Marketing Audit Term Paper
Based on our findings regarding the main social and economic factors, which have been described in detail in the former two papers, this part lays out the foundations for our prospective marketing campaign in Indonesia. Working on both the strategic and the operational levels, this marketing plan will aims to describe our recommendations to a successful transformation of Chatak Chaat’s business concepts into the Indonesian market. As most of our findings so far support the feasibility of the idea, this plan concentrates on the “HOWs” instead of the “IFs” and the “WHATs”; each recommendation is backed up with figures and explicit tasks to be fulfilled as well as projections whenever necessary.
IMPOTRANT NOTE: All sums in this report are given in Indonesian rupiah (IDR). The relevant change rates (as of July 22, 2009) are: USD/IDR = 10073; INR/IDR = 208; SGD/IDR = 6980.
2. The Product
The business concept behind this marketing plan is the India-bred Chatak Chaat restaurant chain. In short, the chain’s market offerings surround the chaat, which are basically vegetarian dishes on fried dough that can be spicy, salty or sweet. Other products include salads, side dishes, desserts and beverages. These products are well-known as an Indian street food, and the chain’s added value is by selling them in an established and hygienic manner, while charging a premium for the elimination of the possible health hazards from consuming chaat in the street.
2.1 Major Problems and Resistances to Product Acceptance
While Mr. Vikaas Gutgutia, Chatak Chaat’s cofounder, insists that “Chaat is the most happening thing in the food business,” (Joshi, 2005) many burdens may challenge the implementation of this service and its product lines in Indonesia:
First and foremost, this kind of product offering is completely alien to the Indonesian tongue. Hence, although it can gain success as an Indian specialty (the Indonesian cuisine resembles much more the Chinese of the Thai than the Indian taste), a gradual phase of consumer learning or even rejection must be taken into consideration. It should be noted, however, that fast food of foreign origin is often successful, mainly since it is typically cheap and hence bears less consumer risk.
Second, although Indonesia has a rather developed acceptance towards fast-food chains, Chatak Chaat’s lack of international reputation implies that consumers may favor dining at bigger chains, which offer international experience. Moreover, the chain’s current narrow product line can create a rapid “burnout” among potential returning customers.
Third, unlike India, where Chatak Chaat offers a popular product in an attractive setup, Indonesians are very likely to favor their own fast-food offering. As a result, the chain may experience consumer apathy due to its weak position among other restaurants, street stalls and mobile carts.
3. The Market
As our previous economic analysis indicates, the general economic conditions in Indonesia reflect a vast demand for consumer goods with growing mid-level income and fast urbanization. This does not imply, however, that the present conditions are suitable for every market entry. This section goes into depth in regard to the specific features of the relevant market, namely dining services with an emphasis on the Asian fast food market.
3.1 Description of the market
During the past few years, the Indonesian fast food industry enjoyed rapid growth in outlets and sales volumes, which exceeds other light dining offerings such as cafés and market stalls. In addition to the general positive economic atmosphere in the country, we can identify several key elements, which may explain give the major reasons for the current positive trends in this market:
First, the momentous urbanization in Indonesia, particularly in big metropolitans such as Jakarta, Surabaya, Semarang and Makassar, supports the local fast food industry, which enjoys more distribution channels in shopping malls and busy commercial areas.
Second, fast food outlets are enjoyed by young customers, who get the opportunity to socialize and enjoy their leisure time at lower costs than cafés or full-service restaurants.
Third, the fast food chains have wisely adapted and/or initially established themselves according to the predominant consumer preferences. For example, local brands of Asian fast food demand lower franchising costs and thus allow franchisees to replace other means of consuming typical Indonesian dishes. Moreover, even international brands such as KFC and Dunkin’ Donuts address the local concern for healthy food by offering products with perceived better nutritional values such as rice instead of French fries and green tea jelly instead of ice cream.
Therefore, it can be argued that Indonesians welcome both international and local brands, and respond positively to diversified product portfolios. As can be seen in Figure 1, Indonesian consumers have learned to appreciate bakery fast food (in particular sweet pastries), favor Asian over non-Asian food and buy much more chicken than burgers.
It should be noted, however, that although Indonesian consumers show significant affection to Asian food, chaat will compete with the other Asian dishes in this category, which are much more familiar to the local consumers and may not see it a substitute to traditional Indonesian offerings.
3.2 Competitor Analysis
The Indonesian fast food market is rather concentrated. According to Euromonitor (2008), More than 63% of fast food outlets belong to chains, out of which 55% are operated by the three major players (KFC, Es Teler 77 and McDonald’s). A major concern for our purpose is the situation in the Asian fast food market, which has about 38% market share and dominated by three major brands: Es Teler 77 (16% of the total fast food market), Hoka Hoka Bento (5.7%) and Mister Baso (3.2%).
