Essay:

Essay details:

  • Subject area(s): Marketing
  • Price: Free download
  • Published on: 14th September 2019
  • File format: Text
  • Number of pages: 2

Text preview of this essay:

This page is a preview - download the full version of this essay above.

COI

Dunkin' Donuts entering the Dutch market. Again.

Subtitle

Students:

Pim van Reekum (2621444)

Muhammed  Özler (2543674)

Esmée Moesbergen (2538221)

Robin Okameme (2540395)

Nick van de Kuinder (2540875)

Uladzimir Skrypka (2617544)

Amsterdam, 11.10.2017

Introduction

Dunkin' Donuts is an American franchise, which was founded in 1950 by William Rosenberg. The headquarters of the company is still located in the state in which the company was founded, namely Massachusetts. In the beginning Dunkin' Donuts grew slowly, until 1963 it was established in around 100 locations. In 1963 William's son Robert took over the leadership of Dunkin' Donuts, where he stayed until 1998. During his leading period, and afterwards, the company grew and is nowadays located in 45 countries with more than 12.000 Dunkin' Donuts stores worldwide (Drake, 2016).

In 1997, Dunkin' Donuts tried to get a foothold in the Dutch market. In the year 2000, however, the company had to close its doors in The Netherlands because it couldn't find an investor, which it needed to be able to grow (Rein, 2017). Nevertheless, Dunkin' Donuts decided to give it another shot in The Netherlands. In March 2017 it opened the doors of a new store. The plans are ambitious, in five years they want to open 25 branches in The Netherlands. But the question that remains is: why would Dunkin' Donuts be a success in The Netherlands this time, as it failed earlier? The President of Dunkin' Brands International, Bill Mitchell, said: "With the highest per capita coffee consumption in the world (Ferdman, 2014), we feel The Netherlands offers a strong growth opportunity for Dunkin' Donuts….” (Drake, 2016). So he is enthusiastic about the fact that people in The Netherlands drink a lot of coffee. CEO of Amba Daoud BV (which is the master franchise company of Dunkin' Donuts in The Netherlands), Robert Fava, mentioned: "It's twenty years later and people's behaviour has changed. Everybody walks with coffee cups in the streets and people like a sweet bite." (Rein, 2017). When Fava talks about a changed formula, he means that people in The Netherlands nowadays act different from twenty years ago. The world has become a global village, which has also brought different food cultures closer together and gives Dunkin' Donuts opportunities to succeed now, while they were not able two decades ago.

Globalization

Modern technology and specifically modern communication methods have made the world smaller. When Dunkin' Donuts first introduced their products in The Netherlands, even coffee giant Starbucks had not taken the leap yet. The Netherlands was not a “coffee-to-go country” and even though their Schiphol location was successful, they did not open stores in the capital until 2011. Now, people are not satisfied with a plain black coffee. They want a barista to make them a signature drink, sipping their PSL while they Instagram their colorful donut. In the early 2000's, multiple American companies struggled to find footing in The Netherlands. However, these same firms are successfully doing business in our country these days. Dunkin' Donuts' history in The Netherlands is not a particularly original one. Two decades after failing to successfully expand in the UK, Dunkin' Donuts decided to try a second time in 2013. -- McKroket, Hamburgerland (van der Velden, 2017).

     Was this country simply not ready for all these American businesses, or was it something else that makes these brands more desirable now than they were back when they first tried to settle in The Netherlands? Most likely, Globalization plays a big part. (Snalzer, 2003). In the case of Europe, the Americanization does not stop at food related products; it also transfers into for example multimedia, pop culture, and technology. An important cause for the spread of Americanization is the rise of the Internet in the past couple of years. Think for example of the millions of people who get familiarized with American habits through their appearance in all of the TV shows these people can watch using one of the popular streaming services online. Social media also plays a big role. When Dunkin' Donuts first tried to settle in The Netherlands, Facebook did not even exist yet. It has been proven that social media representation has a positive effect on the relationship between the company and the customer. It can increase loyalty, as well as brand trust. Furthermore, social media has the ability to increase globalization to a point where the world becomes a global village, enabling Americanization even more. The world is a global village these days, but the Dutch are a stubborn people, so it would do good to add a “Dutch touch”.

