Pret A Manger Internationalization strategy

Secondly, it is interesting to study how this brand has landed to face the increasing competition on the fast food market (Eat keeps opening new stores, Struck starts selling sandwiches and even Ginsburg and M&S are places where people go and buy their lunch). (Nee LEE, 2014) prêt A Manger is a British company created in London in 1 986 by two friends, Sinclair BECAME and Julian METCALF. Prêt, as this company is more commonly called, is a private company, which does not accept franchising.

Prêt owns 335 shops all over the world, amongst which 21 3 are in the United Kingdom.

The company is very profitable since the annual sales worldwide represent an amount of IEEE million. Prep’s customers can either eat or drink in the restaurants, either take away, or order Prêt delivery at home. The message “Made Today, Gone today’, that can be read on every Press product, sums up the mission of the company: the products sold are fresh, made from natural and good ingredients.

They are ready-to-eat, known as gourmet and seen as sophisticated products, to suit the tastes of the target market. They are also convenient to satisfy businessmen and women with a tight schedule.

The values of Prêt are quality, healthy food, ethics and sustainability. Prêt provides work to 7,1 00 employees. It stresses the importance of having a friendly staff. Also, to match its strong Corporate Social Responsibility, Prêt defends the employment of homeless people and people who come from disadvantaged backgrounds.

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Moreover, the company puts in place the project that consists in donating unsold sandwiches to homeless people. Prêt also wants to hit the environment consciousness of the customers by spreading an environmental friendly brand image.

For example, in the 1 9905 they stopped using plastic boxes and started using boxes made of cardboard. So Prep’s target market is this following type of customers: business refashions, who are environmentally conscious, clean and sophisticate and who adopt a healthy lifestyle. (Dave WALLER, 2012) Prêt is a very successful brand in its national country. There are 213 Prêt shops in the United Kingdom and sales per store are twice as high as those of the competitors that are Costa Coffee or Struck for example.

In order to understand this success since 1 986, we have been through a PESTLE analysis regarding the fast food and take-away market. Politic The British government launched a plan to fight against obesity and to spread a healthy lifestyle. Indeed, The Department of Health, in the frame of its 2013 policy of reducing obesity and improving diet, fixed the following objectives: “By 2020, we want to see a downward trend in the level of excess weight in adults and a sustained downward trend in the level of excess weight in children”. Lane Ellison MM, 201 3)

Economic As consequence of the crisis, the purchase power decreased so people changed their consumer habits and focused on cheaper take-away options, which, therefore, became more popular. Social Prêt matched the population’s awareness of the importance to have a healthy way f life, as the growing concern of the population about ethics and sustainability. Technology Prêt updated its services by offering delivery options. The use Of the Internet and therefore of the technologies to promote, communicate about the brand and enable online orders was a very efficient strategy.

The company’s current international operations and strategy Currently, Prêt A Manger is settled in the United Kingdom, in France, in the United States and in Hong Kong. Prêt also tried to enter the Japanese market but it happened to be a failure. Prêt A Manger decided to go abroad for several reasons. The main one is the dangerous expansion of strong and already global brands, such as Subways or Struck – Struck is already implemented in 55 countries- that threatened prêt market shares. Secondly, it is naturally a profit-driven decision.

By looking abroad, Prêt identified promising market opportunities that the United States, China or Europe represent. The final reason is the expansion in the United Kingdom that appears limited eventually. However, Clive SCHLEP, the current Chief Executive Officer of the company remains optimistic regarding the constant growth of Prêt in the United Kingdom. We keep on thinking that London can’t take any more”, he said in an article in The Guardian (Rebecca SMITHIES, 201 0), “but every year we have some very strong openings. He asserts that the brand can rely on the shops opened in much crowed areas such as airport or train stations, areas where the customers that Prêt targets spend times every day.

In 2000, Prêt widened its ambitions and started to expand abroad. The first foreign market the brand targeted was the United States. They opened there their first shop in New York in 2000. The main challenges were to create solid partnerships with American suppliers and to rain the New Yorker staff The US expansion was successful, thanks to the strategic alliance with McDonald’s, which bought 33% of Prêt shares.

