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Analysis of Food Supply Chain Models

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Chapter 1 - Introduction

1.1 Globalization in Food Industry background

Since last decade, Globalization is a trend in the food industry due to growing potential markets in various developing countries and changing consumption pattern of the people. Integration of international food markets and increasing expansion in international markets of the firms is the most significant trends in global economy. Market liberalization and scientific progress gave rise to globalization. Even though consumer diets are gradually changing globally; there are variations in food shopping patterns around the world which is mostly based on income levels.

The focus of food retailing industry in developing and developed countries was different with respect to consumers and the type of food demanded. The trend was that the developing countries retailers focused on high value food while the developed countries retailers focused on meeting consumer demand with respect to quality, security and choices. Thus various retailers are now looking at exploring new markets and using more opportunities in different kinds of developed and developing markets.

Retailers have the information regarding the consumer preference and the standard of living which in then applied for research in segmenting the market according to market demand, affordability as well as quality. Hence food retail sectors is continuously growing and making innovative sale systems. The global food retail sale has increased up to $2 trillion yearly and the top 15 global supermarket companies’ account for more than 30 percent of world supermarket sales.

Bourlakis (2004) opines that “The current changes are driving food supply chains to take up coordination between producers and retailers to aid modifying products to meet consumer demands. The food supply chain progressed from series of shorter, independent transfers to more unified, coherent relationship between processors, manufacturers and retailers”.

Lubbers (1997) refer to the term globalization, meaning the global sourcing of raw materials combined with local marketing. Stalk and Hout (1990), Christopher (1992) and Hewitt (1994) suggested that “The keys to long-term competitive advantage in today’s marketplace are flexibility andcustomer response”. To maximize a competitive advantage, all members within the Supply Chain should ‘seamlessly’ work together to serve the end consumer (Towill, 1997).The effects of globalization (i.e. open markets), the market entranceof new competitors, and stricter governmental requirements for food safety and environment friendlyproduction place increasing demands on management.

This study will examine some of the food supply chain models, evaluating it whether the consumer preferences are bringing changes in the global food supply chain model. Further effort will be made to analyze the changing patterns of traditional and evolving model for existing food supply chains and how it affects the sale and demand of foods in the market.

With the introduction of supermarkets in the 21st century more and more traditional grocery outlets have suffered a fall in share from 40 percent in 1995 to 36 percent in 2005 and thus their was rise of supermarkets (Neff 1997a).Thus globalization has come into picture where more and more supermarkets are establishing in various countries due to decline in international trade barriers and more opportunities for investments as well as growth as a multinational.

1.2 Statement of The Problem

There are various factors which affect the global food supply chain pattern and every stage of supply chain undergoes some kind uncertainties which cause inefficiencies in firm’s logistics. Food industry is also facing various issues regarding proper planning of distribution system which incurred a high cost to the retailers. Due to high competition and growth in the retail sector, many manufacturers and retailers have understood that there can be significant amount of cost reduction by making improvements in logistics.

This can be achieved when the suppliers and the manufacturers work together to give better value to the consumer by maximizing costumer satisfaction and minimizing cost of distribution. Thus there is a need to redesigning a supply chain model.

UK’s Milk supply chain is one of the complex food supply chains.UK is considered as one of the largest milk producers in EU. However, the major concern for UK is that even if the UK is mainly self-reliant in milk, the value of UK exports of milk products is significantly lower than the value of imports and in 2007 the UK had a trade deficit of about £881m in dairy products. (Defra, 2007).Several reason have been estimated which has led to issues in dairy sector in UK.Thus the above issues raised a demand for further in-depth investigation. They thus form the basis for this study.

1.3 Purpose of The Study

The purpose of study is to examine the food supply chain model present in global food industry as well as UK’s milk production and supply chain in particular. Specially, the purpose of the study was:

  • To identify the changing food system pattern in food manufacturing and retailing globally.
  • To highlight conventional and developing model for existing food supply chains and to asses its affects on the global food market.
  • To find out the socio-economics impact of changing pattern of food supply chain on society.
  • To study the supply chain models and to examine how the model could be designed more effectively and efficiently in order to improve supply chain uncertainties.
  • To examine the reason of decline in the milk supplies in UK which leads to decrease in milk exports and increase in milk import even if UK is self sufficient in milk production.

