CB544 International Marketing Report - Pret A Manger PDF

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Summary

Assessed report that contributed to the majority of the final module mark. Have to create a full and detailed international marketing plan. Seminar leader assigns a brand and countries of interest. Mine was chosen to be Pret A Manger in various European countries. I graduated with a 1st class degree...

Description

Executive Summary This report provides Pret a Manger with a detailed international marketing plan for expansion into one of four shortlisted countries; Portugal, Hungary, Sweden or Luxembourg. The first section of this report introduces Pret as a company, discusses their target market, as well as their current domestic and international marketing strategies.

The main body of the report details the analysis used for country selection. The report looks at the external environment of each of the countries, using the PESTLE framework. It also conducts an in-depth cultural analysis using the models proposed by Hofstede and Hall. Upon completion of the analysis, Sweden appears to have the most attractive environment as well as being the best cultural fit. It is then recommended that Pret choose Sweden to launch their international expansion into, as it looks to hold the most potential for success. The report then goes on to discuss entry modes, recommending a staged approach of entry into the Swedish market. This approach being a small number of wholly owned subsidiaries in the initial phase. This allows Pret to keep full control and learn about the new market, whilst minimising risk. Then, should the initial market entry be a success, Pret should use business format franchising in order to grow more rapidly. I will then discuss the various marketing strategies that Pret could use within the chosen country in order to maximise success. This will describe the consumer segment Pret are targeting; young, time-crunched, health conscious professionals in urban areas. I then make recommendations for the four key aspects of the marketing mix; product, place, price and promotion. These recommendations include using an exclusive distribution strategy and price skimming. This section discusses which areas of Pret’s marketing mix can be standardized and which need to be adapted for entry into the Swedish market. Finally, the report will end with a conclusion, providing a summary of the key content and findings. This will highlight the reasoning behind the decisions made and recommendations offered to Pret.

Table of Contents 1.0

Introduction.........................................................................................................4

1.1

Project brief and purpose of report..........................................................................4

1.2

Overview of Pret..........................................................................................................4

1.3

Pret target market........................................................................................................4

1.4

Pret domestic marketing strategy............................................................................4

1.5

Pret international marketing strategies...................................................................5

2.0

Country Comparison and Selection................................................................5

2.1

PESTLE analysis..........................................................................................................6

2.1.1 2.1.2 2.1.3 2.1.4 2.1.5 2.1.6

2.2

Cultural Analysis..........................................................................................................8

2.2.1 2.2.2

2.3

3.0

Political Factors.............................................................................................................................6 Economic Factors..........................................................................................................................6 Socio-cultural Factors...................................................................................................................7 Technological Factors...................................................................................................................7 Legal/Regulatory Factors.............................................................................................................7 Environmental and Ethical Factors.............................................................................................8 Hall 1977 Contextual Continuum of differing cultures.............................................................8 Hofstede’s Dimensions of Culture..............................................................................................9

Conclusion of Country Comparison & Final Country Selection.......................10

Entry Modes......................................................................................................11

3.1

Strategy for Entry Mode Selection..........................................................................11

3.2

Initial Entry Mode Selection.....................................................................................11

3.3

Further Entry Modes.................................................................................................12

4.0

Marketing Strategies........................................................................................13

4.1

Consumer Segments Targeted................................................................................14

4.2

Recommendations for Product...............................................................................14

4.3

Recommendations for Place...................................................................................15

4.4

Recommendations for Price....................................................................................15

4.5

Recommendations for Promotion..........................................................................16

5.0 Conclusion.............................................................................................................17

1.0 Introduction

1.1 Project brief and purpose of report This report will discuss the key elements within the international marketing planning process, using Pret a Manger (Pret) as a case company. The scenario is that Pret’s new owners want to move forward with further international expansion into one of four, shortlisted European countries. The shortlisted countries are; Portugal, Sweden, Hungary and Luxembourg. I have been hired as a consultant, advising upon country selection, entry modes and marketing strategies, with this report providing Pret with a detailed plan for their international expansion.

1.2 Overview of Pret Pret a Manger first opened in London in 1986, and now has over 450 stores in 9 countries. Pret are the UK’s leading retailer of high quality, natural, ready-to-eat sandwiches, salads and drinks (Bridgepoint.eu, n.d.). Pret aim to provide quality products, with their mission being to “create handmade, natural food avoiding obscure chemicals and preservatives’ (Pret.com, n.d.). The food they sell is fresh, healthy and handmade with carefully sourced ingredients. All food is made in-store on the same day it is sold, with none of Pret’s products having a sell-by date (Pret.com, n.d.). Pret pride themselves on being socially responsible, with a variety of different corporate social responsibility (CSR) strategies in order to try and meet stakeholder’s needs. The Pret Foundation has a range of different initiatives that help encourage sustainability, as well as do social good. Pret donate any unsold food at the end of the day to food rescue organisations which feed the homeless, providing around 700,000 meals every year (Pret.com, n.d.).

