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Ways of Entering the Market
The world has experienced multiple changes, especially in technological advances that have facilitated the integration of the economy in different countries. Changes such as traveling, information sharing tools like the Internet, computers, and smartphones, as well as distribution channels, have facilitated the concept of globalization. As noted by Bandick and Sanneh, companies have been operating outside of national borders for a long time. Still, globalization has enabled more organizations to seek cross-border trade and businesses (7). This is because innovation associated with globalization enabled companies to find ways to diminish the costs of operations in sectors such as transportation and communication. Companies are also compelled to participate in international businesses because of the desire to acquire resources and suppliers, seek into new markets, leverage core competencies, and compete with rivals (Pustay and Griffin 36). There are also ways in which businesses enter new markets, which are addressed in this section, specifically focusing on MOD pizza in New Zealand.
Several factors are considered when entering a foreign market. These factors are categorized into external and internal that influence the investors’ choices of foreign entry mode. The decision to internationalize a business is critical because it influences the profitability of a company. Therefore, organizations choose the most suitable foreign entry mode that favors the business. According to Shen, the foreign entry mode considers the way a firm wants to carry out its business activities and the degree of engagement in a foreign market (3). In this case, it is essential to understand the milestones taken by MOD Pizza in Northern America and consider how they can be replicated in European markets with an effective market entry strategy.
MOD Pizza began its operations in the year 2008 in California, United States. MOD Pizza focuses on offering its consumers authentic, affordable, and fast dining experiences, and it has continued to grow over the years. According to Toneguzzi, the company had over 464 stores by 2019 in the United States, the United Kingdom, and Canada. MOD planned to venture into Canada’s market through partnership and franchising modes. The company intended to offer a combination of superior food quality, speed, and value in new markets. Therefore, most of their time is spent in selecting franchisees and partners who share similar business values and cultures. The two approaches of entering new markets have worked for MOD Pizza, and they can be replicated in New Zealand.
The MOD’s management should consider the benefits and disadvantages associated with the two methods when venturing into the New Zealand market. The key benefits of franchising include low financial risks, low costs in assessing potential markets because businesses avoid tariffs and nontariff barriers as well as other restrictions imposed on foreign investments (Pustay and Griffin 364). Companies also maintain more control of business operations in comparison to licensing, and franchisee provides knowledge of the local markets. The drawbacks in this approach include limited profits, dependence on the franchisee, potential conflicts, and a company might be creating a future competitor. Franchising is mainly essential in companies with repeatable business models like the food outlets that are easily transferrable in other markets. MOD Pizza has proven success in applying franchisees in different countries, and they should adopt it in New Zealand markets.
On the other hand, MOD Pizza can consider partnerships for several reasons. First, there are markets where joint ventures or partnerships are required by law. Additionally, partnering works well when entering new markets with different cultures, social, and consumer demographics from the home country. Local partners provide the required market knowledge, appropriate target consumers, and contacts. The New Zealand market is different from the other countries where MOD Pizza operates, especially because of the dining habits and pricing.
Other strategies that MOD can consider when entering in New Zealand market include joint ventures and acquisition. The acquisition strategy involves obtaining control over a firm’s factories, technology, employees, distribution networks, and brand names (Pustay and Griffin 379). The acquisition process is complex because it involves negotiations, lawyers, bankers, mergers, and regulators from different countries. The main benefits of this approach include reduced entry barriers, access to capital, reduces training time needed, generates fresh ideas and perspective, and market power. However, this model creates a clash of different cultures and might create internal fallout as some employees might feel threatened. MOD can identify foodservice outlets in New Zealand that are looking to sell and acquire under its brand.
Alternatively, MOD can identify foodservice outlets in New Zealand and negotiate a plan to work as joint ventures. Such firms focus on promoting their mutual interests, where the risks and profits are shared. This approach is appropriate because it promotes cooperation between companies, especially in a volatile environment. Such an arrangement can help MOD to enter the New Zealand market easily and gain access to greater resources like trained staff or experts. As a result, the company can compete favorably against the main companies that have established themselves in New Zealand, such as KFC, Domino’s, McDonald’s, and Pizza Hut.
