Key Internationalization Decision Criteria Marketing Essay

Published Date: 23 Mar 2015

Taco Bell is a subsidiary of Yum. Brands Incorporation, which is one of the largest restaurant companies. It is one of the first fast food restaurants who introduced people who live in the United States to the Mexican food by offering the fast food service, and added more colour to be somewhere outside the fast-food line, launching several new items that it designed to compete with higher-end restaurants.

Taco Bell offers a wide range of Tex-Mex fast food to its customers, adopting the menus to local tastes. Although in foreign countries the product of Taco Bell is considered as traditional Mexican food. We introduce also new product - desert.

For entering a new market we consider important to choose a country whose market is large enough and concentrated number of people who knows and are familiar with fast food and Tex-Mex food, have stable or increasing GDP, and the country is part of a larger region where Taco Bell is not present yet.

Based on the key success factors talked above, and the comparative analysis made, the target country is Latvia. The KFC and Pizza Hut tried to go into Latvian market in 1993 and failed. Many things have changed since that time. Now Latvian people are more familiar with fast food and Tex-Mex food.

In the research of World Bank "Doing Business 2013" is told that Latvia is in 25th place of easiness of doing business from 185 countries and in 8th place in Europe. Since year 2004 Latvia is a member of European Union (EU). Economic freedom score is 65.2, making Latvia's economy the 56th freest in the 2012. It is above the world's average.

To enter Latvian market the most suitable entry mode would be not franchising, but a wholly owned subsidiary.

The organization

Taco Bell is a subsidiary of Yum! Brands Incorporation, one of the most important fast food restaurant companies. The history of the brand begun in 1962, when the American businessman, Glen Bell founded Taco Bell Corp. in California. Previously he gained experience in this industry, serving the needs of car drivers, as competitor for McDonalds. In only two years, opened 8 more Taco Bells, and in 1965 the first franchise was launched in Torrance (California).

After an amazing period of strong expansion, in 1978 he sold the chain of 868 restaurants to Pepsi. In 1997 as a result of a spin-off, the 3 famous brands (Taco Bell, KFC and Pizza Hut) founded Tricon Global Restaurants, Inc. In 2002 Tricon acquired 2 other brands, Long John Silver's and A&W All American Food, and the same year changed its name to Yum!. [1] As we can see on Figure 1, the portfolio was dominated by Pizza Hut, KFC and Taco Bell, so in order to be able to concentrate on the 3 well performing brands, as part of its new strategy, YUM! decided to sell Long John Silver and A&W.

Figure 1: YUM! Restaurants by Brands (2011) [2] :

The current strategy of YUM is based in the following points [3] :

Build leading brands across China in every significant category.

Drive aggressive international expansion and build strong brands everywhere.

Dramatically improve U.S. brand positions, consistency, and returns.

Drive industry-leading, long-term shareholder and franchise value.

As we can observe in the following chart (Figure 2), Pizza Hut and KFC are brands well-introduced internationally, but the percentage of Taco Bell restaurants operating abroad are far below it.

Figure 2: Number of stores each brand has in the US and internationally (2011) [4] :

So one of the most important actions to be taken in order to achieve the company's international expansion strategy, is to focus on Taco Bell introduction in a foreign market. Our report is aimed to take the first step towards it.

Product Description

Taco Bell offers a wide range of unconventional fast food in Mexican style, adopting the menus to local tastes. The most basic product Taco Bell is offering are nachos, beef and chicken or baked potato wrapped in a tortilla. The long listed menu includes tacos, burritos, nacho, salads, side dishes, and pintos. Just recently, on June 2012, Taco Bell has introduced their new "Cantina Menu" by up scaling items in their Kentucky and California restaurants and it was created by celebrity chef Lorena Garcia. The menu featured black beans, cilantro rice, citrus, and herb marinated chicken and cilantro dressing. Apart from the new Cantina Bell Menu, Taco Bell has service on Drive-Thru Diet, Why Pay More Menu, Frutista Freeze, Limeade Sparklers, and Kid's Meals. Taco Bell also offer meatless options, but aren't certified as vegetarian.

Key competitors

Who is Taco Bell competitors, and how they are competing! At first, Taco Bell is one of the first fast food restaurants who introduced most people who live in the United States, and added more colour to the fast-food line, lunching several new items that it designed to compete with higher-end restaurants.

There are some competitors who came after Taco Bell restaurant who tried to serve Mexican food with wider Varity to compete since Taco Bell was the first and only Mexican fast food line in the United States at the time. One of the first competitors now is Chipotle Mexican Grill, after they decide to enter the market with the same kind of food of Taco Bell by they realizing some of the threats in the SWOT analysis for Taco Bell, which is most new researches that raised awareness among the public, and educated consumers about the harmful health impacts of the fast food consumption; such as trans-fats, sugars, oil, and salts. In addition, Taco Bell ingredients are centrally sourced arriving via what Vickers characterizes as corporate food truck. Therefore, Chipotle as a competitor tried to take an advantage of that and come up to the same assembly line with Taco Bell with more quality fresh. They also, locally sourced and prepared by in- house 'chefs' as opposed to Taco Bell workers. However, they don't have the big brand behind them where's Taco Bell does.

