Introduction of Taco Bell to Hungary

Table of Content

1. Executive Summary

2. Introduction

3. The Given Environment
3.1. Our Target Market Hungary
3.1.1 History
3.1.2 Geography
3.1.3 Demography
3.1.4 Economy
3.1.5 Legal Regulations, Especially Franchising
3.2. YUM and Taco Bell
3.3. Market and Competitors

4. The Positioning

5. Taco Bells Marketing Mix in Hungary
5.1. Product Adjustments
5.2. Location
5.3. Promotional - Mix
5.4. Price

6. Distribution

7. Profitability

Appendix 1: Questionnaire

Appendix 2: Results of the Questionnaire

Appendix 3: Qualitative Interviews

Bibliography

- Budapest Sun (2002): Burger chain gets bigger. 11.04.2002, p.7

- Ernst&Young (1993): Doing business in Hungary. Ernst&Young International, New York.

- Fraser, Allan (2002): fast food franchises jostle for slice of piece. In: Budapest sun 17-23 Jan 2002, p.3

- Gruber, Ruth Ellen (1998): BUDAPEST'S FIRST GOLDEN ARCHES. In: New Leader, 06/01/98, Vol. 81 Issue 7, p13, 2p.

- Központi Statisztikai Hivatal (2003):Statistical year book of Hungary.

- Oláh, Péter (2001): New restaurant boom targets locals, not tourists. In: Budapest Business Journal, Nov 5-11, 2001, p.6

- Reuvid, Jonathan (2003): doing business with Hungary. Kogan Page, London.

- www.cia.com

- www.yum.com

1. Executive Summary

Concerning the task to launch Taco Bell in Hungary, we found good reasons to introduce it in Hungary. The research showed, that the Hungarian fast-food market is with a market size of 33.6 billion HUF big enough; for example, Hungarian families go out once a month in average. Furthermore, Hungarians have already an image in their minds of Mexico and Mexican food, like spicy food in general and Mexican food particularly. Additionally, we have the infrastructure of our brand-family “YUM” already in Hungary. This is a tremendous advantage, because we can use the experience and the network in the Hungarian market.

On the one hand, we want to maintain the global character of the brand. But on the other hand we want to emphasize, that we recommend some changes to adapt Taco Bell to the Hungarian conditions and the market.

We will position Taco Bell in the Hungarian fast-food segment, but we do know that eating out of home is something really special for them; they are not only concerned with time and money saving, but also they are looking for a good sensation and experience. This is interesting, because in many Western European countries it is exactly the opposite.

Our target group consists of students, business people and families, who take part in the new middle class. Their income is increasing and they are world-open, so they want to try out new things, for examples from Latin America.

We try to fulfill this Mexican image. But to adjust on the conditions, we want to offer beer and paprika-based sauce as an additional option, design the store like the Hungarian image of Mexico and use home-delivery-service and one 24h‑restaurant.

The promotional-mix emphasis sales promotions in dating-partys, because we can catch trails and try to find channels like the “Pestiest” to reach our target group. Furthermore, we want to stress the image of being new, world‑open and Mexican.

Concerning the price we want to orientate on the competitor-conditions and undercut it, because the Hungarians are very price-sensitive.

Finally, the product will be profitable, because with eight stores and 5% market share we can reach the average sales for a Taco-Bell-store. Furthermore, the about necessary 500 customers per day are reachable.

2. Introduction

People like “Taco Bell” because of its spicy food in a Mexican style. Also the Hungarians are used to eat spicy food. However, they don’t have Taco Bell in Hungary – at least until now.

Our work is concerning with the introduction of Taco Bell into Hungary. Or more specific: We want to estimate, IF and HOW Taco Bell can be successful in Hungary. Our first impression was, that it can work, because Taco Bell delivers spicy food and Hungarians love spicy food. This was the first reason which comes in our minds and through the research we found more.

To achieve this destination, we will use the methods of a questionnaire, informing about the company taco bell through Internet, did a qualitative research of Hungarian students, library research and observation in the field of the existing competitors.

What we are doing is one of the typical challenges in International Marketing: We want to introduce a product, which is given in one country to another market. But we should avoid the fault that we manage the foreign customers in the same way as the domestic ones. We should avoid to simply copying the product Taco Bell from America. Its called ethnocentristic approach in opposite to an appropriate international marketing approach.

Rather we should adjust our product to the target market. That must not mean to develop a total different product, like the polycentric approach suggests. The right way will be in the middle. Therefore we will take basic elements as well as adjustments to the market.

To reach a successful launch, we have to consider foreign uncontrollable variables like geography and infrastructure, cultural-, political-, legal-, economic-, and competitive- forces as well as the structure of distribution. We can’t influence non of these variables, we can only adjust to them. The instruments to adjust are the four P’s, product, place, price, promotion. These are our controllable variables.

But not only the controllable variables have to fit to the uncontrollable variables, there is also an another task. The marketing-mix elements as well as their sub-elements have to fit to each other. In other words: They have to be centripetal.

To sum it up: To introduce Taco Bell to Hungary, we have to answer following three points: We will mention strengths and weaknesses to introduce Taco Bell in Hungary. Furthermore, we have find the right connection to the existing environment of Hungary. Finally we have to find the right connection between the Marketing mix elements of Taco Bell. So: Let’s start.

