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This Global Business Solution is for the Red Rooster Australia, which is a leading restaurant chain based in Australia. It opened its first restaurant in 1972 in Western Australia and has since then expanded all across Australia. But with restaurants chain like KFC and Mc Donald's the chain is facing very high competition and the market is shrinking.
In order to survive the company should think of tapping the new economies and expand in to other countries, like China, India and South East Asian. Red Rooster will have to expand in order to survive and tap the growing economy in other countries.
As the world economy is in doldrums due to the recent economic meltdown, the new economies like India and China present a great opportunity for any of the companies who are looking to expand and increase their market presence across the globe. Not only the economy in these countries are growing even the population there are more upwardly mobile and the purchasing power parity in these countries are increasing at a very rapid rate.
This report will try to analyze the opportunities that an economy like India will present to a company like Red Rooster. It will also try to analyze whether it will be a good strategy for Red Rooster to expand into India and also the challenges that it will face. Red Roosted in order to survive the onslaught from other competitors like KFC, Mc Donald's etc it will have to look for expansion and new markets.
This report is prepared keeping in mind that Red Rooster will be entering India. Hence this report will cover a SWOT analysis of Red Rooster as a company. It will also try to examine the issues that might be involved while the company tries to expand into India. At the same time it will try to examine the role of various functions of Red Rooster which will be involved in the expansion strategy.
Introduction - Red Rooster:
Red Rooster is popular all across Australia for their oven-roasted chicken which has been marinated for around 12 hours. There key to excellence is innovation in their recipes and they are making more additions to their menu as they keep on evolving their choice of menu to meet the varying tastes of their broad customer support like the newly added grilled, skin free Portuguese chicken pieces.
In the year 1972 Red Rooster was established the Kailis family in Western Australia. Since then it has continued to develop, offering franchisees. The franchisees are getting an iconic brand along with well developed business and support systems.
Red Rooster acquired the Big Rooster chain in 1992, which operated primarily in Queensland. The stores thus acquired were re-branded as Red Rooster stores, and this increased the total number of Red Rooster outlets to 230 throughout Australia.
Australian Fast Foods which is based in Perth acquired Red Rooster in 2002 from Coles Myer Ltd, and hence brought along with them their own long periods of experience in roasted chicken segment of fast food industry.
Red Rooster now has more than 360 stores with a workforce of almost 5000 employees. Apart from its long-established recipes of roast A-grade fresh chicken and very popular chips. Red Rooster also offers healthy baguettes and salads, along with delicious burgers and wraps.
Red Rooster provides its franchisees with a recipe for a successful partnership their incessant novelty in product development and marketing strategy makes a Red Rooster franchise a very profitable partnership for both the parties.
Economic Trends and Issues:
India is the second largest economy in the world in terms of growth and it is the fourth largest economy in the world. India has a rapidly growing middle class population and their lifestyle is changing. India has a fast food market which is growing at a phenomenal rate higher than any other country in the world. The fast food market in India is growing at the rate of around 30-35% year on year. Most of the major fast food brands have already made inroads into the Indian fast food market and they are also showing substantial growth.
Most of these major brands have made massive plans to expand all across the country as they have seen huge opportunity which need to be tapped. Domino's has come up with a plan to open almost 60 to 65 every year as a part of their strategy for 2012 to 2010. Similarly Yum foods which owns the KFC brand is looking to open around 1000 outlets by the year 2015. (Business franchise, Cover Story, Oct 2007)
Socio-Cultural Trends and Issues:
The Indian social culture promotes eating and snacking in a major way. It is a way of socializing in India. Hence we see the phenomenal growth in the fast food industry as mentioned above. This is the reason that the major fast food brands have very easily established themselves in the Indian market. Initially there were only local players which had restaurants and served Indian snacks to the customers. With the influx of foreign brands the customers found the different taste of their recipes a welcome change.
Even the big brands had to face a major competition from the local brands as they understood the local market and tastes well. But with time the foreign brands had to change and adapt their products according to the local taste, and after a change in their recipes they were able to capture the local tastes. (Business Franchise, cover story, 0ct 2007)
Porters 5 force analysis:
Threat of bargaining power of customers:
Profit of red rooster restaurant depends on the number of customers. In Indian market, because of the presence of other companies like Mc Donald's, KFC and other fast food companies, it gives the customer many options and thus increases their bargaining power.
Threat of bargaining power of supplier:
Red Rooster has less bargaining power in the Indian market because of the presence of various other restaurants in the market. Red rooster can increase its bargaining power by maintaining its uniqueness of the product.
