Tim Hortons Essay

In August 2014, what is Tim Hortons’ strategy?

Tim Hortons’ strategic plan entitled “Winning in the New Era,” would focus on Canadian business rejuvenation, US profit growth and increase international presence by 2018. According to Tim Hortons’ 2013 annual report, the company would allocate resources to marketing efforts to fulfill their promise to delight every customer who encounters its brand. Growing their Canadian business even further (i.e., across the country) seemed to be a given since they already have a sturdy base and customer loyalty in this culture. Increasing market share in the Canadian market would require an internal focus on products and services within existing stores (same-store growth). Two challenging aspects of the new strategy was 1) to optimize their business model and continue to develop a foothold in the US market—referred to as “A Must-Win Battle”—and 2) to leverage their relationship with 3G and to learn more about the international environment

then expand into new global markets. In conjunction with the growth and expansion, Tim Hortons’ plan included the redesigning of its restaurants to suit the latest trends better while increasing its throughput. The company also set a path to seek out opportunities for vertical integration. In a review of the impacting forces, the one they can control most in the immediate is the threat of suppliers. If Tim Hortons was to backward integrate into its supplier stage, it could cut costs which will directly increase its profitability and power over its competition.
Is it working?

Companies measure corporate strategy in the same manner as any other business aspect. The implementation of goal congruence and SMART goal structure provides the groundwork to translate actions into financial data. Tim Hortons reported the following metrics as of June 2014 (Q2):
Return on Assets (ROA):
• The company generated 13.96% (17.99% to 20.5%) more cash compared to 2013 by effectively managing its assets. (Scharr and Rowe, p.7) (Appendix-Income statement analysis tab)
Return on Equity (ROE):
• The company capitalized on internal resources more than external resources (shareholder injections) and generated 21.87% more cash (43.39% to 53.0%) compared to 2013. (Scharr and Rowe, p.7) (Appendix-Income statement analysis tab)
Return on Invested Capital (ROIC):
• The company proved its abilities to efficiently allocate its capital (money) resources to generate improved returns for its shareholders. Tim Hortons improved in this area from 2013 to 2014 by 1.2% (24.61% to 24.9%). (Scharr and Rowe, p.7) (Appendix-Income statement analysis tab). The steady increase in the critical areas of ROA, ROE, and ROIC indicate that the first two quarters of 2014 have been successful. The company must continue to review these and other integral metrics and adjust their strategy accordingly.
Evaluate the strategic choices available to Tim Hortons.

Tim Hortons’ annual report states that over the next five years, they will achieve the following:
• Improving and delivering the ultimate guest experience (customer service).
• Becoming the industry’s most innovative customer-focused company.
• Levering technology.
• Brand extensions.
• Management improvements.
What should be its immediate priorities?

Tim Hortons should carry out its customer service, brand extensions and technologically strategic options first. These are among the easiest to implement with their current structure. Addressing the customer service matter can be done by increasing corporate training and conducting follow up inspections to ensure adherence and consistency at all locations. To extend the brand, in the US the company must develop awareness by clustering locations at the US / Canada border then working itself into major US markets from there. Internationally, it must team up with Burger King using combo unit and joint location strategies to build awareness. Finally, expanding into mobile apps for customer ordering, delivery tracking, and rewards programs will keep the high percentage consumers (18 to 34-year-olds) engaged. Collectively, implementation of these options will be costly, but, per our financial analysis, Tim Hortons has the financial capability to put these in motion immediately (Scharr and Rowe p. 3).
Evaluate whether the proposed acquisition by 3G Capital is a good move for Tim Hortons.

Acquisition deals are either made or broken during the financial due diligence efforts. In this case, Tim Hortons' economic status is exceptional.

Tim Hortons’ financial performance from 2011 to 2013 has reflected revenue growth from 4% to 12% and net income growth from 3% to 5%, over the various years (in no specific trend order).

Good income statement performance is a measure of how well the company manages its core business. Although the balance sheet ratios, such as the current and debt/equity ratios, are declining slightly, the ROA, ROE, and ROIC are increasing, which is a good sign of resource management as well. 3G has noticed the opportunities for creating a synergistic venture between Burger King and Tim Hortons to become the third largest global quick service restaurant company. 3G can capitalize from Burger King’s global branding to bring Tim Hortons to locations it could not have broken into otherwise. A bonus is the location of 3G and Tim Hortons’ headquarters; both are in Oakville Ontario, Canada, which provides the company with a tax benefit and opportunities for more strategic endeavors. (Scharr and Rowe,

p.9-10)