Hard Rock Cafe Strategic Review - Case Study Example

Hard Rock Café Name of Student: Name of Course: Name of Instructor: Date of Submission: Executive Summary The following report give an insight into Hard Rocks Café, a restaurant founded in 1971 with an aim of providing American dining culture in London. Since that time, the organization has growth to be a global entertainment company in addition to its core business of surviving food in its outlets. With its diversification strategy, the company has integrated in music, casinos, clothing and jewelry into its product line to become one of the major entertainment brand names in the market. The introduction will give an introduction to the report and also state the thesis statement. The strategic analysis section will give the in depth analysis on venous elements in the operation of Hard Rock Café. Firstly, the analysis of the organization will give a shot history of the organization, give an insight into its growth and give a SWOT analysis of Hard Rock Café. The environmental analysis will analyze the food and entertainment industry in which Hard Rock Café operates in. The analysis will be made using Porters five forces which shape strategy; namely the bargaining power of suppliers, bargaining power of buyers, the ease of entry, the existence of substitute products and the rivalry among the existing players. The report will then analyze the resources and the competencies of the organization. This will be followed by recommendations to the organization which it is supposed to integrate in its business strategies so as to increase its competitiveness. The report will then use the Ansoff Matrix to develop a strategy for growth of Hard Rock Café. The report will then analyze the suitability of the strategy identified above. Lastly, the report will give recommendations to Hard Rock Café on how it should carry out expansion and growth programs. The conclusion will highlight the main points discussed in the report. Table of Contents Executive Summary 1 Table of Contents 2 1.0 Introduction 5 2.0 Strategic Review 5 2.1 A Strategic Analysis of the Organization 5 2.2 Environmental Analysis 9 2.3 Resources and Competence Analysis 10 2.4 Recommendations for Future Development 10 2.5 Ansoff Matrix to Generate Strategic Options 11 2.6 Review Two or More Options against the Criteria of Suitability, Feasibility and Acceptability 12 2.7 Recommendations 13 3.0 Conclusion 13 References 14 Table of Figures Figure 1Revenue and Operating Profit of Hard Rock Cafe (The Ranks Group PLC, 2005) 7 Figure 2The growth of cafes in the US (The Ranks Group PLC, 2005) 7 HARD ROCK CAFE 1.0 Introduction Hard Rocks Café is a chain of restaurants which are located around the world. The chain of hotels was stated in 1971 by two friends Peter Morton and Isaac Tigrett in London. The two American young men were living in the United Kingdom and were in need of an American Burger in London but could not find one; hence decided to set up a restaurant which would offer American delicacies. Since its establishment in 1971, Hard Rock Café has grown to be a major chain of restaurants around the globe. The café has grown in magnitude and services, now offering a wide range of services in the hotel and restaurant line. In 2004, the Seminole Tribe of Florida became a partner with the Hard Rock Café. The following report gives a deep insight into the Hard Rock Café. It will give an analysis of the organization, the environmental analysis, resources and competency analysis, give recommendations for future development, use TOWS and Ansoff matrices to generate strategic options for the café and give recommendations to the chain of restaurants. 2.0 Strategic Review 2.1 A Strategic Analysis of the Organization Hard Rock Cafe was started in 1971. As outlined earlier, the idea behind its development was the need to bring the American style of dining in London where Isaac Tigrett and Peter Morton were living. The initial outlet was in an Old Rolls Royce dealership where the owner of the premises had only offered a 3 month lease to the duo, not confident about the survival of the business past 3 months. 40 years later, the Hard Rock Cafe remains stronger than before in the market. With operations in about 56 countries and 175 outlets, Hard Rock Cafe is surely one of the major players in the restaurant business around the world (Hard Rock Cafe, 2014b). In line with its name, Hard Rock Cafe has integrated in a musical aspect to its operations, a casino and live music venues in its various outlets (Spikol, 2012) (Hard Rock Cafe, 2014b). The modern Hard Rock Cafe is not the cafe that was started 40 years ago. The cafe has diversified business and gone into other complimenting businesses to make Hard Rock Cafe an entertainment company. One of its major sources of revenue is its live music events, which are over 15,000 annually held over the world (Hard Rock Café, 2014) (Hard Rock Café, (2014c). The cafe has integrated many aspects of rock music, making it a destination of choice for high profile rock music artists (Erlwine, 2014). The company has also ventured into the retail business; selling its hard rock brands merchandise all over the world. The retail business contributes about 40% of the cafe’s revenues. Additionally, the cafe has diversified into the hotel and restaurant business; coming up with great products for its target markets around the world (Hard Rock Café, 2014). Hard Rock Cafe has been enjoying good finances over the last years. With increasing revenue over the years and a steady operating profit, Hard Rock Cafe has emerged to be one of the biggest entertainment