural provinces are estimated to have incomes lower than the national average, with people massively being underpaid on low-skilled jobs. Class division is rather evident here, many young people do not get higher education and continue on the low-paid jobs. Thus, it is obvious that such conditions are unlikely to attract enough clients with a stable income that are ready to pay for international sweets and pastries.
Summary
Having analyzed the topical factors of the external marketing environment of Canada, we can conclude the following. In general, the possible positive outcomes outweigh the potential adverse outcomes. Canada strongly resembles the United States in marketing strategies, economic system, production patterns, and standards of living. The two countries already have strong trade and investment relationships, making it easier for US businesses to enter the Canadian market. Canada is a multicultural country with a high workforce potential, the process of attracting long-term employees and customers seems promising to this extent. A strong economy and stable political environment can ensure the safe operating of Persimmon Bakery, and the fast-growing technology sector guarantees computation assessment in every step of business planning. The potential difficulty we might face, however, will be registering a property for the located expansion of the bakery. Nevertheless, this difficulty can be resolved and cannot stand on the way if we do decide on expanding.
Furthermore, the demographic and cultural factors play on our side. However, we must be careful at choosing the province and the area of operating, as for the optimal functioning of the bakery and stable revenue collection, the rural areas far from the US borders will not suffice. As we have estimated, the population with higher incomes and living standards live in big cities of the central provinces. These people are ready to pay for high-quality products, which we are more than happy to supply. Moreover, it seems like an excellent opportunity for us to expand our product menu and add more Asia-inspired pastries and sweets in order to attract a significant number of Asian immigrants in Canada. Thus, we can further focus on producing a more extensive variety of foods for our international customers and even consider adding catering and food delivery as new services for our busy, always-on-the-go customers.
Conclusion
To conclude, after carrying out the present environmental scanning, we have come to the decision of opening the franchise in Toronto, Ontario. The advantages of this decision are evident: Toronto is the best location that complies with the requirements of a successful business operating outside of the current country’s borders. Also, Persimmon Bakery is a popular, successfully functioning business that has outgrown itself within the United States market and is now ready to enter the global market, the process of which we find most feasible to start with a Canadian franchise. Despite the main disadvantage of the difficult property registration process, Canadian market is one of the most stable in the global arena, promising good revenues and prospects for even further international expansion. In addition, it would also be reasonable to consider exporting as a means of expanding the Persimmon Bakery business, the benefits of which would be higher demand and therefore, higher profits; increase in the products’ lifetime; lower manufacturing costs. However, there are also certain disadvantages: transportation difficulties may appear and it would be difficult to solve them from afar; due to the varying export regulations, the administration costs might be higher than expected. Due to these disadvantages, we do not want to accept the exporting scenario yet, but we may reconsider if the franchising proves to be fruitful and successful.
References
Commisceo Global Consulting. (2017). Canada guide.
Lamb, C. W., Hair, J. F., & McDaniel, C. (2018). MKTG12: Principles of marketing. Mason, OH: Cengage.
The World Bank Group. (2020). Ease of doing business in Canada.
U.S. Department of Commerce. (2018). International programs. Demographic overview. Web.
U.S. Central Intelligence Agency. (2018). The world factbook. Web.
World Economic Forum. (2020). Country and regional trends from the NRI.