Threat of substitute products:
In the Indian market there are many competitors which can substitute chicken product. The major competitors for red rooster are KFC, McDonald and other fast food restaurants. But still all of these have different primary products.
Threat of new entrant:
It is easy for any restaurant to enter in to Indian market but it is difficult to sustain and earn profit because of high competition. Red rooster loss the first mover advantage as there are other competitors like KFC, already establish in the market. But with its brand name, reputation and uniqueness it can capture the market.
Competitive rivalry within industry:
In Indian market, the red rooster has rivalry with the brand competitors like KFC and Mc Donald's. But this rivalry is very less because the primary product of red rooster is different from these competitors and other fast food restaurants in the market.
Red Rooster SWOT Analysis:
Red Rooster's foremost strengths is its unique recipe to marinate the Chicken for more than 12 hours and then roast it in the oven. The unique blend of Mediterranean herbs make the taste very unique which the competitors obviously have not been able to match over the years. The company can pass on its unique recipes to their franchisee in India so that they may also provide the same unique taste to their customers.
After its 1992 acquisition of Big Rooster outlets in Australia, Red Rooster has become an expert in the franchisee business model. It aims at a 50:50 mix of company owned as well as franchisee outlets as it grows to 600 outlets across Australia. So when the company starts expanding into India the company can have a minimal number of company owned outlets and the rest of the outlets can be franchisee based.
Red Rooster's continuous innovation in its own recipes has helped the company in adding new tastes and items to its menu. This goes to show that the company is constantly trying to cater to the varying taste of its large customer base. This will be very helpful when the company expands into a country like India where the tastes are very different from that of Australia. Hence the ability to innovate and adapt to the local taste will help the company.
A market leader in Australian roast chicken market, an established brand name and the company's ability to provide training to its franchisees will help the company to establish itself in the Indian market. (Bharatbookseo, July 2010)
While other competitors like KFC, McDonald's and Subway based in USA are expanding phenomenally always looking for newer opportunity in newer countries Red Rooster has been a bit slack in this area. The company should have been a bit more aggressive at least in its expansion strategies in Australia. As a result it has lost a first mover advantage in markets like India.
Since it has not expanded into any other countries Red Rooster might face a paucity of experience in expanding into newer markets. The Indian market is very volatile and very unpredictable hence no adequate experience in expanding in to new country might become a major weakness for Red Rooster.
The tastes of the customers in the two markets namely Australia and India are very different hence this can again be a weakness due to lack of experience.
Even the marketing strategies will be very different in India as compared to that in Australia so Red Rooster will also have to overcome this. Again a lack of experience will prove a weakness for the company. (Bharatbookseo, July 2010)
India has a large population which consists of youth which is either studying or working for MNCs. This presents a huge market opportunity for Red Rooster which it can tap with proper strategy. A major section of the urban population in India consists of upwardly mobile middle class which has increasing purchasing power parity and is willing to spend. Red Rooster can very well tap this segment.
The presence of restaurant chains like KFC, McDonald's, Domino's, Subway etc has already trained the Indian customer regarding the various tastes from other countries. So Red Rooster will not have to educate the Indian customer about the concept of specialty chain restaurants. All it needs to do is to market its product properly.
With its wide range of specialized recipes which has its own unique taste Red Rooster has a great opportunity to make its products popular in the Indian market which is constantly looking for newer tastes and is ready to experiment.
Also a high penetration of television and mobile in India brings huge opportunity for Red Rooster to educate the customers about its products. The company can easily capture its prospects attention with a proper mix of interesting recipes and discount offers etc. The company can use a mix of communication media to spread the word and create a buzz around its products. (Anonymous 2009).
The major threat for Red Rooster entering into India comes from its own lack of experience of expanding into new countries or having operations outside Australia. Due to this lack of experience it might end up losing money but apart from that it might not be able to make a very good first impression amongst its prospects.
The presence of major brands like KFC, McDonald's, Subway, Domino's etc which are world leaders in the fast food industry will also be a major threat. These brands are already well established in the Indian market and are very popular. The Indian customers have accepted them over the years as they have customized their menus and recipes as per their tastes. Hence it will be very difficult to make the customers shift from the established brands to a new lesser known brand like Red Rooster.
The Indian market is very open to new businesses and the policies on foreign investments of the Indian government are very friendly towards the companies but these policies might change with a change of government and it might add to the threats that Red Rooster might face.
Off late there has been a major emphasis on the nutritional values of the food and the fast food companies are the major targets of such a campaign. Hence Red Rooster will also have to face this challenge which the aware Indian customer will pose for the company.
A major part of the Indian customers are vegetarian in nature and Red Rooster's specialty lies in roasted chicken hence this might also present a threat from the local vegetarian activist groups.
