UNIT 407-INTERNATIONAL BUSINESS STRATEGY

LECTURER NAME:

MANSOUR KHAN

TOPIC NAME:
Performance Report on Tim Hortons International Operations

Student Name:
Danish Mohammed

Student ID:
876060

Date of Submission: 14th November 2014

EXECUTIVE SUMMARY

This research report relates to the Canadian Fast Food Chain, Tim Hortons, and its international business
venture in the U.A.E. Tim Hortons managed to enter the UAE Market through a Master Level Agreement
with Apparel Group acting as a franchiser. Tim Hortons has a reputed history with franchising companies
where 99% of their outlets are franchised.
Being a new entrant in the market, Tim Hortons was relatively unknown and they increased their market
share and footfall through heavy advertisement on social media such as: Facebook and twitter. They
started off by establishing kiosks and vending machines in various areas of Dubai and Abu Dhabi as
kiosks was a cost effective option in a relatively new market for Tim Hortons. Once these kiosks proved
profitable, Tim Hortons started independent outlets in Dubai and to further penetrate the market, they
expanded to malls all over the U.A.E.
Tim Hortons primary strengths are that its pricing is more competitive than its rivals such as Starbucks
and they offer a wider range of products as well. Due to rapid expansions, they tend to be understaffed
leading to long queues and customer dissatisfaction and frustration. The biggest competitor to them is
currently Starbucks and they have a new rival, McDonalds that has recently entered the breakfast and
coffee segment.
Strategic Challenges include consideration for the appropriate geographic location for expansion while
maintaining the brand image and reputation enjoyed in the Canadian market through intensive scrutiny of
the potential franchisee company being selected.
Trade limitations and barriers include the partnership with a Local Sponsor followed by obtaining the
requisite approvals from the pertinent food authorities and ministries. Furthermore, this supply chain
management process may lead to delays in shipments and unavailability of items causing potential losses
in Sales.
In conclusion, Tim Hortons has been a major and successful market player in the Quick Service
Restaurant Segment over the last 3 years. To further expand, they should streamline their ordering and
delivery process from Canada to the UAE and offer a variety of healthy options to address changes in
local consumer trends.

TABLE OF CONTENTS

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EXECUTIVE SUMMARYPAGE 2
INTRODUCTION..PAGE 4
PERFORMANCE ANALYSIS..PAGE 5
PERFORMANCE ASSESSMENT....PAGE 8
CONCLUSION..........PAGE 10
RECOMMENDATIONS..PAGE 10
REFERENCES..PAGE 11

INTRODUCTION
International Business Strategy refers to the plans, which guides the commercial transactions taking place
between entities in different countries. Mainly it is concerned with the private companies and the goal
here is maximum profit. (www.wikipedia.org, 2014)
This report provides a proper study of how Tim Hortons has entered into the global market, its market
entry strategies and how it deals with the trade limitations and barriers. In this report we have also shown
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how this organization is performing in the areas of globalization and what factors are responsible for its
development & growth.
We can also see how the international business suits Tim Hortons market entry strategies and how they
have become one of the leading brands in the fast food industry.

Tim Hortons Company Profile:

Tim Hortons Inc.(Internationally known as Tim Hortons Caf & Bake Shop) is a Canadian based
multinational fast food restaurant which is popularly known for its coffee and doughnuts. It is also
Canadas largest fast food service restaurant. It had approximately 4,592 restaurants in Canada, 807 in the
US and 38 in the Persian Gulf region by the end of 2013. Tim Hortons entered in the UAE in 2011 with
store openings in Abu Dhabi, Dubai and Fujairah. As of December 2013, it had 19 stores in the UAE.
Tim Hortons was founded in 1964 in Hamilton, Ontario by the famous Canadian hockey player Tim
Horton and Jim Charade. The franchise spread rapidly and eventually overtook McDonalds. As of 2005,
Tim Hortons accounted for almost 22.6% of all the fast food industry revenues in Canada. Then on 26th
August 2014, Burger King agreed to purchase Tim Hortons for US$11.4 billion and the combined
company is now being owned by Brazilian investment firm 3G Capital and is based in Oakville.
The first stores of Tim Hortons offered only two products i.e. Coffee and doughnuts. But now the menu
consists of a number of other baked goods ranging from muffins, croissants, tea biscuits and more
recently bagels as well. Despite this expansion in their offerings, Tim Hortons is still heavily dependent
on coffee sales. It was observed that their maximum sales are in the morning times and of that 50% is
coffee. Their coffee is a blend of 100% Arabica beans. (www.wikipedia.org, 2014)

