Tricon restaurants international: Globalization Re-examined

2. INTRODUCTION
•INDUSTRY : FAST FOOD INDUSTRY
•TIME PERIOD : 1997 – 1998 (AFTER SPIN-OFF FROM PEPSICO)
•BUSINESS MODEL: COMBINATION OF B2B AND B2C
•TERRITORY: REGION OUT OF UNITED STATES, SKEWED TOWARD ASIA (LIKE CHINA, ASEAN, ETC)
•KEY COMPETITORS IDENTIFIED : MACDONALD'S

3. PESTEL - POLITICAL
Description Opportunity Threat
Political volatility (Page 13, Para 7)
Countries that are not stable may create social issue for businesses.
X

4. PESTEL - ECONOMIC
Description Opportunity Threat
Increasing growth rate in fast food industry other than US (Page 1,
Para 3)
Denote opportunity to expand internationally
X
Price and material Inconsistency across countries (Page 2, Para 1)
Cost cannot be controlled nor standardized across countries increases
uncertainty in managing bottom line
X
Currency Fluctuation (Page 13, Para 7)
Currency risk may affect business decision when it comes to investing in
other countries
X
Regional ASIA Economic Crisis (Page 5, Para 1)
May affect consumer buying power
X

5. PESTEL – SOCIO-CULTURAL
Description Opportunity Threat
People spending more on fast food and with growing acceptance of
fast food (Page 3, Para 2)
Opportunities for business to venture out of United States especially
countries with large market
X
Change in working style; more couple working full time(Page 3, Para
2)
Opportunities for companies to come out with solution that is fast, quick and
easy for these group of consumers
X

6. PESTEL – TECHNOLOGICAL
Description Opportunity Threat
No case evidence

7. PESTEL – ENVIRONMENTAL
Description Opportunity Threat
No case evidence

8. PESTEL – LEGAL
Description Opportunity Threat
In-country legislation interfering in advertising content and quality
(Page 4, Para 1)
Threat since this means additional investment if companies cannot use
single advertising format for all the countries without the need to localize the
content.
X
Regulatory barriers to importing livestock across national barriers
(Page 11, Para 1)
Threat to increasing business cost due to restriction to import and export
raw material
X
Taxation and Cash Flow (Page 14, Para 2)
Potential issue in getting cash out of countries
X

9. PESTEL - CONCLUSION
Based on P.E.S.T.E.L, macro-environment is skewed toward slightly favorable only due to:
• Growth rate of fast food industry especially developing and emerging market.
• In developed markets, change in households habit results to lesser home-cooked
meals, and turning into quick meals.
However some areas that companies need to think about before venturing out of home base:
• Risk in currency fluctuation / Local regulatory and taxes in importing and exporting
• Instability in some markets as well as regional economic crisis

10. PORTER’S FIVE FORCES ANALYSIS
1st Force – Threat of New Entrants
Threat Level
(High, Medium, Low)
• Scale and Experience
(Page 2, Para 1)
LOW
• Tax and Regulations
Link to Pestel > Legal
MODERATE
• Differentiation
Low differentiation in products
HIGH
Sub-conclusion:
Mildly Low Threat

11. PORTER’S FIVE FORCES ANALYSIS
2nd Force – Threat of Substitutes:
Fish and Chip, Sushi & Bento, Tapas, “Mom-&-Pop” stores
Threat Level
(High, Medium, Low)
• Price Performance Ratio HIGH
• Extra Industry Effect HIGH
Sub—conclusion:
High

12. PORTER’S FIVE FORCES ANALYSIS
3rd Force – Power of Buyers:
Consumers
Threat Level
(High, Medium, Low)
• Concentration of buyers, relative to suppliers LOW
• Switching Cost HIGH
• Buyer competition threat LOW
Sub-conclusion:
HIGH

13. PORTER’S FIVE FORCES ANALYSIS
4th Force – Power of Suppliers:
Raw material providers (Chicken, Cheese), Property owner
Threat Level
(High, Medium, Low)
• Concentration of suppliers, relative to buyers HIGH
• Switching Cost MODERATE
• Supplier competition threat LOW
Sub-conclusion:
MODERATE

14. PORTER’S FIVE FORCES ANALYSIS
5th Force – Competitive Rivalry
Macdonald, TRI (KFC, Pizza Hut, Taco Bell)
Threat Level
(High, Medium, Low)
• Competitor Balance HIGH
• Industry growth rate MODERATE
• Fixed cost HIGH
• Exit barriers HIGH
• Differentiation (Low) HIGH
Sub-conclusion:
High competitive rivalry

