Orange Leaf: Global Frozen Yogurt Success

Introduction

Background of Orange Tree Frozen Yogurt

Founded in 2008, the Orange Tree Frozen Yogurt is Oklahoma-based Company with most of its operation in the United States of America (US) Currently, the company has operation in three countries; (US), Australia, and China (opening stores in Shanghai) with more than 350 stores. It is a self-serve frozen yogurt franchise offering products that include frozen yogurt, gluten-free and sugar-free dairy products, cookie cakes, and dairy-free alternatives. In 2009, the company was purchased by Reese Travis and Mike Liddel changing its structure and renaming from Orange Tree to Orange Leaf Frozen yogurt. The franchise was also moved from California to its current operating headquarters in Oklahoma, US. Since its establishment, the company has seen rapid expansion opening 63 between 2008 and 2011 in the US adding 47 stores across the country by September of that year. As Chief Executive Officer of the company, Travis oversaw the expansion great expansion of the firm that include entry into Australian and European market. In 2016, the company announced potential and advanced focus of entry into Chinese market (MDPS, 2016). Over the years, the organization has built reputable and reliable consumer-firm relation increasing it consumer bases particularly in the US and Australia greatly. In 2015, Ruggles (2015) ranked the company among the best performers business measured by the expansion rate within the private businesses and frozen yogurt industry. Currently, the company has over 300 locations spread out across the US and European and Australian markets. Primarily, Orange Tree Frozen Yogurt produce and sell yogurt products that include over 80 flavours such as Brownie batter, strawberry, coffee, cookies n’ cream, and dairy free orange. Additionally, the company has diversified its products line introducing sugar-free, non-dairy, and vegan alternatives in most of its stores.

Overview of the business strategy

Over the years, Orange Leaf Frozen yogurt has built its business structure and approach establishing itself within the US, Australia, and slowly entering European and Asian market. Its consumer base has gradually expanded to incorporate wider consumer demographic and economic status ranging from young children to middle age and older members in a community by offering a wide products variety and different flavours. These wide products varieties such as Dole Pineapple, Cookie Cake, Pineapple Strawberry Banana Smoothie, Dole Orange, and Cheesecake differ on respective calories but offered in mid-range prices (approximately 0.49$ per ounce) (Ruggles, 2015; Jones, 2018). Importantly, the company has increasingly focused on integrating culture of consumer engagement where it encourages people to embrace individual uniqueness by eating and drinking in accordance to one’s diversity. Within it business environment and community outreach strategies, it emphasise on originality stating “mixing and mashing up bites, flavours, music, and art to create an experience that is as unique as they are.” Broadly, structuring and integration of this strategy is driven by need to take advantage of increasing consumer demand for personalised and products designed with consumer’s need in mind (Jones, 2018; Thorn, 2018). Notably, personalization of products or rather designing products to fit individual consumers needs and demands has, recently, forced industries not only in yogurt industries but across the board affecting nearly all business entities.

Business structure

In the past decade, frozen yogurt industry has seen a significantly growth both numbers of business entities in the industry and variety of yogurt products. Since early 2000’s the number of yogurt businesses, the annual sales in the industry grown consistently by 21% annually in the US (Business Journal, 2017). According to United States Census Bureau, the industry generated $2 billion in revenues employing more than 16,000 people between 2008 and 2013. The rapid increase growth in the industry particularly frozen yogurt in the US is attributable to emerging health benefits associated to the yogurt products. According to Shortt and& O'Brien (2016) and Belasco (2014), rising consumer awareness on yogurt digestion benefits, immune boosters, and rich vitamins (B1, B2, and B12) has led to projected growth and entry of more organizations into the market. Globally, the consumption of yogurt has grown and expected to maintain these trends of market expansion. As illustrated by Mohammed et al. (2017), casing from US market, yogurt industry is very competitive characterised by introduction of many products in the recent past years. For instance, the largest organizations such as Greek yogurt saw it revenue increase from $391 million to $3.7billion in 2010 and 2015 respectively. On the other hand, Chobani yogurt manufacturer has held key role in reach out to American consumers (Statista, 2017). The projection by Little (2012) show the sales of frozen yogurt will maintain its current growth to beyond 2025. Broadly, significant growth in the industry has attracted huge competition from other companies entering frozen yogurt business. Robinson (2017) observed that the industry is among the most competitive industries in the US. Such business franchises as Red Mango, Yogurtland, Pinkberry, Menchie’s, Golden Spoon, and SweetFrog have significantly increased their respective store numbers both locally and internationally (Meyers, 2015). Robinson (2017) and He & Lopez (2016) highlighted that this high competitive nature of the industry forces franchises to enhance their innovativeness in order to conform to increasing consumer demands and expectation. Moreover, the anticipation of entry into Chinese market and expansion of its operation in Europe has borne little outcome with Shanghai entry encountering delays. Rugman and Collinson (2012) asserted that strategized approach founded on data and consumer and market needs is fundamental towards attainment of competitiveness.

