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AYANLEKE JULIUS
BBA - F1308 - 0324
BBA PGSM
HOW TO SET UP BUSINESS IN ASIA
MG 433
MS. MAUREEN
EXPANDING TO INDIA AND MODE OF ENTRY
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04 - 07 - 2014
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Table of Content
Topics
Pages
Executive
Summary....................................................................................................
3
Company
Profile.........................................................................................................
4
External Environment
Political
Influence.......................................................................................................
5-6
Economical
Influence................................................................................................. 6-7
Social
Influence.......................................................................................................
... 7
Technological
Influence............................................................................................. 8
Environmental
Influence........................................................................................... 8
Legal
Influence.......................................................................................................
... 8-9
Swot Analysis
Swot
Matrix............................................................................................................
..... 9
Strength........................................................................................................
............... 9
Weakness......................................................................................................
............... 9
Opportunities................................................................................................
.............. 10
Threat............................................................................................................
.............. 11
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Locally Source
Resources............................................................................................ 11
Corporate Social
Responsibility.................................................................................. 11
Pricing.........................................................................................................
................ 11-12
Mode Of Entry
Joint
Venture..........................................................................................................
....... 12-13
Recommendation.......................................................................................
................... 13
Conclusion...................................................................................................
.................. 14
References..................................................................................................
................... 15

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EXECUTIVE SUMMARY
This report aims to evaluate Tasty Fried Chicken (TFC) performance in
order to stipulate expansion into India.

Being that the company's

objective centres around expansion, this report identify a likely attractive

target country in India for such plans.
The analysis used are SWOT, PESTEL, Industry Based View, Market Entry
Mode and other similar evaluative tools to reach an understandable and
valid conclusion that India provides varied opportunities for expansion
that can be exploited by Tasty Fried Chicken.

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COMPANY PROFILE
The current mission statement of Tasty Fried Chicken is to inspire and
nurture the human spirit by one person, one plate and one neighbourhood
at a time.
The first TFC outlet was opened in South Africa on March 20th 1970 by
five partners and name of the store originated from the novel Moby Dick.
The firm believes in supplying and serving the best meals especially
seasoned chicken by using highest standards of quality whilst adhering to
ethical trading and responsible growing practices at the same time.

In

1987, the first stores were opened outside South Africa in Nigeria (1988),
Ghana (1989) and Zimbabwe (1991) and in subsequent years stores
followed the expansion were much more extensive across Africa.
Based on Mintel global consumer research firm (2009), TFC had 73%
market share in South Africa and is significant because the majority of its
revenue comes from their home market which is $1.2 Billion compared to
an overseas share of just $ 640 Million. Among TFC's many achievements
is its spot of being first in fast food and quick refreshment categories in
Africa.
The recession was a major factor that impacted the company's position
because prior to that, TFC was known for having stores around every
corner in South Africa.

However, prior to the recession in 2007, their

share price traded at $38.42 and mere two years later the price had fallen
to a measly $9.92, profits were down for the last three months of the year
from an astronomical $158.7 million to $5.4 million. The recession forced
TFC to restructure its management where the former chief executive took
the back role and set the company's focus on core markets and utilizing
technological breakthrough to introduce TFC chicken and dishes in an
instant form.

The management went back to the roots by focusing on

customer service that neglected during rapid expansion.

All these

decisions helped contribute to the sales flourishing and profits rising to

high levels once again.
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However, despite the continuous increase in

market share and profits the company is enjoying, TFC still want to inspire
and nurture human according to their mission statement and the next
location is India. Conducting a general assessment on the country both in
the area of competition, suppliers, consumers and the broad environment
will determine the entry mode TFC will adopt in other to survive in India.
External Environment
This

are

conditions,

entities,

events,

and

factors

surrounding

an

organization that influence it activities and choices, and determine its

opportunities and risks. Also called operating or broad environment.
The following analysis will aim to extensively evaluate TFC and
understand how Political, Economical, Social, Technological, Environmental
and Legal issues will impact the company's External environment since it
relatively has no control over such factors.
POLITICAL INFLUENCES
Tariffs and International Trade Regulations:
India has progressively cut duties and taxes since 1991, after it began
switching from a Socialist-style system to a market economy. However,
domestic industry still enjoys relatively high levels of protection in several
areas. U.S. companies face tariff and non-tariff barriers that impede their
exports. One such area of protection is in the agricultural sector where
Indian tariffs remain high compared to international standards. For nonagricultural goods, however, India has made considerable progress in
restructuring tariffs.

