A strategic marketing

Published Date: 23 Mar 2015

This is a strategic marketing report for Pancake On The Rock restaurant entry to Hong Kong Market. We are the going to set up a international headquarter in Hong Kong, which named "The Rock (HK) Ltd". Pancake On The Rock is an Australian restaurant, which provides the dessert and food service since 17th August, 1975.

Pancake On The Rocks foresee Hong Kong is a potential market to bring its pancake culture to Asian country. Hong Kong was a British colony back in the 19th century. The city has influenced deeply by western culture. It has a highly developed capitalist economy; it identities as a cosmopolitan centre where east meets west is reflected in its cuisine, cinema, music and traditions. Based on the market research and competitive analysis, the company will slightly adjusted the menu to most suitable to the taste and style of the consumer in Hong Kong Market.

Methodology:

This report has been conducted by using primary data and secondary data research.

Secondary Data Research:

Exploratory research:

The researchers will conducted an exploratory research to have a better understanding on the current situation for the consumer behaviour after the global financial crisis in Hong Kong. The researcher will find the information from both of the sitology magazine or article, and the realistic official statistical data research.

Primary Data Research:

Face-to-Face Interviews:

Research will have face-to-face interviews to 100 public in an intensive location of Hong Kong. Each interview will be approximately 3 minutes and there are about 10 questions to ask. The number of range successfully completed face-to-face interview is 100 people roughly.

Focus Group:

To understand and research about the behaviour of Hong Kong consumer, the researcher will conduct a focus group to study about the price and quality perception of food. The research will pick up 10 participants by judgment sampling (qualitative, representative sample) and invite them to take in a 20 to 30 minutes discussion about the price and quality perception of food.

After we collect the data, we will use PEST model and Porter's Five Force model to analyze the internal and external environment respectively, to find out the factors affecting the company's performance. Then we will use SWOT matrix to analyze the opportunities, threats, advantages and threats for Pancake On The Rocks, combined with the analysis on marketing research, to set up a suitable marketing strategy and the detailed enforcement instructions for Pancake On The Rocks.

Consumer Behaviour:

In Hong Kong, the consumer's expectations of product quality in general have been steadily rising, owning to the increase in income and sociological forces, which have prompted high expectations of a better lifestyle. Hong Kong consumers to­day are looking for aesthetic and social value instead of just fulfilling on the basic needs of warmth and the protec­tive function of products (reference 16). Department stores are now crowded with people, but with only a few of the shoppers are serious buyers. Hong Kong consumers are eager to see what is available, especially from among for­eign products. Hong Kong consumers have a lot of time to browse, and therefore are disinclined to convenience or impulse buying.

Another aspect of Hong Kong culture that influences buyers' behaviour is the reluctance to pioneer (reference 10). The typical Hong Kong consumer does not want to be among the first to try a new product, but the dis­comfort of being 'behind the times' may make them think that if the neighbors have tried it, they had better follow suit soon. The strong collective characteris­tics may imply that informal channels of communication are important in Chinese society. Chinese consumers tend to rely more on word-of-mouth communication because of the high contact rate among group members; thus, communication of a given product idea is quick to circulate within these informal channels.

Situation Analysis:

Internal Analysis:

Company structure:

Pancakes On The Rocks is a privately owned company established in 1975. It operates four restaurant based in Sydney regions. The restaurant in The Rocks is a 24/7 operates and its extended trading hours have been one of the crucial attractions to its consumer's highlight that attracts our main customer to visit the restaurant.

Product description:

Pancakes On The Rocks provides consumers with a diverse range of pancake kinds including origins and delicious flavoured pancakes, and a complete regular menu such as pizzas, a new range of salads, crepes, pancakes and the famous ribs with special house sauce. With an additional kid's menu designed for family dining and breakfast menu for dedicated customer who interested in early breakfast as well. They also offer a selection of pancake mix, quality merchandise and gift packs.

Target Segments in Australia:

The target market segments in Australia are mainly focused on family group, children, and young adults. Therefore, the menu has introduced specific dishes to suit our target customer's tastes and needs. The company has a strong reputation and is rewarding as it won gold awards of "Best causal/ family dining restaurant" from 2003 to 2009. The award represents a milestone to the company that has been targeted to correct market segments in the past years successfully.

The Australian Competitors:

The company has possessed a large amount of market share in the industry. Pancake On the Rocks has developed its brand image remarkable through the popular dessert dishes. Comparing to the other competitors, namely Hooter, Lone star, Sizzler and Hurricane, they are mainly concentrated on their regular menu such as steaks and have a minor fraction in advertising desserts. As well as the 24/7 trading hour has made Pancakes On The rocks a distinctive restaurant due to the fact that restaurant rarely operates 24 hours a day in Sydney region.

Cost Structure of Industry (Hong Kong):

High variable costs:

Labour in Hong Kong per person:

Cook: HKD 11883, Junior Cook: HKD 5993, Waiter/ Waitress: HKD 8190, Supervisory: HKD 9007

Raw Material: spot rate and seasonal price;

Overhead: Electricity: HKD 0.755 per plate; Water rate: HKD 1.43 per cu.m.; Gas rate: HKD 0.685 per meter (reference 39); Logistics: 122.1 per 25kg approximately.

Low fixed costs:

Rent: spot rate and regional price; Cost of Merger: HKD 48800 - HKD 58800; Advertising and Promotion Budget: AUD 7000000

Market Analysis:

Political Factors:

Flexibility of regulation:

The government has adopted the strategy of "stabilizing the financial system, supporting enterprises and preserving employment" to helped stabilize the local economy.

The government's role has made flexible adjustments in response to market needs and remove the barriers for local businesses. The Government stated that to adhere to the principle of "Big Market, Small Government" which implies to boost domestic demand and increase employment opportunities. As a result, Pancakes On The Rocks has advantage in low costs and conducive in the timing of entry by the flexible policy changes.

Low and simple tax regime:

Hong Kong has a lowest and simple tax system in Asia Pacific and third lowest in the world, with a maximum 16.5% corporate income tax and maximum 15% salaries tax. As high development costs of new business, low tax regime is a great advantage and ease of financial difficulty for Pancakes On The Rocks.

