Greggs plc intend to expand their operations into international markets in order to satisfy their overriding objective: 'to be Europe's No. 1 Bakery'.

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  1. Executive Summary

Greggs plc intend to expand their operations into international markets in order to satisfy their overriding objective: ‘to be Europe’s No. 1 Bakery’.  

        Germany has been selected as the host country and justification for this decision has been discussed.  

        Moreover, Greggs will enter the German Bakery market through the employment of a ‘Foreign Direct Investment’ method, more specifically a ‘Sales and Production Subsidiary’.

        This report outlines the blend of marketing mix components used to position the offering; the implementation method adopted to ensure effective product and service delivery; and the control mechanisms utilised to make sure that objectives are achieved.  

2.0 Introduction

Greggs is the currently the leading UK retailer in the bakery market having experienced high levels of growth in 2002.  The company achieved revenues of £422.6 million, an increase of 11.9% on the previous fiscal.  Its operating profit also witnessed an increase of 11.8% to £35.3 million in 2002.  Their popularity has rapidly increased as consumers are seeking quick, convenient and indulgent foods to complement their fast-paced lifestyles.

Greggs is actively expanding their operations and have over 1,200 retail outlets under the Greggs and Bakers Oven brands.  They entered into the international arena in 2003 with the opening of two outlets in Belgium.  This strategy was pursued in order to fulfil the company’s long-term objective of becoming a leader in the European market place.

Further international expansion will therefore satisfy their current objectives and enhance their presence in the European bakery market.  

2.1 Report Objectives

  • To justify market choice
  • To undertake internal and environmental analysis for the home and host country
  • To identify the most appropriate foreign entry strategy
  • To tailor a services marketing mix to requirements of the host market
  • To suggest methods of implementation to allow successful market penetration
  • To monitor the progress of this venture through the employment of control mechanisms

3.0 Mission statement                                                                        

“We intend to be Europe’s finest bakery-related retailer, achieving our ambitious growth targets by attaining world-class standards in everything we do.  Our purpose is the growth and development of a thriving business for the benefit and enjoyment of employees, customers and shareholders alike.  

3.1 Values

Greggs is a customer-focused business, seeking to provide excellent products and services that deliver enjoyment and value-for-money.  We are committed to people development, within a considerate culture that combines autonomy and accountability and maintains a strong focus on profitability.  In all our activities, we aim to achieve excellence through continuous improvement”.  

4.0 - Market Choice                

Cannon and Willis propose a method of “simple elimination” to identify a potential host market.  This method of market choice ensures that the remaining country satisfies all main criteria highlighted by the organisation.  The diagram below shows a systematic approach to finding a suitable market for Gregg’s expansion.  Industrial, economic and cultural factors will be integrated into the selection process as these are central to Greggs’ operations in addition to their main aim: ‘To be the no.1 bakery retailer in Europe.’

        Parallel to their objectives, all non-EU countries will be excluded from the selection process. Greggs’ second priority is to enter markets which display fast growth in bakery markets.  The countries with the highest levels of category growth are shown below:

Figure A

Using this table, Greggs may eliminate Denmark and Spain from their market choice selection process.  

        Psychological distance between the home and host country can also determine the success of international activities and thus have been incorporated into the process.  

        The French have a wide selection of elaborate, exquisite and gourmet dishes.  This contradicts the typical product proposition offered by Greggs.  Although Greggs could consider a focused differentiation strategy targeting niche markets, the abundance of specialist bakery retailers would suggestively make the French bakery market difficult to penetrate effectively and therefore exclude it from further scrutiny.

Portuguese market trends highlight an increasing demand for “wholesome, family products”.

In contrast to the latter, Greggs offer an ‘on the move’ food proposition which is typically consumed individually rather than in a family environment.    Suggestively the Portuguese are reluctant to embrace new food offerings as research illustrates a strong preference for traditional cuisine served in traditional restaurant settings.  Moreover the market is dominated by both high street retailers such as Podaria Popular and industrial manufacturers thus implying high barriers to entry are high.

Having adopted this process of elimination, Germany appears to be the prevailing market choice.  