1.4 Research Questions

To provide focus and direction for the study and to successfully carry it out, the following research questions have been raised:

  • a) Do the changing pattern of food distribution system have an effect on consumer and retailer’s relationship? (b) If they do, in what ways it effect the consumers? What changes should be undertaken to improve on distribution system?
  • Which are the important factors for food supply chain developments and the important characteristics of the food retail sectors, and their effects on the food supply chain?
  • What is the need to redesign food supply chains model?
  • What are the strategic, tactical and operational decision made for food supply chain decision like production and distribution?
  • How globalization in food industry has helped in growth of the world economy?
  • Has the retail sector become more powerful then food manufacturing sector?
  • What are the issues in Milk supply chain in UK? What is the reason for higher import of milk?
  • What is the percentage of production of processed milk products in UK? What are the demand and supply of these milk products?

1.5 Significance of The Study

This research work is to look at the current supply chain process in UK and evaluate the food supply chain model in order find out the changing patterns of global food supply chain which affects the consumer. Thus the study is significant for the following reasons:

First it will help shed light on the ongoing transformation in the food industry globally. It will also help us to understand certain issues which exist in different processes of supply chain management. Also findings from the study may serve as a basis for evaluation of entire food supply systems which has shifted from national to global retailing. This will help them to adopt feasible measures to improve the relationships between retailers, manufacturers and consumer.

The study will also contribute to existing knowledge on what encouraged the retailers, distributors and manufacturers to improve on the efficiencies of existing food systems. This could help strengthen retailing internalization which will further help in focusing more on increasing sale growth and market share than on profitability. The growth in private label and consumer interest brought about new changes in food retailing. In this way, the study will serve as basis for further research on the topic in the various countries as well as all over the world for the particular type of food product supply chain.

Further case study is performed on UK dairy industry. It will address the positive as well as negative aspects in this sector. It also points out the market share for each dairy product and issues in dairy sector. The study also suggests the scope for future innovations in this sector.

1.6 Organization of The Study

The study is organized in following way:

Chapter one provides general information of the study, the research problem, purpose of study and research questions and objective of study. It would also present information on the significance of the study, limitation and organization of the study.

Chapter Two presents background information and key characteristic of food supply chain globally.

Chapter Three presents a review of available literature related to supply chain. In particular, literature on the concept of changing global supply chains perspectives as well as the socio economic effect on the people due to change in food supply chain as well as relationship between society and changing supply chain will be studied.

Chapter four focuses on the dairy food supply chain model, its characteristics and future of the dairy supply chain sector. It will also focus on issues in production of milk and milk products.

Chapter five presents the summary and conclusion of the research findings. It also discusses the findings and implications of the present study and provide a conclusion.

Chapter 2 - Backgroud

2.1. Introducing global retail industry

Last year in 2007, national statistics confirmed that there were 55,540 retailers having around 103,000 retail outlets globally. The world’s major food retail companies are Wal-Mart Stores, Inc., Carrefour Group, The Kroger Co, Metro AG and many more. This company originates from different countries like US, France, Germany but they have made their mark in international markets also.

Wal-Mart being the leader has expanded in over 9 countries and operates nearly 1,300 outlets across North America, South America, Europe and Asia. After acquiring the large market share in developed countries, these major retailers are looking at developing markets like China and India. There is extreme competition in retail markets because companies are always looking for acquisition prospects for further expansion.

White et al., 2004, opined that “there is speculation that Carrefour, the world’s second biggest retailer by revenue may be in the sights of Wal-Mart, the only retailer that is bigger, which unsurprisingly, recently signalled it would like to start expanding more aggressively in Europe”. Reduced trade barriers and regulations have facilitated the global companies to enter the markets of developing economies like India while in China the government has increased the barriers in order to increase the competition between the global companies. Grocery and Food retailing are getting concentrated.

According to the Euromoniter report 2007, “the mature markets of Western European and US markets along with growing saturation in Eastern Europe have turned retailers' focus to the BRIC (Brazil, Russia, India and China) markets, which show extraordinary growth potential”.

Retailers are developing retailing strategies by doing market research specific to a particular geographical region and then using technical innovations and marketing knowledge to develop in that area. There are large formatted supermarkets, hypermarkets and a few small sized formatted stores and grocery stores. Private labeling of the retailers brands are the growing trends now a days and they have become successful as well due to the quality of products they provide at much cheaper rates.