Economics Conditions:

Current GDP and forecasted economic growth:

Hong Kong has entered in an initial stage of recovery after the impact of worse global recession. The overall situation has been improving further in third quarter of 2009. By its trend, the economy is likely to show further sign of improvement in the future. The Table 2 has shown GDP rose by 1.2 % from second quarter to third quarter in 2009. According to the latest private consumption expenditure in Table 3, Hong Kong people are increased gradually in private spending by 1.3 %. In terms of the notable changes, it is a favorable opportunity and significant timing for setting up a business in Hong Kong economy.

Inflation rate:

Consumer price inflation turned slightly negative to -0.3% from 1.2% due to the global financial crisis. The forecast of consumer price inflation rates remain unchanged, at 0.5% and 0.9% respectively for 2009 as a whole.

Unemployment rate:

According to the labour force statistics, the seasonally adjusted unemployment rate decreased slightly to 5.3% and it shown that the youth unemployment situation is improving progressively. The government has advocated new start up of business in order to create quality job opportunities.

Interest rates:

Hong Kong ranks as first in Asia and second in the world in terms of providing access to capital. "Its general financial environment is among the world's best, with a sound banking system, a relatively large equity market and diversified sources of business funding, including venture capital." (The Capital Access Index) The composite interest rate slightly decreased bytwo points to 0.11% at November 2009, from 0.13% at October 2009. (Appendix 6)The best lending rates is positioned at 5.25% per annum in December 2009. Hence, Pancakes On the Rocks has beneficial to capital funding in the running of business.

Social and Cultural Factors:

Cross cultural change in management:

As Pancakes On The Rocks has operated their systems and models well in Australia but introducing to different country would require a lot more considerations. The company may struggle in culture diversity because Australia's culture does not fit into Asian country. To be able to survive in overseas, Pancakes On The Rocks required to modify and test the overseas market that most suitable for the particular groups.

The increase of health-concerns:

According to pattern of using health supplements, 22.8% of the population aged 15 and over aged 15 had taken health supplements in Hong Kong. The main findings shown female and person with higher monthly household income and higher education attainment had greater tendency of having taken health supplements. (Reference 22) Based on the statistics, the growth rate in health-concern is one of the big issues that influence the consumer buying behavior. This trend will directly affect the company in concern of operation activities and the design selection of menu in a health- conscious style.

Infrastructure/ Technology Indicators:

Excellent infrastructure:

Hong Kong International Airport was the world's busiest international cargo airport for the continued 12 years (reference 40). The port of Hong Kong has always been an essential factor in driving Hong Kong's prosperity, which strategically located at the heart of Asia. Hong Kong has one of the world's busiest container ports as well as ranked as one of the most e-ready economies in the world (Economist Intelligence Unit).

Quality and facilities of the transport/Road network:

Hong Kong has a well-developed and sophisticated rail and road network to cover every corner and keep people and goods on the move. Hong Kong's roads have nominated as one of the highest vehicle densities in the world. Over four millions of passenger travelled through the public transport during 2008. In addition, there were over 578,000 licensed vehicles and only 2,049 kilometers of roads in 2009.

Other relevant indicator:

Lowest costs of doing business and business risk:

Hong Kong has keep up its competitiveness and continues to have the best opacity in Asia Pacific and second in the world. The Opacity Index measures high frequency and low-impact risks based on five main factors, underlining the country's stable regulatory environment, low levels of corruption and high compliance with international standards for accounting rules and practices. It indicates Hong Kong has low costs of doing business as well as business risk.

Demographic trends:

Population Size:

Hong Kong is one of most densely populated places in the world, with population estimated seven millions populations in 2009. Almost 95% of Hong Kong population is Chinese by place of origin. People in Hong Kong have a high literacy standard of 97.1% (98.7% male, 95.4% female). In addition, there has been a rapid growth in education attainment in higher education attainment rapidly in the past decades. (Appendix 2) It indicates higher qualifications are tend to go for healthier choices and premium good; as well as a high degree of concern in nutrient value and higher expectation in quality of life.

Ageing Population and Low birth rate:

Ageing population and decreased in birth rate become the demographic challenges in Hong Kong. The ratio of the population under age of 15 has dropped rapidly, in the meanwhile, between 15 and 64 has indicating a marked increase and the group over 65 has more than a double. The supply of children in Hong Kong is at an all time low, at 0.966 children per woman.

Porter's Five Forces Analysis:

Intensity of rivalry / competition:

1. Exit barriers:

Exit barriers of Pancake On The Rocks in Hong Kong are low because it isn't manufacturing industry but a kind of service industry.

2. Industry concentration:

Foodservice industry is well developed and there are approximately ten thousand restaurants are in Hong Kong. Moreover, many famous family restaurants are entered (e,g. T.G.I Fridays, Outback Steakhouse and Tony Roma's etc.) and also trying to enter the market. Therefore, industry concentration of Pancake On The Rocks is low in Hong Kong.

3. Fixed & variable costs:
• Fixed costs:

Generally fixed costs of foodservice business to open a restaurant are included professional fees, insurance, premises costs, staffing and employment, stock, sales and marketing and finance etc. (Reference 42) However, a restaurant does not require high fixed costs as much as a manufacturing business because it needs lesser staff, premise and insurance costs etc than manufacturer.

• Variable costs:

Variable costs of foodservice business are such as actual cost of product, shipping of product, packaging, remuneration and commissions and direct wages etc.

It depends on how the company purchases fresh and good ingredients at lower costs then competitors in order to get competitive advantage.

4. Industry growth:

Population of Hong Kong is about 7 million and approximately 29.5 million tourists visited the country in 2008. Tourism industry and foodservice industry have a very close relationship and local people usually tend to eat out because sub-tropical climate of Hong Kong makes it difficult to store up foods for a long time and many women include married women are working. There are almost 10 thousand of restaurants in the industry but it is not enough to handle demands of local customers and tourists. Therefore, the industry could be growth steadily in the future, if the industry is not influenced by financial crisis and swan flu seriously.

5. Product Differences:

As foodservice industry is well developed and still developing, there are various cultural foods from other countries and fusion in Hong Kong. For that reason, high level of product differences are existing and many restaurants are still trying to invent special menu to attract local customers and tourists.