Another competitor to Taco Bell is Moe's South West Grill, as a Mexican fast food. Choice of meat, beans, and topping is good with wide variety; they were smart to come up with a new idea where you can make your own choice of plate by adding the ingredient with your personal taste. However, they have low brand awareness and limited locations in the market place.

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For example, in a new survey [5] of food preferences, despite the debut of its Cantina menu, Taco Bell placed dead last in every category except "value," according to Market Force. As a global fast food restaurant, Taco Bell knows who are there competitors are in the United States, and how many of them serve tacos. Even though, those Mexican restaurants are similar. But have serious differences such as; Chipotle's music is funkier on the other hand; Moe's is more welcoming by the servers as you walk in the door. Most of all low numbers of loyal customers to each of those fast restaurants especially that our economy going through financial crisis that effected consumers spending and how much money they welling to spend on food, etc.

Chipotle, Moe's Mexican fast food restaurants competitors has striven hard enough to seek consumer satisfactions and freshness themselves to the public to attain to the length where the Taco Bell reach out on the fast food industry.

International development

Although Taco Bell expanded in an impressive scale since its foundation, during the first period of its history started business only in the USA and Canada. In the second phase appeared in Puerto Rico (1985) and Hawaii (in both countries Taco Bell is present also now) and also tried to establish itself in Europe (1983-UK, and 1993-Poland) but in both countries Taco Bell closed the restaurants in a short period of time.

The third stage of internationalization became in the last decade, and it was very important because the brand appeared not only in Asia (2003-China, 2004-Philippines, 2010-India and South Korea) but also returned, this time successfully - to Europe (2006-Iceland, 2008 - Spain, 2009 - Cyprus, 2010 - new entry in UK, Greece). The brand is also present in the Middle East (Saudi Arabia and United Arab Emirates) and in South America (Chile, Columbia, Ecuador and Panama). Although in foreign countries the product of Taco Bell is considered as traditional Mexican food, in Mexico the company is not present. Taco Bell had 2 attempts to establish itself in the country, but without success.

Key internationalization decision criteria

Based on the above explained we have identified the following key internationalization decision criteria:

80' and 90': Taco Bell entered nearby countries and in Europe, in years 2000 targeted countries were in Asia, Europe, Middle East and South America.

to be present in countries with the more habitants in every continent,

also targets small countries where GDP/capita is higher than region average

easier market because of similar language (e.g. UK) or culture (Spain and South-America)

It is important to consider that as the 80 % of Yum! restaurants operate as franchise [6] in most cases the key decision criteria is if there is a possible franchise operators in a specific country. According to Yum! franchise webpage, there are several criteria about optimal site for its restaurants but they define the location (building area, parking, seating, lot size, traffic) or situation (traffic, preferred sites/site qualities) and there are only one criteria according to the city where the restaurant is to be (population: 20.000 Immediate TA). [7] 

Based on the company presentation and competitor analysis above detailed, we summarize in Table 1 the strengths and weaknesses of Taco Bell, and the opportunities to explore, threatens to avoid.

STRENGTHS

pioneer in introducing people who live in the United States to the Mexican food

strong US background

good worldwide presence

co-brand names (KFC and Pizza Hut) are famous and well-known in most countries

competitive prices

wide range of products offered

adopts menus to local tastes

WEAKNESSES

brand Taco Bell is not well-known internationally

doesn't offer a wide variety of deserts

doesn't concentrates on emphasizing healthy ingredients

OPPORTUNITIES

as a result of globalization and cultural standardization customers accept and are more likely to try exotic tastes

Because of lack of time people tends to eat something fast but quality.

THREATHENS

Economic downturn can effect on the dropping of purchasing power. The low standard of living make people can't afford eating out

healthy cuisine is increasingly important for customers, and fast foods are considered unhealthy

New competitors as the new entry in the market can become a threat as people likes to find something similar but in different price.

Table 1: SWOT analysis

Market Opportunity Analysis

Key market success factors for Taco Bell to succeed in a new market:

no restrictions for franchising or foreign direct investments

market size:

large and concentrated number of people who knows and are familiar with Tex-Mex food or if not, they like and accept new tastes and other cultures foods

large and concentrated number of people who accepts and are familiar with fast food restaurants

purchasing capacity, stable or increasing GDP

presence of other fast food restaurants, but not high number of competitors that offer the same line of product (Tex-Mex or Mexican food)

country that is part of a larger region where Taco Bell is not present yet

adequate target customer and market knowledge.