brands in the world. The following table compares the revenues and operating profits of Hard Roc Cafe as at the 2005 and 2004 financial years. Figure 1Revenue and Operating Profit of Hard Rock Cafe (The Ranks Group PLC, 2005) The company has also been experiencing a steady growth over the years. It has been able to increase its outlets to 175 in 55 countries around the world. Additionally, it has brought in a new partner into the company, the Seminole Tribe of Florida, which has increased its capital base. The following figure shows the growth of restaurants in the US. Figure 2The growth of cafes in the US (The Ranks Group PLC, 2005) A SWOT analysis of the organisation gives a picture of the Hard Rock cafe with respect to the market.Under the SWOT analysis, it is identified that the company has a wide range of strengths. Firstly, the company has a strong brand name in the market. On this, it is worth noting that Hard Rock Cafe is one of the leading entertainment brands in the world. As a result of this, the company has a competitive edge over its competitors since it is easier for the market to relate with brand Hard Rock. Secondly, the company has strong customer loyalty. From this, it can be acknowledged that there are many return customers; hence illustrating that the company is able to increase its market share around the world and also retains the customers. The associated customer loyalty is a major factor influencing the ability of the company to retain clients over time; hence rising operating profits and revenue. The company is also associated with a unique experience. On this point, it is worth noting that one of the key factors which influence the success of service industries n the world is their ability to provide their clients with a good experience. The blending of food with entertainment has made the Hard Rock Cafe outlets a venue of great customer experience. The major weakness of Hard Rock Cafe is the many number of restaurants which it operates around the world. In addition to the directly owned outlets, the company has several franchises which operate around the world. A look at the outlets shows that each outlet is different from the other; that is there is no that one unifying factor of association. The main opportunity to the company is that it can venture into unexploited markets all over the world. The company can also look into other diversification avenues to increase its product range. Under threats, it is worth noting that the major threat to the great Hard Rock Cafe is competition. The food and entertainment industry is highly competitive (Armon, 2013). For this reason, Hard Rock Cafe is exposed to competition from other food and entertainment companies such as McDonalds, Johnny Rockets Group Inc, Planet Hollywood international Inc and the Landry’s Inc 2.2 Environmental Analysis Hard Rock Cafe has been able to overcome the challenges in the market to become one of the major entrainment trends in the world by its strategic approach to the market. In order to analyse the environment in which the company operates in. this report will use the Porters five forces which determine strategy to analyse the entertainment and hotel & restaurant industry in which Hard Rock Cafe operates in The threat of new entrants into the industry is moderate. In a good industry, the threat of new entrants in the market should be low (Porter, 2008) (Wang & Chang, 2009). Players in the entertainment and food industry are highly dependent on the customer loyalty and their brand name. Owing to the fact that people like to be associated with already brands, new entrants in the market are often faced with the hurdle of reaching out to the market; hence making the threat of new entrants moderate. The bargaining power of suppliers is high. The degree of this power fluctuates depending on the item being supplied and also the country in which the specific outlet is operating in. With respect to the music and collection rights, it can be acknowledged that the bargaining power of suppliers is very high since the artists and production houses own the rights to the music. With respect to the supply of materials used in the food industry, the bargaining power is relatively high; although prone to fluctuations. On the other hand, the bargaining power of the buyers is high. There are many alternatives available to the target customers in the market; hence making their power to be able to choose what they want relatively high (Sun, Fan, Zhou &Shi 2010). The threat of substitute products is high. With rivals such as McDonalds among others providing the same services as Hard Rock Cafe, the threat of substitute products and services is high. Lastly, the rivalry among the existing players is high. With the many number rivals in the industry and also the availability of many products and services in the market, there is a lot of competition in the industry which necessitates the need for the players to come up with innovative ways f staying ahead of their competitors (Mcgowan & Mahon, 2000) (Stonehouse & Snowdon, 2007). 2.3 Resources and Competence Analysis Hard Rock Cafe has the disposal of funds and human resources to enhance its competiveness in the market. With the integration of a new business partner into the company, the cafe has a large disposal of funds, skills and manpower to go for its ambitions. The core competencies of the company which have enable it to stay ahead of its competitors over its years of operations is differentiation. With differentiation, the company has been able to come up with new products; away from the food products which have in turn complimented its business. Hard Rock Cafe has integrated live music shows into its product line, jewellery, clothing and other apparel, hotel& restaurant and other showbiz related services and products; hence adding value to their hotel & restaurant business. This differentiation has in turn given its customer more value for money; hence being of more utility. 