6. Switching costs:

As it noted above, there are many famous foreign family restaurant chains and local restaurants as main competitors of Pancake On The Rocks in the industry and the main menu is not that different between them. For that reason, the industry is high competitive market that customers can easily switch from on restaurant to another.

7. Diversity of rivals:

Pancake On The Rocks is family restaurant that similar with general family restaurants (e,g. T.G.I, Outback and Tony Roma's etc) and those companies are from western countries. However, there are various countries and fusion restaurants are operating in Hong Kong. For example, Japanese, Thai, and Vietnamese foods are appropriately adapted and also Korean foods are trying to inroad into the Hong Kong market with the aid of Media (e,g. dramas and movies etc).

Threat of Substitutes:

As it mentioned previously, there are many famous foreign family restaurant and local restaurant chains in the industry and it can be direct substitutes because the main menu and price are very similar and each restaurant chain is generally operating all the restaurants of the chain with same recipes, ingredients, interior design and promotion etc. moreover, many people prefer healthy foods as a trend currently. For that reason, customers can easily switch from one restaurant to another by not price change but promotion such as various set menu, coupons and events etc and trends. Direct substitutes are such as T.G.I Fridays, Tony Roma's, Outback Steakhouse, and so on.

Indirect substitutes also exist temporarily that as currently financial crisis, people could be suffered by financial difficulty and should make choice between eating out at family restaurants and shopping or leisure activities. Moreover, swan flu is prevalent around world presently, so people hesitate to go public places such as department stores, restaurants etc. indirect substitutes are such as theatre, shopping mall, sports and possibly hospital etc.

Buyer Power:

The buyer power in foodservice industry of Hong Kong is strong because Hong Kong has so many different choices of restaurants, which are about ten thousand restaurants in the market place (Reference 15), combination of Asian cuisine centralized at the same place. Therefore, the consumer's buying power is stronger that they can have so many different choices.

Supplier Power:

The supplier power is weak relatively as buyer power is strong in the industry. Although there are large number of tourists and local people as a consumer, they can have various choices of restaurants that buyers have strong power than supplier. For example, if customers turn their mind from a restaurant in any reason, the restaurants could be damaged seriously.

Barriers to Entry / Threat of Entry:

1. Government policy:

Hong Kong is one of the freest markets and especially there are no tariffs or duties laid on imported food and beverages. However, local food laws and regulations such as Bacteriological or microbiological standards, contamination regulate imported food and beverages by harmful substances, food labeling regulations, and nutrition labeling regulations and so on.

2. Switching costs:

As it noted above, there are many famous foreign family restaurant chains and local restaurants as main competitors of Pancake On The Rocks in the industry and there is no great difference in the main menu between the restaurants. For that reasons, the industry is high competitive market that customers can easily switch from one restaurant to another.

Relatively, hospitality, tourism and service industries have lower entry barriers that there is larger number of smaller firms because the firms could easily obtain resources and skills etc. In this manner, there are ten thousand restaurants and many foreign restaurant chains that are trying to enter the market.

Porter's Diamond Model Analysis:

Factor conditions:

Hong Kong's foodservice industry is well developed and still developing and has very similar factors with Australia's tourist industry and foodservice industry that huge number of tourists visits the country and various countries' foods and restaurants are exist. Therefore, it could be predicted people adapt different kinds and countries food easily than other counties. In Hong Kong, for example, there are one can find a diverse kinds of restaurants such as Thai, Mexican, Vietnamese, European, American, Chinese, Korean and Japanese in a single building. According to the country's climate condition, not only tourists but also local people usually tend to eat out.

Demand Conditions:

As it noted previously, Population of Hong Kong is about 7 million and approximately 29.5 million tourists visited the country in 2008. Moreover, local people usually eat out because sub-tropical climate of Hong Kong makes it difficult to store up foods long time and many women include married women are working. For the above reasons, there are huge demands and it is why most people consider Hong Kong as a paradise of foodservice industry. There was a change in Hong Kong's foodservice industry that people moved from good taste and atmosphere to health when they choose restaurants or menu. Therefore, well being food and beverage are very famous currently and restaurants are changing to satisfy customers' needs.

Related and Supporting Industries:

There are roughly ten thousand of restaurants and each restaurants are operating by not only one owner but also 3~5 owners and they have very well formed strategies to operate the restaurants effectively and get a competitive advantage in the market. Generally, restaurants outsource many parts such as purchasing ingredients, maintaining and cleaning to manage effectively. As outsourcing is formed well in the market place, there are many dependable outsourcing companies and restaurants can concentrate on only cook and sale.

Firm Strategy, Structure and Rivalry:

Government:

The one of the reasons that local people are usually eating out is the country's climate condition that foods are easily tainted and it can be same problem to restaurants. However, people usually eat out two or three times per day and it can be possible by Hong Kong government that they inspect sanitary conditions of restaurants very strictly. Therefore, even very small restaurants are using dishwasher and control their sanitary conditions through automation systems.

SWOT Analysis:

Strength:

• Strong brand Awareness in Australia.
• Cost leadership.
• Over 35 years pancake making experiences.
• High quality product and services.
• One of Australian largest western food restaurant.
• Diversified product portfolio for different customers.
• A new and innovation product and service to Hong Kong market.
• Exclusive access to high grade resources.
• Good reputation among customers.

Weakness:

• Lack of international marketing expertise.
• Undifferentiated products or services.
• Lack of brand awareness in Hong Kong market.
• Lack of local property in HK.
• Lack of cross cultural management experience.

Opportunity:

• The recent financial crisis gives a good chance for us to entry Hong Kong market.
• Operating into an economics growth rapidly city, such as HK.
• Hong Kong is a special Administrative region of china, their is closely consist with each other in business and social area, so there are high chance to gain the Chinese customer through HK.
• There are less direct competitor and low competition of Pancake restaurant in HK.
• There are unfulfilled needs of pancake restaurant in HK.
• Opportunities to develop strategic alliance and franchising system.
• Self merchandize the products.

Threat:

• New competitor entry to pancake restaurant market.
• Cross cultural and taste barriers.
• Raw material pricing fluctuation.
• Shifts in consumer tastes away from the our products.
• Over spending in advertising and promotion.

