Strategic Management

Case of Study
Aracely Escobedo Campos

Tim Hortons

31/40

Content
INTRODUCTION

HISTORY

MISSION

VISION

PORTERS FIVE FORCES MODEL OF COMPETITION

PESTEL ANALYSIS

FORMULATION STAGE

INPUT

SWOT ANALYSIS

EXTERNAL FACTOR EVALUATION (EFE)

INTERNAL FACTOR EVALUATION (IFE)

COMPETITIVE PROFILE MATRIX

10

MATCHING

11

TOWS MATRIX

11

INTERNAL EXTERNAL MATRIX

12

SPACE MATRIX

13

BCG MATRIX

14

GRAND STRATEGY MATRIX

15

MATRIX ANALYSIS

16

DECISION WITH QUANTITATIVE STRATEGIC PLANNING MATRIX (QSPM)

17

IMPLEMENTATION STAGE

18

EVALUATION STAGE

18

CONCLUSION

19

REFERENCES

19

Introduction

History
Tim Hortons Inc. (Tim Hortons Cafe and Bake Shop) is a
Canadian multinational fast casual restaurant. It was founded in 1964 in
Hamilton, Ontario, by Canadian hockey player Tim Horton and Jim Charade,
after an initial venture in hamburger restaurants.
It is also Canada's largest quick service restaurant chain; at the end of
2013, it had 4,592 restaurants in Canada, 807 in the United States, and 38
in the Persian Gulf region. In 1967, Horton partnered with investor Ron
Joyce, who assumed control over operations after Horton died in 1974. Joyce
expanded the chain into a multi-million dollar franchise.
The chain accounted for 22.6% of all fast food industry revenues in
Canada in 2005. Tim Hortons commands 76% of the Canadian market for
baked goods and holds 62% of the Canadian coffee market The company
competes with specialty coffee retailers, baked goods retailers, sandwich
shops, and gas and other convenience locations, ranging from small local
independent operators to national and regional chains, such as McDonalds,
Wendys, Starbucks, Subway, and Dunkin Donuts.

Mission
The guiding mission is to deliver superior quality products and services for
our guests and communities through leadership, innovation and partnerships

Vision
To be the Quality leader in every thing they do

Porters Five Forces Model of Competition

Threat of New Entrants

There are hardly any barriers of entry for potential new entrants in the
quick service restaurant segment. Any new entrant can join the quick service
restaurant industry whenever they like, but it will be very challenging for
them to earn huge profits since large firms control most of the market share.
Therefor-high capital requirements are indeed in order to enter the market
and not many businessmen are willing to take this risk
On the other hand economies of scale help producers to lower their cost by
producing the next unit of output at lower costs. When new competitors
enter the market, they will have a higher cost of production, because they
have smaller economies of scale.
Bargaining Power of Buyers
It is certain that buyers have more power than suppliers in the
industry. Moreover, the competition between the rivals is quite intense since
all of them are trying their level best to achieve a higher market share in the
industry by offering similar products and promotions. When there are large
numbers of customers, no one customer tends to have bargaining leverage;
when customers require special customizations, they are less likely to switch
to producers who have difficulty meeting their demands.
Threat of Substitute Product
At present, the strength of substitute companies is low because of the
organic nature of the products, such as tea/coffee; a lower performance
product means a customer is less likely to switch from Tim Hortons to
another product or service, also limited number of substitutes means that
customers cannot easily switch to other products or services of similar price
and still receive the same benefits.
Bargaining Power of Supplier
Due to the Tim Hortons Coffee Partnership, supplier strength is
relatively low. Tim Hortons has established a solid partnership with its
farmers in South America. Tim Hortons can also change suppliers at any time

they prefer since there are several other suppliers they can cooperate with at
the current market price for coffee beans.
There most be said that the more diverse distribution channels become
the less bargaining power a single distributor will have, when suppliers are
reliant on high volumes, they have less bargaining power, because a
producer can threaten to cut volumes and hurt the suppliers profits so the
easier it is to switch suppliers, the less bargaining power they have.
Rivalry Among Competing Firms Industry
There is strong rivalry from several typical quick service restaurants, in
addition to large quick service restaurant chains. For example McDonalds has
increased competitive pressure by entering into the breakfast and coffee
line; offering superior quantities for identical prices. As well government
policies and regulations can dictate the level of competition within the
industry.