As most of fast food restaurants are operated by franchisees, one of the most important factors while choosing a new market is if there are any restrictions about franchising. Although the first restaurant in a new country naturally could be operated by the company YUM! but if there are several restrictions for franchising, the expansion opportunities in that country are quite limited.

Second important factor is cultural openness, e.g. potential consumers must be familiar and like the food offered by Taco Bell (or other culture's food) because if they don't accept different tastes, incomes will be seriously lower as expected. Also important if people in the target country like fast food restaurants, or have a slower life style, and prefer eating at home or in classical restaurants.

Third important factor is if people can or not afford eating out. In countries where a large number of people became unemployed because of the crisis, or GDP growth is negative, one of the first things that people consider as money wasting is eating out.

Although it is not a success key factor, but we consider also important while choosing the target country, to study geographical presence of Taco Bell in the world and choose a country which could be a base for a further expansion via countries where Taco Bell is not present yet.

Last but not least, it is very important while choosing the target country is having deep knowledge about the future customer and market, as unsuccessful international expansion decisions are generally based on strategies without knowing what target consumers will think about our company, product, price and promotion.

Potential target countries

Based on the previously identified key success factors, we have chosen as possible target countries Latvia, Malaysia and Hungary. The research of ease of doing business says that Latvia is in 25th place, Malaysia in 12th and Hungary in 54th place of 185 countries in total.

As can be seen in the comparison table (Table 2 in appendices), in none of these countries exist restrictions for franchising or food industry. In Malaysia there is an additional factor to consider, as restaurants have to ensure that the food and the supply are certificated Halal to suit the majority of Malaysian preference. So if the decision would be Malaysia, the product should be slightly amended and the suppliers should also be Halal which is going to be hard because the ingredients of the product are basically Mexican-style. If we choose to be not Halal, the market is still there and we can still make a new entry, but we are going to lose the customers because of the Muslim's majority value.

In all countries people like fast food restaurants and accepts other culture's foods (but as indicated, in Malaysia it is necessary certify Halal ingredients and supply).

In all of the three countries we can find people who can afford eating out in large cities, concentrating people with higher level of income, and a large number of tourists, who can afford fast food restaurants, and they (especially tourists from the USA) are familiar with the brand and Tex-Mex food.

Regarding competition, in all countries exist fast food restaurants, but the number of those that offers food similar to Taco Bell products, is relatively low. In Malaysia there are no locals offering Tex-Mex or Mexican foods, but there are other fast food restaurants that may be competitors for example KFC and McDonalds. In Hungary fast food restaurants are popular, and there are some presence of Tex-Mex and Mexican foods, and other nations (Chinese, Turkish, Indian, etc.) fast food cuisine. In Latvia, similar to Hungary, there are different fast food chains, and restaurants offering Tex-Mex.

As we can see in Taco Bell Worldwide Presence Map (Figure 3 in appendices), Taco Bell is represented in North and South America, in South Asia, in the Middle East, and in West and South Europe. Regions what are not covered are Africa, Central, East and North Europe, Russia and ex-soviet countries, Australia and Oceania. Our three selected possible target countries should be departure points for a further international expansion: from Hungary all east and central European countries can be reached easily, from Malaysia we could reach Australia and Oceania, and Latvia would be an excellent choice because it is an ex-soviet country, but culturally and logistically good connected to North European countries.

The last point to consider while choosing a country is to have deeps knowledge and understanding of local culture, tastes, and customer preferences. Although this point is vital for foreign expansion, sometimes happen that the internationalization strategy focuses on hard (e.g. GDP growth, market size, number of competitors) factors and doesn't focus on soft (e.g cultural) factors.

Based on Hofstede's comparison between countries authors made a comparison between United States and other 3 targeted countries. Unfortunately they do not have data about Latvia, that is why authors took Estonia and Sweden.

PDI - Power Distance

IDV - Individualism versus Collectivism

MAS - Masculinity versus Femininity

UAI - Uncertainty Avoidance

LTO - Long Term Orientation

Figure 4: Geert Hofstede countries cultural comparison

Power distance - this is evidenced by the focus on equal rights in all aspects of American society and government. Hungarian and Latvian style: Being independent, hierarchy for convenience only, equal rights, superiors accessible, coaching leader, management facilitates and empowers, people do not readily obey and respect people in authoritarian positions based merely on their rank and status as power-holders. Malaysian people accept a hierarchical order in which everybody has a place and which needs no further justification.

Individualism versus Collectivism - The United States, Hungary, Latvia is an individualistic culture, people look after themselves and their immediate families, there is a solid conviction about the personal responsibility and everybody's own achievement and contribution in order to be self-fulfilled. Malaysia is a collectivistic society, this is manifest in a close long-term commitment to the group.

Masculinity versus Femininity - the United States, Hungary and Malaysia is considered a "masculine" society - highly success oriented. Latvia is a feminine country, it means that society is driven by a certain amount of modesty and fairness.

