Introduction
Tim Hortons struggled to successfully expand internationally since the brand and its products were synonymous with its Canadian identity and were less known globally. Consequently, it faced stiff competition internationally and domestically from such multinational brands as Dunkin’ Donuts, McDonald’s, and Starbucks. The major challenge with Tim Hortons is that although its robust integration with the Canadian identity contributed to its domestic success, it impeded its ability to expand and compete globally. This paper addresses menu innovation, inconsistent economic growth, acquisition by G3, and global reach as the critical strategic issues to be resolved.
Analysis of the Case Problems
Among the significant problems with Tim Hortons is that it had saturated the domestic market and developing an internal expansion strategy was necessary. The successful business struggled to penetrate the international market since the company had a strong Canadian identity (Hitt et al., 2019). Additionally, Tim Hortons’ brand and products were not widely known outside Canada, which further complicated their international expansion plans. According to do Nascimento et al. (2020), penetrating global markets is a challenging endeavor, especially for firms with a low brand and product awareness. Despite this challenge, Tim Hortons had to venture into the international market segment since it needed to improve its growth rates in the face of rising domestic competition.
Additionally, Tim Hortons was experiencing challenges in venturing into the international market due to low brand awareness. As a result, it was imperative for the organization to consider acquisition and vertical integration as strategic approaches to entering foreign markets and expanding its global reach. For instance, Tim Hortons had to agree to be acquired by 3G Capital, a Brazilian shareholder of the successful multinational fast-food chain, Burger King. According to Hitt et al. (2019), such strategic alliances are critical when an organization is considering international investment since it exposes the management to international experience. Therefore, the acquisition of Tim Hortons was a strategic decision that allowed the firm to leverage the global reputation of Burger King, which facilitated easier entry into the international market.
Further, Tim Hortons had to continually refresh its menu to reflect the evolving consumer tastes and create products that would be recognized by a global customer base. Notably, most of its products were less known beyond the Canadian borders and would experience challenges selling outside the country. Since Tim Hortons faced stiff competition internationally and domestically, it was imperative to reinvent its menu to enhance its competitiveness and capitalize on the changing consumer needs. For instance, there was a growing demand for non-wheat and gluten-free offerings, necessitating the firm to reinvent its menu and eliminate such dishes with declining demand.
Solutions to the Identified Case Problems
Tim Hortons had saturated the Canadian market and faced stiff competition on the domestic and international fronts. As a result, international expansion was a necessary strategic decision for the long-term growth of a firm. According to Ref et al. (2021), expanding internationally enables organizations to access new markets and a broader consumer base. Osano (2019) corroborates this view and posits that a company that has saturated the market experiences no customer growth. In this regard, it was imperative for Tim Hortons to explore new markets outside Canada and stay competitive. Therefore, venturing into multiple countries would promote the firm’s growth rate by accessing new markets and expanding its customer base.
Tim Hortons’ low brand awareness outside Canada resulted in low entry potential into the international markets. Switala et al. (2018) contend that brand awareness is a significant predictor of a successful global expansion. This implies that organizations with limited brand awareness experience challenges in their quest to expand globally and are compelled to utilize such other market entry strategies as vertical integration and acquisition by widely known brands. In this regard, the acquisition of Tim Hortons by Burger King was a strategic decision that facilitated the latter’s easier entry into the international markets. Notably, brand awareness is a fundamental consideration in customers’ purchase decisions and directly influences market performance (Hitt et al., 2019). This implies that consumers are more likely to buy a commodity from a brand they recognize than from a newly formed entity. Therefore, the acquisition of Tim Hortons by Burger was a strategic market entry strategy that allowed the firm to successfully venture into markets outside Canada.
