Marketing Proposal Analysis

INTRODUCTION

House of Kebab is a fast food outlet owned by locals and will have the image and detail presentation to position it as an international franchise.

House of Kebab endeavors to provide tasty cuisine at reasonable prices, all the while fostering a friendly atmosphere and distinctive packaging. We acknowledge the rising desire for fast food kebabs and shawarmas, rendering House of Kebab an outstanding choice. With the fast food sector becoming more cutthroat, distinguishing one’s establishment from others proves arduous. Our main objective is to establish a prominent presence in Kuala Lumpur, ideally within a renowned residential area. Following this, we aim to expand our footprint by launching additional stores in neighboring locales.

The main objective of House of Kebab is to offer a unique dining experience that appeals to young customers who want to enjoy meals with their friends and family. We strive to provide high-quality food at an affordable price.

COMPANY SUMMARY

House of kebab offers a variety of specially crafted shawarma wraps that are similar to sandwiches. These wraps typically contain shaved meat such as lamb, goat, chicken, turkey, beef, or a combination of these meats. They also include kebab, which is thinly sliced meat or chicken made from minced and seasoned meat. These delicious wraps are served with unleavened bread, fresh salad, and sauce. The meat, commonly lamb, chicken or beef, is grilled on a vertical spit that rotates.

Our store will provide a display cooking experience where customers can observe the entire process of cutting and frying our famous Turkish Kebab and Shawarma. Additionally, they can explore our in-house brochures to gain more knowledge about Kebab and our unique sauces. The store will have a lively fast food atmosphere with a vibrant counter and a menu showcased on the wall.

COMPANY OWNERSHIP

House of Kebab is a privately held company that will be registered as a Limited company. The ownership will be divided equally among Sarawanan, Mahendran, Che Rosmawati, and Emmanuel, each with 25% ownership. Our goal is to thrive in this industry by developing a unique and innovative menu that distinguishes us from competitors.

Our objective is to always keep costs in check and adopt a cautious approach to growth policy in all areas. Despite having enough funds for multiple store openings, we prioritize prudence when making business decisions. Our main goal is to sell top-notch products and guarantee customer satisfaction in every category, including food and store merchandising.

Our goal is to ensure complete customer satisfaction and maintain superior service compared to our competitors. We prioritize the crucial aspects of the fast food industry, namely brand and image, which are important in marketing communications. Additionally, we strive to promote positive values within our company culture and business philosophy. Furthermore, we analyzed our business using Porter’s 5 forces model for further insights.

FIVE FORCES

The fast-food industry comprises various companies that provide a range of products and services to fulfill customer requirements. These offerings can be seen as similar options.

Managers have a crucial role in analyzing the competitive forces in the industry’s environment. This analysis allows them to identify threats and opportunities that can be either protected against or benefited from by the company. Porter’s five forces model helps managers with identifying and analyzing these competitive forces within the industry. According to this model, stronger forces restrict established companies’ ability to increase prices and generate higher profits. By utilizing this model, managers can recognize potential new opportunities or threats that may affect their business operations.

Obstacles preventing market entry

The fast food industry is highly competitive and constantly sees new competitors emerge, making it challenging to enter. To stay in the market, businesses must create strong barriers that new competitors must overcome. The most effective barriers in the food industry include providing a diverse menu and maintaining a significant price gap with rivals.

Offering a product at a lower price can make it more appealing and help businesses achieve economy of scale by increasing production and reducing costs. Unlike upscale restaurants, fast food establishments do not have expensive ambience or fine dining experiences that drive up costs. Consequently, fast food operators can lower fixed costs like rent, in addition to benefiting from mass production. These factors enable them to offer lower prices and capture a larger market share.

Having a high market share is essential for businesses as it leads to increased profits and the possibility of expanding. Therefore, effective marketing strategies are crucial in order to attract customers. McDonald’s provides a great illustration of this by utilizing tactics like introducing mascots such as Ronald Mc Donald and offering Happy Meals to appeal specifically to children. These initiatives not only establish a unique brand identity but also differentiate their products. However, a downside is that many competitors often imitate and adjust these same tactics for their own businesses.

For entering an industry, having adequate capital and establishing a strong brand name are crucial. Sufficient investment is required to lay a solid business foundation. Additionally, creating a reputable brand will provide the business with a competitive advantage by fostering customer loyalty. A prime illustration of effective branding is Kentucky Fried Chicken (KFC), known for its fried chicken. KFC’s unwavering meal quality showcases their exceptional branding approach.

Competitors face a major challenge in attracting customers due to customer loyalty, even when prices are lowered. Moreover, complying with government policies is a crucial barrier for entering the market because non-compliance would lead to product failure and an inability to gain market share. In the fast food industry of a Muslim country, it is essential to clearly indicate pork-containing products as ‘Non Halal’ through signage on packaging and in restaurants where they are sold.

