Market Analysis Essay
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Market Analysis
Current situation of EAT
EAT is an online food ordering platform that offers takeaway delivery services from its restaurants. The headquarters of this enterprise is located in London. Currently, the organization has 1.3 million fans on Facebook and more than 124 thousand followers on twitter. EAT is the ‘World’s leading online and mobile takeaway ordering service with its operations in 15 countries in the World (Dunn, 2018, p. 10). The platform allows the customers to locate a restaurant to order food online and choose from the delivery options. The company thus ensures convenient techniques to order takeaways. The company empowers its customers to love their services by providing them with a choice from the menu and the payment method. The major competitors of this company include Delivery Hero and Grub hub (Dunn, 2018, p. par. 13).
Product/Service
EAT company provides various food types such as pizza, burgers, sandwiches, poke bowls, ribs, tacos, salad, and gyros. The enterprise also offers more products and services including coffee, ice cream, and wine bar. The ‘customers’ feedback illustrates their love for these recipes. The company sources all of its Arabica coffee from the Rainforest Alliance certified farms (Azuayi, 2016, p. 9). The coffee trees grow at high altitude, which enables it to develop more sophisticated and with balanced flavours which satisfies the customers. The eggs used in EAT company are either from barn reared hens who have the freedom to consume or feed naturally or are either free range from an award-winning farm (Dunn, 2018, p. par. 7). The enterprise, therefore, ensures value for their customers by also selecting their suppliers who meet the standards for high-quality ingredients.
Place
The buyers of the commodities from EAT company access the menu of their products online, either from their website or the app (Azuayi, 2016, p. 12). The platform enables the customers to choose from the restaurant and order the food and also select the delivery option. The online platform enables the buyers to register with the enterprise and sign into ‘one’s EAT online store where they purchase from the delivery menu. The order is delivered to the doorstep of the customer or the location illustrated (Azuayi, 2016, p. 11). The competitors of EAT also transport food to their customers in exchange for a fee, although it has a loyalty program that allows its customers to earn rewards in food-delivery platforms.
Price
The company updates its prices in its website menu where the customers identify the cost of a specific type of food before he orders. For instance, the budget for breakfast may range between 4 – 7 dollars. Lunch meal, which may include sandwiches and kebabs may cost 7-12 dollars. The budget for dinner may range from 9-17 dollars for an adult. Fish and chips are expensive and may cost 10-15 dollars in the EAT menu (Dunn, 2018, p. par. 6). Prices vary depending on the kind of food that the customer wishes to order.
Promotion
The EAT company advertises its products on its websites, which contains pictures that illustrate the type of food it prepares and the menu. Every item has a description of its prices and ingredients. The list is regularly updated depending on the advancement in styles of cooking and varying cost of the parts (Azuayi, 2016, p. 14). Additionally, the company has social media accounts such as Facebook and Twitter, where it updates its customers about their services.
PEST Analysis of Spain
According to the FDI Regulatory Restrictiveness Index, Spain has been enhancing foreign investment since the mid-2000s and is the eleventh economy, which is the most open to foreign direct investment. Companies such as the EAT enterprise should analyse the macroenvironment factors in this nation for identifying the potential market by adopting the PEST framework. The model evaluates external factors affecting businesses, including political, economic, socio-cultural, and technological aspects.
Political Factors
Spain has enhanced various investment policy measures that have resulted in foreign liberalization, facilitation, and promotion. The ‘country’s membership to the European Union and reforms to strengthen entrepreneurship has resulted in duty-free transactions and free movement of goods, capital, labour, and services (Martinez & Briz, 2017, p. 160). Spain has desirable economic and business ties with other nations and has been the headquarters of multinational companies for European activities. EAT corporation can thus develop in this nation and create its headquarters, which the Spanish government can encourage them to remain competitive and promote their ‘country’s economy (Martinez & Briz, 2017, p. 161).
However, the political spectrum, including the recent change of government and the Catalonian situation, may influence the foreign investors”, such as the EAT enterprise, perception of the country. Spain is a member of the International Centre for Settlement of Investment Disputes union which involves multilateral global treaties that enhance protection of foreign investments. The cohesion of the members of ICSID ensures the obligation for the host nation to bestow fair and equitable treatment on foreign investment (Navarro & Ventoso, 2018, p. par. 4).
Economic factors
Spain has been attracting various multinational companies that seek access to its vast market. The foreign capital has enhanced the growth of its economy, which has resulted in increased GDP, employment, and productivity through competitiveness. ‘Spain’s economy has experienced consecutive growth since 2014. Harvard Centre for International Development has forecasted that this country will lead in Europe and be fourth in the OECD in terms of growth by the year 2025 (Multinacionales por Marca Espana, 2018, p. 32). EAT company can thus be encouraged by such predictions and the current development of the ‘nation’s economy and may decide to expand its operations in this market. The correlation between ‘Spain’s GDP, which is 15th globally and its population, which is 16th worldwide, is close. The GDP per capita in Spain has been increasing for the last four years, currently being at an average of 25 thousand euros (Vermeulen, et al., 2018, p. 13). The economy has recovered its competitiveness resulting in the creation of more job opportunities in recent years. EAT company can thus access more customers in Spain who are working and have limited time for preparing meals.