PESTEL Analysis

Political
The way coffee houses produce is becoming more and more submitted
to high standars of quality and local governments have the right and the
weight to affect the business significantly. There must be since incentives up
to supports in order to attract more business and its expansion in a specific
area, providing low-interest bonds.
Economical
The industry of coffee is a high and growing market in the world. As
there are some big leaders competitors such as Starbucks, Dunkin Donuts
and now McCaf, they are all fighting each other in order to gain more and
more market shares. It seems that there is a high potential in the new
emerging markets such as Asian countries and South America for example.
Moreover, the rising price of coffee beans might be a threat for those
industries.

Social
Sustainability and Responsibility at Tim Hortons is the way we
formalize how we make a true difference for individuals, communities and
the planet everyday. Their sustainability and responsibility framework
focuses on three main pillars. Individuals: Tim Hortons respects individuals
and encourages them to achieve their very best. Communities: Tim Hortons
believes it has a positive role to play in enabling communities to thrive and
grow. Strong governance, high ethical standards and a commitment to active
engagement with our stakeholders support this framework.
Technological
As there is a high and growing variety of products in coffee houses,
they need to always develop new machines and high-tech equipment in order
to stay up-to-date. Some beverages are so complicated to make that they
require high standards of quality in terms of technology
Environmental
Tim Hortons has been tracking energy consumption, water
consumption, and greenhouse gas emissions across our organization since
2008. They strive to continuously improve the quality of their environmental
data, and enhance their understanding of their environmental performance.
They also began tracking their waste diversion at their corporate operations
in terms of recycling and reducing waste
Legal
The Company is subject to various laws and regulations, including laws
and regulations relating to: zoning, land use), transportation and traffic;
health, food, sanitation and safety; taxes; privacy laws, including the
collection, retention, sharing and security of data; immigration, employment
and labor laws, including some increases in minimum wage requirements
that were implemented in certain provinces in Canada
Also laws affecting the design of facilities and accessibility; taxes;
environmental matters; product safety; nutritional disclosure and regulations
regarding nutritional content, including menu labeling and TFA content;
advertising and marketing; record keeping and document retention

procedures; new and/or additional franchise legislation; and anti-corruption

law.

Formulation Stage

INPUT
SWOT Analysis
STRENGHTS

It is Canada's
largest fast food service with
over 100,000 employees
Strong brand name and
company image.
Reputation for having
remarkable product quality.

Tim Hortons commands

majority of the Canadian
market for baked goods and
holds major of the Canadian
coffee market

It has been purchased by

Burger King in this August
2014 and they now are the
third-largest operator of fast
food restaurants in the world

Great customer service.

WEAKNESS

High competition brands

Does not cater to the health

conscious segment

Not a solid worldwide existence

Paying method

Not real differenciation with other

competitors

OPPORTUNITIES

Expanding into new markets

Joining alliencies and partenships

The brand can leverage its

existing image and increase its

THREATS

Growing health conscious

segment

Presence of strong competitors in

this segment

popularity through marketing

exercises

Increasing variety of products can

increase sales

Implement bio products in their

menu

Higher costs of raw materials

Higher costs of labour make

difficult to mantain low prices

The SWOT allows us to have a clearer image of the company and how
the internal and external factors are affecting it. By the strengths and
opportunities we can tell that the brand is well positioned in their target
segment due to its high quality and appreciation from their clients.
Nevertheless it is necessary to realize that a good positioning in the market
in not everything and the company must focus on their gaps in order to keep
being successful.
It has to be taken in consideration that the coffee sector is getting
bigger each day and the customer options are increasing letting a high
variety of possibilities and if the company does not achieve their expectations
it will be decreasing its strength.
External Factor Evaluation (EFE)