Various Departments of Red Rooster in India:
The role of area manager is to manage the number of restaurants effectively. It is a leadership role which consists of managing the perfect balance between the team, shareholders, customers and sales so as to improve the performance of the business. He is also required to direct and coach the General Manager of the restaurant.
Business Development Department:
This department works in four main areas; construction and design of stores, planning network, store management and acquisition. It is also responsible for maintaining the high standards of comfort, convenience and safety in all the red rooster restaurants.
It is responsible for managing the finance effectively. It consists of a team which keeps accurate records of all business transactions through timely and accurate accounting. This may include managing the cash, paying employees, paying or billing to the suppliers, paying to the commercial team in order to achieve the planned direction for the business.
Human Resource Department:
This department is responsible for recruiting, training and developing a suitable candidate for a particular job. As for the red rooster, the business is related to provide the good customer service so selecting right people for right job is of great importance.
Its function is to make sure that appearance of all the red rooster restaurants should be good, proper training should be given to all the employees and all employees are motivated. The product quality is maintained and served in a fresh environment.
The marketing department is responsible for identifying the needs of customers and provides a suitable strategy so as to achieve those needs. As red rooster is new product in Indian market, this department has to find out the preferred taste of locals and prepared the product accordingly.
The major competitors in the Indian fast food market are as follows:
Kentucky Fried Chicken
Café Coffee Day
These are some of the major foreign brands which have captured the bulk of market share in the organized fast food segment in India. Apart from these there are other players which are private chains and family owned businesses which make up the unorganized segment of this sector. The unorganized sector leads the market share as they have the maximum presence throughout the country. This is major due to the fact that the big brands haven't been able to tap the Indian fast food market fully.
The major strengths of these players which are already present in the Indian market is that they have very well understood the Indian market and have adapted their products as well as their strategies according to the taste of the Indian consumer. They are well known brands in the Indian market and the Indian consumer has adopted them as their own.
So for Red Rooster establishing itself will be a major problem as it is a lesser known brand. Another major problem would be that red Rooster has no experience operating outside Australia. Hence the company should look to address both these issues only then it will be able to get a foot hold in the competitive Indian fast food market. (Anonymous, 2009)
Research: Before entering the Indian fast food market, Red Rooster should first do a proper research of the conditions of the country. This research should take into consideration the economic, political, social and demographical aspects of the country. The goal of the research should be to analyze entry and exit barriers and barriers to growth if any.
Partnership: The next step for Red Rooster would be to see if there is an opportunity for it to partner with a local partner in the country. The other companies have entered the country either through their parent companies like Pizza Hut which belongs to Pepsico which has already been operating in India for many years now and has a good understanding of the Indian market, or they have partnered with a local company. Red Rooster can look for a local partner to collaborate which will help them focus on their products while the partner can take on the responsibility of marketing it.
Business Model: Red Rooster should also work out the plan as to what will be a better strategy of expansion will it be the Franchisee model or the outlets must be owned by the company. The company should first begin with company owned outlets and after it has gained proper foot hold in the market and after it has become an established brand should it go for the franchisee model.
Workforce: The Company should also look to acquire proper talent in their workforce which could help them in getting a smooth entry into the Indian market. This workforce might contain of a few upper level management a majority of mid level and low level management which can be of Indian origin so that they may understand the Indian conditions well and make the strategies which will help Red Rooster in achieving its goal.
Adaptation: Red rooster should look to adapt its menu to suit the local taste. For this again the company will have to depend on a reliable research team which will help the company to find out what kind of tastes will work with the Indian customers well.
The fast food market in India is evolving at a very fast pave and it presents a great opportunity for all the brands which are willing to extract meaningful returns from it. The brands like McDonald's, Domino's, KFC, etc are performing very well in the Indian environment even though they had to tweak their menus a bit to suit the taste of Indian consumer. India has now become one of the key markets for all these brands which are very well established in the global market.
Similarly with some tweaking in its menu even Red Rooster will be able to find a fit in the Indian fast food market. All it needs is a good team which can make a good strategy. It will also help if Red Rooster could find a strategic partner which understands and has operated in the Indian fast food market domain. A strategic partner like Nirula's in India is a very good option. But Red Rooster will have to evaluate many other options before opting for one.
It will be a good decision for Red Rooster to expand into a fast growing economy like India. But to do this the company should be prepared beforehand. It must do all its homework, in the shape of research work, hiring a team of well experienced workforce, look for the best partnership opportunities and then chalk out a plan with short term, midterm and long term goals. Only then it will be successful in the ever volatile and ever changing markets like India.