1.3 Pret target market The target market for Pret is young professionals working in urban areas, typically office workers, who are time-stretched, yet still demand high-quality, healthy eating options (Celentano, 2018). Despite their products being of a high-quality, Pret still aim to appeal to value-driven consumers by selling at a reasonable price. They offer a range of eating options in the $3.89 to $6.99 price range (Celentano, 2018), yet this price is still above the national average for a lunch. Pret’s target consumers are often socially and ecologically conscious, with 52% being meat-eaters looking to cut down (Pret.co.uk, 2016).

1.4 Pret domestic marketing strategy

Pret’s largest market is within the UK, with over 360 stores. The majority of these are in London, the most urbanized area of the UK and a transport hub. London has a high concentration of Pret’s target market; described in 1.3. In order to meet their target market’s needs, Pret aim to have the customer out the door within 60 seconds of them making a selection (Celentano, 2016). This gives customers a consistent, high-quality experience, making them more likely to come back. This strategy is a successful one, with the average Pret customer coming in three times a week (Celentano, 2016). Pret use a variety of marketing strategies in order to appeal to health-conscious consumers, an example being their passion facts. These messages highlight the care that goes into making Pret’s products, aided with appealing photography (Celentano, 2016). This reinforces their image as a healthy, responsible eating option amongst their target market. Pret meals come in smaller portion sizes, yet still offer the correct nutritional value to the customer (Celentano, 2016). Pret look to capitalize on new eating tends, like the increased prevalence of vegetarianism and veganism. This trend is common amongst Pret’s target market, resulting in the opening of the first Veggie Pret store in London. The store has been successful, seeing sales increase by 70% in 2016. This shows that Pret are in touch with their target market’s needs and is well placed to fulfill them. As Pret’s customers are typically ecologically and socially conscious, their CSR initiatives and goodwill marketing have been successful in engaging with their target market.

1.5 Pret international marketing strategies Pret’s international marketing strategy has been to open small clusters of stores in cities and transportation hubs. Pret are active in 9 different countries, 5 of these being in Europe. Pret remain committed to international expansion, with a 20% net shop growth in 2016 (Pret.co.uk, 2016). However, international expansion has not always been successful, with them closing two locations in Shanghai in 2018. This decision was made in order to focus investment into Hong Kong, where Pret have 27 shops and see greater potential for growth in the Asian market (Gouk, 2018). This showcases Pret’s strategy of testing out locations to see if there is growth potential, before pumping in heavy investment. Pret’s restaurants seem to thrive in transport hubs. In 2016, Pret opened stores in “key locations, including a second shop in Penn Station in New York, a first in Charles de Gaulle airport in Paris, and one in Dubai international airport” (Pret.co.uk, 2016). This strategy has proved successful for Pret thus far, with 16% of all sales coming from stores at airports or train stations (Pret.co.uk, 2016). Pret have focused on local taste and personalization in all of the markets in which they operate. Rather than having one consistent global offering, they customize their stores to meet the needs of consumers in that region. This can be seen through; menu variations, portion sizes and different seating arrangements in French stores. This is essential as some of Pret’s most popular products in the UK do not translate well to other markets. For example, US consumers are far warier of mayonnaise than those in the UK (Celentano, 2018).

2.0 Country Comparison and Selection

2.1 PESTLE analysis The PESTLE framework is a tool that can be used to analyse the external environment within a country. It gives an insight into different macro-level factors which may impact the success of their international expansion. This analysis can be used to deduce which country has the best external environment for Pret. 2.1.1 Political Factors The political environment is important when considering setting up operations in a new market, especially for a firm like Pret who are very vocal regarding social issues and look to do good in wider society. Sweden has very high political freedom as well as freedom of press (Gov.uk, 2017). They also accept a high number of refugees (Thelocal.se, 2016), which aligns with the Pret Foundation’s schemes to donate food and money to food rescue charities and shelters. Sweden is like-minded in wanting to help vulnerable groups, meaning that the Pret Foundation is more likely to thrive in this environment. Luxembourg and Portugal, the latter being socialist, also have good political freedom (Gov.uk, 2017) (Gov.uk, 2018). This is positive for Pret who share the same socialist values, as demonstrated by their charitable initiatives. In contrast, Hungary has lower political freedom than the other shortlisted countries (Gov.uk, 2018.), which does not fit with many of Pret’s brand values. Hungary is also politically unstable (Gov.uk, 2018), suggesting that at present it is not a good market to enter as this can often cause the economy to be volatile. 2.1.2 Economic Factors Sweden has the most sustainable and stable economic growth of all the shortlisted countries (Gov.uk, 2017). This is demonstrated by stable public spending, domestic demand and exports (Gov.uk, 2017). Sweden was ranked 6 th in terms of their business environment, by far the highest of any of the shortlisted countries (Business Environment Rankings, 2014). These are positive signs for Pret should they choose to expand into Sweden, as the country has a growing economy to tap into. Luxembourg is highly reliant on the financial sector, accounting for 36% of their GDP (Gov.uk, 2017). This is positive for Pret as there will be a large amount of financial sector professionals who work in the city; their target market. Luxembourg boast a very high GDP per capita (Gov.uk, 2017), good for Pret as they sell premium priced products appealing to those with higher incomes. Hungary is predominantly an export-based economy, with fairly unstable growth and a high public debt (Gov.uk, 2018). These do not appear the ideal economic conditions for a new business, selling high quality products, to enter. Despite good economic growth, Portugal has a high unemployment rate (Gov.uk, 2018), meaning that Pret would be able to accrue a large workforce relatively quickly. However, Portugal’s business environment is ranked 38 th, the lowest of the

