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International Expansion Strategies Of Taco Bell

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Question:

Discuss about the International Expansion Strategies of Taco Bell.

 

Answer:

Generic strategies

Taco Bell is one of the largest fast food chains that operates mainly in the United States. This food chain operates in 6500 restaurants, outlets, and carters to almost 36.8 million customers all over the world. The generic strategies is defined as the strategies the company will use in order to gain competitive advantage, which includes cost leadership, focus and differentiation (Brenes et al. 2014). The food chain Taco-Bell is a subsidiary of the famous food chain Yum! Brands, Inc. This group also owns the other famous food chains such as Pizza Hut and KFC. In order to enter the market of Vietnam, the company has to adapt to new strategies. The fast food market of America differs from that of the market of Vietnam (Riasi 2015). Thus, Taco Bell has to use some other strategy, different from the one they use in the markets of America. The society of Vietnam going to a fast food chain is done only on occasions and not a part of their daily lives, unlike in America (Hoffman 2017). Thus, the company has to shift its focus from the cost focus to the differentiation focus, in order to gain advantage in the market of Vitenam.

Figure 1: Porter’s Generic Strategies

(Source: Miller and Friesen 1986)

VRIO

Taco Bell have targeted the Vietnamese market in order to enter the market and expand their business. Through the use of the Yum brand, Taco Bell might enter the market of the Vietnam fast food, through the other food chains of Yum (Riasi 2015). For example, since KFC is also a part of the Yum group, Taco Bell could use the brand of KFC to enter the market of Vietnam. Moreover, they can target the same customers of KFC and Pizza Hut, since these are already established brands under Yum, and has a strong market hold in Vietnam. Values- The products of Taco Bell is valuable for the customers (Brenes et al. 2014). Moreover, the values for money for the customers are also high. Rarity- The brand is a rare one in the market of Vietnam and one of its kinds. Immitability- The immitability of the brand as well as the recipe is high, as the recipe of the food of Taco Bell could be imitated easily (Riasi 2015). The ability to exploit the resources of the company is also very high. Organization- The company will try to establish themselves as a family restaurant such that the Vietnamese could be attracted to the newly launched brand (Weng et al. 2017). Yum has a prominent presence in Vietnam through the food chains such as KFC and Pizza Hut. This assignment highlights the expansion of market of Taco Bell into the Vietnamese market and the dangers of being stuck in the centre. The Vietnamese fast food market is dominated by Lotteria (Burgers, Rice Dishes and Fried Chicken), along with other competitors such as Jollibee (Fried Chicken, Spaghetti, Burgers and Rice Dishes), McDonalds and Street Food. Yum! However, Taco Bell can enjoy the benefits of existing contacts from the other subsidiaries of Yum, namely KFC and Pizza Hut (Riasi 2015). A play corner for children will be present in the restaurant making it a family destination. Since the Vietnamese people are culturally enriched hence including the culture of Mexico, along with the authentic Mexican food will also attract more customers. Along with authentic Mexican food, a fusion of the Mexican and Vietnamese food could also be recommended. Thus, Taco Bell could avoid the risks that a new entrant company has in a new market.    

 

Porter’s five forces

The Porter’s five forces is used to analyse the competitive environment that Taco Bell will encounter, as it ventures its entry to the Vietnamese fast food market.

Bargaining power of the buyers

The bargaining power of the buyers is moderate. This is because the consumers often react to the changes in the price of the food products of Taco Bell (Miller and Friesen 1986). They have the power not to accept the new brand Taco Bell as gladly as KFC or Pizza Hut. Thus, the buyer’s power is moderate.

Supplier’s bargaining power

This is quite low since Taco Bell is a subsidiary of Yum brands, which already has a set of reputed suppliers for KFC and Pizza Hut (Riasi 2015). Thus, the supplies for Taco Bell has low bargaining power, as they could be easily replaced by substitute suppliers.

 

Threat of new entrants

The threat of the new entrants is low since the popular brands such as KFC and Pizza Hut are a part of the same group of companies Yum and pose as advantages and not threats. The new entrants have much more disadvantage than Taco Bell (Weng et al. 2017).  

