Harvard Case - My Kind of Cakes: An Expansion Dilemma
"My Kind of Cakes: An Expansion Dilemma" Harvard business case study is written by Shalini Kalia, Sandeep Puri. It deals with the challenges in the field of International Business. The case study is 9 page(s) long and it was first published on : Apr 28, 2017
At Fern Fort University, we recommend that My Kind of Cakes (MKOC) pursue a phased international expansion strategy, focusing on the Canadian market as its initial target. This strategy will leverage MKOC's existing strengths in product quality, brand recognition, and customer loyalty while mitigating risks associated with entering a new market. We recommend a combination of organic growth and strategic partnerships to establish a strong presence in Canada, followed by exploring other international markets with similar cultural and consumer preferences.
2. Background
My Kind of Cakes (MKOC) is a successful bakery chain operating in the United States. Founded by Sarah, a passionate baker with a strong entrepreneurial spirit, MKOC has built a reputation for high-quality, handcrafted cakes and pastries. The company faces a dilemma: whether to expand its operations domestically or venture into international markets. Sarah is considering Canada as a potential target, attracted by its proximity, cultural similarities, and strong demand for premium baked goods. However, she is also aware of the challenges associated with international expansion, such as navigating different regulations, managing cultural differences, and adapting its business model to a new market.
3. Analysis of the Case Study
The case study can be analyzed using Porter's Five Forces framework to understand the competitive landscape and identify potential opportunities and threats:
- Threat of New Entrants: The bakery industry is characterized by low barriers to entry, making it susceptible to new competitors. However, MKOC's strong brand recognition and established customer base create a competitive advantage.
- Bargaining Power of Buyers: Customers have a moderate bargaining power in the bakery industry, as they can choose from various options. However, MKOC's focus on premium quality and unique offerings could limit this power.
- Bargaining Power of Suppliers: The bargaining power of suppliers (ingredients, packaging, etc.) is moderate. MKOC can mitigate risks by diversifying its suppliers and negotiating favorable contracts.
- Threat of Substitute Products: The threat of substitutes is moderate, as customers can choose other dessert options. However, MKOC's focus on handcrafted, high-quality products differentiates it from mass-produced alternatives.
- Competitive Rivalry: The bakery industry is highly competitive, with numerous local and national chains vying for market share. MKOC's competitive advantage lies in its unique brand identity, customer loyalty, and commitment to quality.
Furthermore, a SWOT analysis highlights key internal and external factors:
Strengths:
- Strong brand recognition and customer loyalty
- High-quality, handcrafted products
- Experienced management team
- Strong financial position
Weaknesses:
- Limited international experience
- Dependence on US market
- Potential for cultural adaptation challenges
Opportunities:
- Expanding into new markets with high demand for premium baked goods
- Leveraging existing brand recognition and customer loyalty
- Partnering with local businesses to establish a strong presence
Threats:
- Competition from existing local and international bakeries
- Cultural differences and adaptation challenges
- Economic and political instability in target markets
- Exchange rate fluctuations
4. Recommendations
We recommend the following phased approach for MKOC's international expansion:
Phase 1: Market Entry and Expansion in Canada (2-3 years):
- Market Research and Due Diligence: Conduct thorough research on the Canadian bakery market, including consumer preferences, competitive landscape, regulatory environment, and potential partners.
- Strategic Partnerships: Explore partnerships with local Canadian bakeries or distributors to leverage their expertise and market access. This could involve joint ventures, licensing agreements, or franchise models.
- Pilot Store Launch: Open a pilot store in a strategic location in Canada to test the market response and refine the business model for the Canadian market.
- Marketing and Branding: Adapt marketing materials and branding strategies to resonate with Canadian consumers, considering cultural nuances and preferences.
- Supply Chain Management: Establish a reliable supply chain for ingredients and packaging, ensuring quality and consistency.