Socio-cultural factors
UNESCO ranks Spain in a third position in the World for its universal value and exhaustive cultural selection criteria. Multinational companies such as EAT should enhance diversity and tolerance for the multiple multicultural markets and operations in Spain. The aspects improve the performance and effectiveness of the businesses and influence the national strategies from social policy to cultural branding (Multinacionales por Marca Espana, 2018, p. 25). Spain has a sense of peace and stable society, which include the inclusion of women both in education and financial sectors. Additionally, there is an absence of organized violence and low rates of men who perceive women at work as unacceptable. EAT enterprise can consider these aspects in analysing whether they will affect their operation and generation of profits. ‘Spain’s most common food is the tortilla de patatas, or potato omelette. Lunch is the biggest meal of the day, which consists of a salad or soup followed by the main entree (Martinez & Briz, 2017, p. 158). The Spaniards tend to gather with their families for their leisurely food, especially on weekends. EAT company can thus assess such behaviours and determine the type of food that it can provide for the customers and at specific days.
Technological factors
Spain has one of the most modern food processing sectors in Europe and in the World, although it encounters some challenges in the industry. The restaurants are experts in quality and safety of food products that they prepare. Engineers are actively engaged in the food processing companies to maintain and improve the quality of the machines, which increases the competition of the restaurants in the country (Navarro & Ventoso, 2018, p. par. 6). Some of the fast-food companies in Spain such as NC Hyperbaric have adopted machinery to eliminate pathogens in food without high temperatures which retain the nutrients and taste of the food. However, Spain imports the food industrial preparation machinery, especially from Germany and Italy (Vermeulen, et al., 2018, p. 9). EAT company can thus adopt technology and start its operations in the country, which will enable it to remain competitive in the market.
PESTEL analysis for Denmark
Denmark investment and trade policies are liberal. The country adopts the core values of human rights, democracy, and the rule of law to develop an active foreign policy. Denmark has one of the most attractive marketplaces for multinational companies, such EAT enterprise, to invest. PEST model can assist in analysing the macroenvironmental factors that may affect the expanding of the ‘EAT’s business operations in this country.
Political factors
Denmark has a significant number of foreign investments which are mostly dominated by the Nordic countries, and also the European nations and stakeholders from North America (Goldman, 2017, p. 68). EAT investment in this country may require review under the EU or Danish merger control law if it decides to create a joint venture with the existing restaurants in the local market. Denmark is a member of EU which may require it to comply with the provisions of the Treaty on the Functioning of the European Union. The agreement includes the prohibition against restrictions on the freedom of establishment for nationals among the EU Member States. EAT company is based on this union; thus, it may be efficient to expand its operations in this market. According to Act no. 262 of 1st April 2016, the companies should register their legal owners with the Danish Business Authority (Goldman, 2017, p. 70).
Economic factors
Denmark has one of the ‘World’s most attractive business environments. However, there has been an increase in the cost of building permits since 2017, which has resulted in more expenses while operating a business. The country has a low unemployment rate, and there is a shortage of skilled workers in various sectors such as construction (Peres, et al., 2018, p. 630). EAT company can, therefore, develop a plan on the target customers who they can buy their food. For instance, they may fail to have more customers form the construction sites, and thus, they should locate their restaurants’ kitchens in developed places in the country. Denmark has established monetary stability, and the government is also ensuring subsidies on renewable energy, which would enable EAT enterprise to lower its cost of production. The average tariff rate is 2.0 per cent in the country (Krugman, 2018, p. 32). The financial system of Denmark, such as the banking sector is currently stable, especially in its relatively practical lending regulatory approach.
Socio-cultural factors
Denmark has high levels of trust among the people, government, organizations, and the police, which is an essential aspect of the business environment. The social trust persuades the citizens and the companies to contribute high taxes to finance the welfare programs in the country. EAT enterprise would thus be extended to limit its revenues by paying more levies to the government. The living arrangements have been altering as the number of marriages has declined and divorces increased (Russell, 2016, p. par. 8). More citizens are thus living alone and may prefer ready and fast food from corporations such as EAT which may wish to invest in the country. Open sandwiches are a national speciality when prepared and decorated with a variety of ingredients, and is mostly preferred for lunch. Hot meals in Denmark such as mustard sauce and trimmings are prepared with fish or meat. Popular traditional foods include meatballs and fried sausage. Foreign and continental practices and adoption of imported tropical spices such as black pepper and cinnamon inspires cooking in this country (Krugman, 2018, p. 29). Such factors might influence the decision of the EAT company to expand its activities in this market.