Worldwide: Top 30 Grocery Retailers, 2006


Rank/ Company

Country of Origin

Retail Banner Sales 2006 (USD mn)

Market Share (%)

Net Sales (USD mn) (1)


Grocery Retail Banner Sales (%)

Domestic Sales (%)

Foreign Sales (%)

1 Wal-Mart









2 Carrefour









3 Metro Group









4 Tesco









5 Seven & I (2)









6 Ahold









7 Kroger









8 Sears









9 Costco









10 Target









11 Rewe









12 Casino









13 Schwarz Group









14 AEON (2)









15 Aldi









16 Auchan









17 Walgreens









18 Edeka









19 CVS









20 Safeway (USA)









21 Leclerc









22 ITM (Intermarché)









23 Sainsbury









24 Woolworths (AUS)









25 SuperValu









26 Tengelmann









27 Coles Group









28 Loblaw









29 Delhaize Group









30 Morrisons









Total Top 30










Total Worldwide




Notes: (1) Net sales include continuing consolidating operations only. (2) Retail banner sales for Seven & I and AEON include sales for their entire international retail network regardless of local ownership. Source: Planet Retail Ltd - www.planetretail.net

2.2 Changing global consumption trends

Many of these chains of supermarkets have finally been recognized as the transformation of the population’s lifestyles on their shopping habit. There have been recent changes such as increasing smaller households, food eating habits and more of the beforehand shopping for a week due to their busy lifestyle as well as change in eating kinds of food at different timings. Recent advances in e-shopping can been seen, where there is immense competition between the retailers.

The weekly household expenditure on food and non-alcoholic drink as recorded by Expenditure and Food Survey in 2006/2007 fell from 33% in 1957 to 10.3% in 2006. The most purchased items in few decades ago included were milk, poultry and meat but in year 2006 most purchased items includes only one food item, restaurants as well as takeaways. As the observed from the trends, shopping mostly depends on the prices the supermarkets. Thus more population is seen shopping in the supermarkets where there are low and discounted prices.

People have become more aware of the health and nutrition. Thus there has been a trend in increasing the intake of the fat reducing products and increasing the intake of products which provides vitamins and minerals. However lots of the diets include fatty foodstuffs which are cheaper than the fruits and vegetable. Due to these types of diets obesity is increasing day by day and more and more people are seen unhealthy. This trend was concluded by monitoring the food consumption pattern.









oil and fats


fruits and



other foods






oil and fats

fruits and vegetable

other foods

Source: International Comparison Project Data

The major retailers Food consumption pattern has changed a lot during the years. The major food consumption trend mainly depends on the social and economic factors. In the case of developed economy, the higher calorie content and the cheaper products like potatoes and cereals have decreased while the consumption of fish and meat has increased.

The evolution of food consumption pattern and food structure changes was related to income increases measured in per capita GDP. Other factors such as consumer attitudes, marketing strategies, health concern, food prices and social environment also affects the consumption patterns. As income has increased, the pattern of food purchase has changed. Consumer eats more of some particular product and less of others.

The food retailing has changed dramatically. At the beginning, their was a transition from small food shops to supermarkets and the hypermarkets encouraged by their lower prices, long open hours and a great variety of food products. Small shop have transformed into the specialist shops which offer fresh quality product at higher prices where consumer prefers to buy only quality product.

Food habit has differences in dietary habits across various countries. Urbanization, consumer outlook about the quality of the product, demographic factors, improved infrastructure are also some of the major factors that have contributed to the changing patterns. In most of the developed countries, improved diets as well as demand of high quality products have augmented the imports of high quality processed foods.

Table: Population and economic growth by region

























United States









Western Europe



Economies in Transition



Mideast and North Africa



Rest of the World






Source: World Development Indicator, The World Bank

There are differences in consumption pattern in the different countries for example the low income country spends a greater portion their income on staple food and have immediate effects in the consumption pattern if food prices and income changes. Different lifestyles in cities and villages people had a difference in consumption pattern depending upon food availability, purchasing power as well as diet differs. Consumers also are knowledgeable and are more anxious about health and quality of food product.

There have been formations of groups in this various retail chains which are the specialty food store, food discount stores, convenience stores and other distributors like vending machines and institutions. The specialty food stores like poultry market ,bakery and other food stores has declined about 55 percent in last few decades. While the discounted food store which is also called as supermarket sells at cheaper discounted prices thus their market is grown during past years.

These discount stores also reduce the extra cost of stamps and marketing on price. Therefore growth of convenience stores has helped the medium sized grocery stores to grow. Thus there was a sudden change from the smaller shops to the retailers. Food supply distribution system starts from producers, to processors through food brokers to wholesalers, to retailers and finally to the customers. Food processors are the link between farmers and food wholesalers and retailers. Further processors sell to the wholesaler and retailer through food broker rather than their own sales forces.

