Tim Hortons, Inc.
is positioned within the market as a mature company with a strong consumer franchise. Broadly, the entity enjoys a strong brand, very profitable franchise income, strong cash flow, high returns, strong same store sales, and a low-risk business model. Business Overview Tim Hortons, Inc. engages in the ownership and operation of quick service restaurants, Tim Hortons restaurants, in Canada and the United States.The company offers coffee, flavoured cappuccinos, specialty teas, home-style soups, fresh sandwiches and fresh baked goods. External Environment Broadly, the restaurant industry has benefited from a long term trend towards eating out, driven by a growth in disposable income, a decline in the price difference between dining out and eating at home, and an increase in the number of dual-income and single-parent families. Demand has remained strong in the broad sector, leading to the conclusion that casual dining is less sensitive to economic conditions than previously assumed.
Tim Hortons Essay Example
Tim Hortons operates within the broader context of the mature foodservice industry, which is characterized as having little growth prospects. Tim Hortons operates in the highly competitive Coffee and Baked Goods (CBG) sector of the Canadian Quick Service Restaurants (QSR) market. Despite The QSR market is intensely competitive in terms of pricing, quality and speed of service, the number and convenience of locations, attractiveness of facilities, personnel and selection of food. Within the sector, Tim Hortons franchises compete with a variety of international, regional and local restaurants.The consumers are very demanding in terms of the speed and quality of service; they have well-established preferences and are extremely price-sensitive. As such, the customers are powerful enough to influence downward price pressures, demand higher quality and speed of service, as well as require convenient locations. In addition, Tim Hortons competes within the QSR market not only for customers, but also for hourly employees.
As such, the company’s survival depends on the effectiveness of advertising and marketing programs targeted at both, customers and employees.Due to the proprietary nature of the manufacturing process for major restaurant chains within the CBG segment, alternative suppliers for their baked products are not readily available, which makes the switching costs for the companies high. In addition, with the market for high-quality coffee beans being particularly volatile, coffee shops are highly dependant on the commodity prices. Internal Environment The Value Chain Tim Hortons has a diverse revenue base generated from franchisee royalties and fees, rental income, warehouse sales and company-operated stores.A major strength of Tim Horton’s integrated and scalable business model is its unique vertically integrated manufacturing and distribution platforms. These platforms enable the company to maintain its overall cost leadership while offering ‘always fresh’ and innovative products. The company operates a joint venture bakery, Maidstone Bakeries in Ontario and a Maidstone Coffee roasting plant in Rochester, New York, which ensure timely delivery of products and provide economies of scale.
Tim Hortons built one of the most advanced food service distribution facilities in Canada that allows the company to improve its distribution efficiency and create additional economies of scale. In general, Tim Hortons’ attains an overall cost leadership in all of its value-chain activities (refer to Appendix XX). The Maidstone Bakeries manufactures par-baked donuts and breads, which are then flash frozen and shipped to system restaurants, each of which contains an ‘Always Fresh’ proprietary technology.The ‘Always Fresh’ baking system requires limited space, and thus provides operational efficiencies and reduces product waste on the levels of operations and outbound logistics. The system allows the subsidiaries to prepare and serve products from the par-baked bread more often and in smaller batches, which provides consistent quality from restaurant to restaurant. Tim Hortons carefully evaluates and identifies restaurant sites and manages the real estate development, financing and construction process with its franchisees in order to minimize shipping times, differentiating itself on the quality and speed of its service.In addition, the company was able to maintain parity on such important dimensions of differentiation as product quality and product innovation through an intensive ongoing new product research and process innovation.