The company benefited from the expertise, the country knowledge and the network in the food industry of McDonald’s. As a result, the brand was well accepted in the new market since American and British share the same Western cultural eating habits. American associates the brand with a British image, I. E. Fast and healthy. Thus, by the end of the year 2013, Prêt had opened 36 restaurants in New York, 9 in Chicago and 3 in Boston (Rebecca SMITHIES, 2010). Along with its strategy to become global, Prêt tried to enter the Japanese market in 2002.

Japan appeared as a very promising market because of its large population that easily welcomes what comes from the Western countries. Moreover, the Japanese are quality conscious consumers who spend about 20% of their budgets on food. On the other hand, entering this new market was a real challenge. As we know, many global brands have already failed in this county, such as Google, Ebay or Burger King. The mode of entry strategy was to create a 50/50 joint venture with McDonald’s Japan. This strategy was legitimate regarding its success in the US.

But unfortunately, McDonald’s which had been present in Japan for a long time, decided to cut its prices down in 2003. Prêt, at a too early stage on this new market, could not follow the decision. So as a result, McDonald’s announced the end of the partnership with prêt. Therefore prêt was forced to close all the shops down in 2004. (Jinee LEE, 2014) How can we explain the failure of Prêt In Japan? First, timing was simply wrong. In 2002, Japan had suffered from the mad cow disease, which represented a big disadvantage for a food company. Secondly, Prêt leaned too much on its partner.

The company relied only on McDonald’s arrest knowledge and information so as a consequence, it lacked of market awareness. Besides, Prep’s expansion on the Japanese market was too ambitious: 14 stores were opened at once, it was a gambling strategy. And finally, prêt had not well understood the customers’ expectations. Japanese customers care about the taste, the cost and the ambiance. Prêt sandwiches were too expansive and they did not suit the customers eating habits (Michael Fitzpatrick, 2004). The brand launched its first shop in France in Paris in 2012.

Contrary to the implantation in the United States, which had been seen as fast, Prêt gradually expanded in France. Ahead the company made a lot of research about the French tastes to make sure that they were pin pointing the right target markets. France was a strategic market to enter because of the cultural French habit that consists in spending 30 minutes in average on lunch break to eat. In order to succeed there, Prêt also adapted the food offers to the French customers to their tastes. As an example, more French baguettes than British puddings Were sold in Prêt stores.

The results were the following in France: sales were 15% higher than the average in the UK (Rose Jacobs and Jennifer Thompson, 2012). II. Three potential target markets Brazil Why this country? First of all, the group chose Brazil because the country itself is a strategic point of entrance for the Latin America at the economic, political and social levels. In the last five years, the world has been looking to this BRICE country as one of the most emergent economies in the world. With nearly 200 million people and a GAP of $2. 4 trillion and $11,875 per capita, Brazil represents the “new breath of Latin America” (Reuters, 2010).

When it comes to a country, the group had to reflect individually about all the advantages and disadvantages of settling down the operations in Brazil. However, sooner we concluded that a country that produces one third of all the coffee produced in the world and that has maintained this position for around 150 years should be the right decision for Prêt A Manger. To conclude, the overview of why the group chose Brazil as one of the three target countries for Pretax Mangers expansion is becalms Brazil has been consolidated as the 7th largest consumer market in the world with $1. 37 trillion. Likely to impact?

Economic Reasons The economic reasons regarding why we choose Brazil as a target country for Prêt A Manger’s expansion were the most pondered within all the reasons u to the country’s emergent economy at all levels. Brazil is mainly characterized by a large and well-developed agricultural, where obviously the coffee beans production is included, services and manufacturing sectors. After 2010, the confidence of investors and consumers in the economy returned which resulted in an increase of the GAP growth of 7. 5% (Remuneration International, 2010) and from that time line the economic performance has been positive.

Since the beginning, Prêt A Mangers expansion has been prudent and conscious to each country. They prefer establish in big and metropolitan cities and after depart to other places within he same country. For the company, the cities ROI De Jeanine and So Paulo are the most indicated because it is where the flow of tourists and the number of habitants is the highest in Brazil. With the objective of calling external investors and companies, the Brazilian government reduced the corporate tax rate from 34 to 25%, which is really beneficial to Prêt A Manger in order to generate future profits (Beseechers, 2013).

