Marketing Project Essay

China with its population of all over 1.3 billion and the GDP growth cast of 7.7% is obviously a major player in the world-wide market based on its size of it and growth potential. In recent years, the consumer food service manufacturing in China has signifi tail assemblytly grown, compulsive by the change in consumption patterns of urban Chinese consumers amid the robust Chinese economic growth. A number of westbound-style franchise chains are increasingly crossing peopleal boundaries and looking for growth among customers in China. In provinces and regions of better economic development and warmer lifestyles, quick service restaurants make up a large share of the total food-service sector. Guangdong province can be chosen as a potentially profitable market where the fast-food market contributes about 90% of the total food service sectors revenue. Mad Mex, as a new entrant in the quick service restaurant (QSR) diligence, is compulsive to penetrate this promising market w ith the goal to open the first franchise restaurant in February 2014. fleck analysis ACMR-IBISWorld (Jan, 2013) estimates that the fast-food restaurant labor in China will generate revenue of $89.60 billion in 2012, up 14.1% from 2011. The pace of urbanization and the higher disposable income urge lifestyle changes and the increase in ask for fast-food. Chinese people have less leisure time to eat in traditional full-service restaurants and take to treat themselves in fast-food establishments. Moreover, the rapid development of fast-food service providers and new brands and food styles with improved chain inject contribute to the strong growth of the diligence in China. The geographic popularity of Chinas fast-food restaurants industry is consistent with Chinas economic development level. Beijing, Shanghai and Guangdong are three of the most developed provinces and regions in China, which account for about 45% of total industry revenue in 2012 (ACMR-IBISWorld, Jan 2013). These regions witness the sex actly easily developed franchise operations. ostiariuss Five Forces Industry AnalysisFigure 1 Forces hotheaded industry arguing Source porters beer (1980) Industry structure has a strong influence in determining the hawkish rules of the game as well as the strategies potentially available to the firm. (Michael E. Porter 1980, P.3) The Porters Five Forces Model introduced a concept of structural analysis as a mannikin for understanding the five basic competitory forces in an industry. These forces, which are shown in Figure 1- new entrants, challenger among existing competitors, threat of substitute products or services, bargaining power of emptors, and bargaining power of suppliers, reflect that the argument goes well beyond the established players (Porter 1980, pp. 6). Both potential and established players can influence average industry profitability.The threat of potential entrants is balanced by the entry barriers like economic of scale, produ ct differentiation, capital requirements, entryway to distribution channel, etc. The intensity of rivalry determines industry attractiveness but figures out the extent to which the economic value created by an industry will be dissipated through competition. Sharon M. Oster (1999) asserts that subsitute products or services play an rum role in industry dynamics. They can play a modest role in extremely competitive industries or during periods of excess production. But subtitutes become significant when demand rapidly increasing or in markets with few competitors. In these cases, the availability of good substitutes influences the profits of the existing firms in a market.buyer power is varied across markets and constituted by the most important determinants of buyer power in a market, which are the number of buyers and the distribution of their purchase, characteristics of product (for instance, standardization of products increases buyer power). In an industry, powerful supplier s can venture their bargaining power over firms by controlling charges or qualities of supply.Depending on each industry and the particular conditions of the industry, different forces will be more or less prominent in the industry competition. And the collective strength of these forces determines the intensity of competition in the industry and the potential profitability. Knowledge of these underlying sources of competition in an industry highlights the critical strengths and weaknesses of the company, animates its marking in its industry, clarifies the areas where strategic changes may yield the greatest payoff, and highlights the areas where industry trends promise to hold the greatest significance as either opportunities or threats (Poeter 1980, pp.4). Once understanding these forces and their strategic implications, the company can formulate an effective competitive stratey, which enables it to defend itself from the existing array of competitive forces, come upon them in its favour thereby improves the firms position in the market.Porters rhomb ModelFigure 2 Porters Diamond Model The theorical framework, which examines the competitive position of a nation and its industries, consists of four determinants factor conditions, demand conditions, colligate and supporting industries and firm strategy and rivalry. According to Porter (1998), factor conditions refer to production endowment that players need to compete in