Many of the top American brands have had a great deal of success in Germany and throughout Europe. McDonald's and Burger King have both seen increased profits thanks to German franchising and marketing efforts. Nordsee and Yum! brands also hold a large share of the fast food market in Germany and throughout Europe.
Some economists predict that the market for fast food will continue to grow as people continue to lead hectic lives. Many people simply don't have time to sit down for a home cooked meal every night. While burgers are the most popular fast food in Germany, there are plenty of opportunities for growth in healthier alternatives.
Meso-Level: PORTER'S FIVE FORCES
Threat of new entrants
- the fast-food restaurant industry has limited potential entrants
- since the major players have already shared the market, it is difficult for a new business to get established
- major players have also accumulated their advantages against new entrants by building new restaurants, franchising, and expanding globally
Value of brands world-wide in billion US$ in 2012
Threat of substitute products or services
- many small businesses are able to capture small segments of the market by catering to certain tastes
- plenty of substitutes product are on the market
- Mexican restaurants exist as well
Most favorite fast-food in Germany in 2012 (in %)*
* 1,054 people (age 14+) were asked
Bargaining power of customers (buyers)
- bargaining power of costumers is strong, due to the various competitors they can choose from
- price is a key factor for German customers in choosing restaurants: they compare the values of food and what they pay for the food
Bargaining power of suppliers
- bargaining power of suppliers is strong in this industry, because fast-food chains rely on their suppliers
- since Taco Bell is part of Yum!, it has a stronger position compared to other competitors, because of existing fast-food chains KFC and Pizza Hut
Intensity of competitive rivalry
- competition is rigorous and several large companies hold majority of the market
- main competitors are McDonald’s, Burger King, Subway and Nordsee
- economies of scale can cause smaller competitors to get crowded out or bought out by a larger company
- Taco Bell restaurants must develop more menu specific items and a wider variety to tap into the German food market and to meet the taste of German consumers
Most favorite fast-food chains in Germany in 2011 (in %)*
* 2-3 visits per month; 23,022 people (age 14+) were asked
Number of restaurants of fast-food chains in Germany in 2011
Macro-Level: PESTEL ANALYSIS
Political Environment
- Germany has a parliamentary government
- a democratic constitution emphasizes the protection of individual liberty and division of powers in a federal structure
- Three levels of Government: Federal level, state level and local level
- Government at local level decides the business policies of that location including taxation
- Major political parties: Christian Democratic Union (CDU); Christian Social Union (CSU); Social Democratic Party (SPD); Alliance 90/Greens; Free Democratic Party (FDP); Left Party (LP)
- Germany is a prominent member of international organizations like WTO, UN, IMF etc.
Economic Environment
- highly developed nation with huge industrial capability
- world’s fifth largest economy (GDP $3.629 trillion) which happens to be one of the most important market in EU
- known for its automobiles and chemicals all around the world
- considered to be mechanical engineering hub
- leading exporter of machinery, chemicals and automobiles
- Germany’s share of total world trade is around nine percent
- projected GDP growth is around 0.6 % in the year 2012
- domestic demand will be the significant driver in the economic growth of the country
- industry benefits from the availability of highly skilled labor
- current industrial production growth rate is around 6.7% which can be considered as healthy
- business environment is very country specific in Germany
- if a new business has to enter then it has to integrate itself with local retailers and distributors
- unless a company understands the local needs of the supply chain, it cannot set up its distribution network
- lots of policies set up by Government also need to be complied with
Social Environment
- Germany is the most populous country of EU
- Ethnic groups: German 91.5%, Turkish 2.4%, other 6.1% (made up largely of Greek, Italian, Polish, Russian, Serbo-Croatian, Spanish); Danish minority in the north, Sorbian (Slavic) minority in the east
- population is well educated with modern and cosmopolitan views
- fair amount of plurality in the lifestyles and diversity in the cultures
- demographic challenges such as aging population, immigration issues, depleting incomes due to economic crisis
- business culture in Germany is unique in the world
- the engineers and managers are given high appreciation than accountants and lawyers; the people on job have good academics and technical proficiency
- hierarchy is prominent in almost every organization and most of the power is vested in the hands of top level senior managers
- roles and responsibilities are strictly defined and the business processes are very well defined
- people tend to be less social in the working environment
- teamwork could probably be best described as a group of individuals working to a specific leader towards a recognizable goal
- one of the qualities of Germans is that they put facts ahead of emotions and hence behave very objectively
- they have direct communication style
Technological Environment
- German industry is very diversified and in many sectors it is a global leader
- Germany’s greatest strength is its automobile industry
- the country committed itself instead to developing renewable energy sources such as wind and solar power
- infrastructural facilities are very strong in Germany which facilitates the growth of any business in the country
- it has one of the world’s most technologically advanced telecommunications systems
- the broadcasting media especially TV and radio is deeply penetrated as more than 90% of homes have cable TV, which provides ample opportunities for effective business promotions and marketing
- internet population is 20.416 million which is fifth largest in the world
- well-developed transportation systems in terms of airways, railways, roadways, ports etc.