External Factors
Opportunities
Expanding into new markets
Joining alliances and partnerships
The brand can leverage its existing image and
increase its popularity through marketing exercises
Increasing variety of products can increase sales
Implement bio products in their menu
Threats

Weight

Rating

Weighted
Score

0.2
0.15
0.05

3
4

0.6
0.6
0.1

0.1
0.05

2
4
2

0.4
0.1

Growing health conscious segment

Presence of strong competitors in this segment
Higher costs of raw materials
Higher costs of labour make difficult to maintain low
prices
Total Score

0.1
0.15
0.1
0.1

3
4
2
3

0.3
0.6
0.2
0.3
3.2

In evaluating the external factor of the company I took in consideration

mainly the competitive, social and economic information and had a result a
score that shows that Tim Hortons is above average and has a strong
position in the market despite the strong competitors and the new trends
from customers. The opportunities are more than the threats and that
provides the company a better overlook of the choices the can make to
expand into a larger market but the score of 0.6 in the presence of strong
competitors forces the company to make its differentiation even stronger.
Internal Factor Evaluation (IFE)

Internal Factor
Strengths
It is Canada's largest fast food service with over
100,000 employees
Strong brand name and company image.
Reputation for having remarkable product quality.
Tim Hortons commands majority of the Canadian
market for baked goods and holds major of the
Canadian coffee market
It has been purchased by Burger King in this August
2014 and they now are the third-largest operator of
fast food restaurants in the world
Great customer service.
Weakness
High competition brands
Does not care to the health conscious segment
Not a solid worldwide existence
Paying method
Not real differentiation with other competitors
Total Score

Weight

Rating

0.05

0.15
0.1

4
4

0.05

0.15

0.1

0.1
0.05
0.1
0.05
0.1

2
1
1
2
2

Weighted
Score

0.15
0.6
0.4
0
0.15
0
0.6
0.3
0.2
0.05
0.1
2.85

Instead the external factor analysis, in the internal analysis we

discovered that the strengths of the company must be improved and become

even more powerful because the weaknesses can be dangerous because of

their nature. The fact of not having a solid worldwide existence and not
standing up to the customer needs can affect directly the position of the
company, mainly if the differentiation among the competitors is not solid.
The company must focus on its high score being a strong and known brand
as well as the benefit of allying with one of the biggest fast food companies.

Competitive Profile Matrix

Tim Horton's
Critical Success Factor
Advertising
Product Quality
Price Competitiveness
Customer Loyalty
Brand Name
Financial Position
Sales Distribution
Technology
Total

Weight
0.1
0.15
0.1
0.15
0.15
0.15
0.05
0.15
1

Ranking
2
3
3
4
4
3
2
4

Score
0.2
0.45
0.3
0.6
0.6
0.45
0.1
0.6
3.3

Krispy Kreme
Ranking
3
2
2
2
2
3
3
3

Score
0.3
0.3
0.2
0.3
0.3
0.45
0.15
0.45
2.45

Dunkin
Donuts
Ranking Score
3
0.3
3
0.45
2
0.2
3
0.45
4
0.6
4
0.6
2
0.1
4
0.6
3.3

The main competitors for Tim Hortons company are Krispy Kreme and
Dunkin Donuts; I analyze those to because they both offer the customers
almost the same line of products with very similar characteristics. The chart
indicates that the three companies are above the average of 2.5 score which
means that they are strong and high positioned among the market. The
brand name and the customer loyalty are the highest scores in the
companys analysis, which means that now they should focus on the
advertising and sales distribution to increase its score on it.
The company should put more attention in what Dunkin Donuts is
doing and offering to its costumers, this can help to appreciate what is that

they have that makes the customers also loyal to them which gives them
also a high score in financial position as the chart shows.

Strengths

Matching

Tows Matrix

- Largest fast food service

with over 100,000
employees
- Strong brand name and
company image.
-Reputation for having
remarkable product quality.