Uncertainty Avoidance - American society is "uncertainty accepting", there is a larger degree of acceptance for new ideas, innovative products and a willingness to try something new or different. Hungary and Malaysia has a preference for avoiding uncertainty. Estonia has a high preference for avoiding uncertainty, Latvians are more prone to rely on rules, detailed and clear guidelines and work descriptions.

Long Term Orientation - the United States is a short-term oriented culture, it is a culture focused on traditions and fulfilling social obligations. Hungary is a long term orientation culture. Latvia is a short term orientation culture. No score available for Malaysia.

United States culture is closer to Europeans culture than Malaysian.

Basic characteristics of target country

Based on the key success factors talked above, and the comparative analysis made, the target country will be Latvia.

Latvia is located in Northern Europe, on the Baltic Sea. Latvia's area is 64.589 km2 from which 1.57% (1.014 km2) consists of water. Latvia's border is 1836 km long (1382 km land and 454 km is water). Land borders are with Estonia, Russia, Belarusia and Lithuania, water borders with Sweden, Lithuania and Estonia. The official language is Latvian, and currency is Lats ($1.85 USD). In year 2014 Latvia wants to establish Euro.

In the beginning of 2012, Latvia has 2 041 763 inhabitants and density is 32/km2, capital city is Riga with 650 478 inhabitants, and density is 2 140/km2. [8] Density in Latvia is one of the smallest in Europe In the beginning of 2012 in cities lived 68% of inhabitants and in countryside just 32%.

In Latvia is 76 towns, and in 2 the inhabitants is more than 100 000, and in 19 town lives at least 10 000 inhabitants.

Climate in Latvia is temperate, it is influenced of the Baltic Sea and Atlantic Ocean. There is explicit change of 4 seasons (-35oC - +30oC). Sky often is cloudy.

Natural resources - 29 660 km2 (45%) of all Latvia's land is forest, and 1.014 km2 (1.57%) is water. In Latvia are 12 00 rivers and 2256 lakes. [9] 

Latvia has one of the fastest internet upload and download speed in the world.

World Economic Forum in their report on The Global Competitiveness Latvia is ranked in 55th place.

Economic Environment

Latvia has market - oriented economy. In the research of World Bank "Doing Business 2013" is told that Latvia is in 25th place of easiness of doing business from 185 countries and in 8th place in Europe.

Since year 2004 Latvia is a member of European Union (EU). That made an impact on Latvia's economic situation. GDP since 2004 grew tremendously. In 2008 Latvia's economy collapsed due too global economic crisis (-18%). Now it has one of the fastest growing economy in EU. Since economic crisis lowest point in year 2009 in 3rd quartile GDP growth is 12.4%.

In 2011 average salary was similar, approximately $828 USD in public sector and in private sector. The biggest average salaries in Latvia in general was in finance and insurance industry, and from all Latvia the highest average salaries are in planning region of Riga.

Economic active people are 1006.7. In general 166.2 thousand people are looking for job, and 375.4 thousand people are not active. In study year 2011/12 in colleges and universities were 97041 students in total.

Average labor cost in year 2011, including wages and benefits, was 852876 thousand USD. In year 2007, year before economic crisis, average salary was lower, but in year 2008 it increased and then decreased in 2009 and 2010. In year 2011 it increased. Unemployment every year since 2008 is increasing, in 2010 it reached the lowest point of 20.5%. In end of May unemployed was 121 994 (12.3%) people it decreased in last 12 month.

70% of total Latvian GDP is structured by service industries. Trade is making 16.69% of total GDP and manufacturing industry 14.1%. The main sectors in GDP are also transportation and building industries.

Import in Latvia is bigger than export. Exports of goods and services (% of GDP) are growing every year from 42 in 2007 to 59 in 2011, and import in 2007 was 62 % of GDP than it decreased to 45 % in 2009 and increased again to 63 % in 2011. Latvia's main trading partners are Europe Union countries. Main exporting products are wood and wooden goods, also food and agriculture.

As Latvia is a member of EU, the customs regime is maintained of EU Customs Code. Importing goods in the Republic of Latvia from other EU Member States, entrepreneurs do not have to declare and pay VAT on the state border. Supply of EU goods from one Member State to another is not regarded as an import or export, but it is defined as free circulation of goods. Importing goods to Latvia one needs to pay shipping cost, insurance and VAT, which for Latvia is 21%. Duty rates applied usually from 0% - 17% (duty and taxes are calculated on the value of imported goods).

Before the global economic crisis the inflation was 10.1 %, than it increased till 15.4 %. In year 2009 it decreased and in year 2010 reached deflation -1.1 %. And now inflation is 1.6%. Latvian Lats is one of the strongest currencies of the world - 1 LVL: 1.45 EUR; 1.86 USD; 1.18 GBP; 59.74 RUB. Latvia will introduce European national currency Euro in 2014.