3. The Given Environment

3.1. Our Target Market Hungary

3.1.1 History

Abbildung in dieser Leseprobe nicht enthalten

source: www.cia.com

Studying the country’s history is advisable, because it provides more tools to understand the culture and the market, so here it is a very briefly explanation: Hungary was part of the Austro-Hungarian Empire, which collapsed during World War I. The country fell under Communist rule following World War II. In 1956, a revolt and announced withdrawal from the Warsaw Pact were met with a massive military intervention by Moscow. Under the leadership of Janos KADAR in 1968, Hungary began liberalizing its economy, introducing so-called "goulash Communism." Hungary held its first multiparty elections in 1990 and initiated a free market economy. On may 1first of this year, Hungary, with other nine countries, will join the European Union, opening even more its borders and Economy to the Western world. As a result of this integration, lots of opportunities are being built, therefore, for achieving a profitable and sustainable result, it is really important to study the Hungarian market.

3.1.2 Geography

Hungary is located in Central Europe and it has borders with 7 countries (Austria 366 km, Croatia 329 km, Romania 443 km, Serbia and Montenegro 151 km, Slovakia 677 km, Slovenia 102 km, and Ukraine 103 km). The country is “land-locked”, or in other words, it does not have access to any Ocean. It has a strategic location across main land routes between Western Europe and Balkan Peninsula as well as between Ukraine and Mediterranean basin.

The country has a temperate continental climate, and in the graphic below it is possible to check the average daytime temperature along the year:

Abbildung in dieser Leseprobe nicht enthalten

source: www.cia.com

3.1.3 Demography

Hungary has approximately 10.05 Mio. inhabitants, and in its capital, Budapest, one can find a population around 1 800 000. To make business in this country, it is extremely important to know the age structure of Hungarian population, for the reason that the company is looking for specific consumers. Therefore, the graphic below provides more info:

Abbildung in dieser Leseprobe nicht enthalten

Sometimes, it is also important to discover the gender ratio – for example, if one company wants to sell lipsticks or underwear, it has to find out the potential market within the genders. In Hungary, the present gender ratio is 0.91 male(s)/female and there are slight differences inside the age structure.

In addition, the ethnic composition is other considerable point; in the country, the majority of the population is Hungarian, followed by the Roma (Gypsi), as it is shown below:

Abbildung in dieser Leseprobe nicht enthalten

source: www.cia.com

This fact has a big impact in the spoken language inside the country; 98,4% of the population speak Hungarian. Nowadays, English is becoming more and more popular within the youth, as a result of the integration process.

3.1.4 Economy

Hungary has made the transition from a centrally planned to a market economy a few years ago and it continues to demonstrate strong economic growth and to work toward accession to the European Union in May 2004. The private sector accounts for over 80% of GDP. Foreign ownership of and investment in Hungarian firms are widespread, with cumulative foreign direct investment totaling more than $23 billion since 1989. Inflation has declined substantially, from 14% in 1998 to 4.7% in 2003; on the other hand, however, unemployment has persisted around the 6% level.

Its GDP is estimated in US$134 billions and has the following distribution:

Abbildung in dieser Leseprobe nicht enthalten

source: www.cia.com

For business people, it is also important to find out the GDP per capita, to estimate the potential market and its demand: in 2002, the purchasing power parity was estimated in US$13 300/ year, which puts Hungary in the 60th place in the world. To understand more the meaning of this position, the rank order below provides a great help:

Abbildung in dieser Leseprobe nicht enthalten

source: www.cia.com

Speaking about international trade, in 2002 the exports reach US $31.4 billion F.O.B, while the imports were close to US $33.9 billion; the main products introduced into the country were: machinery and equipments, manufactures, fuels and electricity, food, among other.

3.1.5 Legal Regulations, Especially Franchising

“The Hungarian legal system is a civil law system and sets out the general principles of contract law specific provisions relating to various contracts set out in Act IV of 1959 on the Civil Code (Reuvid 2003, p.55).”

Concerning import restrictions we have actual data, that there is no permission for food in general needed (Reuvid 2003, p.29). Permissions are needed for goods like medicines or industrial explosives. Quotas are set for fish and canned fish. But this doesn’t fit, because we don’t sell fish. The import duty will according to customs tariff, which was harmonized in the “combined nomenclature of goods” of the European Commission (Reuvid 2003, p.30). And another source is saying: “Approximately 95% of products and services my be imported freely into Hungary (Ernst&Young 1993).”

The Competition Act 1996 prohibits any agreement which may restrict or limit free competition. But franchising is under special circumstances allowed (Reuvid 2003, 55f.).

Under a franchise contract, the franchiser agrees to grant the right to use a number of intellectual property rights of the franchiser, such as trade name, trademark and know-how in a given territory in return for payment by the franchisee fees (Reuvid 2003, 56).

But we should be careful: The permission of franchising is off, if the franchisee set the price of goods or services unilaterally. Also the franchisee is not allowed to produce the same goods. Also in this case, the franchise permission doesn’t apply (Reuvid 2003, 58).

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