SWOT Matrix:

Strength-Opportunity Strategy:

With the existing opportunities over the target market, the organization has two perspectives for short-run and long run respectively.

In short run, the company will continuously extend and maintain its strength within the target market, by regularly invent new and innovative products and integrate with local and international manufacturers of food and drink, and brand franchising to manufacturers of other goods and services, so as to enhance the existing business and facilitate the entry of new target segment - the working group, and also to help to obtain a well-known reputation over the target market.

In long run, the organization is planned to as well emerge in Asian market, as Asian market will also give rise to a great potential benefits as what have been discussed in the related opportunity paragraph. The organization aims to create a worldwide reputation over the world in the future decades.

Weakness-Opportunity Strategy:

Asia and Hong Kong markets are believed to have incessantly potential opportunities for western business to invest in Asia, as Asia is progressively more western culture and custom tended and the economy is still constantly growing, the company should not only focus and dependant on its main competitive advantage, the retail of pancakes and steaks. In future, the company will thus to diversify into different other sectors on its product and service to meet the various needs arise.

Strength-Threat Strategy:

The company will use its competitive advantage over the specific product - pancakes, to influence and to push forward the culture of eating pancakes into the target market culture and trend, also to deepen the western leisure activity into the Asian customs, to strengthen and sustain the market for pancakes. Moreover, in order to prevent replacement of pancakes and customers will give chance to incline to substitute products, the company will strongly promote and acknowledge its product - the original and orthodox pancake to the customers.

Weakness-Threat Strategy:

As what have been discussed in the above paragraph, the company will apparently use the above-discussed strategies have to avoid its weakness to take place while operating the business when facing the threats.

Objectives:

Short term Objectives (1-3 years of operating in Hong Kong):

Launches all the product in Hong Kong within 1 operational year:

The first objective is launching the product of Pancake On the Rocks to Hong Kong, which is requiring the advertising and promotion department to announce to the market. Moreover, need to adjust the taste of product to adopt the Hong Kong market.

Create the customer values:

Pancake On the Rocks would create the customer value by reduce the cost, eliminate the necessaries, raise the product value and create the new opportunities of the brand. In addition, Pancake On the Rocks would increase the customer satisfaction to build up a good relationship to customers. For example, quality and services, which are out of their expectations that can create positive and attitude and feelings to them.

Achieve the break-even point within 1.5 operational year:

The most important objective for Pancake On the Rock is recoup the investment, research and development cost. Therefore, the main objective of 1.5 year operating for Pancake On the Rock is achieve the break-even point within 1.5 operational year. In addition, the break-even point analysis is shown below in international pricing strategy.

Long term Objectives (3-6 years operating in Hong Kong):

Build up the Brand Equities:

Establish the brand loyalty by the Customer Relationship Management system and programs to reduce marketing costs and attracting more customers that are new or retain short-term customers to become long-term customers. Build up brand awareness by the investing in appropriate advertising. In addition, the product quality also can create the effect of word of mouth.

Achieve to 10% Market Share in the dessert market of Hong Kong:

For internal forces, Pancake On the Rocks' will conduct the marketing strategy toward the customers in the target market in order to create perceived value and generate a positive response to increase the market share.

For external forces, Pancake On the Rocks will conduct the marketing researches to understand the market overview and change in Hong Kong. Therefore, Pancake On the Rocks cans utilities the competitive advantages to increase the market share and change the suitable strategies according to the market or competitors' actions.

Set up minimum 15 local restaurants within 6 operational year in HK:

Pancake On the Rocks wants to expand its business in Hong Kong, therefore, its final objective is that build up a wide range chain store network within 6 operational year.

Target Market:

Pancake On the Rocks produce various of pancakes, dessert and western foods, also Pancake On the Rocks provides the kid's menu, breakfast menu. Therefore, its target market can be a big range, such as middle and high-income groups in any ages. However, for its advertising campaigns, Pancake On the Rocks will mainly focus on the generation Y at the age 18 - 38 rounded, because they are the innovative enthusiasts and venturesome that are most willing to adopt and try new products, and they are the most consumable group in Hong Kong.

Market Positioning:

According to the official information, Hong Kong does not have any pancake restaurant existing, so Pancake On the Rocks puts our competitive concentration on the other dessert restaurants.

The position of Pancake On the Rocks as a range of high value (include quality and others factors) with premium raw materials, which provide a good taste than other restaurant. Moreover, Pancake On the Rocks will introduce the especial new range products for Asian tastes to customers in the long run, which will discuses in product strategy. On the other hand, Pancake On the Rocks will charge an appropriate price to the customers who willing to pay. In addition, Pancake On the Rocks will maintain the high level service by the rigorous operation system. Furthermore, Pancake On The Rocks is the new entrant of Hong Kong market, so the network coverage is not high, but it will get closer to the convenience position.

The key differentiates advantage included:

• Brand equity.
• Food offering.
• Product quality, price, place and promotion activities.

The reasons of the intended position, Pancake On the Rocks ultimate target is to be more competitive in the market, Pancake On the Rocks also want to attract more customers, build their confidence to our brand and brand awareness.

Market Entry Strategy:

Market Selection:

Since this is the first time of Pancake On The Rocks to globalize its business, Pancake On the Rocks will choose Hong Kong to be the first target market to entry. The reasons for this are why Pancake On the Rocks will choose Hong Kong as the first place to globalize the business. First, Hong Kong is a developed city; there are well-developed infrastructure and transportation network. Also, as Pancake On the Rocks has plan to expand the business into international market, Hong Kong as a platform city to establishes the global network and gathers intelligence (Reference 1), it is effective for us to make a experiment to test the reaction to our business. In addition, the Customs and Excise Department of Hong Kong stated 'HKSAR is a free port. There is no tariff on general imports.' (Reference 22) Therefore, Hong Kong gives us a taxation advantage. In addition, our managerial team is all Asians and mostly from Hong Kong, so they are very familiar with Asian market condition especially Hong Kong, therefore, it will easier to control and test our business in a small international city, and it would reduce the risk and barrier to entry Hong Kong market.