In order to avoid a substantial loss of purchasing power, it is crucial that the product is Halal as Malaysians, who are primarily Muslims, will refrain from buying non-Halal items. Unobstructed market channels play a vital role in ensuring efficient distribution and marketing of food products. Considering the wide accessibility of the fast food industry to a large customer base, it is imperative that product distribution is streamlined and made convenient, particularly when strategic locations such as towns or office areas are chosen for selling these items. While traditional placements for fast food joints include town centers and proximity to offices, there has been an emerging trend of locating them at petrol pumps to cater to customer convenience. House of Kebab effectively tackles entry barriers through employing these strategies.

House of Kebab has successfully overcome all major obstacles to entering the market. We have analyzed each obstacle individually:

1. Government Regulation Kebab being a food traditionally from Middle Eastern country it is well in demand for Malaysians whom vast majority are Muslims. Government Halal requirements are also addressed and met via procuring meat from suppliers whom already hold a Halal certificate. This way one barrier is well addressed.
2. Marketing Strategy House of Kebab’s marketing would be done via all print medias and also online expiate web pages. This in a way will promote House of Kebab to the high number of Arabian experts whom are in this country. Due to lack of Kebab fast food outlets in Malaysia, House of Kebab’s marketing activity will be able to overcome another form of barriers to entry.
3. Location House of Kebab’s locations are well chosen to be suburbs of Klang Valley where Malay population are significantly higher. Locations such as Pantai Dalam, Shah Alam and Klang were chosen. This in turn would be another giant step forward for House of Kebab to overcome the barriers of entry.
4. Competitor’s Reaction Competitor reaction against House of Kebab is expected to be significantly lower compared to other fast food outlets due to its core business being Kebab. In Malaysia there are very fewer fast food outlets selling Kebabs. This equates to no direct retaliation from other giants such as McDonalds and Kentucky Fried Chicken. This in turn will prove to be a positive factor for Rose Kebab’s success.

SUPPLIER POWER

‘Powerful suppliers have the ability to capture a larger portion of the value by implementing higher prices, restricting quality or services, or transferring costs onto industry participants.

Powerful suppliers can have a negative effect on profitability in certain industries where price increases cannot be applied to counter rising costs. A prime example is Microsoft, which has implemented barriers that hinder access to its software, consequently leading to decreased profitability within the PC industry. Nonetheless, supplier influence varies across different sectors. In highly competitive and easily accessible markets such as the fast food industry, supplier power does not exert a substantial impact.

McDonald’s, KFC, Burger King and other leading players in the fast food industry are facing tough competition and a simple entry and exit process. Consequently, they cannot justify high prices compared to the increasing number of competitors. House of Kebab, as a fast food chain, recognizes this reality and has implemented the following strategy to counter any negative actions by rivals:

1. Establishing our own poultry farm with a strong emphasis on organic and healthy products.
2. Providing recreational rooms for our customers at no additional cost across all our locations.
3. Organizing affordable weekly children’s parties.

Conducting regular customer surveys is crucial to identify areas for improvement. At House of Kebab fast food chain, we take a defensive strategy by constantly improving our menus and offering a variety of dishes based on our customers’ suggestions. In a monopolistic setting where suppliers cater to multiple buyers and their products are highly demanded with no close substitutes, supplier power is higher. To address this, we have created a research and development (R&D) department and actively encourage local farmers to increase the production of our main raw material, chicken. We provide grants to help them acquire machinery for mechanized farming.

This strategy aims to maintain the availability of our raw materials and keep prices low among our suppliers. It also helps us avoid the high cost associated with switching suppliers. To give our suppliers less bargaining power, we have established a uniform standard for both meat and grocery suppliers. At House of Kebab, we have implemented a policy (Memorandum of Understanding) with our suppliers. This policy prevents them from entering our industry while also ensuring that we continue to provide grants and share research on improving farm products.

BUYER POWER

The size and concentration of customers, as well as the level of customer information and competitor concentration or differentiation, are the primary determinants of buyer power. Buyer power is one of the two horizontal forces that impact the allocation of value in an industry.

Kippenberger (1998) suggests that it can be useful to differentiate between the potential buyer power and the willingness or incentive of the buyer to use it. The willingness is primarily driven by the “risk of failure” associated with product usage. Buyer power is particularly strong in markets dominated by a few large players, like retailers and grocery stores, and when there are numerous undifferentiated small suppliers supplying large grocery companies, such as small farming businesses. Moreover, low switching costs between suppliers, like changing from one fleet supplier of trucks to another, can influence buyer power. Price sensitivity also impacts buyer power. Consequently, we believe that our House of Kebab offers a reasonable price in the market and potentially even lower than our competitors.