In February 2007, the Government of India (GOI)

further reduced the peak applied customs duty on non-agricultural goods

from 12.5 percent to 10%. The Indian government plans to gradually ease
currency restrictions and reduce tariffs to the low levels prevailing in other
Asian countries in order to make the Indian environment more conducive
to improved economic performance.
In the case of TFC planning on setting up in India, the tariffs and trade
barriers will not affect them much because majority of the resources can
be locally sourced in India. For example, Basmati rice is available in India
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and chicken can easily be rear since majority of the citizen forbid eating of
cow, so a better means of rearing chicken was developed.
Even though India market has been liberalized, some industries maintain
approval requirement to foreign investment.

After the 2008 financial

crisis, India government increase taxation in order to support a huge

deficit in its budget.
Government Stability
Political stability of India is an important issue that TFC needs to consider
because other indicators may point to that India is investor friendly,
however that could rapidly change when there is political instability.
However, there has been a lot of improvement in India government in the
last decades and it is consider as one of the most stable and nonviolent
government in Asia. Tasty Fried Chicken was forced out of Egypt as a
result of unrest in the country unlike India who conducted easy and
transparent elections recently. This is an indication of stability in
government.
ECONOMICAL INFLUENCE:
Positive Economy:
To decide if one country is suitable for entry, the country long run
economic profit and growth potential should be assessed. Based on
international monetary fund's published data, India has become the
world's fourth economic entity by 4001bn GDP following United States,
China and Japan. BRIC is an acronym for the combined economies of
Brazil, Russia, India and China. The economies of these four nations are
collectively called the BRICs, the BRIC countries, the BRIC economies or
the Big Four. The countries currently represent about 25% of the world's
land mass and 40% of its population. India is one of these giant and with
the nation's rapid growth, it will be four times bigger by 2050.
Monetary Transactions:

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The falling of US dollar rates compared to other currencies which was

caused partly by weaker monetary policy will affect imports. The Indian
rupee could gain as much as 6.5% in the next three months as
international investors pump in dollars to buy stocks and bonds, hoping to
benefit from India stable government.

The rupee, which has posted a

dramatic turnaround from being the worst performer among emerging

market currencies to the best in a matter of months, is poised to climb to
as high as 57 against the dollar. According Economic Times (12th
December, 2013), poll of strategists and traders. This will increase the
company profitability since resources can be locally sourced.
Purchasing Power:
Despite the income gap between the rich and poor, there is a huge
increase in the emerging middle class as a decrease in unemployment
rate.

In India, the unemployment rate measures the number of people

actively looking for a job as a percentage of the labour force. The number
of unemployed persons in India decreased to 3.4 % in December 2013.
Reduction in unemployment rate will increase customers buying habit.
Income distribution is highly skewed in India. Just 20% of the richest
Indians share more than 40% of the national income. A profile of average
annual household income distribution in India. According to a study by
National Applied Economic Research (2004), the number of households
with an annual income over Indian Rupees (Rs.) 1 (US $228,351) has
grown by 26% since 1995-96 to 20, 000 in 2001-02. By 2009-10, it will
increase more than seven times to 1,40,000 households.

SOCIAL INFLUENCE
Changing Taste:
The changing taste in TFC home country indicates that consumers are
purchasing more which amounted to about 2.4% increase in sales.
However in India, local meal is still mainly preferred, so TFC might have to
alter its strategy there. This will not be difficult taking into account and its
success across developing countries.
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Health Consciousness:
Product adaption to incorporate healthy ingredients. Government and nongovernmental organisation emphasis towards healthy eating in India due
to concerns regarding hepatitis A might influence companies such as TFC
to update its menu in terms of introducing new line and healthy
alternatives to be sold in India.

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TECHNOLOGICAL INFLUENCE
Wave of Technological Trends (Emerging Middle Class):
Technological advancement is rapid and organisations needs to follow the
trends and exploit any opportunities that may result and implement any
changes required. TFC can integrate enterprise resource planning to its
business for effective operations to cut long queues at peak times.
Social networks memberships is growing by the millions e.g. facebook has
over 500 million users

and time spent on the site is over 700 billion

minutes a month. Exploiting this trend offers TFC a platform to relate and
share ideas with customers.
ENVIRONMENTAL INFLUENCE
Environmental Pressure Groups:
Non- governmental organisations and pressure groups possess incredible
ability to coerce business into changing their practices. It impact the
intangible assets of a firm which usually involves tarnishing a company's
name. TFC works with Green Life a non-governmental organisation
advocating for sustainable environment is also in India and the alliance
with the organisation over there will bring improvement to TFC image and
recognition, hence environmental influence is favourable for TFC.
LEGAL INFLUENCE
Not all companies welcome big firms because they want to protect their
indigenous

firms

from

unfair

protectionist law in India

competition

and

takeover.