VRINE Analysis The company successfully leverages its competitive strengths (listed in Appendix ___) to remain a leader in the quick services restaurant segment. Tim Hortons has achieved an iconic brand status in Canada due to its system-wide focus on operational excellence, fast and high-quality customer service, convenient locations, ‘always fresh’ products, energized and committed franchise base and sustainable business model.Tim Hortons has developed leading market positions in Canada and very strong presence in every province over a long period of time, which is critical to its success and long-term competitiveness. In addition, Tim Hortons’ commitment to maintaining a close relationship with franchisees is another critical success factor, which has helped the company to capitalize on its proprietary ‘‘Always Fresh’’ baking system to offer consistently fresh products throughout the day and to open restaurants in a variety of formats to ‘fit’ all possible locations.Furthermore, Tim Hortons praises itself on its proven, experienced management team with track record of exceptional growth, which remains a critical success factor to its strong financial performance. Lastly, since the company controls the real estate of most of its franchise restaurants, overseeing and directing all aspects of real estate is a critical core competency. Current Strategy Assessment Tim Hortons strives to: Offer value-priced quality products which is achieved through economies of scale; and facilitated by their strong vertical integration.
The entity subscribes to the slogan, “Always Fresh”, which is seen as a byword and serves as a source of differentiation. Given an emerging health conscious consumer preference, the company is capitalizing on the health trend in order to maintain its competitiveness by adding healthy menu choices. Also, characteristic to Tims strategy is a notion of flexibility, which entails a, “We Fit Everywhere” ethos wherein the entity is actively looking to activate new stores that fit in a variety of non-traditional settings (e. g. universities, hospitals, supermarkets, highway rest stops, major airports and gas stations). Taken together, it is evident that the is exploring a way for the to further penetrate regions where space might not be otherwise available by way of putting the most restaurants it can where they will be most convenient to customers. In fact, the entity is benefiting from their aggressive new store growth as a source of advertising.
Goals and Objectives: Tim Hortons is striving to maintain its status as Canada’s largest Quick Service Restaurant and leader in the Canadian breakfast market.At the same time, Tim Hortons management is keen on maintaining their profit margins and would raise prices only to compensate for rising input costs such as labour or the price the price of coffee or other commodities. Is there anything geared towards their treatment of employees or their suppliers? Something like Starbucks? (Plus any other explicit mission statements or financial objectives) External Positioning: [pic] Tim Hortons is Canada wide network of franchises also at the beginning of their US expansion targeting all customers.Through their quick service restaurant chain Tim Hortons is providing hot and cold beverages such as coffee, hot chocolate, tea, iced cappuccino and Tim Hortons branded soft drinks. Bakery produce such as donuts, muffins and cookies. Additionally, they are expanding their break fast and lunch menus with more sandwiches, soups and other products traditionally available through other fast food chains. They are vertically integrated with their own centralized baking facilities, trucking and off-course their restaurants selling the ready product to the end user.
After being divested from Wendy’s, the two companies maintained its strategic alliance and are sharing facilities at numerous locations to lower costs and generate customer traffic for one another. One of Tim Hortons most valuable attributes is their strong brand name that is a symbolic icon in the Canadian culture. Tim Hortons is supporting young kinds with their sponsorship of Hockey Timbits program. Moreover, Tim Horton’s boosted its popularity by opening a Tim Hortons restaurant in Afghanistan in support of the Canadian troops there.The “Always Fresh” system is a major source of differentiation and a core competency, allowing Tim Hortons to provide fresher and therefore better products at a significantly lower cost due to the vertical integration and cost reduction due to the functional structure and centralization of their bakeries (Anna’s logistics part should have discussed these details). Tim Hortons operates through a well developed Franchise system, that duplicates existing well functioning design and processes enabling local stores to better serve the local customer’s needs and provide the “home” feeling as well as pproduct and service consistency and quality.Tim Hortons franchises are everywhere, “We Fit Everywhere”- Open stores that fit in a variety of non-traditional settings (e.
g. , universities, hospitals, supermarkets, highway rest stops, major airports and gas stations) – offer a way for the company to further penetrate regions where space might not be otherwise available. This leads us to Tim Hortons value proposition of overall cost leadership [pic] Providing value-priced and at the same time top quality products. So Tim Hortons is set for success by being able to be the cost leader and at the same time offer above average quality products.This is achieved through vertical integration, strong emphasis on quality (“Always Fresh”) and the significant economies of scale. In the US Become a strong regional player Penetrate via a “blanket” approach: rather than entering any US market with a single store, the plan is to blanket the area, as you need a strong enough store base to support it with marketing In the US: cost leadership and differentiation, in order to generate consumer demand and better compete with foreign competitors.