Table of Contents
PESTEL analysis the Model:
This report presents a strategic entry assessment of Chick-fil-A fast food chain store into the Saudi Arabian market. This report will entail the six aspect PESTEL analysis of the external environment opportunities and situations that Chick-fil-a is bound to encounter when making an expansion into the Saudi Arabian market. This report strongly advice chick-fil-A to open new branch in Saudi Arabian market. The Six aspects of PESTEL marketing analysis framework that this report has selected to concentrate upon in the analysis of the macro-environment of Chick-fil-a in Saudi Arabia are the political, economic, social, technology, environment and legal. This report will present a detailed review of the macro-environment that Chick-fil-a is planning to enter based on the above selected six aspects of the macro-environment. This will be supported with data and tabulation as necessary within the six different environmental analyses. In addition to the above, the report will utilize the environmental analyses derived to review PESTEL as a strategic marketing tool and use the information obtained to make sound and strategic management recommendations that will help inform the organization’s decision to expand into the Saudi Arabian market. In addition, this report will give recommendation to chick-fil-A to survive and compete in Saudi market.
The Saudi Arabian fast food market has been projected by researchers as one of the fastest growing fast food markets globally (Naheem, 2012). Naheem justifies that assumptions by informing that most of the world’s renowned fast food chain stores including Mc Donald’s, Burger King and Pizza Hut have long set up operations in Saudi Arabia and are recording great profits. In concurrence to the foregoing assertion. Omran (2013) indicates that the projection of the Saudi Arabian fast food market stands to top the $4.5 billion mark by 2015. In a detailed report on retail foods funded by the U.S. embassy in Riyadh, Mousa (2014) reveals that Saudi Arabia stands as one of the most lucrative fast food markets in the Middle East. This the report attributed to be related to the increased levels of income in the country, political stability and economic stability.
PESTEL analysis the Model:
PESTEL analysis model is a contraction of Political, Economic, Social, Technological, Environmental and Legal environmental factors that may affect the operations of a business in a market (Yuksel, 2012). PESTEL analysis is a strong strategic marketing framework that comes in handy in the analysis of the above stated macro-environmental factors as they impact on an organization (Professional Academy, 2015). Gupta (2013) reportedly posits that using the above framework of analysis assists in the proliferation of the ideology that successful strategizing requires a synergy between internal strengths and external environmental factors.
Strengths of PESTEL analysis:
PESTEL analysis studies the environment which the company will work within and give explanation to the marketing dynamics of products (Bivolaru, et al., 2009). It gives some information and knowledge which the company should utilize to survive and grow in the market (Yuksel, 2012). PESTEL analysis supports the organizations setting the future strategies which will give them the competitive advantages (Bivolaru, et al., 2009). PESTEL is a tool which can be use in any market and for any product because of that it is a very flexible tool (Hopkin, 2017).
Weaknesses of PESTEL analysis:
The main weaknesses for PESTEL analysis is it can’t treat with the changes in the markets due to the economic crises or changes in political views in addition it can’t detect the changes in consumers’ preferences (Campbell, 2015).
PESTLE analysis for Saudi Arabia:
Saudi Arabia tops the Middle East as the country with the fastest growing food industry (Lippman, 2010). Saudi Arabian food industry despite being a young food industry in competition with global cities and countries, has maintained resilience and promised growth continuously for over a decade (Alsaleh, 2007). The industry stakeholders led by the government have exhibited enthusiasm to continually improve their production standards and ensure that the country’s food industry attains internationally accreditation as far as food quality is concerned (Alsaleh, 2007). The below chart further explains the political environment in the Saudi Arabia fast food market. According to the figure, it is evident that the government has led stakeholders into investing a huge chunk of money into the production and processing of food. Abbildung in dieser Leseprobe nicht enthalten
Source: Ami (2016)
Rice (2003) is optimistic that with the government putting a lot of effort to maintain political stability and parade a free market country and with the food consumption rates rising rapidly, the Saudi Arabia fast food business environment is bound to grow in leaps and bounds. Even though the fast food industry in Saudi Arabia has grown rapidly in the recent decade, only prominent multinational fast food chain stores are noticeable franchising with some of the local fast food stores (Alharbi, 2014). This therefore poses a threat to other entrants as it seems that the market environment is already dominated with big names thanks to the political enthusiasm towards internationally renowned franchises (Alharbi, 2014). One of the most political aspects affecting any business is the taxes rate (Yuksel, 2012). Saudi Arabia has no government, state or provisional taxes, only the regular taxes on income applies on the firms (Linda, 2012). The taxes rate is 20% on the profit of the year for the non-Saudi investors (Alsaleh, 2011). The market is attractive and the political environment welcoming enough to induce more and more global fast food chain stores to enter the market (Jones, 2003; Brown, 2010).
