Nando’s International: Taking chicken to the world
Nando’s International, led by Robert Brozin, celebrated its listing on the Johannesburg Stock Exchange (JSE) in 1997. The move aimed to shield Nando’s thriving South African operations from the financial strain of international expansion while paving the way for global growth. Nando’s management team was optimistic that their strategies would help the company achieve “critical mass” in international markets by 2000, with significant profitability expected thereafter.

Origins and Expansion in South Africa
Brozin, an entrepreneur with a background in commerce, was introduced to Portuguese flame-grilled chicken by his friend Fernando Duarte in 1987. Despite lacking experience in the food industry, Brozin saw the potential in combining quality food with fast service, defying the conventional wisdom that the fast-food market was saturated. Together, they bought a small restaurant in Johannesburg for R80,000, targeting the Portuguese community first and later expanding across South Africa. By 1990, Nando’s had four outlets, including one in Portugal. Their rapid expansion led to a partnership with the Hollard group to finance new stores. However, by 1995, the partnership proved cumbersome, and Nando’s restructured, buying out joint venture partners. By 1997, Nando’s had grown to 117 stores in South Africa, but international competition was intensifying.

Corporate Culture
Nando’s success was built on a strong corporate culture that emphasized passion, courage, integrity, and a family-like atmosphere. Jane Hume, appointed as Human Resources Executive in 1996, played a key role in preserving this culture. Nando’s encouraged an entrepreneurial spirit, allowing store managers (Patraos) to take ownership of their operations while adhering to company values.
This culture extended to recruitment, training, and performance management, with an emphasis on learning from mistakes. However, as Nando’s expanded internationally, concerns arose about whether the company could maintain its distinctive culture while scaling up globally.

Marketing and Advertising
Marketing was central to Nando’s strategy. In 1992, Josi McKenzie was hired to lead Nando’s marketing efforts. Known for its irreverent and humorous style, Nando’s advertising helped distinguish the brand from its competitors. Their campaigns, rooted in a deep understanding of South African humor, won numerous awards. However, there were concerns about whether this style could be replicated in foreign markets, where cultural nuances varied.
Nando’s also emphasized community involvement, encouraging individual stores to engage in local promotions that supported the brand’s image. As the company expanded internationally, marketing had to adapt to local contexts, with store-level marketing seen as crucial in new markets.

International Expansion
Nando’s first international ventures were in southern Africa, followed by expansions into countries like Australia, the UK, Canada, Israel, and Portugal by 1997. However, apart from Zimbabwe, none of these international markets were profitable. Initial attempts to franchise Nando’s abroad were unsuccessful, largely due to inexperienced partners and a lack of alignment with Nando’s philosophy.
By the mid-1990s, interest from Southeast Asian entrepreneurs prompted Nando’s to reassess its international strategy. In

response, Nando’s International was formed in 1995 to manage global operations. Mike Denoon-Stevens, an engineer with an MBA, was appointed to oversee global strategies and infrastructure development. His team spent two years building systems, models, and manuals to support Nando’s international growth.

As South African exchange controls relaxed, Nando’s bought out its overseas franchisees and took direct equity stakes in international markets. This allowed for faster implementation of their global strategies and ensured greater control over international operations.

Challenges of Global Expansion
Nando’s faced several challenges in its international expansion. The first was maintaining its distinctive culture while adapting to different local markets. Management emphasized the importance of preserving Nando’s core values – pride, passion, courage, integrity, and family – while allowing for local interpretations. This approach, known as “glocalization,” aimed to balance global consistency with local relevance.

Another challenge was building brand awareness and achieving critical mass in foreign markets. Marketing strategies had to be adapted to local contexts, and in many countries, Portuguese food was unfamiliar. Nando’s focused on educational advertising that retained the brand’s irreverent tone. However, translating humor across cultures remained a challenge.
In markets like Australia and Zimbabwe, Nando’s began to establish national brand awareness, but in the UK and other countries, marketing efforts were still at the store level. Nando’s provided marketing manuals to guide local efforts, but Patraos were encouraged to adapt campaigns creatively to their markets.

Financial Models and Critical Mass
To guide its international expansion, Nando’s developed a “Store Model” and a “Country Model.” The Store Model projected sales, costs, and profitability over four years, with the goal of breaking even by the second year. The Country Model consolidated these projections to assess the feasibility of opening stores in a particular country. Critical mass, defined as the number of stores needed to support a regional office and achieve profitability, was crucial to long-term success. This number varied by country but was typically between ten and fifteen stores.

