h3 gourmet: great to go upmarket, but are people willing to pay for the difference?

Abstract

This case study addresses the pitfalls of internationalization and entrepreneurial decision-making in the creation of relevant differentiation for a gourmet fast-food concept, whose foundations lay in good old fashioned fast food rules dressed in a gourmet experience. In standardizing their market offer and having engaged in a frantic expansion program, h3, the organization under scrutiny here (and that illustrates business and management research methods in practice) has had to face serious strategic challenges and concerns. Initially limited to the confines of their home nation, Portugal, with subsequent expansion to Poland, Spain and Brazil, the chosen strategy of geographical diversification cannot be said to have been an indisputable success, as the organization is currently witnessing serious divestment decisions away from the Polish and Spanish markets. The Brazilian market on the other hand appears to be thriving. Their concept is that of gourmet burgers with a fast food logistics and service culture underpinning it. Competition has been tough as several competitors have flocked into the market with pretty much the same idea. The company has sought to establish an emotional difference in what is increasingly a saturated market, although the h3 brand is quickly becoming synonymous with a novel association that has been emerging in the minds of consumers, gourmet and fast food coupled together in one food business concept. However, some service elements and customization characteristics (co-creation possibilities) may give the business a unique angle for relevant market differentiation. Whilst there is no profound emotional difference that would otherwise have been present via the association with a well-recognized and established brand, h3 appears on the surface to have an even more worrying problem, in that they are apparently stuck in the middle in terms of their strategic outlook into the future, as on the one hand their cost structure is not fast food like and on the other, their ethos and potential basis for differentiation, gourmet meals is susceptible to imitation by any middle of the road competitor with serious intentions of coming into a profitable market. In addition to possibly not having enough differentiation they are also not “branded” sufficiently…how best to tackle the future is then their plight.