National

Protectionism is the economic policy of

restraining trade between states (countries) through methods such as

tariffs on imported goods, restrictive quotas, and a variety of other
government regulations designed to allow (according to proponents) fair
competition
domestically.

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between

imports

and

goods

and

services

produced

According to 16th August 2013 Wall street Journal, published that Indian
government is changing its foreign investment rules for companies to
protect the country's supply of cheap products. India Prime minister said if
foreign companies acquire Indian firms, they could refuse to produce
cheap generics. India's retroactive changing of policy has dampened its
image as an investment destination. Foreign direct investment fell 38%
year-on-year to $22.4 billion in the fiscal year ended March 31. This is an
important factor TFC need to consider before setting up.
In summary, the PESTEL analysis found that external influence was
altogether balanced since sociological, technical and environmental
influence were favourable, while the other factors such as Political,
Environmental and Legal factors still pose valid threat. Nonetheless, TFC
strengths counteracts some PESTEL factors because although it cannot
control external environment, it has become imperative to change and
exploit opportunities.
SWOT ANALYSIS
SWOT analysis is a structured planning method used to evaluate the
strengths, weaknesses, opportunities, and threats involved in a project or
in a business venture. A SWOT analysis can be carried out for a product,
place or industry.

STRENGTH

WEAKNESS

Unique Strategy

Over-reliance on home market

Valued and Motivated

Employees

Brand Image

OPPORTUNITY

THREAT

Entry into New Market

Competition

Increase in Purchasing Habit

Corruption

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STRENGTHS
Unique Strategy:
The ability to capture key location key locations and open stores in close
proximity to each other is a unique strategy for TFC. This ensures that
company that do not meet set achievement are closed down. Therefore
only profitable stores that maintain high sales and retain the most
customer survive.

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Valued and Motivated Employees:

The fast food industry is some extent dependent on front house staff, their
attitude and their ability to make customers come back. Tasty Fried
Chicken promotes an environment that encourages team working and
collaboration. Hence through exceptional service, customers keep coming
back.
WEAKNESSES
Over-reliance on home market:
TFC market in their home country is over $18 Billion, too much dependant
on this market leaves TFC vulnerable to unforeseen changes that might
occur in such market. Such as recession affects disposable income for
customers and subsequently, profits. Thus the management decision to
focus mainly on the African market makes it a weakness.
Brand Image:
TFC is among the leading fast food in Africa but not in Asia. Few people
got to know them during world cup 2010 in South Africa. The brand image
is not as strong as its competitors which include McDonalds and Kentucky
Fried Chicken.
OPPORTUNITIES
Entry into New Market:
Global companies that plan for expansion usually seek out attractive
countries with such opportunities. In a bid to increase its worldwide
presence, TFC has opened a range of stores and operates in over 10
countries with 500 fast food outlets.

It is on its way to exploiting

potentially lucrative markets such as India that will generate opportunities

for growth.
Increase in Purchasing Habit:
Increase in India's GDP and emerging middle class will encourage TFC in
its early years in India. This is favourable because it provides an
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opportunity for TFC to expand its customer base with the possibility of
higher profit margin.

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THREATS
Competition:
Although the competitive threat from the specialty fast food is minimal,
competition from other sectors such as restaurants and other big coffee
shop still remain. The dominant threat from other competitors such as
dunk' n donuts and especially McDonalds.
Corruption:
Another area of concern in India is corruption. According to published
corruption perception index by Transparency International in 2013, India
was ranked the 87th of 178 countries with a score of 3.3 compared with
CPI 2009 with 84th position . This indicates that corruption in India is
worsening. TFC known for its anti corruption practices will be force to
engage in some corruptible practices in other to get things done.
LOCALLY SOURCE RESOURCES
TFC can easily source for brown or white basmati rice India, as they are
both rich in nutrient. At