Demographic and social reasons From 2013 to 2014, Brazil increased its population growth in about 0. 8% and its birth rate stands for 14. 72 births per 1 ,OHO habitants (CIA, 2014). According o the population graph, the median age for males is 29. 9 years and for the females is 31. 5 years. It is also observable on the graph that the predominant age ranges are the ones from 25 to 29 years and from 30 to 34 years, which represent the youth of the Brazilian labor force.

In addition, it is important to mention that, as a result of Dilemma Rouses policies, the labor force has become more and more qualified because in a macroeconomic view Brazil wants to match the external investment requirements with a qualified labor force in order for multinational companies to settle their production lines and warehouses. Pretax Manger would have to take this point under consideration because they do not have any operations settled yet so this variable costs would affect their growth rate and the return on investment over the first years.

Since 201 0, Brazil spends 5. 8% of their GAP on education (CIA, 2014) because they know that this subject will have a great impact on the country’s productivity in about 10 years and also because the youth unemployment rate is 15. 4% which is too high. Operational reasons In terms of coffee production about one third of all the coffee produced in the world is attributed to Brazil and the more cherishing thing for Brazilian is hat they have maintained this top position for around 150 years (Heritage, 2014).

So, the group concluded that if our core business is based on selling coffee beverages, choosing one of the biggest coffee producers in the world could benefit the speed and the costs of the operations. As said in the previous reason, the cheap labor contributed mainly for the choosing of Brazil as a target country because prêt should consider the vertical integration of some coffee beans plantations and production warehouses. Since Struck entered the Brazilian coffee market they already bought mom of the biggest coffee plantations in Brazil in order to control all the process from the harvesting to the final product.

Consequently, this allows them to create a monopoly in this sector becoming an entry barrier (5 forces of Porter) for potential companies that would like to enter. Since Prêt a Manger has the financial power to buy some coffee plantations that would facilitate them in terms of costs and of operations. Secondly, it is important to mention the recent enhancement of the Brazilian roads and train ways because the country is so big that if they were in a bad state that could affect Prep’s shipping of coffee and other fresh rodents creating at the same time delays on the store replacement.

Sporting reasons During the 2014 summer, the world stopped to watch the FIFE World Cup in Brazil. This sporting event created a lot of revenues but also a lot of investment in infrastructures by the Brazilian government. From this experience, Brazil created infrastructures that are prepared to generate cash flows into the country. According to the Guardian, the World Cup added $13. Ban in the Brazilian GAP (Betimes, 2014) for the year. One of the reasons why prêt chose this country is because in 201 6 Brazil will also receive the 01 6 Olympic games in ROI De Jeanine, one of the chosen cities for Prêt a Manger expansion.

We believe that this worldwide event that involves more sports than football will bring even more revenues because more tourists and athletes will come and consume in a more extended period of time. Coffee habits and consumer patterns In certain extent Brazil is a very interesting country regarding the customers’ behavior. Out-of-home consumers are looking for different types of coffee beverages, namely espressos, cappuccinos and other milk-based preparations, different from the traditional filtered coffee they usually drink t home (Brazil Bar, 2014).

They are also more inclined to pay more for higher quality coffees as compared to previous years. It is because of the above- mentioned reasons that the group also chooses Brazil. In addition, their purchasing power is increasing due to the enhancement Of the standards Of life, so we expect that if Prêt a Manger decided to penetrate the Brazilian coffee market they would succeed in terms of cash flows’ growth. Canada Canada is really similar and close politically, economically and culturally to the United Kingdom (UK) and the United States (US) – where PRÊT has implemented itself very successfully.

That is the main reason why we have chosen to enter this specific country. Furthermore, other factors specific to Canada make this country such an interesting market to enter for PRÊT. Political factor Canada is a parliamentary democracy and a free country. The head of state is none other than Queen Elizabeth II. Therefore, Canada and the LIKE are very close politically. Economic factor Canada is a developed country with a free market that makes it easy for a foreign company to open a business in this country. Besides, the country received the highest grade of AAA by COFFEE for its risk assessment and business climate in 2014.