PERFORMANCE ANALYSIS
Tim Hortons & Globalization.
This chain focuses mainly on top quality, value and great services to its customers. These factors have
allowed it to grow rapidly into the largest quick service restaurant chain in Canada and worldwide
specializing in fresh coffee and baked goods.

Now the chance to go Global by opening franchises worldwide was a golden ticket to make money for the
people living in Canada. Initially the co founder Tim Horton did not see much potential in this business
but his successor Ron Joyce saw lots of potential and had an eye to its detail. He continuously kept on
improving the Tim Hortons franchise concept and later expanded the chain across Canada, from town to
town and city to city. By 2002, Tim Hortons overtook McDonalds in terms of outlets and the market
share.
The co founder Tim Horton was 44 years old when he died. Following Hortons death, Joyce bought out
his share and gave it to Hortons widow for one million dollars. Now with Ron Joyce as the sole in
charge, Tim Hortons had grown rapidly. And over the next coming years Tim Hortons had spread
worldwide. The following 4 aspects can summarize Tim Hortons franchise:

Franchising: As much as 99% of Tim Hortons stores are all operated by franchises. The company
is known for its tradition of collaborating with its franchises in order to grow business and to build
positive connections. Each franchise owns up to 3-4 outlets, which in turn increases their stake in
the stores in which they operate.

Real Estate: The Company is very consistently been able to protect its brand integrity and control
the property development by owning the head lease.

Vertical Integration: The Company has its own distribution centers and manufacturing facilities in
order to integrate its product. They also preserve the food quality and there are training centers as
well to ensure the best customer service.

Attitude: A we fit ANYWHERE kind of approach is used by the company which allows it to
adapt its brand presence in order to pursue both standard and non-standard expansion prospects.

It was in 2001, Tim Hortons announced a master licensing agreement (MLA) with the Apparel Group for
an estimated 120 outlets in the Arab Gulf States. By 2012 there were around 19 restaurants in the UAE.
Tim Hortons started a serious planning in 2010 for Global expansion. At first the 2 countries considered
were China and India, but there was a concern regarding the large number of fast moving franchises,
which were already operating, into these markets. So Tim Hortons global expansion began by setting up
kiosks in foreign countries to see the reaction of the foreign market toward their brand.

Tim Hortons believed that kiosks cut the risks of huge losses from Global expansion. Later in 2010, the
CBC News reported that the brand had become quiet popular among British and American soldiers
through their stores in Afghanistan. (www.scholar.vt.edu, 2013)
Tim Hortons Market Entry Strategies:
This company follows a strategic approach in the market entry where it can seek long-term positive
impact on their customers. Following are few points summarizing Tim Hortons market entry strategies:
Via Social media. Tim Hortons took great advantage of social media such as Facebook and twitter
to enter into the UAE market and advertise their entry, thereby leveraging the footfall. The total
number of people on Tim Hortons UAE Facebook page is more than 3 million. They started with
the concept of telling people to like their page on any social platform and in return getting a free
coffee. This was quiet popular among the UAE residents that led to its instant fame. Also the Tim
Hortons team would update statuses on social platforms mentioning that fans cant stop thinking
of their coffees and other baked products, which led to more popularity of their brand.
(www.slideshare.net, 2014)
Vending Machines. Tim Hortons started with the opening of many small vending machines in
government offices and plush hotels before making it big in the market. With this they did not
have to fear about huge losses if incase they opened big. So with vending machines being
available in most places, the public could actually taste their coffee and know why it is special.
Focusing on Convenience and service. Tim Hortons would have their main focus on the
convenience for their customers to locate their outlets easily. They would target their locations to
be in crowded areas and near big malls where they could get easy attention and many customers.
Other main area of focus was on the service, which was provided to their customers. They would
make sure their customer goes back happy and satisfied with the service, which was provided, to
them.
Cost effective. In competition with their rivals such as Starbucks, Tim Hortons would ensure that
their coffees and other products are economical to buy and the general public would not have the
burden of heavy pricing.
Introducing new Products. In order to gain more popularity in the UAE market, Tim Hortons
introduced many new types of sandwiches and doughnuts suiting the local needs of the people. By
this strategy much of the general public was attracted and enjoyed their new products.
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Trade Limitations & Barriers:

