Student: Sophie Neue:

SLruLegIc MunugemenL

Nundo's nLernuLIonuI: TukIng CIIcken Lo
LIe WorId






Course: MA Marketing


Date: Mav 2003

Nando's International Case study
MA Marketing
May 2003
1


Table of Contents


1 INTRODUCTION................................................................................................2
2 EXTERNAL ANALYSIS....................................................................................2
3 MODELS OF STRATEGY APPLIED..............................................................3
3.1 INCREMENTAL STRATEGY ...............................................................................3
3.2 INTERPRETATIVE STRATEGY ...........................................................................4
4 STRATEGIC OPTIONS.....................................................................................4
5 GLOBALISATION..............................................................................................5
6 FUTURE STRATEGY OPTIONS.....................................................................5
7 RESOURCE-BASED VIEW ..............................................................................6
7.1 TANGIBLE RESOURCES ....................................................................................6
7.2 INTANGIBLE RESOURCES.................................................................................7
7.3 HUMAN RESOURCES........................................................................................7
7.4 DEVELOP ITS CAPABILITIES.............................................................................7
7.5 MANAGE ITS CAPABILITIES .............................................................................8
8 CONCLUSION....................................................................................................8
9 REFERENCES.....................................................................................................9




Nando's International Case study
MA Marketing
May 2003
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1 Introduction

The study is based on the case wrote by the Wits Business School. Nando's
International is a Iast-Iood chain which is specialised in Portuguese Iood, principally
based on chicken. First created in South AIrica, it had a Iast development overseas,
but it was not successIul everywhere. The points developed in the study are Iirst the
comprehension oI the strategy Iollowed by Nando's, then we give some ideas Ior a
Iuture strategy, based on the globalisation oI the brand and Iinally the analysis oI the
resources oI the company to determine iI the strategy can be applied.

2 External Analysis

In order to understand the strategy developed by the company, it is necessary to look
at the external Iactors. Some characteristics can deIine Nando's strategy. These
characteristics help to identiIy the strategic opportunities as well as the threats and
problems that the company can Iace.

First oI all, Nando's wants to maintain its culture and values while expanding abroad.
That means that all the restaurants opened in the diIIerent countries need to share the
basis oI the Nando's culture. That can be a threat as all countries do not share the
same culture and then globalisation may be more diIIicult in particular countries.
Furthermore, liIe styles diIIer and some people may be less attracted by Portuguese
Iast Iood than others.

Nando's wants to extend its geographical coverage. A mature country should have at
least 12-18 stores. Even at the prime year oI its creation in South AIrica, the idea oI
globalisation was strong. For this, the company has to Iace governmental policies Ior
Ioreign companies that will vary in all countries.

In terms oI marketing eIIort, Nando's wants to use the same tone in its advertising
worldwide. However, as other countries may not be used to this kind oI Iood, they
need to adapt it to be more educational. To be international, the sales Iorce and the
culture need to be adapted.

However, comparing to its competitors, Nando's has the advantage to provide a better
quality and speed. As explained by Hume, they want to be the best, not the biggest.
They Iound a niche market where they can develop their product.

The development oI Nando's international was made by the creation oI outlets that
were operated separately but this was not a good strategy and then, they changed by
buying existing Iranchisee overseas. They also created a holding company in order to
increase the capital base and to be internationally stronger. Shareholders expectations
are an important point in the Nando's objectives.





Nando's International Case study
MA Marketing
May 2003
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3 Models of strategy applied

To deIine the models oI strategy used, the Iive P's will help us understand Nando's
view.
- Plan: when Nando's was created, the ambition oI Brozin was to develop an
international new brand that give the taste oI Portuguese chicken around the
world. To achieve this goal, he decided to hire new partners, as Duarte and
Hume. Furthermore, he tried to introduce new markets thanks to local partners
to support the structure but he wanted to have the same culture in all the
restaurants. That is the reason oI the creation oI the 'Covenant', distributing in
all stores.
- Ploy: Mintzberg said that 'as plan, a strategy can be a ploy, too, really just a
speciIic 'manoeuvre' intended to outwit an opponent or competitor'. Following
this idea, the ploy Ior Nando's is not to Iace the competitors but to Iind a
niche, to Iind weaknesses in the competitors' strategy and to position itselI as
strong to compete on this points.
- Position: it is the way to deIine its strategy in its external environment. As
explained above, Nando's wants to position itselI as the best and not the
biggest.
- Pattern: according to Mintzberg, 'deIining strategy as a plan is not suIIicient;
we also need a deIinition that can encompasses the resulting behaviour'. To
diIIerentiate itselI Irom its competitors, the cultural aspect seems to play an
important role overseas. Every manager oI outlets has a speciIic Iormation.
There is a continuity in the spread oI the culture around the world, even in new
countries which seem not used to the kind oI Iood provided by Nando's. In
addition, the advertising campaign needs to be consistent worldwide.
- Perspective: Nando's wants to develop new stores around the world. However,
Brozin preIers to develop stores Iirst in countries that share Iive criteria oI
culture with South AIrica (chicken must be an acceptable Iood, consumers
must like spicy Iood, the Nando's Experience must be acceptable to the
country's liIestyle, the country must be English speaking and the right partners
must be available). These criteria can be too selective but there will be used
only Ior the entry in globalisation.

