The Tim Horton’s chain was established in 1964 in Hamiton, Ontario, Canada. The chain’s focus on top quality, always fresh product, value, great service and neighborhood management has actually allowed it to grow into the largest fast service restaurant chain in Canada concentrating on always fresh coffee, baked products and house style lunches. Tim Horton’s opened its very first U. S. dining establishment in 1984 in Tonawanda, N. Y. Since then, the business has broadened into nine other states– Indiana, Maryland, Kentucky, Maine, Michigan, Ohio, Pennsylvania, Virginia and West Virginia.
In 1995, Tim Horton’s combined with Wendy’s International, Inc., providing brand-new focus and motivation to the expansion of the Tim Horton’s idea in the United States. Tim Horton’s finished a going public of the company in March 2006 and was fully spun off as a different company since September 29, 2006. Tim Horton’s trades on the NYSE and TSX (THI). Through franchisee partnership with Dubai based Clothing Group, Tim Horton’s entered the United Arab Emirates in 2011 with shop openings in Abu Dhabi, Dubai and Fujairah, with the first location being Sheikh Zayed Roadway, opened in 27th September 2011.
They are expected to open to 120 stores in five years across the Persian Gulf area consisting of Qatar, Bahrain, Oman and Kuwait.
For understanding Tim Horton’s Strengths and Weaknesses, and for identifying both the Opportunities open to the global chain and the Threats they face the following SWOT analysis lays down the picture. STRENGTH
The company’s greatest strength is its brand name and reputation of having the largest successful quick-service chain in Canada with an innovative culture.
It has a very good mix of food, beverages with very accessible strategic locations and designer restaurant. Tim Horton is known for its speed of service and customer satisfaction. Tim Horton in UAE is franchised to Apparel group with a well know expertise and understanding of the market. | STRENGTH * Largest quick-service chain in Canada with an innovative culture * SWOT Good mix of food and beverages , locations * Speed of service and Customer satisfaction| WEAKNESS * Low profitability in USA compared to Canada might make it difficult to attract and retain qualified franchisees * Service quality standards in international stores are low compared to Canada| | OPPORTUNITY * Developing Gulf Regions creates increased demand for convenient foods. * Tim Horton’s can build a reputation of hygienic food they are likely to be successful.| THREAT * Other fast food, such as McDonald’s offering coffee and breakfast option | 1 SWOT Analysis for Tim Horton
The profitability in its current global chains is comparatively low compared to Canada. This might make it difficult to attract and retain qualified franchisees for future global expansion. There is criticism on the service quality standards in the international stores and are low compared to home Canadian branches.
The gulf regions are developing at a very high pace and are creating increased demands for convenient foods. Gulf regions are very much concerned with the food hygiene and Tim Horton could use this opportunity to create a brand know for its hygienic food.
Other competitors in UAE such as McDonald’s are offering coffee and breakfast option which are Tim Horton’s key factors of differentiation. Industrial Analysis: Porter’s Five Forces To draw up on the industrial organization and to determine the competitive intensity and attractiveness of the market Michael Potters five forces analysis has be used.
1. Threat of New Entries
The threat for new entries is high in case of beverages industries as the UAE is an open market for investors and entry barriers are relatively low for the industry. There are new brands appearing in the market with usually lower prices. But as with its brand it holds a very significant market share in Canada and loyal customers are not very likely to try new brands.
2. Threat of substitute
Tea is preferred by many as a healthy substitute to coffee and decaf but there has not been much tread change for coffee lovers. 3. Bargaining power of buyers
The main competitor, Starbucks even though easily available is priced almost the same or higher than Tim Horton. Coffee loves get to experience better ambience and experience for even cheaper prices. 4. Bargaining power of suppliers
Coffee is world’s second largest traded commodity. Tim Horton has worked to created a strategic relation with its suppliers and have also mandated them with Business Partner and Supplier Code of Conduct (BPSCC) .Any supplier would not want to lose a huge customer like Tim Horton. 5. Rivalry among the existing firms
Starbucks owns more than 100 stores compared to 19 stores for Tim Horton in Dubai. They have also plans to expand more as with Tim Horton entering UAE market. But as Starbucks offers only pastries and coffee Tim Horton offers more menu option.
To see the big picture of the market in which Tim Horton is being operated the following PESTLE analysis will be used
With the UAE being politically stable with each emirates having its own governmental institutions. Tim Horton has a greater advantage of being expanded to UAE with minimal risk. Sudden change of political situation is not to be worried.
