Final MKTG Report - Tim Hortons Situation analysis PDF

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Tim Hortons Situation analysis...

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Tim Hortons Situation Analysis

Prepared for Joshua Riker-Fox, MKTG-260 Instructor

Prepared by Elena Tofan, Sasheen Osbourne, Taryn Dachuk, Eros Inigo BA Students School of Business SAIT

Requested by Joshua Riker-Fox, MKTG-260 Instructor SAIT

October 22, 2018 1

TABLE OF CONTENTS INTRODUCTION...........................................................................................................................................1 VALUE PROPOSITION...................................................................................................................................2 SWOT ANALYSIS........................................................................................................................................... 3 Strengths.................................................................................................................................................3 Weaknesses.............................................................................................................................................4 Opportunities.......................................................................................................................................... 5 Threats..................................................................................................................................................... 5 TARGET MARKET ANALYSIS.......................................................................................................................... 6 Geographics.............................................................................................................................................6 Behavioural..............................................................................................................................................6 Psychographics........................................................................................................................................ 7 Demographics.......................................................................................................................................... 7 Tim Hortons Positioning Map..................................................................................................................8 CONCLUSIONS AND RECOMMENDATIONS..................................................................................................8 REFERENCES.............................................................................................................................................. 11

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INTRODUCTION Tim Hortons is one of the most well-known coffee chains in Canada. It was launched in Hamilton, Ontario in 1964 by the “hockey legend” Tim Horton [CITATION Placeholder1 \l 4105 ], and over the years, the chain has expanded over Canada as well as the United States. According to the Statistics Portal, in the year of 2017, Tim Hortons had around 3802 stores open in Canada and 811 open in the United States, with a total of 4748 worldwide [CITATION Placeholder2 \l 4105 ]. Tim Hortons started out as a coffee shop that was know for its coffee and donuts. However, as the years went by, the coffee chain has diversified its menu, redesigned the interiors of the locations and has positioned itself to compete with fast food chains. Tim Hortons mission is to provide products and services of superior quality for its customers and the societies it operates in, through leadership, innovation and partnerships” [CITATION Busnd \l 4105 ]. In March 2018, Tim Hortons disclosed its refreshed restaurant design that offers a better restaurant experience for its customers [CITATION Placeholder3 \l 4105 ]. This new image exemplifies Tim Hortons’ focus on improving customer experiences through a modern restaurant environment, while providing excellent quality products [CITATION Placeholder3 \l 4105 ]. Tim Hortons is also a leader in corporate social responsibility. The company has created a children’s foundation in honor of Tim Horton, with the objective of improving communities [CITATION Timnd2 \l 4105 ]. The Foundation “provides camps experience to economically disadvantaged youth” [CITATION Timnd2 \l 4105 ]. Another example of giving back to the community is the coffee partnership. Tim Hortons started a Coffee Partnership, in 2005, in the countries where it sources its coffee: Brazil, Colombia, Guatemala and Honduras [CITATION Timnd1 \l 4105 ]. This partnership was generated to increase the coffee farmers’ standard of life, by teaching them the aptitudes they need in order to succeed [CITATION Timnd1 \l 4105 ]. The company does this, by improving the economical societal and environmental properties of the farmers’ businesses [CITATION Timnd1 \l 4105 ]. Tim Hortons values giving back to the community. To date, the chain has collaborated with over 4,000 farmers and influenced over 20,000 lives [CITATION Timnd1 \l 4105 ]. A S.W.O.T analysis demonstrates Tim Hortons’ ability to maintain a competitive advantage in the market. It identifies the strengths, weaknesses, opportunities and threats that the company may have. At the same time, this report identifies why consumers should purchase the products it 1

offers and illustrates the chain’s target markets by analyzing the demographic, geographic, psychographic and behavioral attributes.