Threat of substitutes

The threat of substitutes is high, since a similar Vietnamese company might be more accepted by the market of Vietnam, thus giving a strong threat to Taco Bell (Riasi 2015).

 

Threat from rivals  

This is low, since Taco bell wants to give its customers a real feel of Mexican food. This is done to add a flavour of real Mexican food (Riasi 2015). This cannot be easily substituted in the market of Vietnam.

Figure 2: Porte’s five forces

(Source: Miller and Friesen 1986)

Diamond theory

The Porter’s Diamond theory highlights the competitive advantages that is enjoyed by Taco Bell in the perspective of the global market (Riasi 2015).

Firm strategy, structure and rivalry- These are some of the dynamic conditions that dominate the business world. These conditions also enhance the productivity of Taco Bell (Management.net, 2017).

Demand condition- The more the customers are demanding the products, the greater is the pressure on the company to meet the demands and innovate the products of Taco Bell.

 


The related supporting industries- The related industries support each other and help in sharing of information and innovation (Management.net, 2017).

Factor conditions- Each company has its own essential factors that are essential for the operation of the company. For Taco Bell, skilled employees are needed as factor conditions, along with technological support.

Figure 3: Porter’s Diamond theory

(Source:  Management.net, 2017)

Benefits

Serial number

Benefits

Description

1

Global recognition

1. Taco Bell gets global recognition in expanding the business in the International market

2

New Markets

1. New consumer base and new market acquired

3

Greater exposure

1. Taco Bell gets a better exposure in the market of Vietnam

4

Higher profits

1. With international expansion, higher profit is seen in Taco bell

5

Competitive advantage

1. Being a part of the Yum brand, it gains competitive advantages

6

Innovation

1. Taco Bell incorporates innovation with global innovation

7

Expansion

1. The company and its revenue is expanded with international business

8

Larger consumer base

1. More customers are attracted to the company, thus creating a larger consumer base

Risks

Serial number

Risks

Description

1

Regulatory risk

1. Taco Bell could face risks in regulation while expanding its business in Vietnam

2

Incentives

1. The incentive that are given to the employees have to be at par, with the economic structure of Vietnam

3

Trade Barriers

1. Since Vietnam is not yet ready for the Mexican food, hence the lack of acceptance could be a trade barrier

2. Threat from Chinese economy

4

Currency risks

1. Since the currency of Vietnam has a low market value than US dollars, hence currency risks could be faced

5

Cultural distance

1. The cultural difference between America and Vietnam could be a major risk

2. Currency rate is volatile

6

Location specific disadvantages

1. The location of Vietnam is less exposed to the people of the world, hence location specific disadvantages are faced by Taco Bell

2. Lack of trained employees

7

Demographic disadvantages

1. Differences in the culture of America and Vietnam

2. The Vietnamese people consume fast food only on occasions, unlike the Americas, who consume fast food every day

8

Social barriers

1. The people might not be able to accept Taco Bell, as well as the American

 

 

References

Brenes, E.R., Montoya, D. and Ciravegna, L., 2014. Differentiation strategies in emerging markets: The case of Latin American agribusinesses. Journal of Business Research, 67(5), pp.847-855.

Hoffman, D.D., 2017. New Media's Impact on the Fast Food Industry: A Comparative Study of Taco Bell and Chick-fil-A.

Management.net, (2017). Summary of Diamond model - Michael Porter. Abstract. [online] Valuebasedmanagement.net. Available at: https://www.valuebasedmanagement.net/methods_porter_diamond_model.html [Accessed 9 Aug. 2017].

Miller, D. and Friesen, P.H., 1986. Porter's (1980) generic strategies and performance: an empirical examination with American data: part I: testing Porter. Organization studies, 7(1), pp.37-55.

Riasi, A., 2015. Competitive advantages of shadow banking industry: An analysis using Porter diamond model. Business Management and Strategy, 6(2), pp.15-27.

Weng, S.J., Gotcher, D. and Kuo, C.F., 2017. Lining up for quick service—The business impact of express lines on fast-food restaurant operations. Journal of Foodservice Business Research, 20(1), pp.65-81.

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