Weakness
- High competition brands
- Does not cater to the health
conscious segment
- Not a solid worldwide
existence
- Paying method

- Commands majority of the

Canadian market for baked
goods and holds major of the
coffee market

- Not real differenciation with

other competitors

- It has been purchased by

Burger King in this August
2014 and they now are the
third-largest operator of fast
food restaurants in the world
- Great customer service.

Opportunities

SO Strategies

WO Strategies

- Expanding into new

markets

- Take the advantage of the

fact that Burger King is
known worldwide to enter
into a bigger market

- Joining alliencies and

partenships

- Implement new products in

the menu of even higher
quality

- The brand can leverage its

existing image and increase
its popularity through
marketing exercises

- Ally with strong companies

in the expected reachable
markets

- Offering new markets a plus

in the products to have a real
differentiation

- Accepting all kind of paying

methods to give the clients a
more comfortable choice
- Creating combos in the
products to give a better
price and option than
competitors

- Increasing variety of
products can increase sales
- Implement bio products in
their menu

Threats
Growing health conscious
segment
Presence of strong
competitors in this segment
Higher costs of raw materials
Higher costs of labour make
difficult to mantain low
prices

ST Strategies

WT Strategies

- Present as a healthy option

from Burger King reliable
customers

- Introducing bio healthy

products with a price that
represents the quality of it

- Implementing an employee
rewarding system

- Create new advertising to

the new entering markets

- Using the advantage of the

already achieve market to
the mouth to mouth
marketing

The SWOT analysis gives the opportunity to analyze each aspect of the
company, from the internal factors that can be changed and managed up to
the external factors that cant be controlled and affect the company directly.
Once we have established those factors the TOWS analysis allows the
company to match each one of the four aspects (opportunities, threats,
strengths and weaknesses) in order to create and put into practice a different
variety of strategies that will permit the company to defeat their fragile
aspects and increase its strong ones.

Each one of the strategies that I try to apply in the chart will give the
company a way to expand into a new market with the chance of improving
its sales and position even more in the market, as well as entering a new
segment with new products that fit the customers new needs.

Internal External Matrix

IFE: 2.25 Represents average

EFE: 3.2 Represents strong

The internal external matrix (IE) illustrates that the company is

positioned in the Quadrant II with a certain approach to the Quadrant III and
Quadrant V. This means that the company is average in the internal factors
and strong in the external ones.
The company is situated in on of the grow and build cells which
represents that the strategies to improve should be emphasis in market
penetration and product development to rise its sales volume as well as
emerging new offers to the customers.

Space Matrix

Dimension
Financial Strength
Competitive Advantage
Environmental Stability
Industry Strength

Average
2.6
-2.6
-3.2
2.8

Internal Dimension
Financial Strength
Return of Investment
Financial
and
operating
Leverage
Liquidity
Working Capital
Cash Flows
Competitive Advantage
Market share
Quality
Product life cycle
Customer Preference
Technological innovation
Sound supply chain

3
1
4
2
3

X Axis:
= 0.2

-3
-2
-3
-1
-4
-3

-2.6 + 2.8

External Dimension
Environmental Stability
Technological changes
Inflation
Demand elasticity
Competitors price ranges
Barriers to entry
Competitive pressure
Ease to exit
Price elasticity of demand
Risk exposure
Industry Strength
Growth Potential
Profit potential
Financial Stability
Resource Stability
Ease of entry
Capacity utilization

-3
-2
-3
-6
-4
-3
-2
-2
-4
3
3
5
3
1
2

m
p
The
Competiti

Space
Matrix
exemplifies
that
the
company is situated in the Quadrant IV,
representing
industry
strength
as
attractive but an unstable environment.

