Management of Caf de Cora - Essay Example

?Strategic Marketing Management Table of Contents 0 Introduction 3 2.0 Industry Competition 3 2 Threats of New Entrants 4 2.2 Bargaining Power ofBuyers 5 2.3 Bargaining Power of Suppliers 5 2.4 Threat of Substitutes 5 2.5 Rivalry among Existing Firms 6 3.0 Distinctive Competencies 6 3.1 Corporate Architecture 7 3.2 Innovation 7 3.3 Reputation 8 3.4 Comparative Analysis with McDonalds 8 4.0 Strategic Directions for the Next 3 to 5 Years 9 4.1 Succession Planning 9 4.2 Motivation Planning 10 4.3 Capital Expenditure 11 5.0 Value Proposition of the SBU 11 6.0 Marketing Execution 12 6.1 Product 12 6.2 Price 12 6.3 Place 13 6.4 Promotion 13 7.0 Conclusion 14 References 15 1.0 Introduction The research paper is concerned with the study of strategic operations of Cafe de Coral which is a group of fast food restaurant. Chains of fast food restaurants are owned as well as operated by Cafe de Coral. The fast food group consists of various brands such as The Spaghetti House, Oliver’s Super Sandwiches, Cafe de Coral, Ah Yee Leng Tong and many others. The group was founded in the year 1968 and its first restaurant was opened up in the district of Causeway Bay of Hong Kong in the year 1969. At present, the group has over 540 retail outlets all over the world with its several brands. This paper will deal with the study and analysis of the fast food industry in Hong Kong and accordingly will penetrate into one of the strategic business units of Cafe de Coral. The strategic business units of Cafe de Coral consist of fast food, specialty restaurants, institutional catering, food processing and distribution and overseas. In this research paper, the fast food unit of Cafe de Coral at Hong Kong will be taken up for evaluation. With respect to the analysis of the industry and strategic business unit of Cafe de Coral, specific strategic direction and relevant execution explanation will be provided (Cafe de Coral, 2011). 2.0 Industry Competition The fast food industry competitiveness in Hong Kong will be discussed in this section with reference to the Porter’s Five Forces Model. The forces of the model consist of barriers to entry into the Hong Kong’s fast food industry, bargaining power of the buyers in the industry, bargaining power of the suppliers, threat of the substitutes in the industry and the rivalry among the existing players in the industry. 2.1 Threats of New Entrants The threats of the new entrants have to be described in terms of a few aspects for evaluating the factors totally. The aspects are the economies of scale, capital requirements, product differentiation and cost disadvantages. Taking the advantage of the economies of scale, the new entrants interested in the class of limited service restaurants can seek certain favour to economies of scale. But these advantages get weakened by the alleviation of founding a restaurant that provides quick service. Differentiating the products or the fast food being provided is a difficult task in the industry, but for private start-ups this is not a difficulty and thus not a barrier to entry. The requirements of initial capital might repress the development of nation. The cost disadvantages stem from the fact that the established companies in the fast food industry already enjoy the advantage of innovative technology, favourable sites, access to raw materials, experience and government subsidies. There is stiff competition in the Hong Kong fast food industry due to the presence of an enormous number of fast food chains and restaurants. In spite of all these facts, the strategic business unit of Cafe de Coral perceives a high future growth as the receipts of food and beverages have showed upward trend during the past years. From all these analysis, it can be inferred that the entry barriers in the Hong Kong fast food industry is not high and according to the current market condition, the SBU expects growth (ACCA, 2010). 2.2 Bargaining Power of Buyers The Hong Kong fast food industry is characterised by several individual customers who place pretty small orders. There is no switching cost of customers in the industry whereas the industry is time and price sensitive. Thus, from this fact it is definite that in the fast food industry, the power of the individual buyers is low. However, the customers are sensitive towards price as they want their food to be delivered fast. Along with this fact, they are price sensitive because they prefer food which offers value based pricing. The amalgamation of high price sensitivity with lower buying power may often pose as a moderate threat towards entry. 2.3 Bargaining Power of Suppliers The bargaining power in the Hong Kong fast food industry is low as there are a lot of suppliers to choose from; for the SBU. It is even unlikely that the suppliers would integrate forward. There is prevalence of several large suppliers in Hong Kong and thus the bargaining power does not pose as a threat towards entry for new entrants. The SBU is free to easily switch suppliers and thus reduces the power of suppliers to a great extent. 2.4 Threat of Substitutes There is presence of a large number of fast food firms in the Hong Kong industry. Along with this fact, lower cost of switching, existence of similar products and option of healthier products increase the threat of substitutes in the Hong Kong fast food industry. One way to cope up with this threat for the SBU of Cafe de Coral is to focus more on strategy of product differentiation. 