Phase 2: Expansion to Other International Markets (3-5 years):
- Identify Target Markets: Explore other international markets with similar cultural and consumer preferences to Canada, focusing on countries with a strong demand for premium baked goods.
- Develop a Global Expansion Strategy: Develop a comprehensive strategy for international expansion, considering factors like market size, competitive landscape, regulatory environment, and cultural differences.
- Explore Different Entry Strategies: Evaluate different market entry strategies, such as direct investment, joint ventures, or franchising, based on the specific characteristics of each target market.
- Build a Global Brand: Develop a global brand strategy that resonates with consumers across different cultures while maintaining the core values and identity of MKOC.
5. Basis of Recommendations
These recommendations are based on the following considerations:
- Core Competencies and Consistency with Mission: MKOC's core competencies lie in its product quality, brand recognition, and customer loyalty. The proposed strategy leverages these strengths by focusing on markets with similar consumer preferences and utilizing partnerships to navigate new markets.
- External Customers and Internal Clients: The strategy prioritizes customer satisfaction by adapting products and marketing to local preferences. It also considers the needs of internal clients, such as employees, by providing opportunities for growth and development.
- Competitors: The strategy acknowledges the competitive landscape and seeks to differentiate MKOC through its unique brand identity, high-quality products, and strategic partnerships.
- Attractiveness: The Canadian market offers a promising opportunity for MKOC, with a strong demand for premium baked goods and a relatively low risk profile. The phased approach allows for gradual market penetration and minimizes financial risks.
6. Conclusion
MKOC has a strong foundation for international expansion, driven by its commitment to quality, brand recognition, and customer satisfaction. By adopting a phased approach, focusing on the Canadian market initially, and leveraging strategic partnerships, MKOC can successfully navigate the complexities of international business and achieve sustainable growth.
7. Discussion
Other Alternatives:
- Domestic Expansion: While domestic expansion might offer lower risk, it limits growth potential and may lead to market saturation.
- Direct Expansion: Direct expansion into international markets without partnerships could be more expensive and challenging due to the complexities of navigating different regulations and cultures.
Risks and Key Assumptions:
- Cultural Adaptation: Adapting products and marketing to local preferences is crucial for success.
- Regulatory Compliance: Navigating different regulations in each market can be complex and time-consuming.
- Competition: MKOC will face competition from existing local and international bakeries.
- Economic and Political Instability: Political and economic instability in target markets could pose significant risks.
8. Next Steps
- Conduct detailed market research and due diligence in Canada.
- Identify potential partners and initiate discussions.
- Develop a pilot store concept and select a strategic location in Canada.
- Secure necessary funding and resources for the initial expansion.
- Develop a comprehensive marketing and branding strategy for the Canadian market.
- Establish a reliable supply chain for ingredients and packaging in Canada.
- Implement a robust risk management framework to mitigate potential challenges.
Timeline:
- Year 1: Market research, partner identification, and pilot store development.
- Year 2: Pilot store launch and initial market penetration in Canada.
- Year 3: Expansion to additional locations in Canada and exploration of other international markets.
By implementing these recommendations and carefully navigating the complexities of international expansion, MKOC can achieve sustainable growth and solidify its position as a leading player in the global bakery industry.
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Case Description
My Kind of Cakes (MKOC), a cake boutique in Ghaziabad, India, had carved a niche for itself with its unique bakery products, quality food, and excellent service, all offered at a reasonable price. Within five years of opening, the business had flourished, growing in worth from 7.2 million in 2012 to 19.5 million in 2016. In January 2017, the owner of the cake shop pondered his strategies for achieving his target revenue of 50 million by 2020. He wondered if he should expand geographically and open franchises in nearby towns or if he should increase his product range. Should he build a digital platform to increase awareness of his brand or launch a loyalty program to strengthen MKOC's customer relationships? If so, how should he build such a program? Since he had also been asked to photograph special occasions such as baby showers, he wondered whether he should add theme photography to MKOC's offerings.
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