2.4 Recommendations for Future Development It is recommended that the Hard Rock Cafe ventures into new locations around the world so as to increase its market share. In doing this, the company must take not of cultural differences which exists among different regions in the world. Since the company’s values and business are based on the hyped up Rock and Roll culture, the organisation must come up with its equivalent in other regions in the world so as to be of value to the reasons which it ventures into. Currently, the America and European markets are facing a crisis; often being regarded to as having reached their peaks. This has led to a shift of focus to developing markets mainly in Asia, South America and Africa. With a strategic expansion strategy, the organisation can be able to tap into these markets. Secondly, the organisation should seek ways of ensuring that all their outlets are profitable by caring out a planned expansion program. There are claims that some of the newly opened Casinos such as the Las Vegas outlet are unable to break even. This calls for a need to reconsider the strategies employed in its expansion criteria. Lastly, the organisation should consider standardising its look, products and service quality in all its outlets. Currently, each outlet is different from the other. Therefore newly opened outlets do not necessarily benefit from the reputation of the others; but instead ride on the wave of the organisation’s strong brand name. 2.5 Ansoff Matrix to Generate Strategic Options The Ansoff Matrix used by the management to develop strategies for growth in new or existing markets using either new or existing products (Kipley, Lewis & Jeng,2012). According to the recommendations above, there are two main growth options which are recommended to Hard Rock cafe; to either develop their products in the existing market or to venture into new markets. In the existing markets, the company needs to penetrate the market further and also develop its products (Watts, Cope & Hulme, 1998). Market penetration will enable Hard Rock to increase and maintain its market share using the current products, dominate the growth in the market, edge out competitors and increase the frequency at which the customers use their services and products. The company can also develop its products so as to provide more utility to the current market. On the other hand, the company is recommended to venture into growing markets; hence being able to exploit them by market development and diversification (Watts, Cope & Hulme, 1998). Market development enables the company to reach it to new geographical regions and also provide the new market with customised products. On the other hand diversification will enable the organization to come up with new products which are specific to the new markets exploited by the company. 2.6 Review Two or More Options against the Criteria of Suitability, Feasibility and Acceptability Reviewing the option of product diversification in new markets, it is important to acknowledge that new geographical regions have varying cultures which require a different approach as oppose to the Rock and Roll culture at the current Hard Rock business processes. For this reason, diversification of the product package is necessary for the organisation to tap into new markets. This approach is suitable to the organisation since it enables the company to stay relevant to the changes occurring in the market. On the other option, Hard Rock should come up with ways of ensuring that the frequency of usage of its services by its current customers is increased in addition to ensuring that it is able to edge out the competitors hence being able to dominate the market. The suitability of this option is that it give the organisation the chance to drive the market. 2.7 Recommendations It is recommended that the organisation comes up with a strategic expansion program to venture into untapped markets in developing markets. This will enable it to increase its global market share and also sustain its sustainability. It is also recommended that the organisation comes up with a customer loyalty package which is expected to increase the frequency with which the current customers use the organisations products and services. 3.0 Conclusion In conclusion, this report has been able to give an in depth insight into Hard Rock Cafe. From the report, it can be acknowledged that the organisation is mark of resilience and strategy. With its diversification strategy, the company has been able to complement its food business which is its core business activity, hence providing more utility to its customers. With this, the company has attained customer loyalty, built a strong brand name and has been associated with a unique experience. Some of the business processes which the organisation has been able to venture in are clothing & apparel, jewellery, music, entertainment, casinos and hotel & restaurants. With this diversification, the organisation has been able to emerge to be one of the major entertainment brands in the world. The report has recommended that the organisation should venture into new markets, mainly developing markets and also to develop the already developed markets. 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