Economic environment analysis one of the most important aspects which takes place in the decision making of entering any new market, this analysis includes GDP, inflation rate, growth rate, unemployment and Business freedom (Gregoric, 2014). The Saudi Arabian economy considered one of the highest income in the region by $ 1.7 trillion GDP and 3.4% growth also, it is one of the best inflation rate with 2.2% in 2016 and the unemployment stands at acceptable rate with 5.8% (Economic Freedom, 2017). Mettin and Kizgin (2015) indicate that Saudi Arabia, with a considerable population of high income individuals and large population of middle-income individuals is a promising market for the fast food industry. According to Assad (2008) the economic freedom lead to the rise of consumerism in Saudi Arabia and a sector like the fast foods industry is one that clearly portrays the levels of consumerism in the Saudi Arabia economy. The economic freedom score in Saudi Arabia is 64.4 exceeding the world average which is 60.9 and the regional average which is 61.9 (Economic freedom, 2017).Abbildung in dieser Leseprobe nicht enthalten
Source: Foodex Saudi (2017)
The above diagram reveals the lucrative nature of the Saudi Arabia food industry. In support of the above, Sadi and Hendersson (2011) inform that the Saudi Arabia economy well supports big enterprises as it supports small and medium scale enterprises. Saudi Arabia population greatly loves fast foods and it has since become part of their lifestyles (Bhuia, 2008) This has also been followed by the willingness of foreign fast food chain stores to venture into the Saudi Arabia market based on its lucrative nature and the promising economic environment (Baena, 2012). pointing out that through franchises with international heavyweights in the fast foods business, Saudi Arabia food industry has been able to continually grow over the years generating higher revenues year in year out (Preble et al., 2000).
The social environment in Saudi Arabia was initially skeptical of fast foods. Mohammed and Daud inform that some of the major concerns that consumers seemed to raise concerning the consumption of fast foods was the religious correctness of the practice, the health adversities portent in the practice among other concerns (Mohammed and Daud, 2012) However, Since the opening of the market to international fast food chains and the encouragement of partnerships between local fast food chains stores and the international fast food chains, there has been a significant change of fast foods consumption perception among the Saudi Arabian population (Darwish, Al-Saif, Albahrani Sabra, 2014). (Darwish et al., 2014) posit that a study of eating behaviors among school going children between the ages of five and eighteen revealed that youths with the support of their parents were deeply into the consumption of fast foods for whether for breakfast, lunch or support and more times for all the meals.
The above position can be justified by further studies on the rates of obesity and body weight concerns among children, youths and adults alike in Saudi Arabia. There is a rapidly increasing prevalence of obesity among children at about 21.9%, among youths at about 45% and among adults at about 25%-89.1% (Musaiger, 2011; Mallick, Ray Mukhopadhyay, 2014; Elham, 2015). Apart from the fact that Saudi Arabia populace is a perfect target market for fast foods because of their eating affinity, research has noted that Islamic hospitality practices are to be observed to attract more consumers (Moira Mylonopouolos, 2013; Stevenson, 2014).
Saudi Arabia focusing nowadays on the technological solution and the investment on this field and spending on the connectivity have been increased (Market research report, 2016). Using the technological channels give the business big push toward the consumer reaching in addition to saving their time and effort it reflects the good customer service and care which is very important while entering any new market because of that Chick-fil-A should use the technological methods (Berry and Parasuraman, 2012). Current survey done by Saudi Gazette (2016) revealed that 42% of Saudi Arabia residence trust the digital channels in food ordering which reflect the effectiveness of the technology in this field in among the Saudi society, in addition 80% of them using the mobile applications in food ordering (Rodolfo, 2014). The advertising and communication on social media and the reliance on it as a marketing channel will support chick-fil-A in reaching a huge base of customers (Forbes.com, 2012). Creating and innovating new technological solutions and choices will give Chick-Fil-A a competitive advantage specially if it starts its business using it as the using of technology and innovative ideas which fulfill the consumers’ requests and increase their satisfaction will give high reputation to the brand.