Entry Strategies:

Merge & Acquisition: Equity Mode (Foreign Direct Investment):

Pancake On The Rocks is a higher medium size restaurant with 35 years operation experience in Australia, and it has a large financial resource holding on hand. Therefore, Pancake On The Rocks has large financial resource holding on hand, and it will use Merge & Acquisition Strategy to entry Hong Kong market, and this strategy can increase the speed of entry Hong Kong market. In addition, by use this M & A strategy, Pancake On The Rocks can obtain the assets of the local restaurant, such as the human resources, suppliers, logistics, plant layout, place, network and the cooking skills.

1. The first step for M & A strategy is that, Pancake On the Rocks will find a Hong Kong business agency, and select a local western food restaurant with good location, equipment and condition to merge.
2. The second step for this strategy is change the brand name, logo and menu of the obtained restaurant.

Assistant Entry Strategy: Cultural Penetration:

The lifestyle of Hong Kong people are very quickness and rapidity, therefore, Pancake On the Rocks provides a peaceful place with classical music and the convenience location to the customers, let them indulge a tea or have a nice meal after they work, by doing this, Pancake On the Rocks can delivery the Australian pancake culture to Hong Kong customers. In addition, Pancake On the Rocks can create the word of mouth to customers by the quality of the restaurant, and expand Pancake On The Rocks' restaurant culture to Hong Kong customers.

Timing to entry:

The global market environment has been damaged by the financial tsunami. In 2010, the global market is still recovering from the economics recession. However, this is a good timing for Pancake On The Rocks to enter Hong Kong market and globalize its business. As Pancake On The Rocks have got sufficient financial resources, and due to the financial tsunami, the cost of new business establishment in Hong Kong is lower than before, In addition, there is no restaurant typically similar to Pancake On The Rocks, that means there are no direct competitor in Hong Kong. Therefore, 2010 will be a good timing for Pancake On The Rocks to enter the Hong Kong market.

Exit strategy:

In order to ensure the business in Hong Kong will not affect the core business in Australia, Pancake On the Rocks has decided the exit strategy for Pancake On The Rocks. Pancake On The Rocks have set the target break even year to one and half year and the maximum break even year to three years, if it can not break even, Pancake On the Rocks will change our plan of operation. Pancake On the Rocks will sell the restaurant and local office in Hong Kong and cut off the promotion activities in Hong Kong, and change the target market to the other potential market.

Global Strategic Management:

Transnational Strategy:

Pancake On The Rocks will use transnational strategy as the first core strategy. Transnational strategy is highly competitive in the global context, and Pancake On The Rocks will implements this strategy base on the operational experience, location, cost effectiveness and efficiency, as the same time concern about the local market needs. Transnational strategy is focusing on multi aspect simultaneously, to improve the global efficiency, flexibility and learning ability.

Therefore, Pancake On The Rocks implements transnational strategy to create a more sophisticated and diverse portfolio of assets and capabilities. First, it has to decide what important resources and capabilities can best be concentrated in the home country operations. At the same time, it has to decide, what other resources to focus on areas outside their home country to bring benefits of economies of scale, lower input costs and establish competitive advantage.

Value Innovation:

Pancake On The Rocks will use value innovation as the second core strategy, to achieve the operational excellence, customer intimacy and product leadership. All the strategies mention below is cooperating this central strategy, for example international product strategy eliminate the unnecessary, international distribution strategy and strategic alliance reduce the cost, international promotion strategy and franchising raise the opportunity, international pricing strategy, customer relationship management and international operation system create the value. Therefore, all the strategies discuss below are fastening closely and tightly to each other.

Global Branding Management:

As it mentioned earlier, Australia has a nature-friendly image and through the image, we can appeal Pancake On The Rocks as a nature-friendly restaurant. The left side logo is now using in Australia and right side logo is new demo logo that will be using in Hong Kong. The new logo will be using as a global brand of our company and it is more simple to ease to memorize. Actually, many people just call our restaurant not "Pancakes on the Rocks" but just "ROCKS" or "THE ROCKS" in Australia. Therefore, we have changed the logo and brand name a little bit but remaining the main, key word, and concept of the restaurant in the international market to make the company as a globalised restaurant chain.

"Enjoy Australia's nature" & "Taste green Australia":

The one of the above slogans will be using in Hong Kong. As our concept of branding is nature-friendly image from Australia, it could be helpful to manage brand image in Hong Kong.

Customer Relationship Management:

According to journal of "getting the most out of your customers", Stinginess on customer retention is significantly more harmful than extravagance. That is partly because of the correlation between customer profitability and relationship duration. Investment returns more quickly when companies spend more on the customer retention. Therefore, Pancake On The Rocks is putting big effort on customer relationship management. Moreover, it provides the following CRM programs to the Hong Kong customer:

Loyalty Program: it offers a VIP card to the special customers; and it provides the point's card to the new customers, they can get 90% off when they come at the fifth time, and they can get 85% off when they come at the tenth time.

Birthday Celebrative Card and Birthday Discount: Pancake On The Rocks CRM database system will remind the staff to send a birthday card to the birthday customer, and offer the 85% off when they organize the birthday party in Pancake On The Rocks restaurant in their birthday week.

Corporate event: Pancake On The Rocks welcomes the companies to organize the corporate or annual party in Pancake On The Rocks restaurant, it will give 85% to the companies.

Customer Relationship Database System:

For mining and managing the customer information to management all the CRM programs effectively, Pancake On The Rocks develops a customer relationship database system to record and access the customer information.

Pancake On The Rocks stores customers' information by asking them to join its membership, when they join the membership, they need to fill the information form, and the information will stores into the CRM database system. When the staff enters via the member ID card, this system will automatically shows the basic information of the customer, thus, that system can increase the efficiency to Pancake On The Rocks to do the CRM activities.

Global Corporate Strategy:

Short-Term Corporate Strategy (Start from 1 years of operating in Hong Kong):

Global Strategic Alliance: Contractual Alliance (Non-equity based):

To maximize the profit and minimize the cost, Pancake On The Rocks decided to invite FedEx Express to become its strategic alliance partner. Strategic alliance is defined as any agreement between or among firms to cooperate in an effort to accomplish the strategic purposes.

The Strategic purposes include co-marketing, R&D contracts, turnkey projects, strategic supplier and strategic distributor, on Pancake On The Rocks side, it provides the stable jobs opportunities and advertising sponsorship or conjoin promotion to FedEx Express, and it requests the discount of raw material delivery and quality management service from FedEx Express.

