Greggs plc Essay

1. 0 Executive Summary

Greggs plc intend to spread out their operations into international markets in order to fulfill their overruling aim: ‘to be Europe’s No. 1 Bakery’ .

Germany has been selected as the host state and justification for this determination has been discussed.

Furthermore. Greggs will come in the German Bakery market through the employment of a ‘Foreign Direct Investment’ method. more specifically a ‘Sales and Production Subsidiary’ .

This study outlines the blend of marketing mix constituents used to place the offering ; the execution method adopted to guarantee effectual merchandise and service bringing ; and the control mechanisms utilized to do certain that aims are achieved.

2. 0 Introduction

Greggs is the presently the taking UK retail merchant in the bakeshop market holding experienced high degrees of growing in 2002. The company achieved grosss of ?422. 6 million. an addition of 11. 9 % on the old financial. Its operating net income besides witnessed an addition of 11. 8 % to ?35. 3 million in 2002. Their popularity has quickly increased as consumers are seeking quick. convenient and indulgent nutrients to complement their fast-paced life styles.

Greggs is actively spread outing their operations and have over 1. 200 retail mercantile establishments under the Greggs and Bakers Oven trade names. They entered into the international sphere in 2003 with the gap of two mercantile establishments in Belgium. This scheme was pursued in order to carry through the company’s long-run aim of going a leader in the European market topographic point.

Further international enlargement will therefore fulfill their current aims and heighten their presence in the European bakeshop market.

2. 1 Report Aims

To warrant market pick

To set about internal and environmental analysis for the place and host state

To place the most appropriate foreign entry scheme

To orient a services selling mix to demands of the host market

To propose methods of execution to let successful market incursion

To supervise the advancement of this venture through the employment of control mechanisms

3. 0 Mission statement

“We intend to be Europe’s finest bakery-related retail merchant. accomplishing our ambitious growing marks by achieving world-class criterions in everything we do. Our intent is the growing and development of a thriving concern for the benefit and enjoyment of employees. clients and stockholders likewise.

3. 1 Valuess

Greggs is a customer-focused concern. seeking to supply first-class merchandises and services that deliver enjoyment and value-for-money. We are committed to people development. within a considerate civilization that combines liberty and answerability and maintains a strong focal point on profitableness. In all our activities. we aim to accomplish excellence through uninterrupted improvement” .

4. 0 – Market Choice

Cannon and Willis propose a method of “simple riddance ” to place a possible host market. This method of market pick ensures that the staying state satisfies all chief standards highlighted by the administration. The diagram below shows a systematic attack to happening a suited market for Gregg’s enlargement. Industrial. economic and cultural factors will be integrated into the choice procedure as these are cardinal to Greggs’ operations in add-on to their chief purpose: ‘To be the no. 1 bakeshop retail merchant in Europe. ’

Parallel to their aims. all non-EU states will be excluded from the choice procedure. Greggs’ 2nd precedence is to enter markets which display fast growing in bakeshop markets. The states with the highest degrees of class growing are shown below:

Figure A

Country Cakes and Pastries Market – % Category Growth 1995 – 1999

Portugal 4. 60 %

Germany 3. 70 %

France 3. 60 %

Spain 1. 80 %

Denmark 1. 80 %

Using this tabular array. Greggs may extinguish Denmark and Spain from their market pick choice procedure.

Psychological distance between the place and host state can besides find the success of international activities and therefore have been incorporated into the procedure.

The Gallic have a broad choice of elaborate. exquisite and epicure dishes. This contradicts the typical merchandise proposition offered by Greggs. Although Greggs could see a focussed distinction scheme aiming niche markets. the copiousness of specialist bakeshop retail merchants would suggestively do the Gallic bakeshop market hard to perforate efficaciously and hence exclude it from farther examination.

Lusitanian market tendencies highlight an increasing demand for “wholesome. household merchandises “ .

In contrast to the latter. Greggs offer an ‘on the move’ nutrient proposition which is typically consumed separately instead than in a household environment. Suggestively the Portuguese are loath to encompass new nutrient offerings as research illustrates a strong penchant for traditional culinary art served in traditional eating house scenes. Furthermore the market is dominated by both high street retail merchants such as Podaria Popular and industrial makers therefore connoting high barriers to entry are high.

Having adopted this procedure of riddance. Germany appears to be the predominating market pick.

Despite the high labor costs. long holiday clip and decelerate economic growing. Germany’s overall economic public presentation is the 3rd largest in Europe and accordingly presents itself as an attractive market pick for Greggs.

