In order to assess Tim
Horton’s response to the external environment, a series of factors will have to
be considered, which will entail how Tim Horton and THs competitors respond to
Cultural, Geographical and Economical issues.
2.3.1 Cultural Issues
The outstanding cultural
issues of investing into foreign countries will be a barrier to future success;
this is a weakness of international trade as investing into newly developing
countries takes time to adapt to culture, as it creates a culture shock to the
locals as they are unfamiliar with the food types. This is commonly known as
acculturation; when an individual is introduced and adjusts to another culture (Czinkota
and Ronkainen, 2001 pg. 61).
Therefore, in order for a
business to strive in foreign market, the need to adapt to foreign markets
culture would be required, for example, problems will arise when certain
cultural minorities and majorities will not eat anything due to dietary
restrictions, as such in India; India have a large majority of Hindus (80.5%),
Muslims (13.4%), Christians (2.3%), Sikhs (0.80%) and Jain (0.4%). Therefore,
MNCs will have to will to ensure they accommodate the needs of all the
different types of consumers. Furthermore, the language barrier will inevitably
be a problem, and language will be seen as another weakness of international
L. and Webster, P. 2012), especially in the developing countries, which
have low literacy rates, thus speaking English may become an issue, thus
creating communicative issues.
Tim Hortons would have to
successfully implement cultural tactics and strategies to attract customer. For
example, the menu would have to tailor the needs of the population in terms of
dietary requirements and drinks. To expand, Starbucks have expanded into India,
and by doing so they have changed their menu to tailor the needs of the Indian
population, by introducing vegetarian produces and more, this is to meet the
criteria that, a big population of India are vegetarians due to religious
beliefs, so the stores in India have no sandwiches that contain beef (Starbucks.co.uk,
2018), which is entirely for both cultural and religious belief. This is a
prime example of diversification that Starbucks have undertaken, moving away
from their core foundations and incorporated into the company. Therefore, if TH
were to expand into Indian the market or into any other foreign market it is
imperative for success, that the integration of local and national culture is
Geographical issues can be a
very hard barrier to tackle as MNCs will have to overcome issues surrounding communication,
legislation and policy change, Climate changes and physical disturbances i.e.
natural disasters. These are obstacles that MNCs will overcome over time. Tim Hortons currently have 4,613 stores
worldwide (Timhortons.co.uk), therefore TH still have a lot of room for
improvement, as other coffee giants like Starbucks, who currently have 26,696
(Starbucks.co.uk, 2018), and other giants like Costa, which have Costa opened
net 184 UK stores, bringing the total number of stores in the UK to 2,218.
Internationally Costa now operates 1,314 stores across 29 countries (Costa.co.uk.
So as competitors
have expanded operations into foreign markets and fully diversified their
range, making their brand name famous. TH can learn from this as the growth
shows that the coffee industry is demanding and growing. View figure 3:
Tim Hortons have clearly not
covered quite the geographical area that competitors have, as the main
competitors in their foreign markets are doing very well, are a household name,
with their brand image worldwide. So this proves to be a weakness, ultimately
proving that this is an area that TH would definitely need to improve upon.
2.3.3 Economic Issues
Economic downfalls are often
an overlooked issue which can prove to have long term problematic effects on
the organisation. For example, as different countries have different prices,
prices of suppliers, exchange rates dropping and many more. These all play a
part in the contribution of how successful a MNC will inevitably be. The
consumer price index mentioned above (See task 1 – Economical Influences) shows
us the variations, over the years, of consumers, therefore, this will
inevitably play a part in how different consumers decide to spend their money.
Furthermore, meaning that consumers may be more viable to opt for household
necessities e.g. food, water, clothes and miscellaneous. Especially consumers
to are currently living in poverty, this will influence the spending
dramatically, as income is less, TH would have to lower the prices of their
products in different countries to increase demand, as to these majority groups
will not be able to afford these meals, and often see them as luxury meals.
For example, TH opened stores in the Philippines,
where the average minimum wage is 243 Philippines peso (PhP), which is the
equivalent of £3.56, so in order to create a demand, TH will have to lower the
price of their products to create a demand and make a profit. However, also due
to the low income, this may deter customers from purchasing products, as not
everyone will be able to afford the products.