Environmental Factors
- Europe’s largest and world’s sixth largest carbon emitter
- after signing Kyoto Protocol: 22% reduction in carbon emissions; 39% of wind energy of world’s requirement
- committed to use renewable energy source in future
Legal Environment
- Germany has an independent federal judiciary consisting of a constitutional court, a high court of justice, and courts with jurisdiction in administrative, financial, labor, and social matters
- the highest court is the Federal Constitutional Court, which ensures a uniform interpretation of constitutional provisions and protects the fundamental rights of the individual citizen as defined in the Basic Law(23 May 1949) become constitution of the united Germany 3 October 1990
- the legal system in Germany prescribes strict labor laws with stringent rules against lay-offs
- the law also makes it compulsory for the business to publish financial reports even if the business is not publicly listed
- the wage standards allow the central bargaining of wages unlike most developed countries
- the law of the Federal Republic of Germany applies to virtually all aspects of life
- Germany's legal system has been shaped by constitutional law but is also influenced by the law of the European Union and by international law
- the body of federal laws now encompasses approximately 1,900 acts and 3,000 statutory instruments
- laws are passed by the Bundestag, and decrees on the basis of laws are enacted by the Federal government
- State law is mainly concerned with such matters as schools and universities, the press, radio and television, as well as the police and local government
- in surveys on legal stability, foreign investors put Germany second only to Great Britain
- its legal stability attracts foreign companies and is to the benefit of investments and entrepreneurial activity in Germany
- business-life in Germany is based on the principle of competition
- to control unfair market behavior is within the responsibility of the Federal Cartel Office in Bonn
- fair competition is also safeguarded by the Act Against Unfair Competition
- trademarks and patents enjoy strong protection in Germany
- when exporting to Germany, various aspects have to be considered: customs and taxes, quality and environmental standards, trademark and competition rules etc.
- importers are responsible for clearing the items to put the goods in circulation in Germany
- imported goods must be accompanied by a customs declaration, which has to be submitted in writing, and an invoice in duplicate
Hey there, it's me again! :)
ReplyDeleteReally liked the infographics in this section!
By the way, what is Nordsee? I don't know much about the restaurant.
I have a small question here. Remember, we discussed in the class, how sometimes a franchised brand can still be influenced by a country where it currently operates? For example, totaly different menu for Subway in China? Well, you mentioned that it would be necessary to develop a wider menu to attract German customers. But what exactly would that be? Some sausages? German beer? Sorry for the basic stereotypes :)
And most importantly, wouldn't that ruin the mexican perception and pecularity?
Hi Alexander,
ReplyDeleteNordsee (literally translated "North Sea") is a fast-food restaurant chain offering sandwiches with various kind of fish and other sea products. Mostly you can find Nordsee in shopping malls.
Franchising is a good option for an international fast-food chain like Taco Bell. Local franchisees simply know the food-industry and business environment better than any foreign manager. Further more, they better understand what consumers want and need. To a certain degree franchisees will have a freedom to adapt the menus according to local needs. This does not imply that they can do what they want. It has to be discussed with head quarter of Taco Bell. Important is just to have local managers in order to identify what has to be discussed and changed/implemented/adapted.
Tacco Bell is a Mexican fast-food chain, so we won't change the style of food to a high degree in order to keep the Mexican perception and pecularity. For example, ingredients could be definitely adapted to local tastes. German people usually do not eat spicy or very hot food. So they simply would not enjoy their food if it contains too many unknown spices and hot stuff like jalapeño. So in stead of jalapeño, sweet pepper / paprika could be used.
Concerning the stereotype "beer" it would be an opportunity to serve the Mexican beer "Corona Extra" or other Mexican beer.
Yeah, that's what I am talking about.
DeleteOne one hand, Mexican beer would contribute to the image, but on the other hand, local beer would probably gain more popularity, and it would be so much easier to supply... Maybe, a combination of both?
By the way, I think that idea of replacing spicy stuff with paprika is good, the only point of concern here is to establish franchising agreements that allow modifying the ingredients.