Two models oI strategy are mixed in the one developed by Nando's, the incremental
strategy and the interpretative model.

3.1 Incremental strategy

Nando's strategy is to develop a new model. It is an integrated thinking and an acting
at all levels. Brozin and Duarte want an easy management style, with inIormal
approach to staII. Brozin has developed special relations with all its employees, he
also believes in giving staII the possibility to improve themselves.

The leaders can be seen as designers (Brozin and Denoon-Stevens), deIining the
value, the vision and the core purpose and as steward (Hume), deIining the people
position.

Nando's International Case study
MA Marketing
May 2003
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The incremental strategy Iollows the idea oI building and encourage personal visions.
That is not the case in Nando's as all employees have to share the same culture and
Iollow the Covenant. There is opportunity Ior employees to improve themselves but
the Ilat structure oI the company, as well as the strong entrepreneurial spirit does not
allow any new ideas and can go against improvement in the carriers.

3.2 Interpretative strategy

In this strategy the past is salient Ior the Iuture. Then, when Brozin says that
'occasional Iailures were valuable learning experiences', it joins the idea oI the
interpretative model. In the same time, the organisation seems to have a powerIul
coalition oI managers, with Brozin, Duarte, Denoon-Stevens and Hume. There is also
a kind oI coalition with the managers oI successIul outlets. For example, new
managers in Asian stores need to have a training with a South AIrican manager to be
sure that they will Iollow Nando's culture.

Furthermore, managers need to participate to international courses and conIerences to
expose them to the latest trends. Nando's international is a conditioned viewing
organisation. It is passive but assume that the environment is analysable, it relies on
traditional data collection and interpretation and it may use regular scanning
procedures.

4 Strategic options

Nando's has decided to choose a market development strategy. Indeed, the current
market in South AIrica seems saturated and there are new opportunities Ior
geographical spread and Ior entry in new segments. The method used is a joint
venture with local partners. The advantages are the speed and the complementary
competences. They allow both companies to learn Irom their partner. Also, it dilutes
risk when introducing a new geographical market.

This is an embedded organisation perspective, as competing is more a matter oI
positioning one's Iirm in a network than attacking the environment. Nando's has a
niche market. It is too diIIicult to attack big brands as McDonald's. The possibility Ior
the company to develop its market is to Iind a niche. They decided to play on the
quality and the speed and not especially on the price. That gives them an opportunity
to Iind their place in a diIIicult market.

To be international, Nando's developed strategic alliances. The objectives are to learn,
to link and to leap. This is a contribution to the strategic decision and core
competences. The structures used are inter-organisational dependences. The Iunction
oI these alliances are the access to the market and the technological development, as
well as the share oI Iinance and then risk.

The type oI network is based on independent workers, blending employed and selI-
employed people through remote access. However, the 'Covenant' needs to be
Iollowed by all new stores, even iI McKenzie wants this to be only a guideline. This is
a really detailed and speciIic guideline and it is not easy to adapt it to local markets.
Nando's International Case study
MA Marketing
May 2003
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5 Globalisation

Nando's has decided to go to an international market. DiIIerent stages in terms oI
globalisation are possible. Nando's has acquired overseas outlets and branches.

To develop their ideas overseas, Nando's management wanted Iirst to go in countries
where some characteristics make them less risky. There is a general tendency oI
standardisation oI tastes around the world, however some diIIerences can be seen in
local markets. This point represents the market driver to globalisation. Furthermore,
the government drivers, i.e. the inIrastructures and the policies oI the new market, can
inIluence the decision to enter one country. The reason to choose countries which can
speak English is a way to avoid misleading with governmental policies. It is less risky
and easier Ior transaction. The scale oI economies is a cost driver, as well as the
diIIerences in country costs. When developing the Store and Country Models, the
costs were well-studied to remain competitive and adapted to the new market. In term
oI competitor driver, Nando's tries to position itselI in a niche market where there is
no real international competition.