From this date we can see that Latvian market is truly growing. There is a perspective of company's growth. World Bank in its research rank Latvia as 25th country among 185 of ease of doing business. Latvia has increasing GDP, so from this point of view Latvia is a good country to establish Taco Bell. With increasing GDP, increases also purchasing capacity. So people can afford to eat outside the house in restaurants.

Political and Legal Environment, Government

Latvia is a parliamentary democracy republic. Latvian parliament is Saeima that consist of 100 members which are elected from Latvian nation for 4 years. The president is elected from Saeima also for 4 years, he is representative one with limited power. President appoints the prime minister who chooses people 13 other people (Cabinet of Ministers), they govern the country. Ministers can accept one or other law, but then they need to direct it to Saeima for approval.

Latvia's most important document for law is Constitution of the Republic of Latvia and Constitutional Court is answerable for it. Latvia have three - level court (regional courts, district courts and Supreme court). The most important law for doing business is Commercial Law, it tells what is small and medium enterprise large company, explains different agreements and liabilities. A foreign company, who wants to do business in Latvia under its own name, and not establishing affiliated company, may register a branch. Branch is an independent part of a parent company.

Competition law - Labour law - it discusses agreements with employees, minimum salaries and other payments, working time and vocations. There are laws, what can make difficulties for restaurants work, such as it is hard to fulfil all the demands for excised goods and Food Veterinary Service.

According to Aon (Insurance brokers) Risk Countries of World 2011, Latvia is a medium risk country. Research authors draw attention to currency risk and payment default. The main risk in Latvia is politics, parties and individuals, their inability to come to an agreement and their willingness to borrow money for solving any problem, may acquire economic risks.

Latvia is a member of EU trade organization. The trade policy of EU refers also to Latvia. EU is the biggest trade leader in the world with 20% of worlds import and export. Foreign direct investments are growing every year. Main countries that invested in Latvia are Sweden, Netherlands and Estonia. More investments are in fields of real estate and finance.

Latvia has a council which is responsible for property rights and one for intellectual property right protection. Not only these councils is responsible, but all government. Property rights index is 50, the index measures the degree to which a country laws protect property rights. Intellectual property rights are protected with "Copyright Law" (2000) and "Patent Law" (2007).

Latvia is a member of the United Nations, European Union, Council of Europe, NATO, Organization for Security and Co-operation in Europe, International Monetary Fund and World Trade Organization, and is part of the Schengen Area. Latvia is also a member of the Council of the Baltic Sea States and Nordic Investment Bank, and is together with Estonia and Lithuania involved in trilateral Baltic States cooperation and Nordic-Baltic cooperation. [10] 

Corruption is in high level in Latvia. A lot of people involved in corruption are convicted. The time period for investigate the case is relatively long, it is due to quantity of information needs to be collected, and sometimes also of quantity of witnesses. Economic freedom score is 65.2, making Latvia's economy the 56th freest in the 2012. It is above the world's average.

There are no restrictions from government side to open new companies by franchising or foreign direct investments, although there are some specific laws and services that are making problems. Freedom in Latvia is above the world's average. There are no special laws or rules what is restricting action of public catering service.

Cultural Environment

In previous years count of peoples who are leaving Latvia is increasing, year 2011 it established more than 30 000. Along with that Latvia's culture is increasing. Latvian culture is influenced from German, Sweden and Russian cultures due to occupations. Latvian is official language. 58 % of Latvians speak Latvian language and 37 % in Russian. English language can speak 20 % of Latvia's inhabitants. In Latvia are three religions in dominant position - Lutheran, Roman Catholic and Russian Orthodox. Lutheran parishes count decreases every year, Russian. Orthodox stayed at the same level, in last year it increased for 3 parishes. Data about Roman Catholic in first years is not available, in last 2 years it was 250 parishes.

In Latvia is explicit prosperous and poor inhabitant class. Few inhabitants is in middle class, usually they are leaving Latvia. The prior fields for Latvia's inhabitants are prices and inflation, employment, economic situation and health.

In Hofstede site is possible to see the countries cultural outline. Power is decentralized and manager counts on the experience of their team. Employees expect to be consulted, control is dislike, and communication is direct and participative. Latvia is individualistic society. Individuals are expected to take care of themselves. Employer/employee relationship is a contract based on mutual advantage. Hiring and promotion are supposed to be based on merit only. It is important to keep work/life balance. An effective manager is supportive. Decision making is achieved through involvement. Conflicts are resolved by compromise and negotiation. Latvians are more prone to relay on rules, detailed and clean guidelines and work description. Do not like to be rushed into making decisions. Short term oriented society, impatience for achieving quick results.

Yum! was in Latvia from 1993 to 1996 with "Kentucky Fried Chicken" and "Pizza Hut". Those years were not brilliant for fast food industries in Latvia, as people did not know what it is and the purchasing power was quit low, now the situation is far way better. Now people love more and more fast food, and the purchasing power is bigger.