In order to register as a Limited Liability Corporation (LLC) in the United Arab Emirates, a Local
Sponsor is required with at least 51% ownership in order to successfully list the organization.
Furthermore, approval requirement has to be sought from various governmental departments such
as: ADFCA, Ministry of Health and Chamber of Commerce. These requirements will be
significantly different from the requirements in Canada.
If the Royalty Fees paid by Apparel Group to Tim Hortons is linked to Yearly sales and revenues,
this may pose a limitation to the parent company incorporated in Canada as royalty fees will
fluctuate with changes in currency of UAE Dirham against the Canadian Dollar and the realized
yearly sales figures.
Since Tim Hortons raw materials are sourced and shipped from Canada, delays in shipment and
distribution may severely affect the stock levels and inventory. If the replenishments do not arrive
on time, sales may suffer.
Lack of familiarity of the Brand name with Local Authorities, Individuals and the Government
may pose some difficulties in establishing and expanding the Tim Hortons Brand Name.

PERFORMANCE ASSESSMENT
SWOT Analysis:

The below mentioned SWOT analysis for TIM HORTONS is basically being described by keeping in
mind of opening their more than 100 stores in Arab market. (www.ukessays.com, 2014)
-Strengths
No one can beat Tim Hortons in their prices, as the pricing strategy they keep for their items is very
economic.
As per geographical area of US and Canada, they are widely spread and now in Middle East also. The
total numbers of stores they have across the world has crossed 3500.
The menu they are serving is one of the best menus as compared to their competitors. The menu of Tim
Hortons covers all varieties of Donuts, sandwiches and special coffee.
-Weakness
The number of employees is less as compared to their store size and increasing number of customers.
They are emphasizing on expanding their business across the world but lacking customer service.
The number of employee training programs should be increased for better customer service.
-Opportunities
During the expansion across the world, the number of employment opportunities will increase.
The increase in the number of employment opportunities at international level will definitely boom up the
economy.
The increase in the number of stores in global market will increase in the profitability of total business.
-Threats
Competition with already existing major brands in Middle East markets like Starbucks.
Increase in the initial costing of production and employing more number of employees will give a
negative figure on the overall revenue of the company.

Porters Five Forces:

-Rivalry Strength
The rivalry strength for Tim Hortons from equal level cafes plus big chain restaurants is very strong.
McDonalds faces a huge competition from the competitors at the time of introducing breakfast and
especially coffee line like offering good quantities at similar prices of its competitors.

-New Entrants
The barriers in a quick service line are very less as compare to a large service line, so it is easy for a
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potential new entrant to enter this segment of business.

The potential entrant can easily join this quick service business, but its hard to build up the reputation
and increase the profitability of the name and business as big giants already take large number of share.
-Substitute Strength
Due to organic nature of items like tea/ coffee, it makes the strength of substitute firms in a quick service
restaurant very low.