Innovative menu designs and continuous refreshment are integral in staying competitive and enhancing an organization’s ability to satisfy customer needs. With increasing domestic and international competition, it was critical for Tim Hortons to progressively redesign its offerings to stay competitive. Hitt et al. (2019) contend that such internal innovations ensure that organization keeps the ever-evolving needs of the customers fulfilled. Moreover, continuous additions of new products on the menu allow restaurants to earn above-average returns, which is a critical consideration in an industry characterized by small margins (Hitt et al., 2019). Additionally, such innovations enabled Tim Hortons to start offering products that were known outside the Canadian borders, thereby enhancing its global entry. In this regard, menu innovation and refreshments were integral in facilitating international expansion and strengthening the domestic and global competitiveness of Tim Hortons.
Justification of the Solutions
In an increasingly competitive restaurant business, global expansion ranks among the most effective ways an organization can improve its growth and create new revenue streams. After exhausting growth opportunities in the domestic market, organizations pursue international expansion as a strategic decision to access new markets and increase revenues Ahi et al., 2017). For instance, Tim Hortons had saturated the Canadian market, and opportunities for expansion and revenue generation were diminishing.
Additionally, the acquisition of the organization by Burger King as an international expansion strategy was an effective global market entry approach due to the organization’s low brand awareness. Notably, the acquisition as Tim Hortons’ expansion strategy significantly reduced entry barriers into the markets where Burger King was already operating and benefited from the experience and perspectives of the acquiring entity (Islami et al., 2019). Additionally, the strategy eliminated such incidental costs as aggressive advertising to promote brand awareness.
Menu innovation and refreshment were an integral consideration for Tim Hortons to ensure that its products reflected the continuously changing consumer needs. Additionally, in the face of stiff domestic and international competition, it was critical for the organization to reinvent its menu to have a global appeal and mirror the evolving consumer dynamics. For instance, the behavioral and demographic changes in the North American population influenced their purchasing habits, particularly reducing their frequency of eating in restaurants. More specifically, there was a rising demand for non-wheat and gluten-free meals as the public became more inclined towards healthier food options.
Summary
Tim Hortons, a Canadian fast-service restaurant, had saturated the domestic market and was facing stiff competition from locally and internationally. It sought to expand its operations globally but faced challenges since it was a less known brand on the international scene. Besides, its product offerings were synonymous with Canada and would struggle selling outside the domestic market. Consequently, it was imperative for Tim Hortons to enhance its competitiveness and business growth through international expansion. The most effective expansion strategy was through the acquisition by Burger King since the firm had low brand awareness. Additionally, the organization had to reinvent its menu to have a global appeal and reflect the changing consumer demands.
Additional
As Tim Hortons continued to implement its strategic plan, there were other menu innovations that it should have considered to drive customer traffic to its outlets. For instance, the restaurant should have developed full-service products to cater for the aging and wealthier population whose demand for sit-down meals was growing. Additionally, Tim Hortons ought to have integrated gluten-free cuisines, non-wheat-based noodles and pasta, and healthier food options for children to cater for the growing demand for these market segments. As Tim Hortons considered geographical expansion, it should prioritize the U.S expansion then utilize the acquired global reputation to penetrate the Canadian domestic market. Additionally, the organization should not cede the European market despite the presence of its competitors. This implies that Tim Hortons should explore ways of differentiating itself from its rivals. In this regard, the company should not formulate a uniform positioning strategy but should customize its marketing, pricing, and menu to reflect the needs and characteristics of the markets. The partnership with Burger King would benefit Tim Hortons with the international experience and easier entry into those markets since the former was already operating there. Such emerging trends as food trucks provided avenues through which Tim Hortons could generate additional revenue, reach new markets, and promote brand awareness. In this regard, this was an alternative store format that the organization should recognize as long as the operators or franchisees did not violate the franchising stipulations. The shared trademark would make it easier for the franchisees to compete with other established brands that were already accessing such new markets as college campuses and universities through such innovative approaches. Tim Hortons’ partnership with Burger King would facilitate easier entry into the international market segment. However, that association alone would not be sufficient to create a competitive advantage for Tim Hortons on a global scale. For instance, the organization should consider glocalizing its menu offerings to ensure the products accommodate the preferences of the local market. This would help differentiate the company’s products and create a sustainable competitive edge over the competitors.
References
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