The strategies that must be taken into

consideration are primarily the increase of financial strength by extending
the product line and merging with a organization that is stronger and higher
positioned, all of this with the intention of moving into an aggressive
strategy. Moreover improving the profit will also lead to reinforcing the cash
flow of the company permitting to invest into new product development.
BCG Matrix1

Product 1
(Coffee)
Product 2
(Bakery)
Product 3

Revenues

% Of
Corporate
revenues

Your
brand's
share

Relative
Market
Share

Market
Growth
Share

42%

Largest
Competitor's
market
share
65

1350

60

0.92

10%

860

26%

45

30

0.67

15%

490

15%

20

15

0.75

-6%

(Other
beverages)
Product 4
(Breakfast)

550

17%

35

0.14

5%

The BCG describes and evaluates its products and its position in the
market, this is helpful to see and analyze if there must be any changes on
them or if one product is affecting either positively or negatively to the
company. In this chart we estimate as well the shares to approximate if the
company has a high level of competitiveness. The graphic illustrates that the
coffee and the bakery are the star products, which give the company stable
earnings and a neutral cash flow and also provide a high competitive level
among the largest competitor; the strategy that must be taken into
consideration is the invest for growth and it will help directly to making the
company financially stronger. Regarding the forth product (breakfast) it is
exposed as a question mark and it means that this product could be incurring
into looses, therefore the company must pay attention to it to take its
potential of becoming it a star and later on a cash flow achieving customer
preferences. As a cash cow we can identify the 3rd product, it contributes
more earnings for the company because it includes all the other beverages
besides coffee, this product must be promoted because it has a high
prospective but it

2
1

4
3

Grand
Matrix

Strategy

The Grand Strategy Matrix defines the company in a weak competitive

position but in a rapid market growth. It tells that the company is in a sector
in which the growth is continuously getting bigger but also the competitors
are; even thought the company is well known between its customers, it has
not enough elements to be highly competitive against the other companies
that are in the market nowadays.
This matrix expresses that the company has the need of concentrating
in many aspects to improve its competitive position, such as market
penetration and product and market development.

Matrix Analysis
Alternative Strategies
Market Penetration

SPACE
x

BCG
x

A
x

IE
B
x

GSM
C
x

Market Development
Product Development
Forward Integration
Background Integration
Horizontal Integration
Concentric Diversification
Conglomerate
Diversification
Joint Venture
Retrenchment
Divestiture
Liquidation

x
x
x

x
x
x

x
x
x
x
x

x
x
x

x
x
x

x
x

x
x

With the Matrix Analysis it is easy to identify which are the strongest
alternative strategies that could be implemented in the company, in order to
select the Market Penetration and the Product Development I went through
all the criteria of each graphic and chart to recognize which ones were
showing those two elements, and at the end all of them included them

Decision with Quantitative Strategic Planning Matrix (QSPM)

Key Internal Factors
Internal Strengths
It is Canada's largest fast food service with over
100,000 employees
Strong brand name and company image.
Reputation for having remarkable product
quality.

Weight
0.05

Market
Penetration
AS
TAS
4
0.2

Product
Development
AS
TAS
3
0.15

0.15
0.1

3
3

2
4

0.45
0.3

0.3
0.4

Tim Hortons commands majority of the

Canadian market for baked goods and holds
major of the Canadian coffee market
It has been purchased by Burger King in this
August 2014 and they now are the third-largest
operator of fast food restaurants in the world
Great customer service.
Internal Weaknesses
High competition brands
Does not care to the health conscious segment
Not a solid worldwide existence
Paying method
Not real differentiation with other competitors
Key External Factors
External Opportunities
Expanding into new markets
Joining alliances and partnerships
The brand can leverage its existing image and
increase its popularity through marketing
exercises
Increasing variety of products can increase sales
Implement bio products in their menu
External Threats
Growing health conscious segment
Presence of strong competitors in this segment
Higher costs of raw materials
Higher costs of labour make difficult to maintain
low prices

