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

Extracts from this document...

Introduction

1.0 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 market1 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 lifestyles2. Greggs is actively expanding their operations and have over 1,200 retail outlets under the Greggs and Bakers Oven brands3. 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. ...read more.

Middle

The degree of control that management desire over operations will help establish which mode of entry to employ. Hierarchical modes allow high levels of control over operations ensuring that the latter are carried out to Greggs specification. All else being equal, the greater the resource investment, the lower the flexibility of the business. Consequently, if Greggs pursue a hierarchical mode of entry, they will have to consider their potential limited flexibility. The above suggests that Greggs' would benefit from a hierarchical mode of entry as it satisfies all criteria for the latter. This is where the firm completely owns and controls the foreign entry mode. However, regardless of the apparent control over operations specified by this mode, the degree of control that head office can exert over the subsidiary depends on how many and which value chain functions can be transferred to the market. Having reviewed all alternatives, its was decided that a Sales and Production subsidiary will be introduced in Germany leaving the Research and Development and Marketing activities to be conducted at home in the UK. According to Hollensen (2001)34, having selected this mode of entry, Greggs will benefit from having full control over the whole operation. Moreover, Greggs has long term market potential in Germany and therefore the ownership of a sales and production subsidiary will enable Greggs to build a strong international presence over a long period of time. This method also eliminates the possibility that a national partner gets a 'free ride' and allows Greggs to gain market knowledge directly. A sales and production subsidiary will facilitate rapid entry to the German market allowing quick access to its distribution channels. Plus, no transportation costs will be incurred as raw materials will be purchased in the host country. In addition to those proposed by Hollensen, Greggs may benefit from being able to adapt the ingredients used to German tastes. They can additionally tailor the servicescape to German preferences. ...read more.

Conclusion

In light of the short term objectives, Greggs anticipate to encourage trial of their product offering. Through the use of word of mouth and an anticipated 5% redemption rate on the coupon promotion, they aim to secure a loyal consumer base. 10.0 Control To ensure that objectives are met through the strategy implemented, a number of control mechanisms will have to be established in order to evaluate Greggs success in Germany. Primarily, Greggs will have to review their performance in reference to their international marketing objectives. This will be conducted annually and any deviation may mean that their strategy and/or objectives need to be amended. Greggs may also benchmark their activities against the current market leaders in the market - Kuchenmeister. This will allow Greggs to assess their performance relative to competition. Moreover, Hollensen48 has identified two methods of control used to monitor the progress of the organisation: 'Output Controls' maybe used by monitoring levels of expenditure and ensuring that budget targets are not exceeded. This will be the responsibility of the German Store manager and conducted on a monthly basis to enable swift turnaround if necessary. Secondly, to avoid focusing entirely on financial criteria, 'Behavioural Controls49' will also be used. Greggs need to sufficiently train staff to ensure that service standards are met and will employ 'mystery shoppers' on a quarterly basis to measure standards of satisfaction. In addition, Greggs will assess criteria such as sales targets, market share targets and profit levels against targets annually to ensure that they are being achieved relative to objectives. Finally during the implementation process, Greggs will review their critical path (See Figure B) as it is imperative that they remain on track with procedures. By applying these controls mechanisms Greggs may effectively monitor performance ensuring international marketing activities are carried out as intended. Furthermore, problem areas may be revealed and strategies to overcome these discrepancies may be implemented before escalation. However, the Greggs culture is such that these controls will be implemented loosely allowing for flexibility to respond to market changes. 11. ...read more.

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