In other words, 65% of the market for Asian fast food is dominated by three chains, which do not only offer attractive and diverse value meals, but engage in heavy promotions, advertising and special offers. Moreover, as non-Asian brands offer Asian menus and are already very dominant, Chatak Chaat‘s initial competitive landscape (i.e., the environment in which the company can compete) is less than 10% of the whole fast-food market.
3.3 Market Size, Location, Growth and Opportunities
The Asian fast food market in Indonesia has a turnover of more than IDR 4,500 billion, and is expected to grow at an annual rate of 8.5% in sales and 11% in outlets over the next five years (ibid.). These figures are about double than the average trends in the general fast food market and also exceed the growth rate of the Indonesian economy and the growth in disposable income. As in India, fast food chains expend their operations from out of malls and commercial areas, and their presence in transport channels (e.g. train and gas stations) increases. Smaller cities and locations out of Java are also a major penetration target of such companies for the years to come. Indonesia has a rapid-growing service sector, which employs almost 40% of the workforce (Datamonitor, 2008). This sector offers a unique opportunity for fast food restaurants, especially in regards to take-away services of food and drinks. However, growth through take-away services demand close proximity between the outlet and the consumption place (e.g. the office), and thus fast food chains are expected to lower their franchising costs in order to lower franchisees’ risk. A negative implication for that are lower barriers to enter the market and more intensive competition for newcomers.
Finally, the rising health concerns described earlier bring about a weakening in the position of “classical” fast food (e.g. burgers and fried chicken), and strongly affect other foods that are high in calories, especially pizza, carbonated drinks and French fries. This should be taken into consideration for the following marketing plan: though all Chatak Chaat’s products are vegetarian, which is good, the use of fried dough as a basis of the chaat may affect the new product’s image.
3.4 Government Participation in the Marketplace
The Indonesian regional governments have positive approach towards new private business and do not put burdens on foreign investments. It is also very likely that smaller governments and municipalities will offer some incentives for investing in less-popular sites.
One field of active government regulation is connected with the country’s Muslim majority. Only official authorities are allowed to grant Halal certificates, which ensure consumers that the restaurant follows Muslim dietary rules. In addition, advertising must not offend Muslim beliefs and special sensitivity is advised in regard to the Ramadan, a month-long daylight fast. (Gillespie, Jeannet & Hennessey, 2006)
4. Preliminary marketing plan
1. The Marketing Plan
The starting point of our marketing plan is rather difficult, as the market is already developed and controlled by powerful chains. Moreover, consumers are still loyal to the traditional cuisine, which is already wide. Western fast food is also popular. In simple words, the market seems saturated, with high degree of revelry and knowledgeable and demanding consumers.
Chatak Chaat is far from being a powerful brand, even in its home country, and thus the resources for supporting prospective franchisees are limited. Its main strength, however, is a true genuine product offering for the Indonesian market, in contrast to most of the players in the market, which compete against each other on very similar products in several categories (e.g. burgers and Indonesian food). Hence, this uniqueness can and should be the basis of the company’s operations in Indonesia.
1.1 Product Objectives/Strategies
Indonesians share great appreciation towards India. India is a model for many young Indonesians, who are keen to buy products and services from Indian origin (Anjaiah, 2008). Therefore, the chain should be differentiated according to its country of origin, where this kind of fast food is very popular, as if to say “If Indians like it, we should also give it a try.” In addition, the chaat is not a single product, but rather a generic name for a wide range of vegetarian dishes – from spicy to sweet – and thus offer much higher saturation point than burgers, for instance.
These two important points, namely the Indian affiliation and the variety of dishes, imply that the product strategy should lead the whole marketing effort. Thus, most of the other strategies mentioned below aim to teach the Indonesian consumers about chaat and convince them that Chatak Chaat is the right source for this product. As in India, the product line should be wide enough to include cold, hot and sweet chaats, as well as “value meals,” health packages and Indian beverages such as lasi and ambi panna. Every category must include at least 5 different products.
1.2 Selling Objectives/Strategies
In order to compensate for the initial weak physical presence, Chatak Chaat will employ several selling techniques, both in the outlets and on-site. In addition to the conventional selling over the counter in the restaurant, sales will be also made through deliveries, while the customers will be contacted by the following mechanisms:
- Passive telephone orders: a call center will receive the orders. Menus will be distributed to offices and houses within the delivery capacities of each outlet (e.g. a radius of 15 km).
- Active telephone orders: sales agents will call contact persons in offices. The contact person, a loyal customer that has agreed to contact between his respective office/department and the restaurant, will receive a call at an agreed time (e.g., one hour before lunch break). In addition to the social benefits of helping his collogues and being a “chaat specialist,” the contact person will be granted with a volume-based discount and other promotions such as exclusive events for Chatak Chaat’s “ambassador club.”
- Fast and efficient online order system.