Despite the high labour costs, long vacation time and slow economic growth, Germany’s overall economic performance is the 3rd largest in Europe and consequently presents itself as an attractive market choice for Greggs.  

“Products with a convenience character are continuing to prove popular in the German bakery market, ranging from ready to eat and impulse products to in store bakery products”.  Furthermore, “across the bakery market, international bakery specialties such as croissants, ciabattas and baguettes are rising in popularity, a reflection of higher consumer demand for more non-traditional or novel products”.  This market therefore presents itself as an ideal location for Greggs to expand their international operations. Greggs will pursue a ‘concentration’ technique with regard to country and customer target group. “A company may concentrate its efforts by entering countries that are highly similar in terms of market characteristics and infrastructure to the domestic market”.  This will enable Greggs to minimise risk and benefit from cultural fit.   Moreover, as in the UK they will concentrate efforts on a focused target audience.  

5.0 – Internal and Environmental Analysis

                                                

5.1 - Internal Analysis

                                 

5.1.1 Strengths                                                

Internal strengths need to be assessed to identify assets, capabilities and core competencies that are transferable to the host country.  

Greggs is a well recognised bakery retailing brand in the UK which aims to “create a single and cohesive Greggs brand nationwide”. This is being executed using a coherent and consistent promotion of the company’s proposition and brand across the country.

Greggs have sustained a strong cash flow which allows them to invest money in maintaining in their retail outlets, bakeries and brand.  Key investments include significant funds spent on production facilities to support the growth of retail operations.

         Greggs actively seek to position their stores in prominent locations relative to distribution channels and customer access.  Greggs stores are typically located in busy and heavily populated towns where their fast and convenient proposition is ideal.  In response to the 6.4% increase in demand for takeaway foods, Greggs is adapting their servicescape to cater for these growing needs.

5.1.2 Corporate Culture

Greggs operates in a risk taking corporate culture which allows them to be innovative and responsive to market changes. They believe in providing high customer service aiming to retain customers by inducing loyalty and trust.  They place great emphasis on motivating and empowering employees as they believe that continued growth of the business is a reflection of the workforce. These competencies are transferable and of equal value to the German marketplace.  

        Greggs are actively expanding their operations internationally in order to spread risk, increase international brand awareness of their product portfolio and exploit fast growing new markets.  

5.1.3 Value Chain

Greggs UK have produced a ‘Value Chain Analysis’ which is “an analytical tool that describes all activities that make up the economic performance and capabilities of the firm.”  This can be used by Greggs to exhibit core competences that can be exploited in the host market.

5.2 - Environmental Analysis

The environmental analysis aims to identify the current situation of the German bakery market using relevant tools of analysis and international research methods. A PEST analysis has been used to identify influential factors for Greggs in Germany as discussed.

5.2.1 International Marketing Research

“Marketing research refers to gathering, analysing and presenting information”.

It is the lack of knowledge on foreign markets that is one of the major barriers an international marketing manager must overcome. It is therefore imperative that Greggs formulate an effective market research strategy as the first step in overcoming this barrier. In this case, international marketing research was carried out for the purpose of reducing potential risk and providing us with a final systematic and objective approach for our proposition.

        Primary research has not been undertaken due to the limitations of this report. However, if Greggs were to implement this internationalisation proposal, primary research would be an imperative tool when considering market choice. These could include qualitative methods such as interviews and observation. Secondary forms of research carried out have included Government reports, Internet sources and textbook literature, and further strengthened by journal articles.  This variety of data collection methods helps to provide a rich analysis from numerous sources as a foundation for decision-making.

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From this research the following factors have been taken into consideration when considering Germany.

5.2.2 Social & Economic Environment

Social factors, as outlined in the PEST analysis outline the increasing trend towards ‘on the go’ consumption. This reflects the busy lifestyle of the working population in Berlin hence the choice of location. The economic factor of high disposable income also provides an attractive reason for Germany as consumer spending is high.

5.2.3 Prospective Country Culture

Greggs may use the Hofstede model to “identify persuasive fundamental differences of national cultures” and thereby assess their cultural fit. “According to Hofstede, ...

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