Cultural differences in the fast food industry

Successful companies often face a choice whether to go abroad or not. A successful strategy a company has developed in its home country however, doesn't necessarily have to be effective in other countries. Cultural differences are often a factor why companies which are amazingly successful in one country, can be a complete disaster in another country. Many US fast-food chains have entered European and Asian countries because of the huge potential and profitability in new markets. It is nonetheless mainly important for these companies to understand how the firm and its services are being received in different countries (Lee, M & Ulgado, F., 1997). Consumers from different countries react differently to products and services. Asian and European cultures have different concepts of eating out in comparison to US culture (Lee, M & Ulgado, F., 1997). In Asia and Europe eating out can be seen more as a social, family-related or entertaining experience (Copeland and Griggs, 1985). In these countries, low food prices and speed of service may still be important as in the US, but other service features also play a role.

Distance is also an important factor in the aspect of the global world. When companies try to expand globally, countries which are closer to the main country will have positive distance effects (Ghemawat, 2001). These distance effects will have an impact on the acceptance of the product or service in a new market. With the aspect of geographic distance, this means that the further away you are from a country, the harder it will be to do business. Cultural differences can be even more important. Cultural differences include: different languages, different ethnicities, different religions, different social norms, products which affect cultural or national identity, products varying in size, standards or quality norms (Ghemawat, 2001).

When focussed on the differences between the US and The Netherlands on cultural dimensions, it can be concluded that the two most prominent differences are the level of Masculinity and the level of Long Term Orientation (Country Comparison Hofstede Insights, 2017). The Netherlands has more of a feminine society (figure 1) in which life-work balance as well as factors as equality, solidarity and changing the normative side of society over time are valued the most. In a masculine society, like the US, factors as showing individuality and drive are very important. The US society also attaches lots of importance to maintaining old cultural norms. The other elements do not differ that much between the US and The Netherlands. This shows that the cultural distance between the US and The Netherlands is not particularly big. This is important because in international business research, it has been shown that when cultural differences between the foreign and the home country increase, the cost of entry into a foreign market increases (Gomez-Mejia & Palich, 1997).

  In the case of an international franchise business like Dunkin' Donuts, trust between franchisor and franchisee plays an important role because of the high degree of geographic, language, and cultural differences. Even though the essence of a fast-food franchise business is to preserve a standardized product and service, it is crucial for franchisors to adapt their operational strategies in an efficient way to meet local consumers' needs and preferences. Since the food preferences and eating habits of a person are connected to his/her individual culture; these preferences and habits cannot be changed easily (Kittler and Sucher, 2008). Additionally, each culture has its own traditional food and dining habits. Therefore, a certain number of customized menu items are crucial in international markets, even though researchers have claimed that global consumers have become homogeneous in many ways (Lee, 2008).

In such case, one tactic that researchers suggest to maximize profitability and to consider in the internalization of a franchise, is maintaining basic restaurant operations including key menu items and a restaurant theme. At the same time, a restaurant firm could integrate and modify some aspects of restaurant operations such as menu items, operation hours and menu portion sizes according to the needs of each local market. This is exactly what Dunkin' Donuts announced to do in The Netherlands, implementing typical Dutch flavours in their products, such as liquorice, stroopwafel, apple and raisins, Dutch sprinkles, Duo Penotti and Old Amsterdam' (van der Velden, 2017).

Strategic analysis

Let's look at the issue of Dunkin' Donuts first. After failing to enter the Dutch market Dunkin' Donuts is back in The Netherlands (Boon, 2014). Why did they re-enter the market and will the cultural differences be overcome this time? This is the main question to focus on in order to explain the re-entry and analyze the possibility to overcome cultural differences that complicated the entry 20 years ago.

Firstly, it's important to understand the generic strategy of Dunkin' Donuts. In order to analyze this, Porter's Generic Strategies framework is useful (Aken et al., 2006). This provides a solid understanding of the chosen business strategy. According to Porter, deciding on one of the four options is imperative for firms to be or stay competitive. Clearly Dunkin' Donuts uses the cost leadership strategy because they offer products in a high demand market at the lowest possible price. This means that they mainly compete on price and don't offer customers extra value like the association with their brand, which competitors do offer.