Importantly, the cultural difference among different communities outlining differing perceptions on foods and beverages is attributable to expansion into international markets. In study on impact of social and cultural factors on fast food consumption taking cases study of Chinese children, Song et al. (2015) demonstrated accessibility, education levels, and ideology held on fast food as key determinants. Similarly, research conducted by Seubsman (2009) indicated perception of ‘modern’ or ‘western lifestyle’ significantly element in consumption of fast or western food and beverages products into Thailand market. Therefore, difference in perception shaped by cultural elements and beliefs regarding food and beverages has vital implication on products acceptance and subsequent performance in the market. Moreover, the company products primarily depends on dairy products as raw materials hence its scarcity in a given regions severely affects its operation or prompting investing in multi-national market with prospect of attaining economies of scale aimed at attaining business viability and success. It is notable that Orange Leaf Frozen Yogurt needs to overcome the ‘liability of foreignness’ perception in order to attain business success. Peng (2013) and Frynas & Mellahi (2015) described the concept of ‘liability of foreignness’ as inherent disadvantage encountered by companies entering foreign markets caused by its non-native nature. Theoretically, business entities must prepare to resistance from community and other business entities in the market as it enters new geographic and cultural setting through integrating a comprehensive market approach and deployment of overwhelming resources.

International market entry approaches (Foreign entry decision)

Laufs & Schwens (2014) and Rugman & Collinson (2012) argued that complexity presented by international market calls for insightful grasps of micro and macro business environment as well as related factors that affecting operations and subsequently performance. Importantly, the organizational values and culture acts as centre of high outcome measured in terms of financial performance and market share. These beliefs and perception held towards new market greatly determines expansion rate and success in new market. Building from Peng (2013) model of entry into foreign market, location, timing, and entry mode determine views on opportunities available and competitive advantages. The strategic tripod proposed by Peng (2013) map business environment of a firm in relation to nature of competition, barriers, assets, and risks in decision making concerning entry into foreign entry including when, where, and how. Ideally, this approaches is designed to optimise available opportunities, minimise risks, and taking advantage of its strengths through consideration of organizational internal aspects (assets), external micro environment (nature of competition in market), and external macro (outlining risks faced at country’s level).

Orange Leaf Frozen Yogurt strategic analysis

Examining and analysing organizational environmental aspects including immediate surrounding it or intends to operate in enables broader perspective of organizational position and stand on market to entry and prospective success measured in performance in success markets (Barney, & Hesterly, 2015; Rothaermel, 2015). Presently, there exist numerous analytic techniques used to give descriptive perceptive of nature of firms’ operating or potential environment that include currency fluctuation, demographic factors, international policies, and competition. These tools include PESTLE, Risk Analysis, and Competitor analysis each measuring different factors and attribute of a company in relation macro and micro external elements.

Market-seeking assessment

A company need to select a country with high product demand factor and important high acceptance rate of its products. According to Wadhwa (2011) and Collinson (2015), this potential evaluation is done by analysing global competitiveness index of the country to enter comparing to company’s current operating market. For example, Orange Tree Frozen Yogurt needs to have a comprehensive view of the Qatar competitiveness by the country’s competitive indexes in relation to the US where it currently operates). In selecting a nation to enter, the company need to identify nation with high acceptance rate, huge demand of products, positive consumer perception the firm and its products, high consumer purchasing power, economic stability, and presents huge potential of growth (Laufs, & Schwens, 2014; Morschett et al., 2010). Employing the use Global Competitiveness Index ranking countries in accordance to business cooperation, policies, rules governing institutional development, and medium and current sustainable prosperity, US and Qatar have close similarity but demonstrate considerable difference in market size and macroeconomic environment.