The essential steps when going to a globalisation are Iirst to develop a core strategy
Ior the home country, then internationalise the core strategy and Iinally globalise the
international strategy. But maybe Nando's does not Iollow rigorously these steps. As
the idea oI Brozin was to be international, he went overseas beIore really assure the
core strategy in South AIrica, which is the home country oI Nando's.

6 Future strategy options

BeIore deciding to enter new overseas market, Nando's should have studied the
Diamond created by Porter. This tool explore iI a country is likely to be successIul Ior
a product. Four points need to be clariIied:

- strategy, structure and rivalry: it helps to do better, it drives quality up by
deIining a precise strategy and by studying the necessary structure to enter a
new market.
- demand conditions: it needs to have Iirst a strong demand in a local market
beIore entering it.
- related and supporting industries: it is the study oI the potential partners.
Nando's had previously a haphazard selection but had changed to a more
selective choice. The partners need to share the same culture and values than
Nando's.
- Iactor conditions: external Iactors should be taken into consideration beIore
entering new markets.

In the majority oI overseas market, Nando's is a global product company. Indeed, it
has a high global co-ordination but a low local independence and responsiveness. It is
dependent on its partners and there is a standardisation oI the product.
Here comes dilemmas in the way to develop its strategy. Nando's can stay with a
standardised product or can try to adapt it to local market. The problem with
adaptation is the lost oI its speciIic culture. On the same idea, does Nando's need to go
Nando's International Case study
MA Marketing
May 2003
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Ior continuity or Ior change ? This problems are linked with the idea oI hierarchies
and networks in the company as well as centralisation or devolving.
The creation oI a new strategy depends on:

- people: Nando's has developed a 'Covenant' to extend its culture worldwide
but this does not allow local management. Each new store's manager is trained
to be in the 'Nando's culture'. The structure and the role oI people need to be
changed.
- InIormation and strategic capabilities: it is necessary to improve the product
and services to stay the best. Nando's has to develop competitive perIormance.
They want to be the best in quality and speed. When a goal is achieved, it is
important to Iix new goals in order to stay at the top because stagnation is a
sign oI death Ior the company.
- Finance: it is important to invest in assets, as the company has done. But the
company needs also to reach the expectation oI the stakeholders. The company
is now in the growth (stars) phase oI development. That means that the
business risk are high but the Iinancial risk need to be low. The Iunding is by
equity, with a growth oI investors.

The type oI change that Nando's should have is an evolution, based on an incremental
transIormation. As the internationalisation is important according to Brozin's point oI
view, it has to be done incrementally by assuring the development and stabilisation in
one country beIore entering a new one. Furthermore, the shareholders expectation
need to be reached to maintain their conIidence in the company. Some economies oI
scales may be done by grouping the production in one country and then exporting to
its neighbourhood.
The style oI management Ior this change will be educational and based on
communication in order to avoid lack oI inIormation, as it is one oI the most
important aspect oI its current management strategy. II this is a time consuming style
and can be sometimes seen unclear, this style is however well adapted Ior an
incremental change.


7 Resource-based view

Three types oI resources need to be examine to be sure that an incremental change
strategy can be supported: tangible, intangible and human resources.
7.1 Tangible resources
The Exhibit 1 shows the Iinancial resources oI the company and the group. Between
1993 and 1997, the turnover has increased by more than 700. In the same time the
operating income beIore interest has also increased and the net interest paid has
decreased. The company seems to become Iinancially more stable and Ior two years,
the net income is positive. The balance sheets also show that current liabilities are
greater than current assets that can be seen as a problem. However, the Iixed assets
are important and represent investment in subsidiaries Ior the company. Nando's
shows a strong position in terms oI Iinances Ior two years.

Nando's International Case study
MA Marketing
May 2003
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In terms oI physical resources, the company owns 117 outlets in South AIrica and 46
overseas. Many oI them were acquired less than Iive years ago and the expansion with
the acquisition oI new outlets is a major point oI Nando's strategy.

7.2 Intangible resources
The management team sees the continuous innovation as a Iactor oI their success. To
become international, a new international inIormation technology system has been
developed and new methodologies were used to restructure the existing markets.