2.3 Food supply chain framework

Food supply chains are complex, active, time related environment where commodity reliability is essential. The six factors which play an important role in food supply chain as suggested by M.Bourlakis & P.Weightman are as follows

  • Quality
  • Technology
  • Logistics
  • Information technology
  • The supply chain framework
  • Consumers

Quality is the degree of resemblance between what a consumer expects and what is available for them. So the most important task is to deliver proper quality products on time according to consumer and supplier expectation. For overcoming the issues in delivering quality products, quality assurance schemes, production and manufacturing to retailer’s protocols and the application of quality management systems and standards such as HACCP and ISO series are being undertaken.

Technology is always varying in the food supply chains. These technologies are undertaken for developing integrity, efficiency and ability to increase the productivity. Technology in food industry can include innovation in product development, new techniques of food preservation, instrument for detecting the foreign particles in foodstuffs or may be developments in genetic engineering or biochemistry or logistics.

Logistics is process of a single firm and it includes the external flow of materials, information and money between the businesses. Harvey (1996) and Christopher defined logistics as “the process of strategically managing the procurement, movement and storage of materials, parts and finished inventory through the organization and its marketing channels in such a way that current and future profitability are maximized through cost-effective fulfillment of orders”.

Information technology plays important role in accessing information of purchase of a particular product. There are various electronic methods found in retails which are EPOS and EDI which are found at the retailer’s outlets to measure product purchase. The Economist Intelligence Unit (1988) stated that “the benefits accruing from EDI to business as being faster trading cycles, improved inventory management, a reduction in working capital requirement, enhanced cash flow system and error reduction in supply chain system”. Also this kind of systems helps producers, retailers and suppliers to avoid the extra paperwork.

Consumers regulate the supply and demand chain which will be based on quality, type, quantity of product supplied. The efficient consumer response data is used by the wholesaler, retailers and manufacturers to discuss the about the developing efficient supply chains (Fiddis, 1997).

Chapter 3 - Literature Review

3.0 Introduction

From the prospective of global retailing, definite attempts have been made by the food retailing industry to have active relationship between the retailers and suppliers except few uncertainties. There is sudden shift in consumption pattern which has most important impact on the food market all around the world. Accordingly Food producing companies are forced to change over from push (supply) oriented production to pull (demand) oriented production (Hughes, 1994).

According to Davis (1993) and Lee and Billington (1992), “the identification of decision making uncertainties in Supply Chain decision making, and especially the identification of system characteristics that cause these uncertainties, can help in effectively redesigning such a Supply Chain”. Reducing uncertainty is achieved by understanding the root causes and how they interact with each other (Mason-Jones and Towill, 1998).This chapter looks at some interesting literature on changing traits of food supply chain globally.

In particular, the literature reviewed in this chapter includes:

  • Key characteristics of food market structure
  • Changes in global food supply chain
  • Uncertainties in food supply chain
  • Relationship between retailers, suppliers, manufacturers and customers
  • Need for redesigning of supply chain

3.1 Key characteristics of food market structure

According to Erdener Kaynak in World Food Marketing systems, 1986 the Food manufacturing, retail and supply chain industry is heterogeneous in its products ranges as well as in its structure which includes various sectors of the industry. Currently USA has got half of the world’s half largest food and drink. After US companies, UK has got the largest market share. These shares of food and drink companies are increasing day by day through vertical integration.

The world’s food companies are not perfectly structured with many huge multinational firms and many small sized companies. During the few years, it has been observed that there are many mergers and acquisition taking place in the food corporation which also affects the supply chain and manufacturing process.

Food safety is the key characteristic of food supply chain and is given a large amount of importance by the manufacturers, producers, wholesaler, retailers and the food service industry. Consumers play an important role in any products success or failure. Each of them is different having different requirements, attitudes, liking and desire. Thus these attitudes of people should be monitored and act in response accordingly. The main aspect of food supply chain is that they have to inform the consumers regarding the food risk, description of any hazard or crisis as well as act in accordance with government rules and policies.

Consumers today are upgrading their diets to include higher valued products than in the past (Regmi, 2001; Rosegrant et al., 2001).Many studies have shown that a change in food supply chain is linked with consumer preferences whereby people from higher society demand for high value food than those of lower status people.