Long term Corporate Strategy (Start from 4 years operating in Hong Kong):

Global Franchising System:

Franchising is a good way to expand the market, to result in the rapid growth of the company; it is a good way to get capital or to avoid overhead. Therefore, after 3 years of successful operation and the increase of reputation, Pancake On The Rocks will provides the franchise rights to the opportunities seekers in the market. The duties and benefits of franchisors and franchisees are showing in the following table:

International Marketing Mix:

International Product Strategy:

Dual adaptation:

Pancake On The Rocks is a sort of original western restaurant and mainly has three kinds of menus that consist of main, breakfast and kid's menu. According to specialty of Hong Kong's foodservice industry, there are two groups of target customers that one is tourists and the other is local people. As we can see at the previous demand condition of Hong Kong part, currently local people are concerned in well-being and healthy food significantly, so it is necessary that develop new menu, which consist of healthy ingredients and mix the new menu with existed one. Therefore, we can maintain a balance between tourists and local people and as there is a growing tendency that having healthy food worldly, we can bring the new menu to Australia if the new menu is adapted successfully.

Healthy pancake & Original pancake:

The main product of Pancake On The Rocks is pancake, then develop healthy pancake with natural ingredients and also keep provide original pancake to satisfy both groups of customers' needs.

Various kinds of salads, tea, vegetable & fruit juice:

Salad is a general food and there are many kinds of salads in Australia. Therefore, develop various kinds of salads to meet local people's needs and following world tendency is appropriate. Moreover, add more kinds of tea, vegetable and fruit juices to the menu with less wines, liqueurs and beer to be adapted as a family restaurant one of the strategies.

T-shirts and cabs:

Pancake On The Rocks sells T-shirts and cabs inside of restaurants and it could be helpful to gain awareness of our brand and customer-friendly image in Hong Kong, because normally 29 million tourists visit the country and they prefer to get memorial souvenirs. Also, provide special T-shirts, key holder and mobile holder to customers with special events such as birthday and anniversary party and tourists' group menu is an effective promotional factor, etc. Therefore, customers can grow intimacy with our restaurant when they using our T-shirt, key holder or mobile holder etc.

Various kinds & concepts of set menu:

As new menu is developed and mixed with existing menu, it could cause customers into confusion when they choose menu. For that reason, various kinds and concepts of set menu are necessary such as special menu per each day, breakfast, lunch and dinner special and birthday, anniversary and event menu and healthy and well-being set menu and so on.

Nature-friendly strategy:

Australia has a nature-friendly image and currently Hong Kong has a new tendency that people prefer healthy and well-being elements. Therefore, Pancake On The Rocks can use nature-friendly strategy through the image such as applying different concept of restaurant's interior from Australia.

International Pricing Strategy:

Pricing in Global Environment:

In order for Pancake On The Rocks to run the business in Hong Kong, Pancake On The Rocks needs to consider about the inflation and deflation factors, and adjust the price in different situations. However, Hong Kong monetary policy is fixing the Hong Kong dollar with American dollar by the linked exchange rate system, therefore, the inflation and deflation effect of running is eliminated.

Currency Hedging Strategy:

Currency hedging is an important part of running the business globally, as the cash rate of Australia is increasing , there is the edge for Pancake On The Rocks to run its business in Hong Kong by transferring the Australian currency to Hong Kong currency as the cash flow of its Hong Kong department. On the other hand, the other advantage of Pancake On The Rocks is that Hong Kong Monetary Authority has policy on fixing the Hong Kong dollar with American dollars by linked exchange rate system . After the financial crisis, America economy is falling that situation that directly affects the Hong Kong currency rate, and created the barriers of it rise.

However, to increase the efficiency of the cash flow of Pancake On The Rocks, it will do certain transactions to hedge the foreign exchange risk by using the forward contract to deal with the treasury companies. In addition, Pancake On The Rocks forecasts the hedging quantity by regular review both of Hong Kong and Australian currency spot rate and forward rate, to analysis the equilibrium exchange point to determine the rolling hedging strategy and the quantity of forward contracts.

Multicurrency Diversification Strategy:

For increasing the stability and decreasing the foreign exchange risk, Pancake On The Rocks will use the multicurrency diversification strategy to diversify the currency across several asset and liability markets, this strategy can potentially reduce the risk of currency price fluctuation and cost of operations.

Cost-Plus Pricing Strategy:

According to the factor condition and demand condition, Hong Kong food service industry is well developed, and there are 7 million population and approximately 29.5 million tourists. Therefore, the competition and demand is difficult to be forecasted by research and calculation accurately. Therefore, Pancake On The Rocks will use the cost-plus pricing strategy to determine the product price, and the cost-plus pricing strategy is simply allocates the fixed cost and variable cost, then add the standard mark-up or profit margin.

Regional Pricing Strategy in Product Life Cycle:

Introduction Stage: Penetration pricing- 30% mark-up approximately.

Growth Stage: Stability pricing with reasonable rise- 35% mark-up approximately.

Maturity Stage: Stability pricing with reasonable rise- 40% mark-up approximately.

Decline Stage: Mark to Market pricing- 35% - 45% mark-up approximately.

Project Financing:

Pancake On The Rocks will make the local currency loan transaction to the local commercial bank for the long term operation, the benefits for project financing are that;

1. Increase the speed of business expansion.
2. Increase the efficiency of the cash flow.
3. Decrease the risk of financial distress.
4. Decrease the transfer pricing pressure.

Thus, the cost of local currency loan can be calculated by following:

Cost of Local Currency Loan: Interest Cost + Change of Foreign Exchange Rate:

Tariffs and GST:

Hong Kong Government is encouraging the foreign organization to invest in its market in order to advance its economy, therefore, it does not charge any Good and Service Tax, thus, that is a benefit for Pancake On The Rocks to charge less to transfer the price pressure to the end customers.

International Advertising & Promotion Strategy:

Target customer: Local people & Tourists:

• Short-term objective: Gain the awareness of the brand and product.
• Long-term objective: Establish a strong and reliable brand image.