Our company’s vision is to achieve a significant market share within 3-4 years. This vision relies on the collaboration of our entire management team. Additionally, the purchasing power is influenced by production levels. According to the law of demand and supply, if there is high demand for a specific product in the market, its price will increase. Conversely, low demand will lead to a decrease in price.

Therefore, House of Kebab’s management has decided to continuously study market demand and adjust supply accordingly. Our sales team has already conducted research during this early stage.

When making a buying decision, the availability of substitute products is a significant factor to consider. The level of competition from substitutes depends on the ease with which buyers can switch to them. One important aspect to take into account is the switching cost for buyers, which refers to the one-time expenses associated with shifting from one product to a substitute. In our present circumstances, we have identified that our competitor could serve as an alternative if our current product fails to meet customer requirements. According to the review findings, customer economic power does influence buyer power.

According to our analysis, the sales of House of Kebab will generate profit as long as the current demand and buying power remain steady. The customers’ ability to negotiate and utilize their leverage increases when there are fewer customers and larger quantities are purchased. This situation also occurs when the customers make up a significant portion of the total sales for the selling industry. Additionally, the buying power is influenced when customers have the potential to integrate backward, particularly if the item they are purchasing is not a crucial input.

Our research on House of Kebab indicated that consumers play a crucial role in the Kebab market. The low competition in comparison to other fast foods gives them a significant purchasing influence. We expect favorable profit margins assuming the current market conditions continue.

THREAT OF SUBSTITUTES

Substitutes serve the same purpose as a product in an industry, but using a different method. For example, plastics are substitutes for aluminum, and email is a substitute for express mail. However, the threat level of substitutes varies. Some substitutes pose a direct threat, while others are indirect. For instance, day care services are threatened when baby-sitters are hired, and air-ticketing agents services are threatened when airlines choose to sell tickets online.

At House of Kebab, we have implemented a specific differentiation strategy to address the very evident and direct threat of substitutes in the fast food industry. Our main objective is to satisfy hunger, which is why we offer a unique and appetizing dish made with high-quality meat, accompanied by tastefully garnished soya sauce. In addition, when customers choose House of Kebab, they also receive a complimentary gift that may be a key-holder, ball-pen, or a 10% discount voucher for future purchases.

Our tagline is ‘Original Kebab with traditional dish; and the ultimate shawarma with a different taste’. Once again, our prices for kebab and shawarma are lower compared to our competitors as a part of our low price strategy. The Threat of Substitutes is significant when substitutes offer a better price-performance trade-off compared to the industry’s product. Substitutes that exhibit high value and satisfying traits can greatly diminish the profit potential of the industry, such as what happened to Kyros Kebab or Kebab Melawati due to the rise of kebab fast food.

Low consumer switching costs result in a high threat of substitutes, as consumers can easily obtain a lower-priced substitute. Technological advancements in other industries can also create substitution threats if the new product offers better value than the current product. At House of Kebab, we prioritize continuous innovation and improvement.

Rivalry Among Existing Firms

There are various ways in which existing competitors engage in rivalry, such as offering discounted prices, introducing new products, running advertising campaigns, and improving services. This high level of rivalry has a negative impact on the profitability of an industry. The extent to which rivalry reduces the profit potential of an industry is determined by two factors: the level of competition among companies and the basis on which they compete. The intensity of rivalry is highest if:

There is a large number of competitors or they are approximately equal in terms of size and power.

• Industry growth is slow. Slow growth precipitates fights for market share.
• Exit barriers are high. These barriers keep companies in the market even though they may be earning low or negative returns. Rivals are highly committed to the business and have aspirations for leadership, especially if they have goals that go beyond economic performance in the particular industry.
• Firms cannot read each other’s signals well because of lack of familiarity with one another, diverse approaches to competing, or differing goals. The strength of rivalry reflects not just the intensity of competition but also the basis of competition. The dimensions on which competition takes place, and whether rivals converge to compete on the same dimensions, have a major influence on profitability.

The profitability of a business can be significantly impacted by rivalry, particularly if it focuses solely on price. This is because competing on price leads to a direct transfer of profits from the industry to its customers. It is often easy for competitors to identify and match price cuts, which often leads to retaliatory actions. Furthermore, prolonged price competition can result in customers paying less attention to product features and service. Price competition is most likely to occur when:

• Products or services of rivals are nearly identical and there are few switching costs for buyers.
• Fixed costs are high and marginal costs are low. Capacity must be expanded in large increments to be efficient.
• The product is perishable.