From the figure above, it observable that the US demonstrate higher market size that Qatar’s that is in line with respective countries population. Nevertheless, other variables such as innovativeness, sophistication in business, readiness to technology, health and primary education, market efficiency, and labour market show very close similarity. Taking into account all these variables, the US is listed 3rd while Qatar 18th postulating high potential but considerably low risk for the company to enter into Qatari market.

Qatar risk analysis (Hofstede analysis)

Employing the use of Peng’s model, risk analysis of two nations can be compared. The following table summarises the risk factors including regulatory, trade barriers, and cultural distance.

Observably, regulations in Qatar are higher in relation to those in the US. Nevertheless, an open policy for trading taken by both nations allows low barriers. Instability in Middle East frequent by conflict, war, and acts makes Qatar relatively unstable economically. Moreover, using Hofstede analysis that compares core variables affected external business environment for a business entity, the following table capture difference in the US and Qatar macro-environmental cultural dimension.

From the diagram above, cultural dimension in the Qatar and the US’s differ with former perceived more conservative in relation to the US business operating environment. Based on Hofstede (2001) assertion, these factors that include indulgence, power distance, individualism, long term orientation, and uncertainty avoidance outline influence held by various factors in business environment. Additionally, unlike the US considered a liberal nations, Qatar observes coordinated market highlighting institutional difference.

Pestle analysis (Qatar)

From Dcosta (2011) and Ho (2014) explanation, PESTE measures extent to which macro-environment influence performance of both market and industry. Hence, usually act as basis of developing a firm’s strategic plan.

Risk analysis grid

Building from alexander (2009) illustration, expanding into foreign market presents numerous challenges bounded by international policies, business environment, geographic condition, difference in political view, economic variation, and social and economic status. The table below highlight potential risks that Orange Leaf can encounter during entry and operating in Qatari market and subsequent prospective avoidance strategy.

Competitiveness of the company

Theoretically, competitiveness of an organization outlines ability to offer services or products in a manner that is more effective and efficient than other players in the market. Considering the frozen yogurt industry has developed gradually since 1970s, the market is relative mature with large consumer awareness of the product. Orange Leaf entry in 2008 has been characterised with being affected by recession and emergence of alternative products like regular yogurt, iced coffee, ice tea, and flavoured frozen beverages (Dobbs, 2014). Currently, business entities offering similar and alternative products are very many to the extent that American market can be considered crowded and highly competitive. For example, Capriccion, PinkBerry, and The Frozen Yogurt franchise operate internationally with stores in Qatar offering frozen yogurt services and products similar to those offered by Orange Leaf. On the hand, Awal and Gharissa Ice Cream organizations offer and sell alternatives products such as ice cream, iced cake, and flavoured dairy products.

Positioning matrix

Organizing the company against other players in the market aids in focusing strategy and optimizing market approaches by using evidence and knowledge of levels of different determinants of firms’ performance such as assets and resource measured against competitors (D'Aveni, 2007; Rothaermel, 2015). In Qatari frozen yogurt industry, such franchises as Gharissa and Ghandeer dominate the market with large market share and consumer awareness as well as control over the limited raw materials. Recently, internationally franchises such as PinkBerry and Capriccio have entered and intensified their activities in the country (D'Aveni, 2007). In this light, one may assert that entry by Orange Leaf will be characterised by encountering severe competition, limited raw materials, storage and cooling challenges, and presence of substitute products such as chocolate cream, milk, regular yogurt, and ice cream. The diagram below highlights Orange Leaf competitive nature measured by its service and products qualities against companies and franchises in the market with similar or alternative products and services.

Porter’s Diamond Model

Also referred as Diamond of National Advantage, Porter’s model is modelled to outlines and provides an insight into competitive edge possessed availed by certain variables within their reach or available to them and stipulating the strategies set by government and other governing bodies in attempt to enhance country’s position in relation to global competition index Ozgen (2011) and Riasi (2015).

Organizational competence and resources analysis

As asserted by Firm Specific Advantages (FSAs) and Country Specific Advantages (CSAs) are two of the main elements determining organizational ability to compete with other plays in a specified industry and market (Hillemann, & Gestrin, 2016; Kersiene, & Savaneviciene, 2015). Fundamentally, it is measured in relation with other nations within global scale by taking nations and company’s competitiveness and capabilities. For a business entity to operate efficiently and adequately attain formulated goals, it requires coordination between its resources: tangible, intangible, and human capital. Based on Hamilton and Liu (2014) explanation, Orange Leaf must have measure to mitigate changing business environment, product management, optimization of resource, and strategy of introducing new products. The following table illustrate Orange Leaf mapped resources.