VALUE PROPOSITION A company’s statement used to summarize why a customer would buy a product or use a service it’s called the value proposition. It persuades a potential customer that the product or service, the company offers, has more value than other similar products[ CITATION Inv18 \l 4105 ]. The value equation is the ratio between the benefits offered, typically described as the quality and the sacrifice required, which is represented by the price [ CITATION Dav181 \l 4105 ]. Tim Hortons has a wonderful value proposition for several reasons. Firstly, it offers a wide variety of good quality products and the prices are affordable. Secondly, most Tim Hortons restaurants are open 24 hours a day and people go there any time they want a few moments to themselves with a great cup of coffee or need a fast bite to eat while on the go [CITATION Bui11 \p 227 \l 4105 ]. Additionally, there are multiple ways you can order through: over the counter, drive thru or using the mobile app, which saves customers a lot of time. Moreover, the company has a high Corporate Social Responsibility trying to give back to the communities they operate in, trying to improve the lives of farmers and supporting major sporting events and activities. As an example, is this year’s Smile Cookie campaign, which helped raise a record of almost $7.8 million all over Canada. The program is a fundraising event which offers funding to over 500 charities and community programs in Canada[ CITATION Smile8 \l 4105 ]. All of these reasons are supported by the company’s vision and mission statements. Tim Hortons’ mission statement is “To deliver superior quality products and services for our guests and communities through leadership, innovation and partnerships” [ CITATION missionvision \l 4105 ]. Its vision is “To be the quality leader in everything we do”[ CITATION missionvision \l 4105 ]. Tim Hortons has aimed to be the first in everything: number one in the community, the leader in quality, value, service and new ideas [CITATION Bui11 \p 232 \l 4105 ]. When it comes to the franchisees, more than 90% of the stores are owned by them. And Tim Hortons’ mission in this area is to be fair to everybody. The company wants franchisees to flourish, and the entrance fee is only the beginning of a successful relationship. New franchisees

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are carefully trained and if anybody has problems, the company is there to help[CITATION Bui11 \p 225 \l 4105 ]. Overall, because customers are the key element of a business, Tim Hortons listens to their opinions through direct comments and focus groups, including people who are loyal to other brands. That will ensure the company is going in the right direction, and it’s also a pathway to bigger sales [CITATION Bui11 \p 225 \l 4105 ].

SWOT ANALYSIS A S.W.O.T. analysis is an analytic framework that evaluates a company’s competitive position by assessing its strengths, weaknesses, opportunities and threats[CITATION Inv18 \l 4105 ]. Tim Hortons is a successful company, however there is still room for improvement. STRENGTHS 

Price



Variety

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Community Initiatives



Customer Service

 Social Media and the Mobile App OPPORTUNITIES 

WEAKNESSES 

Poor Brand Awareness Outside of Canada



Franchisees Anger

THREATS

Foreign Markets



Competition



Increasing Health Concerns



Increasing Labour Costs

Strengths 

Price: Tim Hortons provides a wide range of products for reasonable prices. Customers can buy a cup of coffee from $1.59 for a small, up to $2.19 for an extra large[ CITATION Tim182 \l 4105 ] and compared to other restaurants, the chain has low prices that accommodates all income groups.

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

Variety: Tim Hortons started with selling mainly coffee and donuts, however over the years it has expanded its markets by enhancing the menu to accommodate breakfast, lunch and dinner as well.



Community Initiatives: To uphold the legacy of giving back to the community of Tim Horton, the Tim Hortons corporation continues to be a leader in Corporate Social Responsibility. It has funded numerous charities such as Tim Horton Children’s Foundation and Timbits Minor Sports Program [CITATION Timnd2 \l 4105 ]. The chain focuses on building relationships with the youth of Canada through the consolidation of community ties and social relationships, as it can help youth to better handle difficult situations.[ CITATION Tim18 \l 4105 ]. Tim Hortons also started a Coffee Partnership in the countries where it sources its coffee: Brazil, Colombia, Guatemala and Honduras [CITATION Timnd1 \l 4105 ]. The chain generated this partnership in order to improve the farmers’ lives and teach them the aptitudes they need in order to succeed [CITATION Timnd1 \l 4105 ].



Customer Service: Tim Hortons values its customers and is very mindful when it comes to training its staff. The employees are usually very polite, quick and efficient in providing the best service to customers.



