The appeal of realizing an increased customer base and more revenue makes the pursuit of the international market a primary objective for every domestic brand. However, replicating strategies behind successful performance in the domestic market hardly guarantees immediate success. Consequently, the effort to take a homegrown brand to the international level compels undertaking several changes to the business model to ensure a seamless alignment with the target market opportunities. Doing so involves conducting a market situation analysis to determine the entry strategy likely to leap success for the brand. Such case befits 1901 Hot Dog in its pursuit of Middle Eastern market amidst saturation by international franchising giants and unique business environment. This report captures the market situation analysis and evaluation of unique competitive challenge facing 1901 Hot Dog it would solve by expanding beyond Malaysia.
Founded in July 1997, 1901 Hot Dog today's represents the success of Malaysia franchise culture. Its history traces to the pushcarts model of selling sausages that Rozidar, its founder, borrowed from the America where street traders would sell hot dogs (June & Abdul-Talib, 2011). The emphasis on the founder's principles of creativity, determination, and perseverance has seen the company evolve from a purely-local food vendor to running over a hundred franchisees. Incentivized by the local franchise-friendly policies, 1901 Hot Dog rebranded to prioritize quality ingredients and enhanced customer-oriented services as a Food for Friendship brand (June & Abdul-Talib, 2011).
1901 Hot Dog defied the challenges caused by the Asian financial crisis to transform from a customized prototype pushcart operated by a single seller to its present franchise chain operating beyond Malaysia. The simplicity and low cost associated with the franchise model eases its expansion in the country of origin (Grossmann, 2017). Such is evident in 1901 Hot Dog expansion aided by a robust corporate identity reflected by the smoke-free preparation, quality ingredients and elimination of mechanically de-boned meat. Unlike other local brands, it committed to continuous research and development to improve the nutritional value of its hot dogs. The hands-on management ensured all staff undertook the comprehensive in-house training to acquire the necessary operational knowledge and excellent customer service skills (June & Abdul-Talib, 2011). By doing so, all 1901 outlets have retained a wholesome image founded on halal brand and universal right values.
The emphasis on wholesome image for the company exposes it to predominant quality issues. Secondly, franchisees hardly understand the essence of operating independently and not working as 1901 Hoy Dog agents (June & Abdul-Talib, 2011). Such situation compels making frequent visits to the outlets to oversee customer services and quality ingredients. Nevertheless, commitment to the founder's hands-on management earned it the Superbrand status for a local company that began from a single pushcart outlet. The strong brand recognition allows the franchisor company to generate higher sales sustained through intensive marketing (Siebert & Leonesio, 2016). It allowed 1901 to recapture the youth market segment, previously dominated by fast food franchises of foreign giants (June & Abdul-Talib, 2011).
Consistency in quality products and enhanced presentation turned 1901 pushcart strategy into a profitable business model supported by innovative research and development. Its primary offering involves the steamy and hot fresh American hot dogs. They contain sausages made from chicken-breast and quality beef cuts, unlike the conventional de-boned meat (Arshad, 2005). Besides, it offers variations of best-selling hotdogs including the New York Chicken, Texas Ted, Minnesota Twins, and Chicago beef. Each product has unique custom blend sauces that deliver the sweet relish and taste desired by the consumers. Recent additions include the Great Hot Dog targeting customers seeking the larger versions alongside the Great Cookie meant to increase the takeaway products range (June & Abdul-Talib, 2011).
The competitiveness of 1901 Hot Dog lies in the brand strength derived from using superior quality ingredients and enhanced customer-oriented delivery channels. Secondly, the smokeless-preparation maintains cleanliness and hygiene making its products premium (June & Abdul-Talib, 2011). Furthermore, the hands-on management yields franchise commitment to the friendly delivery of services to customers. It extends to the creation of a sustainable ecosystem attracts a loyal customer base conscious of brands breeding respect, honesty, and integrity. Lastly, its low-cost yet profitable business model draws numerous inquiries from potential franchisees (June & Abdul-Talib, 2011). It eases expansion of its operating base in new markets.
The company suffers from several weaknesses characterizing the franchise business model. Firstly, it faces confusion in outlets operating as agents rather than independently (June & Abdul-Talib, 2011). Secondly, its sizeable geographical presence exposes it to coattail effect where less oversight and control over franchisees would lead to inferior products and poor services (Buchan, 2013). Such occurrences may affect the entire chain, thereby harm the brand.
The demand for exclusive and tried products in the high-end consumer regions presents the right target market for franchise-oriented brands in the Middle East. The concentration of high net worth earners in the oil-rich Middle East and North Africa makes the region a leading franchise economy (Devadason, 2013). The acceptance of international brands in the area is ideal for the American-style products offered by 1901 Hot Dog. The 1.4 billion population combined with $1.9 trillion gross domestic product presents the ideal affluent customer base, thereby a viable opportunity to exist (ABR, 2018).