Forbes’ magazine even ranked Canada as the best country for doing business in 2013. It is also one of the wealthiest countries in the world. Canada’s economy is also very close to the US and the EX. ones, and especially from the UK. In fact, a free-trade agreement – ACTA – is to be signed within years between Canada and the European Union (Foreign Affairs, Trade and Development Canada, 2014). This will lead to even more economic relationship bet”/en the two regions. And currently, the UK is one of the strongest economic partners of Canada.

Finally, the cost of entering the Canada would be affordable. It will be similar to the US operation. As a result, we should gain some benefits by expanding our sales. Demographic, social and cultural factors Canada is a very big market. Currently, more than 3 million people are living in this country and 54. 5% of the population is between 25 and 64 years old which is our target age. Furthermore, an important part of Canada’s population comes from England and France, so the brand is already present in the minds of potential consumers.

As English and French are also both official languages, we will not have to translate our advertising for the ascription of our products in another language. Moreover, there is no specific food restriction due to religion. Lastly, obesity is quite high in Canada so it could be a good strategy for us to play our ‘healthy fast food’ card. Finally, Canada is extremely close culturally to the LIST and the KICK. In fact, the Hefted cultural criterion for these three markets are, if not the same, really similar (Hefted center, 2014).

This can be a real advantage for PRÊT as they can use the same strategy used in the LIKE and the US, and it is likely to be a success. Geographical factor Canada is the 2nd biggest country in the world. It has a border with the US from which more than of its population lives within km (CIA, 2013). Prêt is already set on the east cost of the IIS so it is a way to expand in America. There are lots of big cities in Canada as 80. 7% of the population live in a town (major urban areas in 201 1: Toronto 5. 573 million, Montreal 3. 856 million, Vancouver 2. 267 million, Calgary 1 . 16 million, Ottawa 1 . 208 million, Edmonton 1. 142 million).

This is an important point as Prêt only opens in big cities. Consumer food and drink habits Historically, the Aborigine, English and French cultures has influenced Canada. As a consequence, Canadians are used to eat fresh and healthy food. Moreover, Canadians are huge coffee drinkers. According to the Canadian Coffee Drinking study 2013, coffee is the second most consumed beverage in 201 3 and 65% of adults seem to drink coffee regularly (Coffee association of Canada, 2013). Likely to impact?

As we have seen before, the political and monetary risks are really low regarding Canada but the competition is actually quite tough. Moreover, Prêt will have to consider a few economic, cultural and political issues when entering the market, which are likely to impact negatively on its equines, if not considered seriously. Competitive risk First, Prep’s main competitor, Struck, is already very well implemented in this country (Struck, 2014). Second, a lot of coffee shops have already seized the opportunity of settling into Canada so competition is tough.

Local standards of products and practices in pricing, distribution, and advertising are similar than in the US. Economical issue Currently, unemployment and poverty are quite high in Canada. In fact, 7% of the population is unemployed and 9% live under the poverty line (CIA, 2013). This could have an impact on our revenues since our products are quite expensive and since we are targeting businessmen and women. Cultural Issue There are two different cultures in Canada: a culture of Quabeck and an English Canadian culture.

Hence, we may need to adapt our products differently for each of those cultures. Actually, Quabcoos seem to have better food habits than the rest of Canada (Louise Limited, 2008). What’s more, French Canadian is slightly different from the French that is spoken in France. For example, Canadian use the French word ‘submarine’ when referring to what is called in France a ‘sandwich’ (Doctrinaire des expressions ubcozies, 2007). That is why we cannot use the exact same marketing strategy we used in France.

Political and legal issue Canada is composed Of 10 provinces and 3 territories. Each province has different registration procedures and regulation fee (CIA, 2013). Therefore, it could become really complicated to settle in different provinces at the same time. It would be the same as entering into different countries at the same time. Other issues Geography is also an issue PRÊT should consider when entering the market. The climate varies from temperate in south to sybaritic and artic in north. There are mostly plains with mountains in west and lowlands in southeast and only 4. % of the land is arable (CIA 2013). This could be a danger for the production, supply and conservation Of food. Germany Germany is one of the most developed countries in the world, from an economical, technological, political and social point of view.