Nando’s also recognized the importance of securing sufficient financing to support its global ambitions. Listing on the JSE helped increase its capital base, allowing for further international expansion. The company adopted a flexible financing approach, with equity participation preferred in most countries, while franchising was reserved for markets where shared equity would be unprofitable.

Listing and Restructuring
Prior to its JSE listing, Nando’s restructured its operations. Nando’s International Holdings (NIH) was formed as the parent company, holding 54% of Nando’s Group Holdings (NGH), which oversaw South African operations. NIH also held 100% of Nando’s International (NI), responsible for global activities, and Nando’s International Investments (NII), which managed international financing. The restructuring aimed to protect the South African operation from potential losses during international expansion.
The listing was a success, with shares oversubscribed by 25%. The international management team believed that their new infrastructure and strategies would enable Nando’s to achieve critical mass globally by 2000, setting the stage for exponential growth and profitability.

Nando’s International Structure and Global Expansion Strategy
Nando’s International developed a global organizational structure to ensure optimal operations across its various markets. The structure is divided into three main categories: mature markets, developing markets, and research and development (R&D). This classification helps the company manage its global operations effectively while allowing flexibility for growth and innovation.

Mature Markets
Mature countries, which include South Africa, Zimbabwe, the United Kingdom, and Australia, have a minimum of 12-18 stores and a complete head-office structure. These countries have been operating for at least three to five years and have employees who fully understand the company’s values and operational culture, known as the Nando’s Covenant. In mature markets, the focus is on providing strategic guidance and motivational support rather than day-to-day management.

Developing Markets
All other countries are classified as developing markets. This category includes markets with fewer stores or countries where Nando’s has recently launched operations. Examples include Canada, Israel, Portugal, and several African countries. Developing markets require significant attention and training to understand the Nando’s culture and operating style. The goal is to eventually mature these markets to the point where they can function independently with full head-office structures.

Research and Development
Nando’s International also emphasizes research and development (R&D) to ensure the brand stays ahead of industry trends and innovations. The R&D division covers a broad range of areas, including marketing, technology, store design, and product development. While research is typically conducted at the country level, findings are shared across the global organization to foster innovation and consistency.

Communication and Coordination
With Nando’s global expansion, communication became crucial. In its early stages, communication within Nando’s was informal and personal, but the company recognized the need for a more formalized system as it grew internationally. To facilitate global communication, Nando’s developed an intranet system called “The Nando’s Ring of Fire.” This system serves as a communication hub, allowing functional executives across different countries to share information on disciplines such as finance, operations, marketing, and IT.

The intranet includes bulletin boards for each discipline, where teams can discuss ongoing projects, share best practices, and improve operational efficiencies. There are also library pages containing important resources, such as Nando’s advertisements, the Creed, the Covenant, and other key documents.
The Importance of Personal Meetings
In addition to the digital communication system, Nando’s International leadership continues to emphasize the importance of personal meetings. Senior executives regularly meet with country heads and local managers to maintain the brand’s unique culture and ensure that personal relationships remain a key part of the business.

Selecting International Partners
Choosing the right local partners is critical to Nando’s international success. These partners are responsible for running operations at the country level, while local Patraos manage individual stores. Partner selection has often been informal, with potential partners approaching Nando’s, or third parties such as brokers making introductions. The company evaluates potential partners based on shared values, financial strength, local networking ability, and commitment to the business.
Partners must be willing to endure a period of limited profitability, as it can take up to three years to establish a market presence. Financial strength and commitment are essential, as partners need to remain focused during this challenging period.

The Nando’s Experience
One of Nando’s key competitive advantages is that it offers more than just food – it delivers an experience. The company’s strengths lie in its culture, flexibility, and people-focused outlook. In a world where any restaurant can offer good chicken, the difference lies in how the product is delivered, and Nando’s ensures that its people and culture remain at the forefront of its operations.

Southeast Asia Expansion
In 1996, Nando’s set a goal of having 800 stores worldwide by 2005. The company’s international team began exploring which markets to enter next, using criteria such as the popularity of chicken, local preferences for spicy food, and compatibility with the Nando’s experience. Southeast Asia emerged as an ideal region for expansion due to its strong demand for chicken and spicy food, as well as its growing economy and familiarity with Western brands.

The first three markets identified were Singapore, Malaysia, and Indonesia. In Singapore, Nando’s partnered with the Kua family, who had interests in the property sector. The company planned to open 20 stores in Singapore, starting with a mid- tier location to avoid high property rental costs.
In Malaysia, Nando’s partnered with another family, securing a 30% equity stake, the maximum foreign share allowed. Malaysia’s larger population and demand for spicy food made it an attractive market, with potential for up to 150 stores. Nando’s provided extensive training and operational support to ensure the success of its first store in Kuala Lumpur, with plans for an aggressive promotional campaign. Indonesia, although slightly behind in negotiations, was also identified as a promising market for Nando’s expansion.