Technological factors
Denmark is a food safety World leader with highly efficient and reliable food and veterinary controls in addition to cooperation between the industry and the food safety authorities. The high quality of Danish food products has resulted in 20% of the ‘country’s total exports (Peres, et al., 2018, p. 635). Therefore, domestic consumption is already satisfied with the extent of exporting the surplus. EAT company may encounter high competition in this market from a variety of companies providing similar services. Denmark supplies 14% of all bio ingredients, emulsifiers, probiotics, and proteins to the global food ingredients industry. EAT company may thus be able to purchase these ingredients at a lower price in Denmark market, thus lowering its production cost. The food-related companies adopt a high level of technology in their operations, which ensures effective food quality competition and efficient production (Únlú, et al., 2017, p. 562). The advancement is evident in packaging solutions and automation of processes and safety at the slaughterhouse.
Advantages of Investing in Spain
Spain is the second-largest country in Western Europe with a high population, which increases the size of the market and chances of generating more profits for EAT company. The stable political situation and diplomatic relations with other countries in the European Union enhance development opportunities for foreign enterprises in Spain and reduce the risk of potential conflicts (Curci & Cardoza, 2017, p. 40). Such an aspect can encourage EAT company to expand its operations in its market as it will ensure a smooth workflow without distractions from the political factors. Additionally, the consistent growth of the Spanish economy with the strongest rates of GDP increase in the EU and is the 9th largest globally creates a favourable business environment for EAT. Recently, the Spanish government has developed policies that aim at creating a favourable environment for foreign investment. The country also offers a variety of benefits for these companies, such as developed infrastructure that could enable EAT to transport food easily to its customers.
Limitations of investing in Spain
Spain is covered in bureaucracy which can stifle private sector investment and result in the complication in the operation of a business. The procedure of starting a business in Spain involves ten stages, which can be discouraging to international corporations. Companies may also require to acquire an operating license before the completion of building registration and installation of electric power, and water. The world bank ranks Spain 100th in the World for the protection it provides investors which leaves the private sector to govern itself (Curci & Cardoza, 2017, p. 30).
Benefits of investing in Denmark
In recent year, the Danish government has implemented laws that aim at ensuring limited discrimination of foreign businesses in its market. Additionally, the administration has concentrated on improving the general investment conditions and reducing structural obstacles to market access (Azuayi, 2016, p. 18). For instance, it has enhanced privatization, competitiveness, and de-monopolization. The country has also set an investment promotion website for attracting potential investors such as EAT in their nation. Denmark has a highly skilled workforce, ultramodern infrastructure, and labour market that ensures a favourable environment for EAT to invest.
Disadvantages of investing in Denmark
Denmark is experiencing an investment crisis resulting from the financial challenges and lack of foreign direct investments which has not been fully managed. The high cost of operating a business in this country also discourages international companies from investing in their market (Krugman, 2018, p. 27). ‘Denmark’s productivity growth and competitiveness index are among the lowest among the European nations. The high taxes that the government expects individuals and corporations to contribute may result in the generation of low profits or sometimes loss, especially when the business is new and unfamiliar to the citizens (Azuayi, 2016, p. 16). For instance, EAT company may require time before generating revenues as it would have to advertise and convince customers to order food from their online platform. The company may be required to pay the high tax rates, which can be impossible for the first months of operations and thus may result in its closure.
Potential Market
EAT company should thus select Spain as the most potential new market for the expansion of its operations from the above analysis. Spain has more favourable and encouraging factors than Denmark such as wider market, low taxes and benefits for foreign investments, stable economic growth, and lower competition for the food industry. Denmark may not be suitable for the EAT company to invest as a result of the limitations that various corporations in that State encounter. The company requires a market with a variety of customers who can purchase the different types of food that it provides. Additionally, a low competition would enable it to develop at a higher rate.
Reference
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Curci, R. & Cardoza, G., 2017. Spanish Foreign Direct Investments in Latin America: Internationalization Strategies and Financial Management Practices. Journal of Comparative International Management, 12(1), pp. 29-46.
Dunn, E., 2018. How Delivery Apps may Put your Favorite Restaurant out of Business. [Online]
Available at: https://www.newyorker.com/culture/annals-of-gastronomy/are-delivery-apps-killing-restaurants
[Accessed 3 February 2018].
Goldman, C., ed., 2017. Foreign Investment Regulation Review. The Law Review, September.pp. 67-76.
Krugman, P., 2018. Something not Rotten in Denmark. The New York Times, 16 August.
Martinez, M. G. & Briz, J., 2017. Innovation in the Spanish Food and Drink Industry. International Food and Agribusiness Management Review, 3(7), pp. 155-176.
Multinacionales por Marca Espana, 2018. Positive Factors for Foreign Investment in Spain, Madrid: Paseo de la Castellana.
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[Accessed 23 October 2018].
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Russell, H., 2016. How did Denmark become a Leader in the Food Waste Revolution?. The Guardian, 16 July.
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Vermeulen, T., Machiels, B. & Zand, J. V., 2018. The Food Processing Industry in Spain. Flanders Investment and Trade Market Survey, April.pp. 4-21.
