Posted: March 24th, 2023
Shake Shack is a fast food restaurant based in the United States. In essence, China is a suitable market for Shake Shack based on the country’s positive economic outlook. Therefore, Shake Shack should employ the franchising entry mode while expanding into China. What is more, the Company should employ the localization marketing strategy while penetrating to the Chinese market. For this reason, Shake Shack should strategically tailor its brand in a manner that suits the Chinese culture.
Shake Shack is a fast food restaurant based in the United States. The company commenced in 2000 as a fast food cart in Madison Square Park. Indeed, the firm has steadily grown over the years with many products, including hamburgers, milkshakes, hotdogs, and fries. Shake Shack prides itself for its emphasis on the use of all-natural and 100 percent Angus beef. In addition, the meat used is totally free of antibiotics and hormones. Since its establishment, Shake Shack has been among the fastest-growing fast food chains and eventually became a public company through an IPO in 2014.
China is among the fastest developing economies globally. The country has the second-largest economy globally on total nominal GDP and has the highest purchasing power parity worldwide. Being the country with the highest population globally (with a total population of above 1.5 billion), China has a sizeable market for businesses. Although China has a communist government, its economy has become considerably more market-based. In fact, the business concept reflects that market forces are extensively playing an active role in the Chinese economy. As a result, the business climate has become less vulnerable to political intrusion than it was previously (Steele & Yau, 2000). Therefore, the positive outlook in China is a good indicator that Shake Shack would enjoy market growth for its products.
Shake Shack should employ the franchising entry mode while expanding into China. Therefore, the company should pursue contracting entry approach strategies through evaluating and choosing the most prospective franchisees in China. While assessing and selecting the potential franchisee, Shake Shack should weigh up the organizational values and culture, experience, and the franchisee’s knowledge of the local market, among other facets. Particularly, it would mean that any firm seeking to become a franchisee has to exhibit its capacity of establishing and operating effectively the Shake Shack restaurants in China. Indeed, the chosen franchisee is, in this manner, expected to execute the Shake Shack business strategy, philosophy, and model. Through using the franchising entry mode, Shake Shack would enjoy some benefits. With respect to the approach, franchising entry mode has low-risks relative to other approaches, such as FDI and joint ventures (Sen, 1998). Therefore, through the entry aspect there would be a low local investment, and thus, no expropriation risk. In addition, Shake Shack would transfer all resource commitment to the selected franchisee, which would subsequently be required to remit the franchise fee and royalties.
Consequently, Shake Shack should employ the localization marketing strategy while penetrating to the Chinese market. For this reason, the company should strategically tailor its brand in a manner that suits the Chinese culture. In addition, the firm should also seek to hire a considerable number of local employees since the company has diversified knowledge of the domestic market regarding consumer behavior and market trends.
Marketing and R&D Strategies
Shake Shack would segment the market based on the demographic, behavioral, and psychographic dimensions. Accordingly, the young adults aged between 19 and 50 years across the Chinese marketplace would be the primary market segment for Shake Shack products. In effect, the company would seek to meet the behavioral and psychological needs identified within this segment through aligning its marketing strategy to those needs so as to ensure better customer satisfaction and reputable brand (Kivela, 1997).
The target market for Shake Shack products would be the young adults across Chinese market. In fact, this segment would include the wealthy and the middle-class customers from the dimension of the income level. In addition, Shake Shack will make use of the differentiation strategy which would be realized by distinguishing its products from those of its competitors. Therefore, the product differentiation will be based on the identified real-time needs of the customers.
Shake Shack will always seek to meet the real-time needs of the marketplace as the Chinese target customers seek for natural and health foods as well as a broader variety to choose from. Going forward, continuing market research and innovative product development will be executed so as to establish the trending consumer preference and buying behavior, thereafter, polish up the company’s products accordingly for better customer satisfaction. After all, the products’ quality will be the differentiation dimension for the company’s products in China. In other words, Shake Shack would consistently put emphasis on the diversity of its food products to (or “intending to”) enhancing stronger competitive advantage.
Shake Shack will enter the Chinese market through the use of premium pricing strategy. In essence, premium prices are often associated with high-quality product perception. Thus, for a product to be viewed as high quality, the premium pricing is a requisite. To this end, Shake Shack will sell its products using premium prices so as to penetrate into the target market. Therefore, pricing strategy will cater for both high-end market and the middle-class market. However, if the company feels that the level of competition has gained momentum in the future, the management may consider revising the pricing strategy and possibly adopt a competitive pricing strategy. In this regard, Shake Shack will adopt a competitive pricing strategy when such need arises, but will do so without compromising the perceived quality of its products in the marketplace. By and large, the company will offer price discounts in its attempt to boost sales performance.
An integrated marketing communication will be applied with an aim of enhancing the market share. As such, the marketing promotion will commence by launching the business in style. In addition, the business introduction will be followed by vigorous advertising, sales promotion, public relations, and internet marketing. Particularly, the advertising on local TV stations and the print media like magazines and newspapers will be utilized to inform the target consumers of the existence of the business, its product offers, and its location. Furthermore, the social media networks, such as Facebook, Tweeter, and blogs will also be used with an aim to enhance brand awareness. In essence, the use of social media platforms would be strategic since they will enable the business reach to a large number of audiences at a relatively low cost and within a short time. As such, Shake Shack would also create a webpage for the Chinese market within the functional corporate website to facilitate internet marketing for the new product. Once a customer opens the website, they would be able to access the company information, product offers, prices, and other marketing information. More importantly, the marketing messages would be aligned across all the elements of the promotion mix to actualize the brand positioning values of the new product (Ferrell & Hartline, 2014).
It is worth noting that the Shake Shack would be located in major cities across China, including Hong Kong, Beijing, Nanjing, Guangzhou, and Tianjin. Under those premises, Shake Shack should employ the localization marketing strategy while penetrating to the Chinese market. For this reason, Shake Shack should strategically tailor its brand in a manner that suits the Chinese culture.
Opportunities and Challenges
The main opportunities at the company’s disposal include:
Shake Shack has an opportunity of growing and expanding in developing countries, including China. In this regard, the company can use an effective market development strategy so as to establish its operations in the country. As aforementioned, China is among the few countries globally recording the fastest economic growth. Therefore, the nation presents a great business opportunity for Shake Shack. More importantly, the company can address the market-based risks, through developing new product lines that cover the entire hospitality industry.
The main threats affecting Shake Shack include:
The restaurant industry has become highly competitive. In essence, the rise of aggressive competitors would threaten Shake Shack’s market share in China. Nevertheless, the trends in healthy lifestyles pose a huge threat to Shake Shack. As more and more customers continue to shift from high calories and sugar foods and beverages into more healthy products, the company’s sales performance could be threatened.
Evaluation and Conclusion
The Chinese market is characterized by a steady political atmosphere, and its economy is considerably growing with an optimistic future outlook. Most Chinese people, particularly in the urban areas, are increasingly entering the middle class. Therefore, with the increase in disposable income, Chinese consumers are ready to pay high prices for premium quality products. Going forward, Shake Shack should exploit these market opportunities in China. In essence, the R&D should always remain the basis of its marketing strategies which should be done with a focus on realizing the real-time market needs.
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