Coursework 2 Part A
Restaurant Industry Analysis
As initially defined, the restaurant industry is under the umbrella of hospitality industry, specifically the foodservice category. Eating establishments from expensive restaurants to fast food chains comprises the restaurant industry. Significant to such industry are segmentation variables which include price level, service level, cuisine and alcohol content. The persistent growth of the said industry is because of the amount of disposable income allotted for food spending (Davies, Lockwood and Stone, 1998; Grant, 2005). The initiative to identify the boundary before analysing the restaurant industry proved to be beneficial because the analysis has its focus and direction, and it does not blur with that of other industries’ dynamics and nature. Because of the reconciled definition, it would be possible to provide a greater understanding of the strengths and weaknesses of the industry in relation to its suppliers and buyers.
Since the industry does conform to increasing competition due to less number of entry barriers, there are specific factors putting center at the food that must be consider. Basham (2007) maintains that these are the quality of the food, the quantity of the food and the prices of the food. The requirement then is to differentiate the products so that people will always have a variety of choice thereby come back for their product. As such, the restaurant industry finds difficulties in cultivating consistent customer loyalty. As the restaurant industry is not nearing its maturation stage and saturation point, the extent of rivalry is very high. Internal competition continuously increases because of food quality and consistency as well as the range of products being offered. Likewise, the restaurant industry is struggling because of the changing consumer demands in accordance with ethical consumerism; health is now an important factor. Wendy’s and Burger King, for example, are extending their menu offerings especially the breakfast menu, for the purpose of competing with McDonalds. With a low level of capital intensity, acquiring competitive advantage in the restaurant industry also lies in the ability to exploit technology to ensure quality service while also reducing customer wait time.
In the restaurant industry, if the buyers are not satisfied with anyone of the key elements identified above they can easily switch their suppliers. Leaving the suppliers at the disadvantaged position, suppliers also have limitations in their offerings and that restaurants could always refer to other suppliers since the supplier does not provide anything unique only to restaurants. As such, the suppliers have no power to keep the restaurant business going. Say a company like the Pizza Hut decides to buy spices from other supplier because of the rise in prices of the recent supplier. Such a change requires Pizza Hut to find a similar type of supplier with similar type of spices offerings at a better price. Pizza Hut has its own supplier code and conducts must not deviate with the code and when happened, the company shows no reluctance in changing suppliers (Price, 2007). Nonetheless, the restaurant industry is not threatened of the forward integration because the suppliers have no intentions of the selling the products of the restaurants but only raw materials.
Going back to the buyers, buyers in the restaurant industry are said to have weaker power because of the highly individualistic nature of the industry. Foods are served for each person and are not bought in large volumes. Further, the levels of uniqueness of the industry’s meals and surrounding are another determinant of the buyer power, aside from the available money to be spent on food. Consumers of the restaurant industry are not price sensitive especially for the high class restaurants, contributing to their weaker position in the industry. Nonetheless, the consumers will attempt to find best prices for a meal as well, and will settle for restaurants which offer promotions and price cuts. Fast food chains like McDonalds, Starbucks, Burger King, etc. are examples of these restaurants apart from catering to on-the-go people through drive thrus (Eagle and Brennan, 2007). The decision of dining out, even so, depends on the choice of the buyers, making them powerful in this sense. Since they can do without the products from restaurants of whichever class, we can say that buyers have a relatively strong influence on the strategies of restaurants.
In sum, provided that taste, palatability, cost, convenience, diversity and availability are the key elements in the consumption, it would be necessary for the restaurant industry to localized product offerings as well as diversify them. In addition, it would be also highly appreciated if food will be offered at the least possible time and place. The quality of the taste must not be compromised despite this, with relation to reasonable pricing and high levels of customer servicing. The five forces analysis proves that striking a balance between products, pricing and service is critical in achieving competitive advantage. The attractiveness of the industry is in its easy penetration and the willingness of the people to spend more money on better quality food. However, it was also unattractive because of the easily exploited competition because of the many players, making low switching costs and substitution possible.
Five Forces Analysis
1) Bargaining power of suppliers
- Very low
- No influence on the success of the restaurant industry
- Non-existence of threat of forward integration
2) Bargaining power of buyers
- Low to high power depending on the class/category of restaurants
- High when it comes to decision-making
3) Threat of new entrants
- Less entry barriers
4) Threat of substitutes
- Low switching costs
- Many substitutes
5) Rivalry among competitors
- High competition
- Ever-changing consumer demand
- Flexibility is the key
Reference:
Basham, M., 2007. Industry Surveys Restaurants. Standard and Poor’s, pp. 1-42.
Davis, B., Lockwood, A. and Stone, S., 1998. Food and Beverage Management. Butterworth-Heinemann.
Eagle, L. and Brennan, R., 2007. Beyond advertising: in-home promotion of ‘fast food’. Young Consumers: Insight and Ideas for Responsible Marketers, 8(4), pp. 278-288.
Frumkin, P., 2006. Centralization of all restaurant company’s systems a sensible goal for the future, keynoter says. Nation’s Restaurant News 40(48), p. 27.
Grant, R. M., 2005. Contemporary Strategy Analysis: Concepts, Techniques, Applications. Blackwell Publishing.
Price, S., 2007. The new faces of the food market? The potential for consortia in pizza home delivery. British Food Journal, 99(11), pp. 436-446.