the just concluded Global Animal Conference

(GLANCE 2014), The livestock sector contributes approximately 4% to GDP

and 27% to agricultural GDP. Thus, chicken which is another important
resources to TFC will easily be outsourced in India.
CORPORATE SOCIAL RESPONSIBILITY
India being the only country planting and exporting of Basmati rice, makes
it a good target country that matches TFC sustainable development. Tasty
Fried Chicken is ready to give back to the community where the rice is
being planted. Fertilizers and equipment used in harvesting rice will be
given annually.
PRICING
Pricing strategy can be attributed to company's growth. In India an
average of each household spends about 50% of income on food and
beverages, food prices are always a sensitive issue. Even the Indian
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middle class, despite their much improved income level, remains very price
sensitive. TFC will pursued what is called purchasing power pricing or the
customers ability to pay. The adoption of such a pricing strategy in India
offers a useful country specific insight on possible price differences of the
companys products on the basis of purchasing power parity (PPP).
Calculations across India as provided, meals will be in the range of Rs
29, Rs 39, Rs 49, Rs 59, Rs 79,and Rs 89. This prices indicate the
affordability of the product
TFC employed this value ladder strategy to ensure affordability and thus
attract the widest section of customers. The main motive strategy is to
bring the customers in initially and provide a range of entry-level products
so that they can try new items and graduate to the higher rungs.
Another pricing strategy is to have customers, and is called the 80-20
menu board, 80% visual and 20% descriptive. The main objective of the
company is to make it easier for customers to understand what the 29,
39, 49, 59, 79, and 89 rupee options are. Coupled with the pricing range,
TFC quick service, convenience, and no tips environment will attract many
school and college going customers, as well as young middle class
families.

MODE OF ENTRY
After detailed analysis from the previous sections above concerning the
company's motive to go international, its strengths and weaknesses;
evaluating the attractiveness and risks of the Indian market to decide on
the entry mode. There are various mode of entry suitable for TFC, which
includes Franchising, Foreign Direct Investment, Exporting, Licensing,
Wholly-Owned, Direct Investment and Joint Venture. However, Joint
Venture is the appropriate entry mode.
JOINT VENTURE
Joint venture is an association of two or more individuals or companies
engaged in a solitary business enterprise for profit. Joint venture is a
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popular mode for entering a new market. A typical joint venture is a 50/50
venture, in which there are two parties, each of which holds a 50%
ownership stake and contributes to share the operations and risk.
In India, government only allows foreign firms to hold no more than 51%
equity in 34 industrial sectors, including the retailing industry in which TFC
will operate (Russ Thai, 2009). Therefore, a wholly owned subsidiary by
acquisition or Greenfield investment is impossible for TFC to choose at this
stage.
Tasty Fried Chicken (TFC) is considering partnering with Burger Point a
popular outlet across India with over 1000 stores for a start with TFC
having the majority stake (51% - 49%).
After identifying Joint venture as preferred mode of entry, it is important to
assess the benefits and downsides of such entry mode.
Advantages:
Potential risk such as unseen future regulations, political risks or natural
disasters for growing basmati rice, could be shared among its partners.
TFC could gain more knowledge about growing the Indian Basmati rice,
and retailing industry from its partner during their work together.
Disadvantages:
Even though TFC holds a majority role in the venture, it means TFC cannot
have total control and may face some conflicts related to decision and
management issues, which could possibly result from their different
expectations or objectives on each other and their cultural differences.
The nature of Joint venture determine that TFC must share profits with its
partner which is uncharacteristic of the company
RECOMMENDATION
No entry mode is perfect and all has its downsides but Joint ventures
seems to be the most suitable for TFC in India. On the final note,
precaution must be taken during negotiation and agreement should be
clearly stated between partners, to avoid unnecessary conflict in the
future.
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CONCLUSION
Having assessed the evidence concerning TFC decision to expand to India,
it is fair to conclude that the company is in a strong position to expand
especially after successfully scaling through all the factors that may
influence TFC performance in India. The outcome of the analysis showed a
strong favourable PESTLE condition, emerging middle class receptive
towards TFC, high profitability and strategic position or location.
Based on the environmental condition in India, it should be the next
country for its subsequent expansion since it provides a very good
opportunity.

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REFERENCES
Corruption

perception

INdex2010

(Online)

(2011)

Transparency

international

Available

from:

http://www.transparency.org/policy_research/surveys_
indices/cpi/2010/results (accessed 27th June 2014)
Statement on Industrial Policies (1991), Ministry of Industry, Government
of

India

(Online).

Available

form:

http://saidipp.nic.in/publicat/nip0791.htm( Accessed 27th June 2014)

Consumer

Lifestyle

inIndia:

Cafe

Culture

(2010),

Euromonitor

International: Country Sector Briefing

Wilson and Purushothaman (2003) Dreaming with BRICs: The Path to
2050,

Goldman

sachs

(Online).

Available

http://www2.goldmansachs.com/ideas/brics/ten-things-doc.pdf
20th May 2014)

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from:
(Accessed