With no direct taxation on corporate profit and with minimal governmental control and regulation UAE is strategically the best place for Tim Horton to expand. Also being only launched with the recovery from severe recession Tim Horton had lots of cost benefits.
UAE is occupied with mixed nationalities and with a consumer behavior of welcoming adaption of new culture. Tim Horton has a reduced risk and minimal cost of adapting to the local market with less of segmentation and research.
UAE is one of the fastest growing countries with the latest technologies being adapted rapidly. Tim Horton could benefit from internal sourcing of many required equipments. The consumer market is also very much adapted to the new technology and thus requires minimal requirement of training and developing. UAE still lags behind on some new technologies that are being widely used in Tim Horton’s other global markets eg NFS
Certain commodities that are required for many of Tim Horton’s products are not legal with in UAE market eg Pork. Tim Horton’s will have to do advanced research and introduce new products that can be adapted to the local market.
UAE environment is mostly hot and sandy so much of the business has to happen indoor. Bigger shop flooring is required to accommodate more customers.
With the expansion plan to enter Middle East outside of North America Tim Horton has managed to keep its benchmark and plan on its growth in a steady pace. As of November 2012 it has 19 stores in the United Arab Emirates and one in Oman. It plans to open up 120 stores over the next five years in the Persian Gulf, with focus on Qatar, Bahrain, Kuwait, Oman and UAE.
Tim Horton has managed to attract more and more customers daily and adapt to the local market. But market share of Tim Horton is still comparatively very low. It has got an ample growth opportunity if it manages to keep and improve its standards. The Business Model of Tim Horton
Multi-layered business model.
The Tim Hortons business model includes significant levels of real estate control and vertical integration, supporting their highly franchised business. Each aspect of Tim Hortons model contributes to their success and creates system advantages, while also generating system benefits and value for the Restaurant Owners. The Tim Horton’s business model is time-tested and different from most quick service restaurant companies. This model has created a 47-year history of growth and performance. In Dubai the franchised business strongly stays on the supply and integration from the parent business and support from very vast experience. They are given royalty based on the percentage of the sales created.
* Wide menu option
Tim Horton’s believes on differentiation strategy has catalyzed them to create more menu options. Their immediate competitor in Dubai is Star Bucks with a well established infrastructure. Tim Horton’s provides more menu options compared to star bucks and added service for breakfast and lunch. * Strategic pricing
Tim Horton has strategically priced their products to be cheaper and economical, which gives them a head up among the competition.
* Design and Aesthetics
Tim Horton’s stores are designed with an innovative outlook. The restaurant gives its customer a steady ambiance for fresh and rejuvenating experience.
* Advertising & promotion
Tim Horton’s primary aim was to do aggressive marketing to bring brand awareness to Dubai Consumers so as to create trust among the people and give value to them. As part of the campaign Tim Horton invested heavily on advertising gaining them Retail me award for the most admired retail launch & marketing campaign of the year 2012. * Strategic locations
As location places a very important part for any restaurant business Tim Horton worked to secure the best locations in Dubai some even next to the very immediate competitors. As part of the plan the very first launch was in SZR next to the Canadian University where it would attract more of their home customers. The busiest branch however is the Dubai mall which creates sales of up to AED 80,000 per day.
Corporate Level Strategy
Tim Horton has always been an innovative company in the beverage industry. With the focus on growth and expansion Tim Horton’s have always invested heavily on product development and innovation. * Exposure to market leadership in Canada
In Canada Tim Horton is further planning to expand and drive growth. They are planning to gain more market share with better Menu Expansion and category and day part opportunities.
* Emerging US presence
In US Tim Horton’s primary focus and driver to growth supports on differentiation and enhanced marketing. They have to provide more values for its US customers. * Seeding long term international growth
The strategic expansion plan to UAE will give Tim Horton’s a better global presence and its success story will be greater advantage for future global growth.
Tim Horton’s further outlook should be to increase its market share and coverage in UAE. Its proposal of 120 stores in 5 years is promising but has to watch over its competitors and their plan of actions. Tim Horton’s core business strength and its franchise system have to be given leverage. Its focus on better quality product with proper promotions, place and price cannot be compromised. Tim Horton should keep continue its investment to build scale and brand in new and existing market. It should spend more on R&D to improve and bring new products to adapt to the local markets. The service in UAE is criticized to be low compared to the once in Canada so a must required focus should be to training the staff to be more customer friendly. Also regular introduction of new products in the market will create more interest in the minds of the people.
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