People in Latvia are familiar with fast food and Mexican food. McDonalds in Latvia is already 12 years and have 11 restaurants, Hesburger -working 8 years with more than 20 restaurants. There are also a lot of Turkish kebab places and their number is still increasing. As for Mexican style food can be mentioned restaurant Tequila Boom (2003) and restaurant chain Tex-Mex. It is working from year 2001 with 2 restaurants in Riga and 4 in other cities. Their menu is similar to Taco Bell's menu.

General education in Latvia is 12 years (9 years compulsory primary education, 3 years high school education). 2 - 6 years higher education, 1 -2 master studies and 3 - 4 years master studies. Last 5 years number of students who got the professional education is about 9000 per year.

There will not be a problem of Taco Bell to join Latvian market. People are familiar with fast food and Mexican style food, where they don't need to spend all day long for waiting the food. But for success Taco Bell should choose the place closer to city centre and, where all day and night life is taking place.

Product/Service

Taco Bell specializes in serving Mexican food such as burritos, tacos, nachos, chalupas, gordita, salads and some other specialities that distinguish Taco Bell (Taco Bell, 2012). These already existing items will be present in taco Bell's menu that will be introduced in the Latvian market. New items will also be added to the menu. The booming desert trend in the fast-food market has made the introduction of a sweet meal to the menu very appealing. Since deserts have high demand in the market, ice cream and apple pie will be added to the menu. Ice cream and apple pie were chosen specifically, because these desserts are already present in Taco Bell's competitors' menu, and people enjoy them. Therefore, by adopting these new products that already exist in the fast food market and are well liked, we are taking advantage of this opportunity.

Many of the competitors in the market offer desert on their menus. The main competitor of Taco Bell is Chipotle Mexican grill (Hoovers, 2012). Chipotle doesn't have dessert on their menu. Thus, by adding dessert to the menu it will assist us on gaining competitive advantage over them. However, chipotle is not the only competitor, Taco Bell also have other competitors in the fast food industry such as McDonald and Burger King. Both McDonald's and burger king carry desserts on their menu. McDonalds Apple Dippers and Baked Apple Pie are ranked sixth amongst the 10 most popular McDonalds menu items (William Harris, 2012). McDonald's desserts are listed as the first and Burger King as third of the best fast food desserts amongst other fast food restaurants that serve desserts (Dana Barnett, 2012). Because the desserts have shown a huge demand, McDonald decided to eliminate some of their existing products from the menu such as the small French fries and small drinks, and add more desserts like fresh cookies and more ice-cream to have a "dollar value menu" (Lisa Baertlein, 2012).

People also tend to crave desserts after meals and that is usually due to the brain chemistry, diet make up or even habit (Andrea Crespede, 2011). So by introducing dessert on the menu we would attract more people to the restaurant because of the variation in the menu.

In addition to what's mentioned above; according to a study made in 2006 by the Swedish trade council about the Latvian food market, 40% of the household's expenditure is usually to food and eating out. Furthermore, the study states that there are some factors that influence the consumer purchases. According to the graph below the country of origin doesn't have a dramatic influence on the purchasing decision, only 12%. Price on the other hand is the main factor that influences the consumer decision (Swedish trade council, 2007) [11] . Therefore, since prices of Taco Bell are close to the prices of its competitors. They are affordable and inexpensive. So the introduction of Mexican fast food restaurant is not an issue as long as the prices are within reach. Moreover, The Mexican cuisine is widely liked worldwide and it's like a staple in every country along with Indian cuisine and the Italian cuisine etc. And since Taco Bell will be opened in Riga the capital of Latvia, many tourists will be attracted to Taco Bell.

Figure 5: Most important factors which influence Latvian consumers purchasing (2006)

In some countries special products of interest may be offered. Because they are not necessarily in demand in other countries, they are not mentioned on the main product lists. Of course, these products could also be supplied to other countries if required. We are adding the dessert into Latvian market and there is no special adding on menu according to Latvian preferences and culture. So, the product is not country specified, the decision on doing Taco Bell in Latvia is because of there's no restriction and so it works in the concept of multiple markets. So the products remained the same without having to modificate it to suit the community preferences. Taco Bell used price sensitivity when it introduced "value pricing" to the quick service industry in 1988. (Services Marketing New York: McGraw Hill, 1996). They have succeeded with it because it is based on its strategy on customer perceptions of value. (Leonard A. Schlesinger, 1991). Latvia is still in the price sensitivity state, however they don't really mind about the taste or the country origin, in which can be an opportunity for us. Placing Taco Bell in Latvia is not bother by any certification and regulation and basically just go with the original Taco Bell operation.

Entry mode

There are six basic modes of entry into a foreign market, which are exporting, licensing, franchising, turnkey projects, wholly owned subsidiaries, and joint venture. Each has their own advantages and disadvantages, but the mode that works best for introducing Taco Bell in Latvia could be franchising or wholly owned subsidiary.