First - Extension (Promotion Budget - AUD $2 million):

In the first year, Pancake On The Rocks will use communication extension in Hong Kong, the reason is that it can minimize the budget of promotion by using the same campaign of Australia. As the establishment cost of new company will be very high, if Pancake On The Rocks can eliminate the budget in promotion, Pancake On The Rocks will increase the efficiency of its cash flow, and reduce the liquidity risk and market risk.

Barriers of promotion in Hong Kong:

Universal advertising:

Pancake On The Rocks will use the same promotion campaign of home country to Hong Kong market and promote universally. However, Pancake On The Rocks will transfer the language of promotion campaign to Hong Kong, as Cantonese is the mother language in Hong Kong.

Adaptation (Promotion Budget - AUD $5 million):

In the fourth year, Pancake On The Rocks will adapt the promotion campaign for Hong Kong market. As Pancake On The Rocks will convert the business level from introduction stage to growth stage, there are more profit expectation in after three year operation. It will have more financial resources for the investment of promotion.

Advertising and Promotion mix:

Advertising:

Outdoor advertising:

The area of Hong Kong is 1,110 km and instead of massed urban environment, 70% of the area of the country is formed as a rural area and 40% of the area is formed as accessible national parks. (Reference 17) It means that 30% of the area of the country is formed as a city and we can focus on the 30% of the area that advertise at bus stops and an outer wall of the buildings.

Newspaper & Magazine:

Apple Daily is a well-known newspaper with colour printing on all pages. Therefore, it is more effective to advertise restaurant especially food in colour printing than normal newspapers. In addition, there is popular food critic, travel writer Chua Lam and the restaurant will ask him to criticize the food. Hong Kong Restaurant Guide and Open Rice are popular magazines, therefore, Pancake On The Rock will advertise on those.

TV:

Pancake On The Rocks will not advertise on TV but will request to "Choi Lam enjoyment" to collect news materials for the TV program about the restaurant. Moreover, Pancake On The Rocks Choi Lam, who is food expert to introduce Pancake On The Rocks intermittently.

Sales Promotion:

Sampling:

As it mentioned on the web site, which is Hong Kong Tourism Board, there are more than twelve most popular attractions. Therefore, Pancake On The Rocks will be implemented mobile sampling at the attractions such as The Peak, Hollywood Road, Repulse bay, Cat street and so on to attract tourists. At the same time, sampling will be implemented in front of the restaurant to attract local people.

Give-always (key-holder, mobile-holder, etc. with company logo):

For three months after opened Pancake On The Rocks restaurant, key-holder, mobile-holder and so on with company logo will provide to customers to reach more friendly. After three months, key-holder, mobile-holder and so on will be provided to customers not to all but selected customers such as visiting the restaurant at birth day or for party etc.

Affiliated with Credit Card companies and Telecom organizations.

Pancake On The Rocks will affiliate with Credit Card companies such as Shinhan Bank, City Bank and Kookmin Bank and the reason why choose these banks is that they already affiliated with some family restaurants such as T.G.I Fridays, Outback Steakhouse and Tony Roma's etc(reference 18). Therefore, it could be easy to be affiliated with these banks and they already had a system to promote each other. Moreover, the company will affiliate with Telecom organizations such as Hutchison, which is most popular telecom company with over 37 million customers. (Reference 48) Pancake On The Rocks will provide 5% discount to customers who pay in allied companies' credit cards and customers of Hutchison. However, there will be limitation such as customers can get a discount once a month.

Events (Lady's day, Valentine day, Birthday, etc.):

To get a relationship with customers more firmly and help customers to feel friendly about the restaurant, there will be various events. For example, some special days will be designed such as Lady's day, Valentine day and as a public relations, membership system and community on the Internet will introduce that such a member's day can be designed and the restaurant hold a party to enjoy with all members with cheap price. It can help customers to consider the restaurant not as a normal restaurant but more friendly and space to meet new people that have a same preference.

Public relations:

Membership:

To get a relationship with customers A strategic marketing, introducing membership system and providing membership card to customers with various benefits such as birthday and anniversary etc discount, event party, point reserving and so on. This system will be helpful to manage the customers more personally as when they make membership card, it can be possible to get the customers' personal information such as phone number, gender, date of birth and so on. Moreover, in case of tourists, they also can use the membership card in Australia with same condition as Hong Kong. Therefore, Pancake On The Rocks can expect synergy effect in both countries.

Community on the Internet:

Community on the Internet is related with the membership system that the customers can join the community when they make the membership card. Pancake On The Rocks will provide various benefits and information such as the customers can check their reserved points and event day, if the customers make bookings on the Internet, they can enjoy their meal in discounted price (5%) and so on.

International Distribution Strategy:

International Logistics System of Pancake On The Rocks:

Third Party Logistics (3PL) - FedEx Express co.

Pancake On The Rocks is using the third party logistics to delivery the raw material to the end user, because of Pancake On The Rocks is a medium size corporation, and a effective logistics system can decrease the cost for Pancake On The Rocks in order to meet the goals to gain the profit.

Therefore, Pancake On The Rocks decides to use the company- FedEx Express as the outsourcing logistics partner. The reasons to use FedEx Express are: lower price and wide range location coverage compare with the other international logistics companies in Australia, such as SDV International Logistics and World-Link International Logistics co. In addition, it provides a wide range of services such as sea freight, air freight, land freight, perishable logistics, warehousing & distribution, fashion logistics, project & event cargo, freight forwarding and tracking services etc. (Reference 12) (Reference 13) (Reference 14).

In this system, it classifies the raw material suppliers into five categories such as group 1: Meat Supplier, Vegetable & Fruit Supplier and Egg & Mike Supplier; group 2: Flavoring & Sauce Supplier and Plain & Cake flour suppler. This system would choose the logistics method for each group according to the preservable time of the material. For example, group 1 material needs to be fresh, so it would use the air freight, and group 2 material can preserve the long time, so it would use the sea freight. When the raw materials reach the regional headquarters, the regional headquarters will delivery the raw materials to the different regional restaurant. Thus, Pancake On The Rocks can reduce the cost, increasing the efficiency and ensuring the sanitary and quality of the product and service by this logistics system.