Social media and the mobile app: Over the years, Tim Hortons has built its image through social media, becoming very popular and well known. On July 27, 2017, Tim Hortons launched the mobile app. This app gave consumers the opportunity to order and pay ahead of time so that they don’t have to stand and wait in long lines [ CITATION Sop17 \l 4105 ]. It improved Tim Hortons’ customer service and made it more efficient.

Weaknesses 

Poor Brand Awareness Outside of Canada: Outside of Canada, most individuals would probably not be able to recognize the brand [CITATION Placeholder1 \l 4105 ]. As a company with such dominance in Canada, it has not been able to succeed in the international market. Unlike brands like Starbucks or McDonalds that are well recognized worldwide, Tim Hortons has not been able to achieve the same feats and seems far away

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from closing the gap between the chain and its competition [ CITATION missionvision \l 4105 ]. 

Franchisees Anger: Many franchise owners from Canada and The U.S. are pursuing lawsuits against Restaurant Brands International (RBI), which is Tim Hortons’ parent company. Their anger is caused by the fact that they have been overcharged on basic materials. One of the biggest law suits is the $850 million one[ CITATION Ale18 \l 4105 ], which can cause a huge harm to the company’s image. Opportunities



Foreign Markets: Tim Hortons is mainly a Canadian brand, although there are around 800 restaurants in the United States and a very small number in some other countries. The chain focuses on growing in the current and potential new markets [CITATION Tre18 \l 4105 ] and there is a lot of room to grow outside the Canadian borders. On July 11, 2018, the company made public the fact that it signed a franchise joint venture contract with Cartesian Capital Group and during the next 10 years, more than 1,500 Tim Hortons restaurants will be launched all over China. [ CITATION Tim181 \l 4105 ].

Threats 

Competition: Tim Hortons has many competitors which are selling similar products, some of them even offering a larger variety. The biggest competitors in Canada are McDonalds and Starbucks, while in The U.S. there’s Dunkin’ Donuts as well. Tim Hortons must continually improve its product and service in order to stay ahead of its competitors, which is a benefit for the consumers. However, competition can be a threat to the company’s further growth.

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Increasing health concerns: Eating healthy is a concern for most individuals. Increasing health concerns are a big threat for Tim Hortons because it offers a lot of fast food and high in calories products. If the company doesn’t act fast and come up with new ideas and a wider variety of healthier products, that can cause individuals to shop at other restaurants offering what they are looking for, which will eventually result in a big loss of profit and customer loyalty [ CITATION Jes17 \l 4105 ].

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

Increase in labour costs: The increasing labour costs might have a negative effect on Tim Hortons’ operating costs and the company’s profit. As of October 1, 2018, the minimum wage in Alberta increased to $15 per hour, while in British Columbia it is supposed to rise to $15.20 per hour by June, 2020 and in Ontario it will be $15 by January, 2019[ CITATION Ret18 \l 4105 ]. As the company mainly operates in Canada, such rise in minimum wages may increase its operating costs which will have a negative effect on its profit margins.

TARGET MARKET ANALYSIS For a company to grow, it needs to do its segmenting, which means dividing the population into groups that share various features. In that way it will be able to determine if the members of that group defined by segmentation are truly the people the company wishes to target, meaning they would have to be profitable. To segment consumers, businesses use four key characteristics: geographics, demographics, psychographics, and behavioural [ CITATION Dav181 \l 4105 ]. Tim Hortons’ segments have the following characteristics:

Geographics: The chain is extremely popular in Canada and mainly targets its Canadian market living in suburban and urban areas. In fact, there is more than 3,800 Tim Hortons locations through Canada alone (Statista, 2017). However, the company isn’t focused just on Canadian locations and, currently, it has over of 4700 restaurants in nine countries, like the U.S., Spain, Mexico, Great Britain, Philippines and the Middle East [ CITATION Timnd \l 4105 ].

Behavioural: The company’s customers are loyal and frequent buyers, since many of them go to the food chain daily, due to its convenience, low price and variety of menu options. In addition, Tim Hortons rewards them with various contests and prizes such as the “Roll up the Rim to Win” contest [ CITATION rolltherim \l 4105 ].