The third mode of entry is franchising. Franchising is a method of doing business wherein a franchisor licenses trademarks and methods of doing business to a franchisee in exchange for a recurring royalty fee. Franchising is also a form of licensing. The franchisor can exercise more control over the franchise compared to that in licensing. Under franchising, an independent organization called the franchise operates the business under the name of another company called franchisor. The franchisor provides the following services to the franchisee: trademarks, operating system and product reputations.

Wholly Owned Subsidiary is defined as "a corporation that is wholly owned by one or more parent Crown corporations directly or indirectly through any number of subsidiaries each of which is wholly owned directly or indirectly by one or more parent Crown corporations (Wholly owned subsidiary)."

Although - as we can see in the following chart (Figure 6) - quite large percentage of YUM! restaurants are operated by franchisees, and only the 17 % of the are owned by the company. To enter Latvian market the most suitable entry mode would be not franchising, but a wholly owned subsidiary.

Figure 6: Percentage of YUM! Restaurants by how they are operated

To understand the entry mode suggestion, it is important to consider that establishing a restaurant in Latvia would be the first step for a high-scale international expansion, and the country could be a departure via North-Europe (Norway, Finland, Sweden), neighbouring and culturally strongly connected ex-soviet countries and Russia, and via Poland, so it would be a strategically important, maybe regional centre for the company.

In case of a franchise, YUM can't control quality and supervise efficiently if the introduction of the brand in a new region goes smoothly, and a failure during the introduction could affect negatively the brand image and reputation in other countries as well, which can also cause a negative impact on YUM! stock prices.

Also important that introducing a totally new brand in a region requires more effort and financial investment and franchisees maybe won't take such a risk in this initial period. Next restaurants in the country and later in the region could be operated by franchisees, under the existing YUM Restaurants International Franchise system.

Establishing a wholly owned subsidiary abroad will require a set of steps from the company part. Taco Bell will need to seek a legal partner and financial advisors in the country in order to find the most appropriate company form, and learning about financial and legal requirements.

Also highly recommended to contact commercial and trade development offices in Latvia in order to get professional advice on market entry activities, choosing the location, and take decisions about marketing issues, although for franchisee partners Taco Bell (and all YUM!) has a detailed set of requirements about these issues, so not much amendments will be possible, but it is important to align them to local preferences customer needs.

For staffing the company will need to identify the number of employees needed, and their responsibilities, deicide if they should be local or expat colleagues (talked deeply in next chapter). Taco Bell also will have to choose the location for its subsidiary office.

Staffing

First of all we have to make a manpower inventory planning to identify what tasks to be covered and what positions to open in the totally owned subsidiary in the Latvian market. (In this report we basically use the position names that can be found in the careers section of Taco Bell webpage (http://www.tacobell.com/careers) for better understanding.)

At the same time, we have to examine if the positions require local, expat, or third country nationals, current employees, or hire new ones.

Those, who prepare and deliver Taco Bell food to customers

Team members are responsible for preparing food and serving customers. They should be local persons, as they have direct contact with customers, so common language and culture, and a good understanding of customer habits and preferences, communication style is one of the key factors in these position.

Those, who make sure that team members are properly trained, positioned and ready to provide a customer experience, coordinating job of team members and have a personal skills to do such kind of work.

Shift Leaders: Depending on opening hours, but basically 2 shift leads are needed, they will work on turns and will be responsible for managing the team who serves the customers. They should be local employees, as they will manage the team of local persons.

Those, who are responsible for business and overall restaurants operations.

Restaurant General Manager (RGM) - A restaurant manager is also needed (1 person for each Latvian restaurant), would be responsible for procurement, logistics, restaurant finances, so the smoothly running of the restaurant, but also builds and inspires their team, creating an environment where Customers love to visit. As for this position is really important the deep understanding of Latvian laws and legal regulations (e.g. about food industry), experience in Latvian fast food industry (e.g. good contact with suppliers, knowledge of raw material price level and quality), the restaurant manager should be a Latvian person.

Those who are responsible for the implementation of Taco Bell Brand in the region an in the future, in all the region.

Assistant Manager: At the same time it is necessary to hire a local assistant manager, who in the initial period could support country manager's work with his/her local knowledge, and by shadowing, could learn information about the parent company and the brand. After the initial period could substitute the country manager or participate as country manager in further expansion in neighbouring countries.

At overall, it is necessary to find a country or general manager, whose responsibility will be the implantation of Taco Bell brand in Latvian market. This person must be somebody who knows the brand quite well, preferably has worked for YUM/Taco Bell for several years, is aware of the company's strategy and has a deep knowledge of fast food industry. The best option for that should be to choose an existing employee in Taco Bell and send him as an expat to Latvia for the period of the implementation (approx. 2-3 years) and then return the parent company.