2.5 Rivalry among Existing Firms The number of competitors in the Hong Kong fast food industry is large due to the presence of huge number of competitors. One advantage of the fast food industry is that despite the downturn in the economic condition, it is stable. Cafe de Coral is perhaps the largest in the industry and this feature reduces the fear of extreme rivalry to a great extent. However, giants such as McDonald’s at times might pose a serious threat. 3.0 Distinctive Competencies The perspective of distinctive competencies of Cafe de Coral’s fast food chain will be explained in this section with respect to the view of John Kay (1993). According to Kay, “the source of competitive advantage is the creation and exploration of distinctive competencies” (Kay, 1995). The advantages and disadvantages of Cafe de Coral’s fast food, the SBU will be evaluated with the help of the following three distinctive capabilities as identified by John Kay. 3.1 Corporate Architecture Corporate architecture is building up of a network of contracts with relationship focused overview both within and outside the firm. The architecture value is enhanced by the organisation’s capacity to create routines and enrich the knowledge of the organisation. The objective of corporate architecture is to respond promptly to the changing circumstances of the market for achieving open and easy knowledge exchanges (Kay, 1995). Cafe de Coral holds regular board meetings where papers related to the board and meeting agenda are precisely sent to the Directors. Circulation of board papers is undertaken for ensuring that adequate information is sent to them on time. Cafe de Coral holds a responsibility of passing the information in a timely manner in order that all the Directors can adequately get involved in the decision making activity of the company. Thus, it can be well mentioned that the SBU of Cafe de Coral bears a full advantage of building up the unique corporate architecture (Cafe de Coral Holdings Limited, 2010). 3.2 Innovation John Kay (2010) has elicited that innovation is the dynamism of the market economy. This dynamism evolves from the product and process innovation. He has even mentioned that the innovation in this respect, in fact, arises from external market structure of the existing condition. The performance of the companies with regards to innovation is actually initiated by their capability to respond to the prevailing market competition. Cafe de Coral is an undisputed market leader in the fast food industry and with this market position in concern, it always strive to build pride through its marketing excellence and product innovation. The fast food giant never compromises with its quality standard of food and service being provided to the customers. Cafe de Coral’s innovative distinctive competency is the quick service (Cafe de Coral, 2005). 3.3 Reputation Reputation as another distinctive competency; is nothing but the experience of the customers. This involves the quality signals, warranty, other brand’s association and spreading of the word-of-mouth. Reputation of the company is enhanced once the above mentioned traits are established (Value Based Management, 2011). Cafe de Coral has a distinctive position in the world market and has evolved as a restaurant business that provides quick service. The company, with the horizontal and vertical diversification has evolved as a reputable sector in the world market and the perception of the customers is even valuable in the mass market (Cafe de Coral, 2005). 3.4 Comparative Analysis with McDonalds From the review of the Hong Kong’s fast food industry, it has been observed that McDonald’s poses a serious challenge to Cafe de Coral. This is because McDonald’s focuses more on the commitment to serve the community not only through various food provisions but also through contribution towards the general society. Certain fascinating facts about the operation of McDonald’s have created the challenge. However, it is also evident that Cafe de Coral focuses more on the corporate social responsibility. But McDonald’s is more visible in this field within the Hong Kong market. The other aspects of both the holdings seem more or less similar as regards to the enjoyment that customers derive from them (McDonald’s Corporation, n.d.). 4.0 Strategic Directions for the Next 3 to 5 Years Cafe de Coral has outperformed its competitors with respect to sustaining in the global economic condition. With regard to the tremendous performance in the year 2010, as evident from their annual report, the following strategic directions will be helpful: 4.1 Succession Planning Cafe de Coral can strive towards initiating planning of management succession in the Hong Kong fast food sector. The upcoming economic growth presumed in the coming years will require dynamic approach in the competition. Young blood with innovative ideas and mode of doing business will bring profitable results for the SBU. 4.2 Motivation Planning The SBU of Cafe de Coral should look after motivation factor of its employees in order to fight with the challenges in the upcoming years. Internal strength is more important to win the external world. Thus, for sustaining growth and improving competitiveness, Cafe de Coral should try to enhance the inner strengths of its organisation. 