Dunkin' Donuts holds a multidomestic strategy for their internationalization purposes, which means that their main branch organises all the business but subsidiaries can decide on the product range, personalise the menu and add country specific products or products features (Hartman, 2017). For example, they have 12 Limited Time Offers (LTOs) a year that are directed on generating publicity but not on sales (Kelso 2013). They also customized their products in The Netherlands to be more familiar to Dutch people, which also made it more attractive for tourists because donuts with tulips and windmills are only available in The Netherlands. This method has a wide range of benefits like maximising local responsiveness. This can empower effective marketing and eventually increase the local market share. Downside of this customization is that it hurts economies of scale.  It also increases the need amount of high skill labor costs, because of the increased number of specialists working on product customization and adds some price on research and development of customized good.

Lastly, it's important to consider the cultural dimension as this influences the market and the decision of Dunkin' Donuts to re-enter the Dutch market. But what is culture and how does it affect Dunkin' Donuts? Culture consists of shared operating procedures, unstated assumption, tools, norms, values and habits, according to Triandis and Suh (2002:136). For Dunkin' Donuts the collectivism dimension of culture (Triandis & Suh, 2002) is very important. It means that people desire fewer choices and want to be less unique. People are interdependent with their in-groups and care for relationships. The strategy tripod theory also acknowledges that culture is a critical element (Peng et al., 2009). This theory explains that institutions, including culture as an informal institution, are an important pillar that affects firm strategy and performance. So culture, and the possible cultural changes, is critical elements for companies to consider.

In a way, globalization and social media have steered Dutch culture from individualistic culture to be more collectivistic. Nowadays the association to social groups is very important and people use social media to show their association. For Dunkin' Donuts this may be an opportunity to address the market in a different way than just focusing on cost leadership. If they can successfully market their brand name so it relates to a certain social group or lifestyle, it may prove successful.

Alternatives

We believe Dunkin' Donuts has a couple of alternatives which could mean they would become successful in The Netherlands this time around.

Applying the Dunkin' Donuts American strategy in the Dutch market. In the US, Dunkin' Donuts makes use of a cost-leadership strategy. This strategy involves offering the same or better quality product or service at a price that is less than that of competitors (Azarian et al., 2016). Also, Dunkin' Donuts tries to be in as many locations as possible in the US, especially in the East, by franchising. Convenient drive-thru service is also a part of this. By producing as much as possible, Dunkin' Donuts can utilize economies of scale to keep prices as low as possible. In the Dutch coffee market that is dominated by Starbucks, a similar strategy could help Dunkin' Donuts build a loyal customer base.

Providing high quality coffee segment at premium places. A way to succeed in competitive markets is to be able to offer the best product possible, to differentiate from competitors. In the case of Dunkin' Donuts this means offering the best quality coffee and donuts. When offering the best quality, a company can use premium prices, which can have positive effects on revenues. The premium prices can be justified not only by offering high quality coffee, but also by the premium places the stores are located at.

Cost-leadership adjusted to the Dutch market. As discussed earlier in this paper, the markets in The Netherlands and the US are different, mainly because of cultural differences. Implementing the successful cost-leadership strategy Dunkin' Donuts uses in the US, but changing some aspects of it, tailoring the product to the Dutch market, could be a successful alternative.

Recommendations

Twenty years ago Dunkin' Donuts retreated from The Netherlands, ‘because the Dutch people were not ready' (Fava, 2017). Two decades later things have changed: the ‘Globalization' in the Dutch market is more than ever visible, resulting in an exceptional growth of fast-food franchises. Simultaneously, The Netherlands have the highest per capita coffee consumption in the world, which offers a strong growth opportunity for Dunkin' Donuts. Also this time they've found an investor that has experience as an entrepreneur in the Dutch market. The investor also runs Nutella stores in Amsterdam, which are a great success.

Considering the general factors for success as stated above, we believe the third option - implementing a cost-leadership strategy adjusted to the Dutch market - has the best potential for Dunkin' Donuts to succeed. As described earlier in the strategic analysis, the shift in cultural dimension from individualism towards collectivism provides an opportunity for Dunkin' Donuts to aim for social groups to associate themselves with Dunkin' Donuts. Dutch people nowadays want to use products and services to associate themselves with social groups and social media has made this very easy for people. Dunkin' Donuts can use this to build a loyal customer base and combine this with their cost-leadership strategy.

Possible extra arguments specific for alternative 3:

Dunkin' Donuts has successful experience (key of the successful strategic formula in the US) with a cost leadership strategy. Providing coffee and donuts for a reasonable price. ---> Offer seating to customers, do not make it only aimed at fast consuming or take away of coffee and donuts. Dutch society is not always on the run as American society is (Debassio, 2015). Customized products for the dutch market (stronger coffee, stroopwafel flavour donuts).