In addition, when customer feedback is important (e.g. introduction of a new product or a new outlet), it is possible to engage in various post-sale activities. For example, each POS serving or delivery of a specific product will include a short questionnaire; those who will return the questionnaire to the counter will receive some kind of incentive (e.g. a free dessert).
1.3 Distribution Objectives/Strategies
Chatak Chaat’s will franchise its outlets. Franchisees can purchase either a single or several licenses and will be obliged to strict corporate standards. Production, serving methods and hygiene standards will have concise measurements. They will have, however, more freedom to choose the size of the franchised outlet.
The outlets’ design will correspond with the overall positioning strategies mentioned above, in particular with regard to motifs that resemble chaat’s consumption in modern India. Delivery and take-away packages will convey the same ideas. Indian-style chaat carts will be used temporarily for promotional purposes.
1.4 Price Objectives/Strategies
One of the reasons for chaat’s popularity in India is due to its very affordable prices, even in chained restaurants. Indonesian restaurants, on the other hand, are much more expensive than the current price levels of Chatak Chaat in India. For example, Asian fast food chain Hoka Hoka Bento offers a low-cost value meal (known as “Hoka Hemat”) for 10,000 IDR. A similar meal in Chatak Chaat costs 30 INR (6,205 IDR). Other factors of cost of living also show about 30% higher costs in Indonesia compared to India (Numbeo, 2009).
Chaat has a cost advantage due to the fried dough basis, which is satiating and provides more calories for its costs compared to rice or bread. Other overheads, such as Halal certificates and the storage costs of meat are not needed due to the pure vegetarian menu. Therefore, it should not be a problem to maintain price dominance compared to other Asian and non-Asian fast food chains.
Therefore, Assuming a 30% price index gap between India and Indonesia, Chatak Chaat should set its level exactly in the middle (i.e. +-15% at current price level) between its Indian prices and prices of comparable offerings of its key competitors. Similarly, the initial investment of franchisees will be between IDR 50-150 million.
1.5 Terms of Sale
The terms will be as any other fast food restaurant, i.e. immediate pay upon handing the products.
1.6 Method of Payment
The restaurants will accept cash and bank cards of all forms. Online orders can be paid by credit cards, electronic transfers (e.g. PayPal) or in cash to the delivery person.
2. Proforma Financial Statements and Budget
2.1 Marketing Budget
Most of the marketing budget at the initiation phase is dedicated to building brand image and awareness. Further investment is required to duplicate Chatak Chaat’s pre-franchising operations, which are based on opening the first three outlets with the company’s own funds.
Based on the financial data given by Jushi (2005), the total required budget for the first operating year should be around IDR 1.2-1.4 billion, out of which about a half should be allocated to building the brand (mostly promotion). In the following years, marketing expanses should continue to dominate corporate budgets, and should account to 15% of corporate-owned outlets’ sales and 50% of corporate revenues from franchisees.
2.2 Proforma Annual Profit and loss Statement
As mentioned earlier, total sales in the Asian fast food category amount to approximately IDR 4,500 billion a year. Assuming that Chatak Chaat can gain 1% market share within one year of operations, sales can reach IDR 4.5 billion at the end of the year, leaving a margin of 70% for operating expenses over the initial investment to avoid a loss. Furthermore, as the average annual growth rate in the industry is about 8.5%, the break-even point should be reached within 24 months at the latest.
3. Resource Requirements
Given the initiation costs and the financial projections mentioned above, it would be advisable to secure IDR 2 billion for the first year of operations in Indonesia. In case of operating surpluses, it will be possible to allocate some funds as loans to franchisees.
If the company’s own resources are not sufficient to cover the initial costs, they can be reduced through lowering the number of outlets in the first year. Alternatively, Chatak Chaat can consider a modest implementation plan by acquiring existing small restaurants and converting them into outlets with minimal investment in overheads. Marketing budgets do not seem malleable at this point.
At least five experienced personnel from India will have to support the process during the initiation period. These are one manger for each outlet, a marketing executive and a regional manger (who will also handle business development). Besides this specialized workforce, local employees can be trained rather easily to carry out all the duties within the outlets.
Special marketing operations, in particular orders center and CRM should be handled by local specialists. Therefore, it would be wise to negotiate a convenient deal with an outsourcing company. As Indonesia has an active sourcing industry, finding such a strategic partner should not be very difficult. Moreover, the company will need to develop a support and control system, which will work with the franchisees to ensure a smooth implementation as much as possible, especially with all that concerns technical and quality assurance issues.
3.3 Production Capacity
As the outlets use simple equipment, production capacities are not a major problem in this plan. Nevertheless, one should examine the availability in Indonesia of raw materials and special foodstuff, which are used by Chatak Chaat in India. In the absence of a major component for the preparation of chaats and other dishes, local alternatives should be compared to the feasibility of importing materials from India or somewhere else in the region.
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