“Products with a convenience character are go oning to turn out popular in the German bakeshop market. runing from ready to eat and impulse merchandises to in shop bakeshop merchandises “ . Furthermore. “across the bakeshop market. international bakeshop fortes such as crescent rolls. ciabattas and baguettes are lifting in popularity. a contemplation of higher consumer demand for more non-traditional or fresh merchandises “ . This market therefore presents itself as an ideal location for Greggs to spread out their international operations. Greggs will prosecute a ‘concentration’ technique with respect to state and client mark group. “A company may concentrate its attempts by come ining states that are extremely similar in footings of market features and substructure to the domestic market “ . This will enable Greggs to understate hazard and benefit from cultural tantrum. Furthermore. as in the UK they will concentrate attempts on a focussed mark audience.

5. 0 – Internal and Environmental Analysis

5. 1 – Internal Analysis

5. 1. 1 Strengths

Internal strengths need to be assessed to place assets. capablenesss and nucleus competences that are movable to the host state.

Greggs is a good recognized bakeshop retailing trade name in the UK which aims to “create a individual and cohesive Greggs trade name countrywide “ . This is being executed utilizing a coherent and consistent publicity of the company’s proposition and trade name across the state.

Greggs have sustained a strong hard currency flow which allows them to put money in keeping in their retail mercantile establishments. bakeshops and trade name. Key investings include important financess spent on production installations to back up the growing of retail operations.

Greggs actively seek to place their shops in outstanding locations relative to distribution channels and client entree. Greggs shops are typically located in busy and to a great extent populated towns where their fast and convenient proposition is ideal. In response to the 6. 4 % addition in demand for takeaway nutrients. Greggs is accommodating their servicescape to provide for these turning demands.

5. 1. 2 Corporate Culture

Greggs operates in a hazard taking corporate civilization which allows them to be advanced and antiphonal to market alterations. They believe in supplying high client service taking to retain clients by bring oning trueness and trust. They place great accent on motivation and authorising employees as they believe that continued growing of the concern is a contemplation of the work force. These competences are movable and of equal value to the German market place.

Greggs are actively spread outing their operations internationally in order to distribute hazard. increase international trade name consciousness of their merchandise portfolio and exploit fast turning new markets.

5. 1. 3 Value Chain

Greggs UK have produced a ‘Value Chain Analysis’ which is “an analytical tool that describes all activities that make up the economic public presentation and capablenesss of the house. ” This can be used by Greggs to exhibit nucleus competencies that can be exploited in the host market.

5. 2 – Environmental Analysis

The environmental analysis purposes to place the current state of affairs of the German bakeshop market utilizing relevant tools of analysis and international research methods. A Plague analysis has been used to place influential factors for Greggs in Germany as discussed.

5. 2. 1 International Marketing Research

“Marketing research refers to garnering. analyzing and showing information “ .

It is the deficiency of cognition on foreign markets that is one of the major barriers an international selling director must get the better of. It is hence imperative that Greggs formulate an effectual market research scheme as the first measure in get the better ofing this barrier. In this instance. international selling research was carried out for the intent of cut downing possible hazard and supplying us with a concluding systematic and nonsubjective attack for our proposition.

Primary research has non been undertaken due to the restrictions of this study. However. if Greggs were to implement this internationalization proposal. primary research would be an imperative tool when sing market pick. These could include qualitative methods such as interviews and observation. Secondary signifiers of research carried out have included Government studies. Internet beginnings and text edition literature. and farther strengthened by journal articles. This assortment of informations aggregation methods helps to supply a rich analysis from legion beginnings as a foundation for decision-making.

From this research the undermentioned factors have been taken into consideration when sing Germany.

5. 2. 2 Social & A ; Economic Environment

Social factors. as outlined in the PEST analysis outline the increasing tendency towards ‘on the go’ ingestion. This reflects the busy life style of the working population in Berlin hence the pick of location. The economic factor of high disposable income besides provides an attractive ground for Germany as consumer disbursement is high.

5. 2. 3 Prospective Country Culture

Greggs may utilize the Hofstede theoretical account to “identify persuasive cardinal differences of national civilizations ” and thereby measure their cultural tantrum. “According to Hofstede. the manner people in different states perceive and interpret their universe varies along four dimensions: power distance. uncertainness turning away. individuality and maleness. ”

The German civilization is a low context and explicit. possibly of all time more so than the British. Furthermore. “the German national outlook is of a comparatively high degree of uncertainness turning away. The Germans do non like a sense of insecurity which makes them experience uneasy in concern. ( Germans work with ) difficult facts. and sound statements “ . There are hence little cultural differences that the UK direction squad will hold to see upon come ining the German market.

5. 2. 4 Market Competition

Competition in the German market is a cardinal variable of Greggs’ success.