Licensing entry mode

In a competitive market, organizations need to forge partnership with other partners in the field particularly those with local presence in order to enhance success rate (Johnson, 2009). Therefore, Orange Leaf need to identify established local companies within its potential location but these organizations must have attained specified threshold such as understanding of consumers’ needs and expectation, given market share, assets, human capital, and in line with local policies (Morschett et al., 2010; Laufs, & Schwens, 2014; Ahsan, & Musteen, 2011). Moreover, the entry process should concede with branding and production activities to reduce minimise risk, time, and establishment of market share. In addition to reducing the cost of production and acquiring storage facilities, the approach allows averting national, regional, and international regulations as well as enhancing acceptance rate.

Market strategy

Strategic approach will aid the firm in planning and making decision on direction and resource allocation including coordination and collaboration among stakeholders in the two countries (market to entry and established market). It need to set not only measurable, achievable, and realistic but specific and time-bound (SMART) aims before entry into Qatari market (Mullins et al., 2010; Vishnevskiy, et al., 2016). In using SMART framework, the company has to identify suitable store and storage (products and raw materials) location, local companies for outsourcing and licencing (must include licencing period), and estimated period for attaining a substantial market share.

Possible challenges faced into Qatari market by the company

Entry into any market particularly within international dimension is occasionally characterised by numerous challenges. Therefore, potential challenges that Orange Leaf will face include agreement with outsourced or licenced firms. In addition to national and regional business regulations, social beliefs and government regulatory policies on food and beverage industry may pose major challenges. Furthermore, storage facilities, acceptance rate, and instability are other issues that the company must strategized to address.

Plan for entry

Key elements in business expansion into foreign markets development of strategic approach comprising market characteristics, consumers’ attributes, business environment, and competition. For Orange Leaf Frozen Yogurt Company to entry into foreign market it must set out a planned roadmap design with various influencing factors in mind aligned to structure of market to entry. First, it needs to identify the market, set attainable goals including level of expected goals with specified period. This goal setting should take considerable period like 2-3 months because setting wrong goals including over or under setting could cause serious problems of failure to achieve business success. Second, the company must have in depth understanding of the market learning every dimension ranging from consumer perception of foreign products, beliefs, to government policies supporting business environment. Having deep knowledge of the market vital elements thus the analysis should go beyond entry period but also during operation. During implementation period, it should coordinate with licenced firms and governmental bodies by sharing key personnel in management (Human Resources, marketing, and operation) and regional director. Lastly, structures monitoring the progress both success and failure story should be in place.

Conclusion and recommendation

Entry into new market demands adequate preparation that include understanding different market components, market structure, consumer demands and expectation, values and beliefs, purchasing power, stratification, regional and nation policies, and but not limited to economic, social, and political stability. Currently, Orange Leaf has business operation in the US and Australia, which has significant difference in cultural, social, political, and economic structures to Qatar (potential market). Therefore, in order to curb this difference, the company need to strategize including cooperation (licencing) and outsourcing local and well-established business entities while basis it activities on consumer engagement and satisfaction. Using analytic tools, Qatari market is viable for the Orange Leaf but it requires taking into account factors within its micro and macro environment.

Bibliography

Ahsan, M., & Musteen, M. (2011). Multinational enterprises' entry mode strategies and uncertainty: A review and extension. International Journal of Management Reviews, 13(4), 376-392.

Ashill, N. J., & Jobber, D. (2010). Measuring state, effect, and response uncertainty: Theoretical construct development and empirical validation. Journal of Management, 36(5), 1278-1308.

Belasco, W. J. (2014). Appetite for change: How the counterculture took on the food industry. Cornell University Press.

D'Aveni, R. A. (2007). Mapping your competitive position. Harvard business review, 85(11), 110-20.

Davis, C. G., Blayney, D., Muhammad, A., Yen, S. T., & Cooper, J. (2010). A cross-sectional analysis of US yogurt demand. Journal of food distribution research, 41(2), 36-45.

Department for Business, energy, and industrial Strategy (2018). Energy Consumption in the UK July 2018. Energy Consumption in the UK. London: Department for Business, energy, and industrial Strategy, pp.1-40.

Department for Business, energy, and industrial Strategy (2018). Energy Consumption in the UK July 2018. ENERGY CONSUMPTION IN THE UK. London: Department for Business, energy, and industrial Strategy, pp.1-40.

