Strategy Tim Hortons Essay

Tim Horton’s Strategy Components: “we fit anywhere” Goals Growth goal structure As demonstrated by its recent activities, Tim Horton’s is following a goal structure of growth. The growth model is characterized by a focus on market, plant and personnel investments, sometimes at the expense of current profitability. Tim Hortons has been eyeing the US quick service restaurants (QSR) market for the past decade, but only recently has Tim Hortons started pushing more aggressively into the US.

Just last year (2009), Riese Organization, a restaurant franchisee and real-estate company, approached Tim Hortons with a contract to open 12 new locations in and around the New York area. However, it is not without significant risk to profitability that Tim Hortons moves into the US market. In 2004, after acquiring 42 new outlets in southern New England, Tim Hortons had to compete directly with Dunkin’ Donuts (another coffee shop chain that had a strong foothold in the area). Ultimately, Tim Hortons had to close 11 money-losing stores in 2008, incurring $21. 3 million in asset impairment and closure costs in the process.

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With respect to growth, below are its operational and financial goals for 2010. 2010 Operational Objectives * Same store sales growth of 3% – 5% in Canada; 2% – 4% in the US * To open a total of 130 – 150 restaurants in Canada; 40 – 60 in the US * Convert 15 – 30 existing Tim Horton’s restaurants to include Cold Stone Creamery; 15 – 30 new restaurants in US will be co-branded with Cold Stone Creamery 2010 Financial Objectives * EPS of $1. 95 to $2. 05 * Operating income growth of 8% to 10% * Tax rate of approximately 32% * Capital expenditures of $180 million to $200 million

Long-term Objectives (2010 – 2013) * 12% to 15% earnings per share (EPS) compound annual growth * New restaurant development of approximately 600 in Canada; 300 in the US Product/Market Focus Product * Sales (67% of total revenue) * “Breakfast” items, sausage ‘n egg sandwich * “Lunch” items, including sandwiches, soup, chili, wraps * Drinks, including coffee, tea, flavor shots, cold beverages * Baked goods, such as cookies, donuts, muffins, bagels, danishes * Home coffee brewers, home-brew coffee, boxed teas, other seasonal products * Rent & Royalties (29% of total revenue) Franchise Fees (4% of total revenue) Market * Who? * Anyone from children to seniors * Students * Business people * “on the go” people * Where? * High traffic, visible & easily accessible locations * Regional markets, such as Ontario (Canada – 23. 8%), New York, Ohio & Michigan (US – 0. 2%) Value Proposition – value to customers (from sales), not franchisees Features| Benefits| Visible locations| – convenient: customers can easily find a location if they want to buy food| Fast| – saves time: customers don’t have to wait for service, can “grab and go”| “Always Fresh”| – tastes good|

High Quality Control| – feel safe eating the food; know it was made in a clean environment| Variety of menu items| – convenient: “one stop shop” for breakfast, lunch, dinner, snacks| Value items| – affordable| Buy in bulk offers (discounts)| – saves money; don’t need to invest time on buying snacks for a group, can easily drive to a Tim Horton’s and purchase a dozen donuts etc…| Simple (vs. Starbucks)| – customers feels comfortable & know what their ordering| Core Activites & Value Chain * Manufacture Coffee Roasting Centres – supplies 46% of system wide needs * Bakeries (JV Maidenstone Bakeries) – proprietary technologies * Fondant and Fills – sole supplier of ready-to-use glaze for Tim Hortons products * Distribution * Regional warehouse distribution structure to ensure food is “always fresh” * 5 warehouses, four distributing dry goods, one shipping 3-channel * 3-channel system – dry/frozen/refrigerated * Marketing * Ad campaigns – always featuring new menu items, or items according to season


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