Competition based on factors other than price, such as product features, support services, delivery time, or brand image, is not as likely to reduce profits as it enhances customer value and can justify higher prices. It can also enhance the value compared to alternatives or make it harder for new competitors to enter the market. While non-price competition can sometimes reach levels that harm industry profitability, this is less probable than when price competition takes place.

Understanding the dimensions of rivalry is crucial, especially when considering if rivals are competing on the same dimensions. If competitors aim to meet the same needs or compete on the same attributes, the competition becomes a zero-sum game, where one firm’s gain is often another’s loss, ultimately leading to decreased profitability. However, if companies effectively segment their markets and target specific customers with their low-price offerings, this risk can be mitigated, ensuring that price competition does not necessarily transform into a zero-sum scenario.

Rivalry in an industry can be beneficial and increase overall profitability if each competitor focuses on serving the unique needs of different customer segments. This can be achieved through varying combinations of price, products, services, features, or brand identities. This type of competition not only enhances average profitability but also leads to industry expansion as it caters to a larger range of customer groups. Industries that cater to diverse customer segments have a greater potential for positive-sum competition.

With a strong grasp of the structural foundations of competition, strategists have the ability to influence the direction of rivalry in a positive manner. As mentioned earlier, the fast food industry is experiencing rapid growth, leading to increased competition among existing companies in terms of sales, profits, and market share. Consequently, each company is striving to acquire a larger portion of the market and boost their sales. For example, KFC and McDonald’s engage in intense competition as they vie to enhance customer service through initiatives like introducing new menu items and implementing home delivery services.

The fast-food industry is dominated by a few large companies with significant financial resources and a strong competitive position. This enables them to outperform smaller rivals and deter new entrants. The industry also benefits from a high demand for its products, particularly in Malaysia, where this demand is expected to persist. Moreover, the introduction of microwaves has further amplified the need for fast-food items that can be conveniently and rapidly prepared in these appliances.

By providing companies with a greater opportunity to sell more and increase their profits and market share, this would assist in moderating the competition. Additionally, the future demand for fast food may be influenced in various ways by demographic and social trends. Thus, it is evident that decreasing rivalry allows companies to raise prices and augment profits. Conversely, an increase in competition among established competitors could result in the opposite outcome.

Whenever demand and profit are high, there will be a flood of new entrants hoping to enter the market. The industry may be consolidated, with a few large companies dominating (oligopoly), or with just one company (monopoly). In such an industry, companies are interdependent, meaning that the competitive actions of one company directly impact the profitability and market share of other competitors.

House of Kebab plans to open an outlet in the sub-urban area of Pantai Dalam, which includes Pantai Hill Park, Shah Alam, and Klang. This location is chosen because it is predominantly inhabited by the Malay community, who place importance on ‘halal’ local products over American products. Additionally, Pantai Hill Park is dominated by expatriates from the Middle East. This strategic move aims to mitigate competition, allowing all companies to increase sales without negatively impacting each other’s market share and profits. However, it is important to note that a decrease in demand may intensify rivalry among industry players as they vie to retain their market share and revenue.

There are strategic, economic, and emotional reasons that keep companies in the industry, even when profits are low. If there are high barriers to exit, companies would become stuck in an unprofitable industry with unstable or declining demand. This would create excess production capacity and intense price competition, as companies would lower prices in order to get rid of their unused resources.

The exit barriers in the fast food industry include significant fixed costs for severance pay and investments that cannot be sold off. Furthermore, if a company relies heavily on the industry as its main source of income and lacks diversification, it faces additional challenges. The competitive structure in this industry is concentrated, with a small number of large companies holding substantial financial power. This advantage allows them to outperform their smaller competitors and discourage new entrants.

The fast food industry has a significant demand for its products, and this demand is expected to continue in Malaysia. The introduction of microwaves has also increased the demand for fast-food products that can be quickly and easily prepared in microwaves. This can benefit companies by increasing their opportunities to sell more and increase their profits and market share. Additionally, various demographic and social trends may impact the future demand for fast food in different ways.

It is evident from this statement that when competition decreases, companies can raise their prices and increase their profits. On the other hand, if competition increases among existing competitors, the opposite can occur.

CONCLUSION

After conducting a thorough analysis using Porter’s Five Forces Model, the shareholders have high confidence that House of Kebab will achieve significant success if the aforementioned strategies are implemented effectively.

The current advantages of House of Kebab that contribute to its strong market position are:

1. Fewer competition in the Kebab Fast Food industry
2. A well crafted strategy which includes two of very strong strategy which is low cost and product differentiation.
3. A qualified and competent management team
4. Prior experience dealing with meat suppliers
5. High sales potential locations for Halal Food
6. Strong emphasis on customer satisfaction.