The expansion of popular international food brands operating through the franchise business models threatens to erode the dominance of 1901 Hot Dog. Their compliance with halal requirements will undermine the company's core advantage. The presence of global food franchises in the Middle East including McDonalds, Hard Rock, Hardees, and Burger King offers stiff competition (June & Abdul-Talib, 2011; Salman, 2017). Again, the emergence of regional fast food chains such as the Just Falafel embracing a similar franchise route may complicate the company's penetration in the industry.
Products suitability is critical to making successful inroads to the franchising opportunities made attractive by brand-conscious consumers who desire healthy living. 1901 Hot Dog complies with such requirements in its product range. In particular, it uses smokeless preparation by steaming the hot dogs to sustain hygienic conditions (June & Abdul-Talib, 2011). The company offers a premium product range by using sausages from quality meat cuts and not the mechanically de-boned meat. Lastly, the hot dogs feature custom blend sauces thereby satisfying the taste desired by the affluent consumers (June & Abdul-Talib, 2011).
Companies face increased competition from international brands alongside the evolving local and regional players closely replicating their strategies. Since its transformation from a pushcart retailer to today's franchise brand, 1901 Hot Dog remains vulnerable to international players operating in the country including Burger King, KFC, McDonald's, Dunkin' Donuts, Pizza Hut, Auntie Anne, KFC, and Domino's Pizza (June & Abdul-Talib, 2011). The retaliation strategies deployed by the global brands in their attempt to recapture their lost market poses constant threats to the company. It necessitates cyclic investment in brand advertising blend with promotional campaigns to retain its loyal customers and win others from rival brands.
Political and Institutional Influence
Political climate influences the institutional policies adopted towards incentivizing investment in the country. Besides peace, order, and stability, pro-investment incentives implemented by the government ease the establishment and expansion of businesses. They extend to financial incentives including tax holidays, subsidized infrastructure, trade concessions, and reduced tax rates (World Bank Group, 2017). Such institutional influence is evident in Malaysia where franchising is a primary arsenal for the 'Made in Malaysia' commitment. The 9th Malaysian Plan features an effort by the government to ease the conversion of Malaysian brands into global brands (June & Abdul-Talib, 2011). The directive recognizes the saturation within the domestic market, thereby encourages homegrown brands to venture into the high growth economies including the Middle East, China, and India. The franchise-friendly policies blend with resourceful assistance from the Malaysian Franchise Association facilitates quick venture into the overseas market (June & Abdul-Talib, 2011).
The legal environment reveals efforts to make Malaysia the base for Asia-Middle East market. It reflects in the enactment of the legislative framework to support the Malaysia-Gulf Cooperation Council agreement, thereby enhancing bilateral cooperation in trade and investment. Although the projects tied to the agreement experienced regulatory delays, its harmonization with the Franchise Act (1998) stimulated a huge inflow of foreign business (June & Abdul-Talib, 2011). The business-friendly regulation fosters the steady growth of franchises, particularly in the food sector. By doing so, the franchise-friendly policy ushers more foreign companies to set shop in Malaysia. It exposes the home-grown brands in the food sector including Marrybrown, Secret Recipe and 1901 to international competitors (June & Abdul-Talib, 2011).
Economic Conditions and Trends
The uncertainties in today's global economy exert pressure on the cost of input and conscious consumer spending. The trend stimulates waves of worsening economy that reduce the disposable income, thereby revenue growth. Such patterns hamper 1901's expansion and in-house re-branding efforts. Liberalized food and beverage sector encourage fierce competition from homegrown brands such as A&W alongside international players including KFC, McDonald's and Dunkin' Donuts amongst others forces 1901 to allocate substantial resources in promotion and advertisement campaigns to stay relevant (June & Abdul-Talib, 2011).
The increased globalization trend and socio-cultural exchanges influence the consumption patterns. Today's consumers desire western recipes and menu. Such reflects in the uptake of American-style hot dogs. Consumers seek diversity in the product range manifested by 1901 success despite offering products associated with western trends. The widespread eating out culture stimulates increased demand for hot dogs among individuals with high disposable income. However, such consumers desire quality products that fulfill the health-conscious requirement. Lastly, food companies must comply with the halal requirements given their target market in Malaysia involves a dominant Muslim population. Similar compliance is necessary for 1901 to present itself as a halal brand in the pursuit of the Middle East market. Lastly, the cultural-appropriate atmosphere is desirable in the Muslim-dominated markets given the need for lounge feel and segregated space for families.
The sustainability of the franchising business model in the food and beverage sector relies...
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