0.05

0.15

0.1

0.15

0.45

0.45

0.1

0.2

0.1

0.1
0.05
0.1
0.05
0.1
1

2
1
3
1
2

0.2
0.05
0.3
0.05
0.2
2.55

2
1
2
1
1

0.2
0.05
0.2
0.05
0.1
2.1

0.2
0.15
0.05

4
3
3

0.8
0.45
0.15

1
2
2

0.2
0.3
0.1

0.1
0.05

2
2

0.2
0.1

4
3

0.4
0.15

0.1
0.15
0.1
0.1

1
2
-

0.1
0.3

2
1
1
-

0.2
0.15
0.1

1
Sum

2.1

1.6

4.65

3.7

The QSPM is the chart that gives an overall sight of the decisions that
are imperative to take for the new company strategies that if applied
correctly would provide the company a better positioning and a stronger
financial and environmental situation.
The chart is settled according to the market penetration and product
development as seen before in the matrix analysis. The result shows a higher
score for the market penetration, over 0.95 points more than the market

development and this represents that Tim Hortons must apply a strategy
that makes a direct change over the access of the market

Implementation Stage
Overall the result of all the charts gave the outcome for the QSPM to
apply a market penetration strategy to the Tim Hortons company once that
all the variables have been taken into consideration. The product of all this
study confirms that the company is struggling in having a differentiation from
competitors and by applying this strategy it will be assured that the market
would have the company positioned in their minds.
To implement this strategy aggressive pricing is a very common tactic
that can bring along good results, using penetration pricing the company can
set prices lower than competitors. The company will be able to maintain the
low prices due to the volume of expected sales, decreasing costs per unit of
the product and giving a higher profit. Aggressive marketing campaigns and
strategies of distribution can achieve as well the market penetration because
the most important goal is to set up the company in the customers
awareness.

Evaluation Stage
Once the strategy is implemented in the company it is necessary to
keep on evaluating the different tools that have been use to set up the
strategy chosen. This can also be seen as a planning process where all the
estimated outcomes from every alternative that was valued are compared to
the associated estimated risk and result. There must be a measuring of the
actual and the expected performance of the company to verify that al the
variances that will take place on it will just deliver a better position in the
market. The SWOT illustrates how opportunities exist to further leverage our
assets, broaden our reach, deepen our capabilities and continue to grow.

Conclusion
Strategic analysis is always fundamental in every company, no matter
how good or bad it is in the business world it is necessary to always have an
overlook of what is going on inside and outside of it and how the different
factors affect it, whether we can change or control them or not.

With this analysis I can have a better overlook of the Tim Hortons
company and I can be able to describe and define all the characteristics that
may be taken into consideration to see if a company is in a good situation in
a specific market segment. All the strategic tools were useful in order to
define what is what the company needed to keep being successful and also
to overcome very obstacle that could appear and to know how to apply the
result of every tool is helpful to understand the diverse action that a
company may take when its situation is not the best.
For the future the company has two major plans to achieve by
following the strategies; having an established international presence and
model to roll out in the new markets and also an enhanced set of capabilities
and talent in the organization. By all means the company requires defending
and building its strongholds, as well as developing new sources of growth
and future competitive advantage.

References
1. Market Publishers; Report Database (2015) Tim Hortons Inc.
Fundamental Company Report, SWOT Analysis.
http://pdf.marketpublishers.com/bac_swot/tim_hortons_inc_swot_analys
is_bac.pdf
2. Balance Sheet; Annual Report (2014) Tim Horton's
http://annualreport.timhortons.com/downloads/Balance-Sheet.pdf
3. Statement of Operation; Annual Report (2014) Tim Hortons
http://annualreport.timhortons.com/downloads/Statement-ofOperations.pdf
4. Statista; Coffee, House, Chains (2013) Revenue ranking:
http://www.statista.com/statistics/270091/coffee-house-chains-rankedby-revenue/
5. Statista; Coffee, House, Chains (2013) Revenue ranking:
http://www.statista.com/statistics/270091/coffee-house-chains-rankedby-revenue/
6. Strategic Plan; Annual Report (2014) Tim Hortons.
http://www.timhortons.com/ca/en/corporate/strategic-plan.php
7. Corporate, Investors; Safe Harbor (2014) Litigation Reform Act and
Environment: http://www.timhortons.com/ca/en/corporate/safeharbor.php