15. PORTER’S FIVE FORCES ANALYSIS -
CONCLUSION
• Based on Porter’s five forces analysis, industry is Mildly Attractive due to:
• High growth rate BUT:
• High competitive rivalry

16. STRATEGIC CAPABILITIES
Strategic Capability Analysis
Bundled Resources + Competences = Strategic Capability
• Human Resources – grow Talent, promote
staff internally
• Technological – “One System” across
business units
• Management and Leadership – Cross-border
managerial mobility
• Organizational – Unified food service
purchasing cooperative, leveraging general
and administrative expenses.
• Develop CHAMPS – an Operating program to
simplify quality checks and standardized
common operating platform across all business
units (Page 10, Para 2)
• Making use of existing experience and replicate
business know-how into new markets
• Balanced worldwide sourcing with local
accessibility and cost (Exhibit 12)
Ability to penetrate and expand presence into multiple
foreign markets with prior experience and through the
use of CHAMPS, facilitates initial operation setup to
minimize errors, and provides unified fast food
experience to customers.
• Human Resources – grow Talent, promote
staff internally
• Technological – “One System” across
business units
• Organizational Culture – “How we work
together” principles, restaurant-focused and
reward appreciation culture
• Develop CHAMPS, four volume standard library
of operating manuals for management, service,
product and equipment, customizing and
translating different languages
• Emphasized ownership and recognition
appreciation
Ability to regulate regional teams across territories to
maintain standard performance and preserving
restaurant culture of “how we work together” to
encourage ownership for accountability and recognition
reward for positive energy and teamwork.

17. V.R.I.O
Strategic Capability VRIO Criteria Results
Valuable Rare Inimitable Organization
Support
Ability to penetrate and expand presence into multiple
foreign markets with prior experience and through
the use of CHAMPS, facilitates initial operation setup
to minimize errors, and provides unified fast food
experience to customers.

SC is valuable as this
shows the standardized
operation through in a
brand

It’s rare as only a
few existing
competitors have
this.
X
From the case, it was
mention that
McDonald have their
own set of rules to
follow.
- Temporary
Competitive
Advantage
Ability to regulate regional teams across territories to
maintain standard performance and preserving
restaurant culture of “how we work together” to
encourage ownership for accountability and
recognition reward for positive energy and teamwork.

SC is valuable as with
the recognition award is
put in place as an
encouragement.

It’s rare as only a
few existing
competitors have
this.
X
From the case, it can
be imitated by other
fast food industry for
example: (Exhibit 5)
- Temporary
Competitive
Advantage

18. VRIO - CONCLUSION
• The strength would be to have the standardized operation with a common platform in various
business units set-up.
• Having the assurance to consumers that the product is within the quality controls in
relationship to the parent company.
• Another strength would be Teamwork among their staff and allow recognition for positive
energy and good work.

19. S.W.O.T.
STRENGTHS
• S#1 – Ability to penetrate and expand
presence into multiple foreign markets
through the use of CHAMPS
• S#2 - Ability to regulate regional teams
across territories to maintain standard
performance and preserving restaurant
culture
WEAKNESSES
• W#1 – Low differentiation of products
OPPORTUNITIES
• O#1 – Economic growth in fast food
industry is increasing
• O#2 – Consumer demand and acceptance of
fast food is increasing
THREATS
• T#1 – High power of buyers due to low
switching cost in an undifferentiated
industry
• T#2 – High competitive rivalry due to low
differentiation among competitors
TRI’s SWOT

20. ISSUES
• How can TRI reduce the high power of buyers to switch (T#1) to competitors offering similar
products (W#1), so as to increase retention rate of its own customers and to gain market
share when competitive rivalry is high (T#2)?