Figure B- Competitor Analysis

Germany bars and pastries market portion ( % value ) by company

Manufacturer 2000 2001

Bahlsen 11. 2 9. 1

Lady Cake-Feine Kuchen 8. 0 6. 9

Dahli Kuchen 7. 4 7. 2

Grossbackerei Wendeln 7. 0 7. 0

Dan Cake 3. 2 3. 4

Kuchenmeister 7. 8 11. 3

ABK 9. 0 8. 6

Private Label 15. 1 16. 5

Other 31. 3 30. 0

Entire 100 100

It is hence of import to place. analyse and proctor competitory motion. Figure B illustrates the possible competition in the German bakeshop market in conformity to market portion

5. 2. 5 Geographic Climate

Greggs’ gross revenues are affected merely by climatic extremes – really hot conditions can deject demand for bakeshop merchandises. and drawn-out rain or snow can do people reluctant to travel out and do their usual day-to-day purchases. This form is mirrored in Germany and hence fluctuations in gross revenues must be accounted for.

5. 2. 6 The German Market

The usage of the Porters 5 Forces theoretical account has recognized the attraction of the German bakeshop market through the designation of barriers to entry and possible replacements.

6. 0 – International Marketing Aims

In visible radiation of the administrations resources and competences. the following aims have been established:

6. 1 Short Term Aims

Utilise promotional mechanisms to promote test and to animate client trueness to the trade name

By carry throughing this aim. Greggs will be working toward procuring a loyal client base thereby supporting themselves. to a big extent. from rivals.

Conduct quarterly pricing reappraisals to guarantee that monetary values remain competitory with challengers

By guaranting competitory monetary values. Greggs’ reinforce their committedness to offering ‘value for money’ as highlighted in their mission statement.

To guarantee all employees receive high criterions of preparation that is reflected in high quality service to the consumer

Greggs corporate scheme highlights the importance of a merriment and supportive working environment. They promote themselves as being a “great topographic point to work ” and promote personal development. This in bend reflects on their high quality service offered to the terminal consumer.

6. 2 Long Term Aims

To continually supervise. anticipate and challenge rival motions in the bakeshop market.

This will let Greggs to stay advanced and develop new and altered formulas in response to market alterations and consumer demands.

To beef up and construct upon our topographic point market to accomplish 4 % place by 2010.

This will be achieved through “core growing and debut of new mercantile establishments “ . It will enable Greggs to be a adept participant in the German Bakery market ( see Figure B )

To broaden the Greggs merchandise portfolio by 5 % twelvemonth on twelvemonth.

This will allow Greggs to spread out their operations. in line with their growing ideals. and to boot offer a larger merchandise scope to ever-evolving consumer demands.

To establish a farther 6 shops in Germany by 2010 therefore spread outing range and influence.

This will ease Greggs strive towards accomplishing their chief purpose: ‘To be Europe’s finest bakery-related retail merchant. ’

Increase consciousness of the Greggs trade name in the German bakeshop market

By achieving trade name consciousness. Greggs will able to insulate themselves. to an extent. from the wrath of competition. The German bakeshop market is mostly disconnected therefore doing it an attractive market for possible new entrants.

7. 0 Foreign Market Entry Strategy

“Firms make up one’s minding to come in a foreign market face a critical determination in taking the best market entry manner to serve the market. This determination is important because it can hold an on-going impact on a firm’s international concern public presentation. ”

Root ( 1994 ) suggests three different regulations ‘Naive rules’ . ‘Pragmatic rules’ and ‘Strategy rules’ . However as a consequence of the progressively heterogenous nature of the international market. it is of import that Greggs do non generalize their attack. but adapt each entry manner harmonizing to the host market. The manner selected in Belgium hence. may non be wholly applicable to Germany. Based on this principle. Greggs will be using ‘Strategy rules’ which is when all entry manners are compared and evaluated before a pick is made.

Furthermore. harmonizing to Hollensen ( 2001 ) “some houses have discovered that an ailment judged market entry choice in the initial phases in the houses internationalization can endanger the houses future market entry and enlargement activities “ . hence exemplifying its importance to Greggs plc.

Greggs will necessitate to see the chief groups of entry manner influencers prior to pick in order to place the most appropriate and profitable manner.

1 ) Internal Factors

Harmonizing to the Company’s Act ( 1985 ) . houses with over ?5. 75 million in turnover and over 250 employee are classified as big. Greggs more than qualifies this with a turnover of ?422. 6 million and employment of 17600 people in 2003. This provides them with an equal resource capableness to open up a gross revenues and production subordinate in Germany.

Furthermore. in developing their theory of internationalisation. Johanson and Vahlne 1977 assert that “uncertainty in international markets is reduced through existent operations in foreign markets ( experiential cognition ) instead than through the acquisition of nonsubjective cognition. ” Greggs have already ventured into Antwerp and Leuven in Belgium hence increasing their experiential cognition and expertness.