In terms oI reputation, thanks to its advertising campaign, Nando's is seen as
provocative, topical and interesting worldwide. It is also seen as providing superior
services, better quality and speed than its competitors.

But the most important intangible resource is its culture. Nando's international has a
really strong culture. The management team thinks it is transportable overseas and
tried to develop the corporate culture overseas. It was helped by the creation oI the
'Covenant' distributed to all new store's managers. This is named the Nando's
Experience. Furthermore, Nando's has its own Iive core values: pride, passion,
courage, integrity and Iamily.

7.3 Human resources
At the start oI the development, Brozin has hired the better team he could Iind. There
is a high level oI skills that need to be developed overseas. The management team
also considers that there is a strong knowledge about chicken preparation and based
their reputation on the Iact that each manager has a strong knowledge about
Portuguese Iood. Denoon-Stevens developed strong skills by creating the Store and
Country Models that are used by the Group Finance Department.
The communication inside the company was inIormal and personal but with the
development oI the company, there is a risk to lose personal touch. The management
style developed by Brozin was easy and he was seen by his employees as a highly
creative visionary who enjoyed working with people. He has passion and enthusiasm
Ior all aspects oI the business. This has helped to motivate people in their work.
However, the Ilat organisation can be a problem Ior promotions and then Ior
motivation.

7.4 Develop its capabilities
The resources acquired by the company could be a good support Ior the Iuture
strategy but the company needs to shiIt its perceptions. Indeed, with the development
oI the company some aspects, particularly in terms oI culture and communication may
change. It is not possible to have the same personal relation with employees in a
global company. So, it is necessary to organise itselI around its capabilities.

It was seen that what customers value are the diIIerences that Nando's developed
comparing its competitors. It has a strong Portuguese Iood's culture, it emphases
quality and speed.
Nando's International Case study
MA Marketing
May 2003
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The resources described beIore should be categorised according their importance Ior
strategic development:

- strategic capabilities: are the skills and knowledge developed by the
employees and the management team
- threshold resources: are the Iinancial resources
- unique resource: is the culture that diIIerentiate it Irom competitors
- inadequate resources: may be the inIrastructure and the physical resources
- threshold competences: are represented by the 'Covenant' provided to all
managers
- core competences: are represented by the management team.

It seems that Nando's has good bases to develop a new strategy in terms oI resources.
The most important inadequate resources, i.e. the inIrastructure may be changed by
the acquisition oI new overseas shops and by the development oI their partnership
with the diIIerent Ioreign companies.

Does they have the strengths to become leader in their niche market ? Nando's has to
Iace many diIIerent competitors but they can base their strategy on the culture, the
internationality and the quality oI their products. Other competitors are, in the
majority, local companies and Nando's can emphasis its size's strength.

7.5 Manage its capabilities
To use its capabilities to develop a new strategy, Nando's should develop its relation
with partners. This will allow the company to develop its capabilities and to Iind
complementary resources through alliances. It is the cheaper way to acquire new
resources but on the other hand, it decreases the liberty oI the company.
Nando's should also concentrate its resources to the most important and useIul ones.
A too big diversiIication may be a bad strategy and it should be better to IortiIy its
existing markets beIore entering new ones.

Finally, it is important to correctly reward its human assets to maintain their strengths
and their cultural strategy. II personnel does not Ieel reward Ior the job, this will be an
important problem. As the Ilat structure oI the company does not allow many
promotions, the management team should Iind another way to reward its personnel.

8 Conclusion

Nando's has diIIerent possibilities in terms oI evolution. To develop the company
worldwide, the management team will have to make some choices, because it will not
be possible to have the same structure as a small company when being international.
The problem oI the culture may be the major point to examine Ior the Iuture. But
Nando's seems to have the potential to become a strong international brand.




Nando's International Case study
MA Marketing
May 2003
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9 References

Ellen Earle ChaIIee (1985), Three Models oI Strategy, Academy oI Management
Review, 10 (1), 89-98.

Johnson, G., Scholes, K. (2002), Exploring Corporate Strategy, Text and Cases, Sixth
Edition, Prentice Hall.

Mintzberg, H (1987), The strategy concept I: Five P's Ior strategy, CaliIornia
Management Review, 30 (1), 11-25.

Yip, G.S. (1989), Global Strategy. In a word oI nations ?, Sloan Management
Review, 29-41.