4.3 Capital Expenditure Pertaining to the present success of the organisation, Cafe de Coral should focus on higher capital expenditure during the next three to five years. Expansionary strategy should be followed by Cafe de Coral as the current market condition is highly competitive. 5.0 Value Proposition of the SBU The creation of value is a part of a business strategy for a firm. One compact way of creating sustainable value is through satisfying the customers. For staying ahead in the competition, Cafe de Coral primarily focuses on the perspective of opening up new and fresh stores and accordingly invested more than HK$35 million during the last year. Offering of quality products according to the basic demands of the customers is the key towards value proposition. Cafe de Coral should focus more on the repackaging and upgrading of their menu items for creating value. Cafe de Coral has increasingly focused on the continuous upgrading of their fast food offerings and has thus so far been able to create and enhance value of their holdings. This characteristics of the company helps in standing out in the competition by creation of distinctive competency. This value creation strategy of Cafe de Coral has acted as a differentiation strategy in the world market (Kwong, 2009). 6.0 Marketing Execution The execution of proper marketing strategy is essential for attaining the strategic directions. The marketing execution will be demonstrated with the help of elements of the marketing mix. 6.1 Product The product offerings of Cafe de Coral should be designed as such that they not only satisfy the customers’ needs but also adhere to the objectives of the company. The menu is specially designed for meeting the budgets and tastes of the customers. The strategic direction of increased capital expenditure will be achieved through this maintenance of the menu. Along with these, introduction of new and seasonal products will further enhance the competitiveness. 6.2 Price Cafe de Coral can approach towards bringing certain changes in the pricing strategy of their SBU. The pricing strategy should be formulated as such that they completely adhere to the strategic directions of their future plans. The company at present is running at their competitive level with high profit margins, even at the time of global recession. Thus, the company can afford to bring certain degree of changes in the pricing strategy. 6.3 Place Apart from utilising the shopping centres, districts, business cores, public and private housing estates and industrial areas, Cafe de Coral should increasingly emphasise on opening up of distribution centres in various parts of the world. Distribution centres help in directly reaching to the customers. Customers can be then entitled to easily reach their favourite locations of enjoyment with less difficulty. 6.4 Promotion Cafe de Coral can increasingly promote their products in order that reaching out to more people at a convenient way can become possible. At present, advertisement is increasingly used as a promotional tool. At the same time, utilisation of more promotional tool will make the promotion more effective. Promotional tools such as internet and promotion of entertainment events can really add prospect to the firm’s overall objective (Cafe de Coral, 2005). The above adherence of the elements of the marketing mix will help Cafe de Coral to enhance their current market position. The adherence will help in augmenting the present competition along with the sustenance of the prevailing growth. 7.0 Conclusion The research on the present topic of the paper suggests that Cafe de Coral, being the largest fast food chain in the global market follows competitive strategy for performing better in the world market. The objective of this research paper has been partially fulfilled as appropriate strategic directions have been suggested for the firm. The strategic business unit of Cafe de Coral fast food segment has been discussed with respect to the various strategies. The marketing mix elements have been discussed with regard to the suggested strategic direction. Comprehensive adherence to the strategies will fulfil the future perspectives of the company. References ACCA, 2010. Business Plan. Hong Kong. [Online] Available at: http://hongkong.accaglobal.com/pubs/hongkong/general/technical_activities/sme/businessplan/illustrativeplan.pdf [Accessed February 17, 2011]. Cafe de Coral, 2005. Strategic Business Unit. Show. [Online] Available at: http://www.cafedecoral.com/web/show/show.jsp?ppid=10 [Accessed February 17, 2011]. Cafe de Coral, 2005. Corporate Information. Web. [Online] Available at: http://www.cafedecoral.com/web/ci/coporate3.htm [Accessed February 17, 2011]. Cafe de Coral, 2005. Strategic Business Units. Web. [Online] Available at: http://www.cafedecoral.com/web/sbu/sbu1_2.htm [Accessed February 17, 2011]. Cafe de Coral Holdings Limited, 2010. Annual Report. Web. [Online] Available at: http://www.cafedecoral.com/web/download/are2010.pdf [Accessed February 17, 2011]. Kay, J. 1995. Foundations Of Corporate Success: How Business Strategies Add Value. Oxford University Press. Kay, J., 2010. Radical Innovation Rarely Comes from Within. Financial Times. [Online] Available at: http://www.johnkay.com/2010/11/24/radical-innovation-rarely-comes-from-within [Accessed February 17, 2011]. Kwong, L. H., 2009. Corporate Information. Web. 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