Recent socio-economic developments have resulted in changing performance requirements for food Supply Chain’s as a whole and, consequently, for all stages in the Supply Chain. Because of demographic developments and changing social concerns (e.g. strong increase of the ageing population, more double-income families and smaller households) there is a demand for fresher products and products with higher added values.

Globally the food consumption pattern is based on the income groups present in various countries. The food consumption depends on the status, trend, and taste as well as it will depend on the quality of food eaten by a particular family. The following pyramid depicts that the various global consumption pattern depends on the income of the family.

Low income


Middle income Countries

High income Countries


Status, trend, taste

Physiological and health needs

Source: USDA Economic Research Service

Determinants of food consumption are the changes in the consumer income, in product price and in prices of paired and substitute goods as well as preferences and socio-demographic factors. In centrally planned countries, people’s diet depended status of social culture of the people. Most of countries spent their money on the import of foodstuff due to their respective existing economy. Thus the preferences of the consumer were not related to the quality and consumption of diverse kinds of foodstuffs. Thus the availability of the food product was most important part of food consumption pattern (cf.Henson and Sekula, 1994, p.422).

3.2 Issues in global supply chain

Dornier et al., 1998; Wood et al., 2002; MacCarthy and Atthirawong, 2003 suggested that “Global supply chains are more difficult to manage than domestic supply chains”. The main reason behind it is that as commodities are traded on international basis, it will indirectly increase the transportation cost as well as their will be uncertainties in the supply chain decisions because of increased lead time in the distribution systems.

The other issues of supply chain were different traditions and languages of communication of different countries which also affects the efficiencies of the processes of the supply chains like planning, forecasting. Company also faces the challenges in terms of lack of infrastructure, lack of knowledgeable manpower, technology in different countries where they are planning to invest like transports and other primary facilities required for the smooth functioning of an international firm.

Reduction in competitive advantages due to all these uncertainties is the main issue in global supply chain. Dornier et al., 1998 further stated that “Global supply chains carry unique risks that influence performance, including variability and uncertainty in currency exchange rates, economic and political instability, and changes in the regulatory environment”. While Carter and Vickery, 1988, stated that “Currency exchange rates affect the price paid for goods that are purchased in the suppliers currency and so influence the timing and volume of purchases as well as the financial performance of the supply chain”.

There are many researches going on in food supply chain modelling in order to solve technical problems as the issues are continuously changing globally. Keeney, 1994 pointed out three issues “First, firms are increasingly outsourcing to both domestic and global locations. Second, many firms that had viewed their sourcing problems myopically as an enterprise-level concern now strive to integrate decision processes across tiers in the supply chain. A third issue is the broadened definition of supply chain performance, as mission, strategy and objectives can vary considerably based on the value of the product offered to the customer”.

Other rising issues are regarding the unity in deciding on assessment in global supply chain design. According to Sherman(1998) and Lewis(1999), in practice “firms engaged in Vendor Managed Inventory (VMI) and Collaborative Planning, Forecasting, and Replenishment (CPFR) integrate replenishment planning between enterprises by sharing sales and promotion information”. Likewise, firms that implement Advanced Planning Systems (APS) may integrate production decisions across the supply chain by including supplier inventory and capacity constraints into their scheduling function, striving to avert supply problems before they occur (Rohde, 2000; Bowersox et al., 2002).

Thus these integration preparations also affects the supply chain designs and decisions. Dornier et al, 1998; Brush et al, 1999; Trent and Monczka, 2003 discusses the value and need for integration between facilities in the global supply chain. In addition they find out that an integrated, well-coordinated global supply chain is difficult to duplicate and so plays an important role in competitive strategy.

In recent times, more importance is given on reducing the cost of supply chain rather than on the performance. According to Supply-Chain Council (2003), performance is measured in terms of reliability, responsiveness, cost, flexibility and assets. Additionally, Handfield (1994) mentions five benefits for companies who choose to source globally - improving quality, meeting schedule requirements, reducing cost, accessing new technologies, and broadening the supply base.

Further Bozarth et al. (1998) suggested that “delivery performance and quality as important measures in global supply chain management”. Firms that had previously looked to their international manufacturing sites as a source of low-cost advantage now rely on their global production sites for improved access to customers, suppliers and skilled employees (Ferdows, 1997).

Another study points out that there is growing insecurity in Supply Chain decision making as to what developments to react to, and what action to take. The increase of uncertainty has led to a requirement for higher dependability and flexibility within the production systems and the planning and control systems in the Supply Chain (Handfield and Nichols, 1999). Hence this can also be the basis behind the changes in the supply chain model in global food industry.