Part B
UK Mobile Phone Industry External Analysis
As noted, UK is one of the most advanced telecommunications markets in Europe and provides relatively low prices for mobile phone usage. The continuous increase for demand in mobile telecommunications is perceived to be the greatest contributor to the welfare of the UK economy where the industry is reported to contribute £15 billion a year to government finances. It was also reported that today there are almost 74 million mobile connections with 86% of the total number of adults own mobile phone and 44% of them uses text messaging on a daily basis at an average of 67 messages per day (MOA, 2008). The key determinants of the sustainable success of the mobile industry in UK are the marketing strategies, brand strengths and support of regulations.
Marketing strategies
Most of the telecommunications companies in the UK have a long standing relationship with its suppliers. Say for Nokia, the core competencies include high tech manufacturing, supply chain management and logistics. As such, major players are able to collaborate with diverse suppliers base though horizontal integration, enabling knowledge and technology transfers between the company and the partners. Such process was also seen as an effective way of multiplying technological capacities. These strong supplier relationships functioned as the international marketing channel (OECD, 2006). There are also contracting firms which handle design, marketing and research. The firms manage downstream processes, allowing the parent company to concentrate on core businesses (Steinbock, 2006). Marketing strategies are considerably important for the mobile industry because it serves as the venue to respond to the changing telecommunications demand of UK consumers. It was significant because through marketing strategies, competition increases, leading to more diversified products and services from telecommunication companies thereby providing people with the freedom for choosing quality vis-à-vis prices.
Local advertising and promotional tactics within the UK mobile phone industry draw from the major advantages of using mobile phones as the center theme of marketing. The major advantage is the direct importance of this communication device to the consumer. Masterman and Wood (2006) maintain that the UK consumers are well aware that mobile phones are highly personal, keeping them at arm’s reach day and night to respond quickly to voice, text and multimedia messages. Further, the UK mobile industry had, and is currently witnessing, a diverse demography as target markets. Today, not only the UK youth consumers are the core market, penetrating in other demographics such as the working market 20 and above. Increasing convergence in technology highlights the innovativeness of communication (p. 127) and is conveyed through a wealth of advertising mediums. These mediums include television, radios, movies/theaters, magazines, newspapers and other printed materials, Internet, billboards and other visual portals.
Brand strengths
Strong branding in the UK mobile phone industry is also a crucial determinant of the success. Specific brands like Nokia is said to shaped the framework of UK innovation system. Increasingly, brands are now expected to be equipped with a range of mobile devices with services which will enable UK consumers to experience music, navigation, video, television, imaging, games, business mobility and others (OECD, 2006). Likewise, there is also increasing demands for brands to provide equipment, solutions and services. As such, the measure of strong brands is diversification, responsiveness, sophistication and flexibility. Through strong brands, the UK mobile phone industry is forward looking whereby tapping knowledge and creating standards and specifications for greater brand acceptance (Steinbock, 2006). As Schroeder, Salzer-Morling and Askegaard (2006) put it, the mobile phone service in the UK is also depending on the strengths of brands to shape and influence consumption trends and patterns based on the ‘standards’ wars into the mobile phone brand ecosystem (p. 192). As such, the importance of this lies in the integration of brand principle in creating distinctiveness while setting boundaries of what a strong brand that makes an industry is. Reflecting the promises of the brand, people evidently prefer the functionality of the products and services.
Support of regulations
With the European Union, the regulations have been more relaxed via the removal of trade and investment barriers thus the substantial increase in the trade volumes. Product regulations and specifications as well as the inception of EU Supplier’s declaration of Conformity intended for telecom and electrical equipment and parts result in greater integration among nations, benefiting distinct mobile industry of these nations (OECD, 2006). UK mobile phone industry also benefited from the regional trade agreements and mutual recognition, allowing a full autonomy on the operations in the domestic and international contexts. Since UK is also a member of World Trade Organization, negotiations leading to the opening of the telecom markets to competition have been feasible. As such, the competition facilitates the intra-trading while also encouraging technology transfers and maintaining competitiveness of the industry (Steinbock, 2006). Complying with regulations ensures that the players in the UK mobile industry are endowed the opportunities to penetrate specific market niches while also concentrating on the domestic capabilities. The support of national and international regulations serves as steadfast interventions, resulting to improvement in minimum performance.
In sum, these three elements are considered to be key determinants of the UK mobile phone industry. Because, enables the effectiveness responsiveness to the demands of the UK consumers when it comes to telecommunications; brands are perceived to be the standard setters in the industry; regulations are said to set the direction of UK mobile phone companies.
Reference:
Masterman, G. and Wood, E. H., 2006. Innovative Marketing Communication: Strategies for Events Industry. Butterworth-Heinemann.
Mobile Operators Association, 2008. History of cellular mobile communications. London, UK Available from: http://www.mobilemastinfo.com/information/history.htm [Accessed 31 October 2008].
Organisation for Economic Co-operation and Development, 2006. Science, Technology and Innovation Indicators in a Changing World. OECD Publishing.
Schroeder, J. E., Salzer-Morling, M. and Askegaard, S., 2006. Brand Culture in the Telecommunications Industry. Routledge.
Steinbock, D., 2006. Innovative Capacity.
Credit:ivythesis.typepad.com
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