an industry. These factors are discriminated into basic factors versus innovational factors, and generalized factors versus specialized factors. A basic factor is passively inherited, for example natural resources and unskilled labour. in the meantime advanced factors include what nations can create during their industrial growth like capital, infrastructure and highly ameliorate labour forces. The standard for production factors is gradually rising due to the improvement of knowledge, science and technology.A nation can possess compe titive advantage in an industry when it is able to create new competitive factor conditions and/or upgrade the needed factors. Demand conditions refer to the nature of home-market demand for an industrys product or service considering in terms of quantity and quality. The size of the home market, the presence of demanding and forward-looking domestic buyers pressure companies to innovate and upgrade, meet high standards in order to respond to more various and higher levels of customer needs. The presence of suppliers and related industries within a nation that are internationally competitive provides benefits such as innovation, upgrading, information flow, and shared technology development which create advantages in downstream industries (Porter 1998). A nation thereby gains competitive advantage in an industry when it has competititve edge in the number of related industries. Another determinant is firm strategy, structure, and rivalry, referring to firms organizational structure , management situations and the performance of competitors in domestic market.The presence of tearing rivalry in the home base is important, because it is powerful stimilus to creation and persistence of competitive advantage. Two external factors are chance and governments. Chance can discontinue the possibility of some companies to gain competitive position and some lose. Governments have an overarching effect on all the players. In many industries, government is a buyer/ supplier and can influence the competition of the industry by its policies. Government can also affect the relation between an industry and subsitutes through regulations and other means. They play a role in shaping the context and institutional structure surrounding companies and in creating an environment to support companies to gain competitive advantage. grind Analysis Internal analysis Strength Mad Mex is known as a gourmet restaurant with a healthy, fresh approach to Mexican cuisine. Its philosophy is to offer food servicing in a fast paced environment to create a high volume takeaway business but a unique and high quality product offer that is sufficient to command a premium price point. This concept will bring it the competitive advantage in food service industry relative to other global QSRs in China at present. By remaining true to the founding principles sporty and Healthy, Fast and Delicious, Authentic and Exciting, Mad Mex gradually broadens its business with 15 stores opened in just over four years and makes effort to arm itself with a team of business savvy, hands-on, franchisees.WeaknessEstablished in 2007, Mad Mex is still a baby to global giant fast-food restaurants like Mc Donalds or KFC with its limited presence in three states of New South Wales, Victoria and Queensland within Australia. It is regarded as a strange brandname to the worldwide food service industry and particularly the Chinese market.External analysisOpportunities Chinese consumers are believed to have a positive image of quick service restaurants (QSRs) and good perception of their repast quality and customer services. The average level of consumer satisfaction yet high loyalty of Chinese customers is attracting to Western fast food restaurants franchise to engage their business in this market. According to a study on International Journal of Quality and Reliability Management regarding perceived service quality in the fast food industry in China, reliability, recoverability, tangibles, and responsiveness were all significant dimensions of perceived service quality( Hong Qin, 2010). As the study mentioned, all these positive perception in turn influenced the customer behavioral intentions in the industry. patronage the increasing customer preference for Western-style to-go restaurants in the Chinese market, the QSRs market share accounts for only 9.8 percent of Chinese sales for outside meals (Datamonitor, 2007). This means the unprecedented opportunity for Western restaurant ch ains to operate in China.ThreatsThe segmentation of QSRs in China is witnessing a tougher competition between international brands like MacDonalds and KFC and countless domestic companies like YumBrand and Ajisen. Besides, Asian QSRs are the largest sub-sector in the QSRs in China, in which Chinese cuisine is dominant. It is explained by the fact that Chinese people prefer their tradition rice-based dishes and their price sensitivity when choosing the lower dishes in the Chinese restaurants. Furthermore, for the first time penetrating foreign market, the inability or unwillingness of the company to lay out dietary and cultural challenges will lead to the failure in the image of Mad Mex in the global market. To succeed in the Chinese market, Western-style QSRs are required to examine Chinese customer behaviours and develop merchandise strategies that adapt to the Chinese cultural environment.