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Psychographics: Tim Hortons targets those consumers that value fast service and fresh coffee and food items. They cater to those with a fast-paced lifestyle and because many of the company’s customers prefer Tim Hortons for their everyday cup of coffee or meal on-the-go, they offer convenient speedy service. Moreover, through its community initiatives and high CSR the company appeals to people that are not indifferent towards their societies and the environment. The company has green initiatives that are in place to reduce its environmental footprints as well as its energy consumption[CITATION Tim1 \l 4105 ]. Tim Hortons has many lifestyle themes they try and target as well. The organization works intensively at targeting Canadians that are involved in the sport of hockey. It has many hockey-based commercials and contests they put together, at the same time sponsoring Canadian hockey tournaments around Canada for young kids aged 4-8 called the “TimBits league” [CITATION Hok \l 4105 ] based off its trademarked snack bites.

Demographics: The reasonable prices Tim Hortons offers, appeal mostly to consumers from lower to middle working class. The chain has widened its targeted consumers by expanding its product chain to meet the wants and desire of different age groups. For kids, ages 3-13, the menu has “TimBits” and cookies, as well as smoothies and frozen lemonade. The most targeted groups are teenagers and adults, ages 14-35. Tim Hortons offers sugary drinks, menu items like soups, sandwiches and potato wedges, as well as the all-day breakfast options. They also serve light, medium and dark roast coffee to satisfy each individual’s preferences[ CITATION Tim182 \l 4105 ]. The fast service provided and a friendly, relaxed environment appeals to more and more customers. For adults which are 36 and up, Tim Hortons delivers a variety of baked goods, such as biscuits, scones and donuts, as well as hot drinks like teas and lattes. In general, the fact that all these segments are profitable, makes them the company’s target markets. The increasing competition is a big threat for Tim Hortons’ growth. The market positioning map presented below helps us get a clear understanding where does the company stand in contrast with its competitors, like Starbucks, McCafé and Van Houte.

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Tim Hortons Positioning Map High Quality

Starbucks Dunkin’ Donuts Second Cup McCafé Limited Product Line

Broad Tim Hortons

Product Line Van Houte

Low Quality

CONCLUSIONS AND RECOMMENDATIONS Tim Hortons is one of the biggest quick-service restaurant chains in North America. From its foundation, in 1964, the brand had an enormous growth and is, currently, one of the most known Canadian consumer brands[ CITATION Tim18 \l 4105 ]. The company appeals to a wide range of consumers, making use of a good marketing mix (product, price, place and promotion). Its menu continuously evolves to meet the customers’ changing needs and tastes. It includes a broad selection of products, such as: coffee, hot and cold specialty drinks, smoothies; as well as baked products, sandwiches, soups and many more. All the products are reasonably priced and the dollar amount paid for them is lower than the competitors’ prices, attracting all types of customers. The company’s target market consists mostly of people from lower to middle class,

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busy professionals, students and families with children, which live in suburban and urban areas [ CITATION Tim18 \l 4105 ]. Tim Hortons has over 4,700 restaurants around Canada, the United States, and all over the world[ CITATION Timnd \l 4105 ]. The company’s strategy has made it possible for new stores to be opened in the Philippines, Mexico, Great Britain and Spain. Additionally, the famous Canadian brand is soon to be seen in China, as stated in the coffee chain’s international expansion strategy [ CITATION Dav18 \l 4105 ]. For the consumers’ convenience, most Tim Hortons restaurants are open 24 hours. Customers can eat in the restaurant, order take out at the counter or through the drive-thru, useful for people who are always on the go. Every day, Tim Hortons franchises are selling over three million coffee cups and more than a million donuts [ CITATION Tim13 \l 4105 ]. They also have a Twitter and Facebook page, helping raise the brand awareness and not too long ago the mobile app was launched. Now, ordering is even easier. People can save a lot of time by ordering on their personal phones and the app is constantly being updated[ CITATION Ti...