Market Segmentation
The presence of consumers influences the success or failure of a business. While moving into the New Zealand market, MOD Pizza should understand the characteristics of the consumers that will help in choosing the appropriate business strategy and adapt effectively. The food service providers in New Zealand are segmented into several types that include café and bars, street stalls and kiosks, full-service, self-service, fast foods, as well as 100% home delivery restaurants (Mordor Intelligence). The food service is further segmented into either chain consumers or independent consumers. The analysis conducted by Mordor Intelligence revealed that New Zealand’s foodservice industry grew by 3.73% mainly because of the growing demand for home delivery and expansion of the market by international foodservice providers. The foodservice industry has also changed in the country amid the growing concerns of dietary habits and increased influence of western processed foods.
MOD Pizza should focus on leveraging the emerging consumption trends when expanding in New Zealand. For instance, the restaurant should offer a menu with options such as vegan, raw food, and gluten-free diets to attract more customers and remain active. According to Toneguzzi, MOD focuses on delivering pizzas made on-demand, and the customers choose their own toppings and salads for one price. This mode of operation will bring a new experience in New Zealand’s food industry because MOD Pizza focuses on people-first culture. Therefore, the business will likely perform well in a competitive environment. The company can also learn from the other businesses like Pizza Hut that transitioned fully into takeaway and delivery services.
4P’s Marketing Strategies
Pricing Strategy
The prices of fast foods in New Zealand is influenced by various factors. The main factor is the stiff competition introduced by international foodservice producers led to price wars in New Zealand. As noted by Walters, when Pizza Hut charged $30 for a pizza when they opened their first store in 1974. At the time, the competition was nonexistent, and New Zealand people were happy to pay for the pizza. However, the success experienced by Pizza Hut in New Zealand paved the way for other international food chains like Domino’s, Pizza Haven, KFC, and Eagle Boys. The stiff competition from these companies led to changes in the foodservice industry in New Zealand as they shifted focus to high-volumes and low-margin. Domino’s and Pizza Hut were aggressive in gaining the low-end market, which led to the introduction of value pizzas that cost $5 (Walters). These prices were intended to offer value to the people in New Zealand.
The companies also introduced other strategies to remain active in New Zealand. For instance, Domino’s focused on pizza delivery services within 15 minutes from when an order was placed. As a result, they introduced the GPS tracking system intended to help the driver deliver pizza on time. Additionally, the time taken to make pizza was halved to speed up the delivery process. While Domino’s and Pizza Hut focused on lower-end markets, Kiwi brand aimed at the premium markets, the customers would pay more for quality rather than quantity (Walters). The changes in consumers’ preferences and tastes, as well as consciousness in a healthy diet, means that businesses can offer high-quality products for favorable prices. MOD Pizza can disrupt the New Zealand foodservice market by offering uniquely positioned products that focus on quality, health, and assure consumers value for money.
MOD Pizza has high/low pricing and one-price strategies. In this case, MOD charges the same price for consumers in similar conditions or quantities. For instance, an 11-inch pizza inside London costs £7.87. However, the same pizza might cost £7.47 outside London. Additionally, the company has something for everyone because they provide customers with six-inch mini-MOD pizzas that cost £4.47 (QSR Media). These prices are favorable compared to competitors. The prices are also fair compared to Pizza Hut and Domino’s.
Product Strategy
The product strategy identifies the market needs that might be served by providing different products. In this case, MOD Pizza’s main focus is pizza, which is positioned differently in various locations or countries. However, the CEO noted that MOD Pizza differs from the competition by offering three key things. First, the customers get to choose what they want on the pizza. According to QSR Media, the customers have the option to select all the available 34 toppings to be used as toppings at no extra cost. MOD Pizza was the only company in the UK offering all toppings for the price of one. Secondly, the company focuses on speed, where the pizzas are made in under five minutes. Thirdly, the company ensures that the tomato sauces are made fresh every day in all outlets. Californian tomatoes are preferred in MOD Pizza because they are sweeter compared to regular tomatoes, and they help in giving the company a unique taste.
