INDUSTRY BOUNDARIES FOR RESTAURANT AND FOOD AND BEVERAGE INDUSTRY
From the word boundary itself which means a border or a limit, industry boundaries could be defined as the point at which industries ends or beyond which it becomes something else. This means that industry boundaries are the demarcations between two distinct industries, and so it encompasses both the supply and demand trajectories. Porter (1980) assert that delineating the industry boundaries purports the separation of industries based on the dynamics of competition, strategic position, profitability and attractiveness, through PESTEL analysis, that is. Understanding the industries and its sectors and monitoring the macroeconomic environment are the two main objectives of industry boundaries whereby organizational strategies are at the core of the business conduct.
Strategizing is an important element in the existence, survival and functioning of any group or organization. Many organizations are well aware of the fact that their success if highly dependent on the quality and effectiveness of such dimension. As organization grows in size and complexity, the necessity for efficient and effective strategies multiplies. Strategies that will address the different threats imposed by the internal and external environment and at the same time can explore the opportunities that the new business environment provides are critical.
The two industries that the paper will going to consider are: restaurant and food and beverage. Both are offshoots from the hospitality industry, but are now considered to be increasingly growing and birthed as new emergent industries. According to Grant (2005), the restaurants industry has strategically significant segmentation variables such as price level, service level, cuisine and alcohol license (p. 118). The restaurant industry belongs to the foodservice category which mainly consists of eating establishments from expensive restaurants to fast food chains. The food and beverage industry, on the other hand, mainly concerns retailing of food and beverages merchandise from fixed point-of-sale locations. The establishments under such industry are endowed with special equipments including freezers, refrigerated display cases and refrigerator for the purpose of displaying food and beverage goods. Likewise, they have in-house staffs trained to process food products, guaranteeing proper storage and sanitary conditions required by regulatory authority.
Both industries are growing and are two of the leading retail employer in the world; these industries make for booming industries. Food is always been the top priority when it comes to spending, which explains the growth in the quantity of restaurants, fast-food places, delis, diners, coffee shops, cafeterias and bistros, making these industries as usable unit for analysis.
As evident, however, the definitions of the two industries are somewhat overlapping, considering the examples provided. Grant (2005) also noted that the key challenge is defining the relevant industry because a single business operation may belong to multiple numbers of industries. The simplest definition of industry is a group of firm that supplies a market thereby pointing that industry boundaries means to identify the relevant market (p. 86). With competition as its central relationship, market’s boundaries are could be defined by substitutability in the demand and supply side. In the industries we are taking into account, the difficulty lies in determining the relevant actors and the categorization of product offerings. The challenge of establishing a concise definition for both industries is on the lack of understanding of the dynamics of vertical and horizontal integration and the competition between inter and intra sectors.
For instance, the vertical boundary between the two industries will include the buy or make. Full-service restaurants and grocery stores’ prepared food shops and catering businesses both specializes in service and prepared foods; but we cannot consider food shops and catering as part of the restaurant industry because they are not part of the foodservice industry. Nonetheless, the nature of the business is the same. The horizontal boundaries also exacerbates the demarcation between the two industries, comprising of the scale and the scope of the activities as well as the market power, the degree of entry barrier and the cost per unit of the product.
To reconcile, the paper will define the restaurant industry as eating establishments where meals and drinks are sold and served to customers on the basis of price level, service level, cuisine and alcohol license whereas the food and beverage industry deals with value-for-money foods and beverages and are consumed at home or elsewhere. Taste, palatability, cost, convenience, diversity and availability are the key in consumer decision-making (Davis, Lockwood and Stone 1998). Although both industries are within the context of customer-driven service management schema, the main border that is evident lies on the framework of services provided.
Reference
Davis, B., Lockwood, A. and Stone, S. (1998). Food and Beverage Management. Butterworth-Heinemann.
Grant, R. M. (2005). Contemporary Strategy Analysis: Concepts, Techniques, Applications. Blackwell Publishing.
Porter, M. E. (1980). Competitive Strategy: Techniques for Analysing Industries and Competitors. New York: The Free Press.
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