shortlisted countries (Business Environment Rankings, 2014). This, combined with low economic freedom, suggests that the market conditions are not ideal for a new business to enter. 2.1.3 Socio-cultural Factors Sweden has seen a significant drop in meat consumption in recent years (Court, 2018). With nearly 1 in 5 amongst the 15-34-year-old demographic being vegetarian or vegan (The Independent, 2014). This is promising for Pret, especially with their new Veggie Pret initiative. Thus, Sweden presents an exciting opportunity to explore this idea further. Sweden has the highest worker motivation score of the shortlisted countries at 7.19, promising given that Pret are very demanding of their workers. 87% of Sweden’s population live in urban areas (Gov.uk, 2017), more favorable than the 72% and 65% urban populations in Hungary and Portugal respectively (Gov.uk, 2018). Luxembourg has a culturally-diverse population, with 90% being urbanized, the majority of which work in the dominant financial sector (Gov.uk, 2017). This aligns well with the target market. Pret’s success in airport outlets proves they are capable of appealing to a culturally-diverse range of consumers. Hungary has a big agricultural industry, with a preference for fresh food (Gray, 2014). This is good as fresh ingredients will be both popular and able to be sourced at a low cost. However, Hungary’s worker motivation is just 4.38. This indicates that Pret may struggle to motivate their workforce to achieve the high standards of quality expected. In Portugal, vegetarianism and veganism are on the rise, increasing 400% over the last decade (Theportugalnews.com, 2017), presenting an opportunity to further explore Veggie Pret. However, the Portuguese have much more relaxed dining and commuting patterns, which is not a good sign. Pret make fast service a key part of their strategy, but this is unlikely to be successful in Portugal. Moreover, mobile food sales account for just 13% of total restaurant sales in Portugal (Aaron Allen & Associates, Global Restaurant Consultants, 2018), showing a lack of demand. 2.1.4 Technological Factors Good transport links are essential to ensure ingredients are fresh when delivered. Transport hubs are also a prime location for Pret, meaning that density of railways is a consideration for the business. Sweden ranks as tier 1 on the European Railway Index whilst Luxembourg is placed in tier 2, and Portugal and Hungary are tier 3 (Duranton, 2017). This shows Sweden has the most advanced rail network of the shortlisted countries, which is highly desirable. 2.1.5 Legal/Regulatory Factors

Sweden Luxembourg

Corporate Income Tax 22% 18%

VAT 25% 17%

Portugal 17-21% Hungary 9% Figure 1 – Tax Rates in shortlisted countries (export.gov, n.d.)

23% n/a

Figure 1 shows tax rates in the shortlisted countries. From this it can be seen that Sweden and Portugal have the highest levels of taxation, with Hungary by far the lowest. This makes Hungary an attractive option due to the potential for large financial returns. Sweden has strict regulations regarding health, sanitary and labelling rules (export.gov, n.d.). Hungary also require all labels to have a certain level of detail, as well as being translated into Hungarian (export.gov, n.d.). This is something Pret should consider, given that they have had prior labelling issues.

2.1.6 Environmental and Ethical Factors Sweden and Luxembourg are typically more generous toward charitable causes than Portugal and Hungary. This make the aforementioned countries a good fit for Pret, who do a lot of work for charitable causes. This is evidenced by them ranking 42 nd and 41st on the world giving index, in contrast to Portugal being ranked 83 rd and Hungary 120th (CAF World Giving Index, 2018). 2.2 Cultural Analysis This section will analyse the present culture in the four shortlisted countries. This is important as Pret should aim to expand into a country that’s culture aligns with that of the business. This will lead to a higher chance of success, avoiding a possible ‘culture clash’. 2.2.1 Hall 1977 Contextual Continuum of differing cultures

Figure 2 – The contextual continuum of differing cultures With reference to figure 2, ‘Context’ refers to the way in which people in a culture communicate with others (Thompson, 2014). In a high-context culture; gestures, body language and other non-verbal cues are seen as more important (Thompson, 2014). Thus, the messages are more implicit. In a low-context culture, communication is centered around verbal messages, making the messages more explicit. A higher context culture, with more implicit messages, is more difficult for an outsider to understand. Thus, Pret should look to launch into a low-context culture, as it will be easier to understand and tailor their offerings to meet the needs of consumers. Portugal’s culture is most similar to ‘Italians/Spanish’, making it the highest-context of the four shortlisted countries. This makes it the most challenging culture to grasp and create appealing marketing strategies for. Contrastingly, Luxembourg is lowestcontext culture, most similar to ‘German’, making it the easiest to understand. This makes it easy for Pret to figure out what consumer needs are and how to meet them. Hungary and Sweden both fall under ‘Scandinavians’, a low-context ...