Just In Time System:

Since the fresh food is very important for the restaurant industry, the raw inventory control is one of the most important issues for Pancake On The Rocks. Therefore, Pancake On The Rocks will operate its international business under Just-In-Time System, which can decrease the rental cost of warehousing, the waste of inventory storage, and increase the raw inventory verdure. In addition, Pancake On The Rocks will use the following formula to forecast the demand of inventory:

I = R x T

Where I = Inventory, R = Flow Rate, T = Flow Time

Retail Restaurant/ Stores:

Retail restaurant/ Stores are the final platform that directly deal with the customers, for reaching the wider range of customers, Pancake On The Rocks will choose an intensive population place(e.g. Central, Tsim Sha Tusi ) to establish the stores, to convince most of the customer, and expand the market from the first-tier customers to third-tier customers.

International Operation:

Operation System:

To make sure the quality of Pancake On The Rocks products and services are at its highest, it develops a standard operation system.

The key points of the successful operation system are the consistency and predictability, which means the products and services, consistent across the globe (except the regional or cultural products and services), thus, the speed of services provides and the customer services are the same as Pancake On The Rocks standard- High Quality. The standard quality of Pancake On The Rocks measures the states of quality, service and hygienic, which is stating in the following table:

Quality:

Regular standard of the food making process.

Regular standard of the food making details.

Regular standard deal of flavouring and material.

Service:

Service Chain:

1. Welcome customersà.
2. Collect and manage the order formà.
3. Provide the food speedyà.
4. ettle accountsà.
5. Say thank you and welcome back to customers.

Positive attitude, action and conversation to customers.

Hygienic:

Regular cleaning standard

Regular timing for food storage

Regular cleaning in certain period

Internal Marketing:

By above quality operation system, Pancake On The Rocks would gains the benefits and create the word of mouth by the following service profit chain and expands it to the globe.

Budget Planning:

According to this scenario, the sensitivity of demand is difficult to forecast. Therefore, Pancake On The Rocks budget planning is based on the economics condition and the cost of operation. Hang Seng bank assumed that the growth rate of GDP is about 3% per year from 2010, and the political state of Hong Kong is stable, therefore the environmental factor is eliminated. For the international operation of Pancake On The Rocks, it will spend approximately AUD 20 million for 6 years operation including AUD1 millions for merger and acquisition, AUD 7 millions for promotion, AUD 9 millions for international operation and AUD 3 millions holding in cash flow for emergency.

Break-Even Analysis:

Pancake On The Rocks will use Activity-Based Costing to analyze the variable cost and the target net profit:

1. Activity Cost ÷ Activity Driver = Application Rate.
2. Added Up Total Application Rate ÷ Total Units = Variable Cost.
3. (Variable Cost + Fixed Cost) x Mark-up Rate] x (1 - GST Rate) = Net Profit.

Then Pancake On The Rocks will use Cost Volume Profit Analysis to analyze the break-even point and sales revenue:

1. Sales Price - Unit Variable Cost = Unit Contribution Margin.
2. Break-Even Point (in units) = Fixed Expenses ÷ Weighted Average Unit Contribution Margin.
3. Break-Even Point x Sales Price = Sales Revenue.

Implementation and Control:

Action Plan:

Pancake On The Rocks marketing plan is a six years platform plan. In the future six years, we will operate the above strategies, and the action plan is shown following:

There are few risks existing in the market, such as below:

Environmental Risk:

Environmental risk relates to the uncertainty in the economic and political in the global environments.

Market risk:

Market risk is the risk that competitor strategies affect the market that will result in a loss of Pancake on the Rock.

Liquidity risk:

Liquidity risk is the possible in sustaining significant losses due to the inventory inability to liquidate.

Operational risk:

Operational risk is the risk of loss due to inadequate monitoring system, management failure, defective controls, fraud, or human errors.

To avoid or fix those risks, Pancake On The Rock has designed an International Risk Management System and Recovery Strategies. This plan is including the four marketing mix elements. The combination of marketing mix for recovery strategy is showing below:

Recovery Strategy:

Product Strategy:

The product strategy applied when the liquidity risk and market risk happen. Pancake On The Rocks will develop the product set or a batch of new product to shift the style and taste closely to the Hong Kong consumer when those risks happen.

Pricing Strategy:

International pricing strategy mentioned about the applications when the environmental risk happens, such as currency hedging strategy and multicurrency diversification strategy, it also can reduce the financial distress by project financing. In addition, if there are liquidity risk, operational risk and market risk happening, Pancake On The Rocks should simply use the penetration pricing strategy to increase the sales volume to recover the cost.

Advertising and Promotion Strategy:

Advertising and promotion strategy is useful when the market risk and liquidity risk occurs. When those risks rise, Pancake On The Rocks can decrease the Advertising and promotion cost and seek the other lower costs way to increase Pancake On The Rocks brand awareness, when the brand awareness increases the sales.

Distribution Strategy:

Distribution Strategy can hedge liquidity risk and operational risk, when liquidity risk occurs, Pancake On The Rocks can reduce the inventory order volume by accurate forecast and the demand of inventory; on the other hand, Pancake On The Rocks can restrict the operation by the quality control from international operation system.

Reference:

Textbook & Journal:

1. International Marketing: Second Asia-Pacific Edition, John Wiley, Milton (Australia), Kotabe, Reige, Griffiths, Noble, Ang, Pecotich, Helsen, 2008 [2010, Jan 8].
2. Marketing Strategy and Competitive Positioning, Prentice Hall, 4th Edition, Hooley, Piercy, Nicoulaud, 2008 [2010, Jan 8].
3. Blue Ocean Strategy, Kim, W., Mauborgne, R. 2005, McGraw Hill [2010, Jan 8].
4. On Competition, Porter, M. 2008, McGraw Hill [2010, Jan 8].
5. Advertising and Promotion - An integrated Marketing Communications Perspective by George E. Belch, Michael A. Belch, Gale Kerr, Irene Powell, David Waller and Robina Xavier Irwin McGraw-Hill, 2009. [2010, Jan 8].
6. Management Accounting: Information for creating & Managing Value, 5th Edition, 2006, Langfield-Smith, Kim; Thorne, Helen., McGraw-Hill. [2010, Jan 8].
7. Financial Kaplan Schweser, Financial Risk Manager (FRM) full exam 2009 [2010