Resuming the above explained, in case of the country manager we suggest employing a current Taco Bell employee/expat, who could lead the implantation with his/her experience in the parent company's issues, transmitting Taco Bell corporate culture. This also would have the benefit that Taco Bell could have higher control about the implantation process, and this could generate a better relationship between parent company and its Latvian subsidiary.

In case of other positions, we suggest hire new employees from Latvia, as local market and customer knowledge, good understanding of regulations, earlier professional network will ease good corporate performance. In case of employees that have direct contact with customers, is even more important. And last, salary level in Latvian market is lower that US salaries, so hiring local employees also will keep budget in tighter scales.

In case of local employees it is important to provide an initial training in order to transfer not only the parent company's corporate values, but experience and process knowledge.

Marketing

Taco Bell I not offering totally new product for Latvian market, as there are already companies who provide fast food and Tex-Mex food. First of all, Taco Bell should introduce local market, public and other companies, with them, their products/services. They have to provide the information to potential costumer, introduce them to their services using advertisement in TV, radio and internet.

As there are differences in culture, language and I laws, Taco Bell will have to take some challenges, but basically Latvia is a country where people accept and like American products and lifestyle.

Market size - people are familiar with fast food and Tex Mex. McDonalds in Latvia is already 12 years and have 11 restaurants, Hesburger -working 8 years with more than 20 restaurants. There are also approximately 5 Turkish kebab places and their number is still increasing. As for Mexican style food can be mentioned restaurant Tequila Boom (2003) and restaurant chain Tex-Mex, working from year 2001 with 2 restaurants in Riga and 4 in other cities. Their menu is similar to Taco Bell's menu.

Due to such a variety of products offered to consumers, companies constituting Yum brand represent a serious power in the fast food market occupying the leading positions in different segments of the market.

The Yum brand implemented the marketing mix; after identifies the different growth opportunities then they decided what to do, how to do it in the fourth steps of the marketing mix- products, price, promotions, and place.

Marketing mix

Description

Product

Consumers will perceive the products/services as valuable to buy. The Yum brand has created different, new products in in the fast food restaurants to consumers who would like to eat fast food other than hamburgers. As mentioned before, people in Latvia are familiar with fast food and Tex-Mex, their number is increasing.

Price

Value- based marketing requires firms to charge a reasonable price for the quality of products. The Yum brand have used market skimming which is a bit high priced to target the middle and upper class people which appeals to the many classes of the society. Prices in Taco Bell and other similar restaurants in Latvia are not so different.

Promotion

The Yum brand brought all food lover attention toward its delicious one-of-a-kind products together. Taco Bell should put their promotions in internet, TV and radio to contact with wider group of people.

Place

After creating the value through good products or services firms should be able to make it essay accessible where consumers can find it at any time they wanted it. So Taco Bell restaurants should be in city center, where are more people daily and all night life going on.

People

Taco Bell should think of all stakeholders - workers, clients and others. Workers to be satisfied with work environment, payments, working hours. Clients/costumers should get the quality they want, quick service and delicious food. Other people should feel that they are welcomed in restaurant. Here Taco Bell will have to take challenges, because people in Latvia speak basically 2 languages, they like quick service and quality.

Physical evidence

Taco Bell should make the atmosphere, the interior and environ that people could feel welcomed in restaurant and willing to come back. That the passers would willing to go in.

Process

Taco Bell should train workers to serve the costumers fast and with quality, Latvian people like fast and qualitative service.

Table 2: Service marketing 7P's

Appendices, references

Table 3: Market opportunity analysis comparison table

Country

Market Success

Criterions

Social/

Cultural

Economical

Customers

Competitors

Political/Legal

Hungary

People aged between 20-40 likes and accepts other cultures food.

GDP increase slows down, during the crisis a large number of people became unemployed.

Customers are not price sensitive in fast food sector. Budapest is full of tourists.

2 Restaurant that offers Mexican (Tex-Mex). Other nation's fast food in Budapest.

No restrictions to franchising food industry.

Special tax on fast and junk foods (introduced in 2011)

Malaysia

People don't actually eats other culture foods in daily basis.

Fast food restaurants are always full of people.

The purchasing capacity is large but only at certain location. The price rate is quite high for the community at large.

Not sure if people wants to eat something out of ordinary (Mexican food).

They are okay with the prices but won't visit regularly.

Other fast food restaurant. There is not yet any Mexican Style restaurant.

No restriction to franchising, but have to ensure that the food and the supply are certificated Halal to suit the majority of Malaysian preference.

Latvia

People like and accepts other cultures food.

Fast food restaurants are always full of people.

Latvia has the fastest growing economic in Europe. People have purchasing capacity.

Local people love to try something new and not ordinary. Riga is new target for tourists. Students are the biggest fast food purchasers.

Different fast food restaurants. Mexican food restaurants (Tex-Mex (2 in Riga, 4 in other cities), Tequila Boom).

No restrictions to franchising food industry.

Figure 3: Taco Bell Worldwide Presence Map