Even though the Dutch culture is quite similar to the American culture, they could use this strategy in other countries to gain more popularity when they expand to countries with very different tastes? It's a strategy which is not only beneficial for The Netherlands?

One more argument, if you can think of one?

References

Akan, O., Allen, R. S., Helms, M. M., & Spralls III, S. A. (2006). Critical tactics for

  implementing Porter's generic strategies. Journal of Business Strategy, 27(1), 43-53.

Boon, L. (2014). Donutboer Dunkin' Donuts wil weer vestigingen in Nederland. Retrieved on

  02-10-2017 from:

https://www.nrc.nl/nieuws/2014/04/16/donutboer-dunkin-donuts-wil-vestigingen-in-ne

  derland-a1425716

Copeland, L. & Griggs, L. (1985). Going International, Random House, New York, NY.

Country Comparison Hofstede Insights. (2017). Retrieved on 01-10-2017 from:

  https://www.hofstede-insights.com/country-comparison/the-netherlands,the-usa/

Debassio, T. (2015). Dutch Dunkin' Donuts: second time's the charm? Retrieved on

  06-10-2017 from:

  https://dutchreview.com/dutchness/dutch-dunkin-donuts-second-times-the-charm/  

Drake, J. (2016). Dunkin' Donuts Announces Upcoming Entry Into The Netherlands.

  Retrieved on 02-10-2017 from:

https://news.dunkindonuts.com/news/dunkin-donuts-announces-upcoming-entry-into-the-netherlands

Ferdman, R. (2014). Here Are the Countries That Drink the Most Coffee - the U.S. Isn't in

the Top 10. Retrieved on 06-10-2017 from:

https://www.theatlantic.com/business/archive/2014/01/here-are-the-countries-that-drink-the-most-coffee-the-us-isnt-in-the-top-10/283100/

Ghemawat, P. (2001). Distance still matters. Harvard Business Review.

Gomez-Mejia, L. R., & Palich, L. E. (1997). Cultural diversity and the performance of

  multinational firms. Journal of International Business Studies, 309-335.

Hartman, C. (2017). Differences between a multidomestic & transnational company, Retrieved

  on 04-10-2017 from:

http://smallbusiness.chron.com/differences-between-multidomestic-transnational-compan

 y-33807.html

Kelso, A. (2013). Dunkin' Donuts uses LTO strategy to talk to customers. Retrieved on

  01-10-2017 from:

   https://www.qsrweb.com/articles/dunkin-donuts-uses-lto-strategy-to-talk-to-customers/

Kitter, P. G., & K. P. Sucher. (2008). Food and culture. Belmont, CA: Wadsworth Thomson

  Learning.

Lee, M. & Ulgado, F. (1997). Consumer evaluations of fast-food services: a cross-national

  comparison. Journal of Services Marketing, 11(1), 39-52.

Lee, K. (2008). Issues for International Franchising Lessons from the Case of a

  Poland-Based Restaurant Operator. Cornell Hospitality Quarterly, 49(4),454-457

Peng, M. W., Sun, S. L., Pinkham, B., & Chen, H. (2009). The institution-based view as a

  third leg for a strategy tripod. The Academy of Management Perspectives, 23(3),

  63-81.

Rein, E van. (2017). Dunkin' Donuts ziet ruimte voor 160 verkooppunten. Retrieved on

  03-10-2017 from:

https://fd.nl/economie-politiek/1193455/dunkin-donuts-ziet-ruimte-voor-160-verkoopp

unten

Triandis, H. C., & Suh, E. M. (2002). Cultural influences on personality. Annual review of

  psychology, 53(1), 133-160.

van der Velden, L. (2017). Dunkin Donuts keert terug in Nederland - slaagt keten dit keer

  wel? Retrieved from:

https://www.volkskrant.nl/economie/dunkin-donuts-keert-terug-in-nederland-slaagt-ke

  ten-dit-keer-wel~a4478109/

Appendix

Figure 1: Hofstede's Country Comparison on cultural dimensions, differences between the Netherlands and the United States

...(download the rest of the essay above)

About this essay:

This essay was submitted to us by a student in order to help you with your studies.

If you use part of this page in your own work, you need to provide a citation, as follows:

Essay Sauce, . Available from:< https://www.essaysauce.com/essays/marketing/2017-10-7-1507364319.php > [Accessed 20.10.19].