Doole, I. & Lowe, R, (2012). International marketing strategy: Analysis, development and implementation. 6th ed. Andover: Cengage

Gianos, J. F. (2013). A Brief Introduction to Ansoffian Theory and the Optimal Strategic Performance-positioning Matrix on Small Business (OSPP). Journal of Management Research, 5(2), 107.

Gibbons, P. M., Kennedy, C., Burgess, S. C., & Godfrey, P. (2012). The development of a lean resource mapping framework: introducing an 8th waste. International Journal of Lean Six Sigma, 3(1), 4-27.

Gripsrud, G., & Benito, G. R. (2005). Internationalization in retailing: Modeling the pattern of foreign market entry. Journal of Business Research, 58(12), 1672-1680.

He, X., & Lopez, R. (2016). Do Firms Price and Advertise to Maximize Profits? Evidence from US Food Industries. In 2016 Annual Meeting, July 31-August 2, 2016, Boston, Massachusetts (No. 235436). Agricultural and Applied Economics Association.

Hollensen, S., Boyd, B., & Ulrich, A. M. D. (2011). The choice of foreign entry modes in a control perspective. IUP Journal of Business Strategy, 8(4), 7.

Hopkin, P. (2017). Fundamentals of risk management: understanding, evaluating and implementing effective risk management. Kogan Page Publishers.

Kersiene, K., & Savaneviciene, A. (2015). The Formation and Management of Organizational Competence Based on CrossCultural Perspective. Engineering Economics, 65(5).

Laufs, K., & Schwens, C. (2014). Foreign market entry mode choice of small and medium-sized enterprises: A systematic review and future research agenda. International Business Review, 23(6), 1109-1126.

Martínez-Noya, A., & García-Canal, E. (2011). Technological capabilities and the decision to outsource/outsource offshore R&D services. International Business Review, 20(3), 264-277.

Mohammed, R., Murova, O., & Chidmi, B. (2017). Demand for Yogurt in the Trend of Manufacturer Brand and Organic Information. In 2017 Annual Meeting, February 4-7, 2017, Mobile, Alabama (No. 252728). Southern Agricultural Economics Association.

Morschett, D., Schramm-Klein, H., & Swoboda, B. (2010). Decades of research on market entry modes: What do we really know about external antecedents of entry mode choice?. Journal of International Management, 16(1), 60-77.

Mullins, J. W., Walker, O. C., Boyd, H. W., & Larréché, J. C. (2010). Marketing management: A strategic decision-making approach. Boston: McGraw-Hill.

Ozgen, E. (2011). Porter's diamond model and opportunity recognition: a cognitive perspective. Academy of Entrepreneurship Journal, 17(2), 61.

Riasi, A. (2015). Competitive advantages of shadow banking industry: An analysis using Porter diamond model. Business Management and Strategy, 6(2), 15-27.

Robinson, R. A. (2017). Examination of the Demand for Yogurt by Brand, 2009-2011 (Doctoral dissertation).

Seubsman, S. A., Kelly, M., Yuthapornpinit, P., & Sleigh, A. (2009). Cultural resistance to fast‐food consumption? A study of youth in North Eastern Thailand. International journal of consumer studies, 33(6), 669-675.

Shortt, C., & O'Brien, J. (2016). Overview of opportunities for health-enhancing functional dairy products. In Handbook of functional dairy products (pp. 19-30). CRC press.

Song, C., Goto, K., Hu, M., & Wolff, C. (2015). The impact of social and cultural factors on the consumption of western fast food among Chinese children. Community Development Journal, 50(4), 709-723.

Tate, W. L., Ellram, L. M., Schoenherr, T., & Petersen, K. J. (2014). Global competitive conditions driving the manufacturing location decision. Business Horizons, 57(3), 381-390.

Vishnevskiy, K., Karasev, O., & Meissner, D. (2016). Integrated roadmaps for strategic management and planning. Technological Forecasting and Social Change, 110, 153-166.

Wadhwa, K. (2011). Foreign direct investment into developing Asian countries: The role of market seeking, resource seeking and efficiency seeking factors. International Journal of Business and Management, 6(11), 219.

Zanoni, S., & Zavanella, L. (2012). Chilled or frozen? Decision strategies for sustainable food supply chains. International Journal of Production Economics, 140(2), 731-736.