MOD Pizza assures its customers’ value for the money by using high-grade ingredients. The quality strategy for the products is emphasized on their marketing campaigns in the United States and the United Kingdom. They also focus on customers’ satisfaction through the provision of quality products at affordable prices. The option to select the toppings allows the customers to experiment with different tastes in their pizzas. There are also provide customers with 15 different pizzas (QSR Media). Furthermore, the time-based strategy is one of MOD Pizza selling points because they assure the customers that pizzas would be delivered on time. Making pizzas take about 3 minutes, and they are delivered within a 3-mile radius. Furthermore, MOD Pizza has partnered with third-parties to deliver pizzas at an affordable price. These strategies can be replicated in Europe and other markets around the world.
Promotional Strategy
There are a wide range of promotion tools used by MOD Pizza, including advertising, sales promotion, and personal selling. These strategies are intended to increase market shares, boost sales volume, and improve the rate of repeat purchases. For instance, the company has “MOD Rewards,” where the customers are given points every time they purchase products. Customers earn one point for every dollar spent on MOD outlet, which can be redeemed for free MOD menu items besides alcohol. This strategy is intended to increase repeat purchases and grow market share. Additionally, MOD customers earn 75 points for downloading the MOD app and creating an account (MOD Pizza). The app also allows the consumers to receive custom offers, find the nearest MOD store, order ahead and skip the line, and reorder favorite items. These features are aimed to increase sales volume and acquire new customers, especially the 16-24-year-olds who use phones regularly.
MOD Pizza also utilizes televisions, radio, print media, and magazines, as well as the Internet advertisement with the aim of reaching new customers. The company recently hired Mark Shambura as the Chief Marketing Officer to help in improving brand awareness and customer loyalty. Shambura has worked with many organizations, and his experience will help MOD to realize international recognition, especially now that it wants to expand to New Zealand.
Place
This strategy focuses on providing the right products at the right place and at the right time. Therefore, organizations focus on identifying the ideal locations where they can maximize sales by targeting the customers at convenience. Even in modern society when most businesses are moving to e-commerce, companies need to identify how they can conveniently reach the customers. For instance, businesses like MOD have established social media accounts and mobile apps intended to boost customer engagement. The businesses also provide scalable, responsive, and adaptive applications that can be used on mobile phones, laptops, and tablets as chosen by the client. These approaches are intended to make it easier for clients to find the products.
MOD Pizza locates its outlets in big cities and locations with heavy traffic. For instance, QSR Media reported that MOD Pizza had selected five location types that include retail parks, leisure parks, shopping centers, high streets, and Central London as the key areas within the United Kingdom to open more outlets (QSR Media). MOD’s CEO noted that the business was doing well in the retail parks in the United States, despite stiff competition. The company will be required to adapt to new changes in New Zealand, where many consumers prefer takeaways when opening new outlets.
Works Cited
Bandick, Sako, and Fabakary Sanneh. “Foreign market entry strategies: Evidence from a developed and an emerging market.” (2018).
MOD Pizza. “Feel the Love. Eat the Rewards | MOD Pizza.” Mod Pizza, 2020. Web.
Mordor Intelligence. “New Zealand Foodservice Market | Growth | Trends | Forecast.” Mordor Intelligence, 2020.
Pustay, Michael W., and R. Griffin. International business: a managerial perspective. Prentice Hall, 2014.
QSR Media. “Exclusive: Here’s how MOD Pizza is revolutionising the UK’s pizza market.” QSRMedia UK, 2016.
Shen, Zhi et al. “Foreign market entry mode research: A review and research agenda.” The International Trade Journal 31.5 (2017): 429-456. Doi: 10.1080/08853908.2017.1361368.
Toneguzzi, Mario. “Popular USai’ ‘MOD Pi’a’ to enter Canada amid significant expansion plans.” Retail Insider,2019.
Walters, Laura. “The evolution of New Zealand’s pizza industry.” Stuff, 2016.
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