Supply chains are those systems which are mostly used for spreading important information from consumers to food producers, as well as to farmers and distribution systems. The most important stages of a supply chain are production, processing, input supply and retailing. Thus managing the supply chain is not remained at national level but that outsourced in outside world to get the benefits of lower tariffs, trade barriers as well as lower cost of production.

That is the main reason behind this supply chain to get transferred globally. Consumers are demands for convenience is increased which has increased the demands and will overtake global retail food sales in the future. In the same study further it is pointed out that “increase in acquisitions of refrigerators may lead to greater household purchases of perishable food products, while increases in ownership of microwave ovens may lead to increased purchases of ready-to-eat foods that require minimal preparation due to which there is higher demand high value food. The problems faced by food suppliers are not new, but recent research on supply chain design and management puts them in a new light”. (Venturini and King 2002, p. 58).

Food retailers in the developed economies like United Kingdom have been the best in the expansion of high-quality private label products that shift brand identity from the food manufacturer to the retailer. Davidson, 2003 opined that “While changes implemented by U.S. retailers in response to consumer demand include a marked increase in new products on store shelves, a rising prevalence of one-stop shops combining grocery and gasoline operations, and wider selection of prepared foods in store deli sections”.

In response to increasing consumer demand for safety, quality, and convenience in food, retailers have adopted more proactive marketing strategies, where they try to achieve customer loyalty not only by improving service, location, and store layout but also by having more influence on the overall, value creation process in the food chain. More recently, food manufacturers have used the health criterion in the development of “functional foods,” food products that have an added positive health benefit (Frewer et al., 2003).Even though the type of health claim will have an impact on consumer food choice, the degree to which a health claim affects consumer choice is dependent on the consumer’s interpretation of the claim based on personal food health theories (Bech-Larsen and Grunert, 2003).

Despite the apparent benefits to consumers, proliferating product assortments are making it more difficult for manufacturers and retailers to predict which of their goods will sell and to plan production and orders in response to customer demand. As a result, the inaccuracy of forecasts increases along with the costs related to forecast errors, such as extensive inventory and stock out costs (Fisher et al., 1994).Hence it is no longer possible to cope with uncertainties by building inventories, creating slack in time or by providing additional capacity (Newman et al., 1993).

Supply Chain Management provides the opportunity to reduce decision making uncertainty in the SC, which management has considered as unchangeable ‘givens’ up to now(Silver et al., 1998). Partnerships with key suppliers and customers will reduce uncertainty and complexity in an ever-changing global environment and minimize risk while maintaining flexibility (Handsfield and Nichols, 1999). Hence there is a need for analyzing the current supply chain and then make an effort to point out critical points and then redesign these models for better consumer and manufacture relationship.

There are various walls between the stages of supply chain which should be broken so that the uncertainties may be decreased which may result into availability of more information which can control the possibility of uncertainty in every step of management. Further it would help the management to estimate the alternative action against this uncertainty on supply chain’s performance. Thus the system would be managed properly and supply chain objectives would be achieved. Some factors which brought about competition amongst the retailers.

Takeaways and food services

Retailers and other supermarkets are also facing competition from various international restaurants and takeaways. Globalization in international food services in 1960 started by Burger King and MacDonald’s and they were the first ones to explore International markets. Senauer.B and Venturini, L. (2005) found out that “McDonald’s is by far the most globalized of the restaurant chains with over 15, 000 outlets in other countries and international sales of almost $20 billion”. All these US food service companies like Burger king, KFC, Starbucks, the coffee house chain, is expanding in Europe and Asia.

Mckinsey and company also suggested that the share of food spending in the traditional grocery outlet will fall from 40 percent in 1995 to 36 percent in 2005(Neff 1997a).Casper 1997, noted that “purchased meals from the restaurants were eaten more outside the premise then inside it thus takeaways gave great deal of competition to the supermarkets”.

Thus to achieve that percentage of market share, supermarkets were keen on selling more ready to eat foods and easily prepared meals. These categories of food service companies have the policy of Franchising, Partnership ventures or licensing agreements. The study done by Masur, 1997 found that “foreign franchised outlets became profitable in an average of 16 months, whereas company-owned ones required 25

Months”. Thus developing good customer relation and business knowledge can help food service companies to enter in new markets. Profit sharing in this kind of business helps in more profit generation by the partners. The main focuses for such bu

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