Future Market Considerations
While Southeast Asia was the primary focus for Nando’s international growth in the late 1990s, other regions were considered for future expansion. Nando’s was cautious about entering the United States, acknowledging that it needed more experience and resources before tackling the competitive U.S. fast-food market.

Latin America also posed challenges due to language barriers, although Nando’s executives indicated they might consider the region after establishing themselves in the U.S. Similarly, Europe was seen as a mature market with high operational costs and significant regulatory hurdles. Despite these challenges, Nando’s planned to use London as a hub to eventually break into the European market.
Middle Eastern markets were also considered for future expansion, although the company recognized that regional consolidation was necessary before further growth.

Nando’s Global Vision

By 1997, Nando’s International had solidified its strategy for global expansion, with a focus on consolidating existing markets and expanding into Southeast Asia. While there were concerns about whether the company had the resources and capacity to succeed internationally, Nando’s leadership remained committed to its original vision of global growth.
The company’s leadership believed that international exposure was vital to staying competitive in South Africa and that expansion was essential to maintaining the entrepreneurial spirit that defined the brand. Continuous innovation and a willingness to take risks were seen as key drivers of Nando’s success.
In April 1997, Nando’s team was optimistic about the future. They believed that their carefully developed methodologies and strategic criteria would enable them to succeed in Southeast Asia, and they remained confident in their ability to achieve their ambitious global growth targets.

New Insights on Nando’s International Structure
Since the original expansion, Nando’s has refined its international structure to maintain its brand identity while adapting to local markets. Each mature country operates with a significant level of autonomy but remains aligned with Nando’s core values through regular interaction with the global head office. The development of leadership programs and global training initiatives helps foster a unified Nando’s culture across its international operations.
Nando’s also places a strong emphasis on local adaptability, ensuring that its stores in different regions reflect the tastes and preferences of the local population. This approach has allowed Nando’s to remain relevant and competitive as it continues to expand globally, with a focus on sustainable growth and innovation.

Adapted from: (Case 18. Nando’s International: Taking chicken to the world. Re-printed with the kind permission of De Wits Business School. http://cws.cengage.co.uk/hoffman/students/cases16-18/case_18.pdf)

Question 1 (20 Marks)
Assess the reasons behind Nando’s struggles to establish profitable operations in foreign markets such as Australia, the UK, and Canada. Additionally, propose two alternative market entry strategies that could have been more effective in these regions, and justify your recommendations.

Question 2 (20 Marks)
Critically discuss the role of Strategic Alliances and Joint Ventures in global marketing strategy with reference to Nando’s. Demonstrate how Nando’s can ensure that these partnerships align with their corporate culture, values, and long-term strategic objectives. Ground your discussion in relevant strategic management models such as Transaction Cost Economics (TCE).

Question 3 (20 Marks)
Nando’s advertising has been tailored to reflect the local psyche in South Africa, leading to award-winning campaigns. Assess Nando’s unique advertising style and suggest changes that Nando’s should make to its communication strategies to effectively resonate with international audiences.

Question 4 (20 Marks)
Nando’s corporate culture is a key component of its operational success in South Africa. In that context, analyse how Nando’s can maintain its corporate culture and core values while expanding into diverse international markets. Use the CAGE framework to critically examine the challenges and opportunities Nando’s faces in transferring its corporate culture to culturally diverse global markets.

Question 5 (20 Marks)
Nando’s has differentiated itself through its irreverent marketing style and premium brand positioning. Apply the Porter’s Generic Strategies framework to assess Nando’s competitive positioning in both the South African market and international markets. Discuss how Nando’s can modify its brand positioning to better align with global consumer preferences while retaining its unique identity.

Answers to Above Questions on Strategic Marketing

Expert Answer 1: An analysis of the given case study of Nando’s international expansion indicates that the company has faced significant struggles while expanding into the foreign markets. This section of analysis aims at identifying the reasons that led to struggles by the company and it will also suggest two alternative market entry strategies that the company can consider in performing International expansion.
Struggles faced in International Expansion:
The international expansion of Nando’s in market such as Australia, the UK and Canada indicates that the company has faced with challenges because of inexperienced franchise partners, failure to adapt cultural conditions in the target market, lack of propen knowledge in terms of brand awareness in target market, operational issues, inadequate research in the target local market etc. To get detailed analysis of all these challenges, connect with our strategic marketing management expert at assignmenthelp.co.za