-Supplier Strength
Tim Hortons carries a big relationship and positive strength with their suppliers as compare to their
substitute companies as they hold a partnership with American farmers Tim Hortons Coffee
Partnership.
As long as they have a partnership with American farmers, still they can change their resources anytime
they want as on the other part they have a huge pool of suppliers who can provide the coffee bean at same
price.
-Buyer Strength
The buyer strength with the Canadian brand is to be noticed quite well in the quick service restaurant
industry.
One can make conclusion that buyer strength in this type of industry is stronger than supplier. In this
industry the competition level is very high so all the competitors are trying their best to set up their brand
image and reputation by offering similar deals as in same price.
Strategic Challenges:
-Right place to consider for expansion.
It involves a big risk in expanding internationally as no one knows well about the market condition of that
particular markets so it may be a failure for a new franchise and make a big loss for the company in terms
of money and brand image. With regards to Tim Horton a big Canadian brand expanding in the
international market is a big issues as the brand awareness of Tim Hortons is not same as in Canada,
therefore involves a big spending in terms of brand awareness and marketing which may result in huge
financial risk. Therefore, proper market study is compulsory for Tim Hortons to minimize the financial
risk and make it a profitable expansion.
-Tim Hortons maintaining a big brand reputation in Canadian market.
A big Canadian brand Tim Hortons franchising model is basically based on its name and brand value in
the market. Every franchise model is based on its brand value and name. No one will like to have a
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franchise of an unestablished brand. As per the previous statistics, Tim Horton spent nearly $100M in
2012 for their digital menu board; this surely shows the seriousness of the company towards its brand
image. Thus, Tim Hortons must ensure about the franchise process that it is thoroughly screened and
going to the right hands that will take care of the brand value and will not spoil the same.
-Maintaining market leadership in a competitive market.
Tim Horton is maintaining its brand value and name by offering quality of variety of menu at very
reasonable prices. There are some others factors mentioned below which helps Tim Horton to maintain its
leadership in the market.

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2.
3.
4.
5.

The best location and good number of restaurants.

Variety and quality as mentioned above with speedy service.
The facilities provided by them in the restaurant i.e. free Wi-Fi etc.
Good promotional strategy by social media and operational programs.
The last but not the least pricing of their items.

The above factors are helping Him Horton to maintain its leadership in the competitive market. Failure of
one or more above mentioned factor might decrease their share in the market.
CONCLUSION AND RECOMMENDATIONS
Based on Tim Hortons approach to the UAE market coupled with its market entry strategies and taking
into consideration trade limitations and barriers, it can be concluded that Tim Hortons is performing better
than most competitors in the F&B Sector. In a short span of time (approximately 3 years) it has gained a
foothold in its segment and has proven to be one of the top 3 organizations by market share in its
segment.
In order to improve its international business performance, the following is recommended:
1) Streamline the raw materials ordering process to include; sourcing, shipment, delivery,
inspection and dispatching to the concerned outlet.
2) Develop an understanding of the broad customer base by expanding their existing product line.
3) Tim Hortons should start offering healthy and non-fat products to suit the UAE Market in
order to address health concerns.
REFERENCES

Wikipedia (2014), International Business Strategy [Online], Available at

http://en.wikipedia.org/wiki/International_business_strategy, [Accessed on 05th November 2014]

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 Wikipedia (2014), Tim Hortons [Online], Available at http://en.wikipedia.org/wiki/Tim_Hortons,

[Accessed on 06th November 2014]

Adduono, J. & Sulhi, L. (2013), Tim Hortons Goes Global [Online], Available at
https://scholar.vt.edu/access/content/user/ekaufman/Share/TimHortonsCase.pdf, [Accessed on 08th
November 2014]

LinkedIn Corporation (2014), How Tim Hortons Entered the UAE Market via Facebook & Twitter
[Online], Available at http://www.slideshare.net/watconsult/case-study-tim-hortons, [Accessed on
11th November 2014]

All Answers Ltd (2014), Extensive Research on The Tim Hortons Company Marketing [Online],
Available at http://www.ukessays.com/essays/marketing/extensive-research-on-the-tim-hortonscompany-marketing-essay.php, [Accessed on 12th November 2014]

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