21. BUSINESS LEVEL STRATEGY
Tricon Restaurant International: Cost Leadership
Cost Leadership Differentiation
Cost Focus
Differentiation
Focus
Scope
NarrowBroad
Cost Differentiation
Source of Competitive Advantage
PORTER’S GENERIC COMPETITIVE STRATEGY

22. CORPORATE LEVEL STRATEGY
• Existing relationship in overseas market while working into
new market
• Products are mainly original with slight flexibility to cater
for localization
• As such, Company are likely to adopt: Market Development
/ Penetration through Value-Creating Drivers like:
• Increasing Market Power
• What else?
Market
Penetration
Product
Development
Market
Development
Diversification
NewMarketExistingMarket
Existing Products New Products
ANSOFF’S MATRIX

23. INTERNATIONALIZATION STRATEGY
Market Drivers
* Increase in transactions from China as compared to United
States
* Increasing growth rate in fast food industry
* Allowances for food culture to attract locals
Cost Drivers
* Some markets have lower cost in raw material that can be
exported to company-wide
* Franchise requires low set-up cost for TRI
Competitive Drivers
* More working adults and lesser people dining at home
* Company wants to have a pie of the share in the food
industry.
Government Drivers
* No Case Evidence
YIP’S FRAMEWORK
Conclusion
• Market drivers seems to be the dominant factor as we can see that the increase in term of
the sales and transaction when it was launch in China.

24. TRI’S HOME ADVANTAGES
PORTER’S ‘DIAMOND’ MODEL
Firm strategy, industry structure and rivalry
• TRI has the appropriate Strategic Capabilities in foreign
markets (SC#1).
• High competitive rivalry in the industry, and competitors
are large-scale.
Home Demand Conditions
• Home choice of food is limited
• High demand of fast food
Related and supporting industries
• No case evidence
Factor conditions
• No case evidence

25. TRI’S HOME ADVANTAGES CONCLUSION
PORTER’S ‘DIAMOND’ MODEL
• The key advantages were:
• Firm strategy
• with the relevant strategic capabilities to penetrate into foreign markets
• There is intensive competitive rivalry in the industry, hence TRI is able to adapt to
challenging industry conditions overseas
• Demand Conditions
• As food choices is limited, TRI come up with variety of food which can be used to
enter into different market
• High consumer demand of fast food gives TRI an opportunity to expand its business
overseas

26. INTERNATIONALIZATION STRATEGY• Degree of Global Integration: High;
• Need for standardization and to maintain golden standard through its
value chain
• The franchise advisory council met three times a year to discuss
franchising issues (Pg 11, para 6).
• Degree of Local Responsiveness: High;
• Flexibility is necessary to accommodate to local preference
• Some degree of local customization of product lines was essential (pg
3, para 3)
As such, Company are likely to adopt: Transnational Strategy
Global
Strategy
Transnational
Strategy
International
Strategy
Multidomestic
Strategy
LowHigh
DegreeofGlobalIntegration
Low High
Degree of Local Responsiveness

27. MARKET ANALYSIS
Cultural
* China and US had much cultural differences.
* Language Barrier
* But Upper scaled people in China preferred more
“American Style” of meals.
*
Administrative
* Local policies and US policies have different policies,
therefore the distance is far.
Economic
* Both are dominant countries
*
*
*
Geographic
* Far distance between China and US
*
*
C.A.G.E DISTANCE FRAMEWORK

28. MODE OF ENTRY
• Competitive Advantages: Narrow
• Different socio-cultural approach.
• Tradability: Low
• Ease of Transport: Food is produced locally.
• Legal protection: Low protection, local policies
different from US policies
As such, Company are likely to adopt: Joint Ventures
Export
Wholly Owned
Subsidiaries
License/
Franchise
Joint Venture
CompetitiveAdvantages
NarrowBroad
High Low
Tradability

29. INNOVATION - CONCLUSION• Key dilemmas:
• Technology or Business-Model innovation
Tricon – To adopt Business-model innovation- opportunities to innovate and improve the value chain process.
• Technology Push or Market Pull innovation
Tricon - Under Strategy capabilities resource - innovation, “R&D and Quality Assurance” department developed new
products passing ‘gold standard’. Dilemma as there is need to attract sales and by using market pull, driven by market
demand, yet need vigorous statistic testing.
• Product or Process Innovation
Under threats of entrants and competitive rivalry in P5F, there is low differentiation in fast-food products. Tricon spent
around $20 million per year on R&D projects mostly meant for US market, dilemma, overseas also need product
innovation.
• Open or Closed Technology
Tricon focus primary on closed innovation, looking forward should focus on open innovation.

30. INNOVATION - CONCLUSION
• What is recommended:
• Focus on open innovation, do more market research in overseas market through surveys.
Encourage feedbacks and suggestions from the local market, speed up innovation progress.
• Experimentation- Try out new menu items during short promotion periods, test out
innovation demand and encourage consumer adoption.
• Relationship management – Increase ease of placing orders, providing good customer
support and service.