Greggs green goods is fresh and adust goods. In order to keep this stance. the lone executable option would be to bring forth. every bit good as sell in the host state. Additionally. because Greggs will advance themselves as a British company. they will be pass oning a clear derived function and competitory advantage.

2 ) External Factors

Both the UK and Germany are members of the European community thereby cut downing their Socio-Cultural distance. This propinquity between states will therefore favour hierarchal manners of entry.

Due to the propinquity between states perceived hazard is reduced. Companies are hence less loath to prosecute more affecting manners of entry.

It has been stated that “the size of the host state is an of import attractive force to foreign direct investing ” as big and turning markets will do direction more likely to perpetrate resources to the development of a entirely owned subordinate. With a population in surplus of 825 Million people in 2002 Germany is obviously a big and turning market doing it an ideally suited to a FDI manner of entry. Furthermore. the German bakeshop market is extremely disconnected which reduces barriers to entry in the signifier of dominant rivals.

All other variables being equal. the higher the strength of competition. the more likely a house is to choose an export manner of entry. The German bars and pastries market is made up of several little participants each of which occupy little proportions of the market place. This presents itself as an ideal proposition to Greggs who will be able to set up themselves without dominant resistance.

3 ) Desired Mode Features

The pick of manner of entry will besides depend on the attitudes of the determination shaper. Although it is hard to find how pro-risk or hazard averse Greggs Managing Director Sir Mike Darrington is. one may presume from their hierarchal entryway into Belgium that a high hazard. expansionist scheme has been adopted and will be pursued.

The grade of control that direction desire over operations will assist set up which manner of entry to use. Hierarchical manners allow high degrees of control over operations guaranting that the latter are carried out to Greggs specification.

All else being equal. the greater the resource investing. the lower the flexibleness of the concern. Consequently. if Greggs pursue a hierarchal manner of entry. they will hold to see their potency limited flexibleness.

The above suggests that Greggs’ would profit from a hierarchal manner of entry as it satisfies all standards for the latter. This is where the house wholly owns and controls the foreign entry manner.

However. regardless of the evident control over operations specified by this manner. the grade of control that caput office can exercise over the subordinate depends on how many and which value concatenation maps can be transferred to the market.

Having reviewed all options. its was decided that a Gross saless and Production subordinate will be introduced in Germany go forthing the Research and Development and Marketing activities to be conducted at place in the UK.

Harmonizing to Hollensen ( 2001 ) . holding selected this manner of entry. Greggs will profit from holding full control over the whole operation. Furthermore. Greggs has long term market potency in Germany and hence the ownership of a gross revenues and production subordinate will enable Greggs to construct a strong international presence over a long period of clip. This method besides eliminates the possibility that a national spouse gets a ‘free ride’ and allows Greggs to derive market cognition straight.

A gross revenues and production subordinate will ease rapid entry to the German market leting speedy entree to its distribution channels. Plus. no transit costs will be incurred as natural stuffs will be purchased in the host state.

In add-on to those proposed by Hollensen. Greggs may profit from being able to accommodate the ingredients used to German gustatory sensations. They can to boot orient the servicescape to German penchants. Greggs green goods is non-durable and therefore it would be inappropriate to demands to be produced and sold rapidly as it is preponderantly sell fresh nutrient.

Retaining R & A ; D and Marketing operations at place will cut down costs and hazard. Having established themselves in the German market. Greggs may see reassigning these operations over in the hereafter. Furthermore. using a hierarchal manner will enable Greggs to work new market chances every bit shortly as they arrive with minimum hold. In line with the latter. Abell ( 1978 ) construct of a strategic window provinces that there are merely limited periods during which the tantrum between the demands of the market and capablenesss of the house are at an optimum. Investing should hence be timed consequently.

Although. this method will necessitate a great trade of investing in footings of clip. money and committedness. research has shown that “the net income returns generated by foreign direct investing manners are normally greater than those generated by exporting “ .

Harmonizing to the Uppsala Internationalisation Model. companies begin their internationalization process a ) by traveling into comparatively close markets foremost so more distant 1s and B ) companies entered new markets through exporting. Although at face value it appears that Greggs’ scheme contradicts the premises of theoretical account. it does nevertheless highlight the undermentioned exclusion: Firms that have larger resources can take larger stairss with fewer effects. Arguably Greggs autumn under this class.

This theoretical account besides suggests that houses start by come ining markets which are nearer in footings of psychic distance hence cut downing uncertainness. Germany is considered comparatively near and despite linguistic communication barriers. the German civilization is similar to that of the UK as highlighted in the ‘Environmental Analysis’ subdivision of this study.