Potential and Competitiveness of the Cafe and Restaurant Market in Australia - Research Paper Example

This is the idea report of Small Business Management Table of Contents Introduction 3 Limitations 3 Market Audit 4 Market Overview of Australian Caféand Restaurant Market 4 Market Conditions 4 Competitive Landscape 5 Growth Opportunities 5 Summary of Market Audit 5 PEST Analysis 6 Summary of PEST Analysis 8 Analyzing the marketing mix 8 Target Market 10 HR Issues 10 Conclusions 10 References 12 Introduction A feasibility study puts special emphasis to identify potential problems and looks to answer one key question; whether the idea is likely to work or not. Before initiating a new venture, most of the companies, if not all conduct market feasibility study to find out demand of the product or services to be offered, potential target market segement, etc. One of the key components of market feasibility study is competitive environment analysis. Keeping the objective in mind the study looks to analyze the café and restaurant market of Sydney, Australia. In order to conduct the feasibility study, methodical analysis of the market condition is required. Market conditions tend to have significant effect on the viability of a business. While conducting market analysis certain strategic tools are required. Keeping the objective in mind PEST analysis of Australia has been conducted. Special emphasis has been to the city of Sydney while conducting a PEST analysis. A part from this the 4 P’s of marketing has also been used to provide a future action plan. The in-depth analysis has been punctuated with a brief market audit of the Australian Restaurant and café market to analyze the present and future market scenario as well as growth opportunities (Burgemeister, 2009, p.25). Limitations 1. The nature of data used for the analysis is only secondary in nature 2. The study has been conducted over a relatively short period of time. 3. The finding of the study should be treated as indicative. Market Audit Market Overview of Australian Café and Restaurant Market 2011 Total Revenue $19.3bn 2011 Average net profit margin 8% 2011-2012 Historical annual growth rate 1.1-2.6% 2012-2017 Forecast annual growth rate 3.0-5.7% Market Conditions Mainly due to the unrestricted spending nature of the restaurants, the industry has come across certain difficulties in trading. Due to the recent economic down turn consumers decided to control their spending and decided to eat at home more of than not. However the preference of gourmet coffee among of the coffee has been quite evidently visible. This is largely due to the fact that the Aussies view quality coffee like a luxury product at an affordable price. If numbers are to be believed more than one billion cups of coffee have been sold in Australia. The percentage of out of home consumption of coffee has seen a steady rise. According to analysts as the economic conditions are set for improvements, steady growth of the café and restaurant business is expected over the course of next five years and so. Such growth is applicable as there is likely to be presence of both international players as well as other franchises (Henry, 2008, p.51). Competitive Landscape The café and restaurant industry of Australia can be tagged as highly competitive. The main reasons can be presumed as very low barriers to entry. Add to that the industry is believed to be highly fragmented. According to reports the major players hold less than ten percent of the total market share. The small players enjoy a fair share of success as the 91% of the food chain businesses have less than fifty employees. There exists strong presence of franchisee model or any equivalent business strategy. Companies like McCafe, Coffee club, Hudsons Coffee, out back Jacks, etc. have set up strong and successful franchisee models in Australia. The companies mainly compete on the merit of quality, price and customer service. Growth Opportunities The key to the success in Aussie restaurant and Café business is to understand the customers and providing the customers something unique. Statistics have shown that many local and small business stores have been able to outperform the major players. The major international players made the mistake as the companies failed to understand the customers. Therefore the companies did not customize the products according to the needs of the customers. Companies should focus on increasing profit margins by improving business process. This can be achieved by reducing labor cost and wastage. Modern day technology provides ample opportunity to the business units to increase market share and gain competitive advantage leading to grater brand recognition. Summary of Market Audit From the above analysis it can be summarized that Australian Café and Restaurant market saw a down ward growth due to the market down turn. However, the Australian coffee business continues to be very competitive as there seems to be constant rise in the out of home consumption of coffee. The market barriers to entry is also quite low and over 90% of the market share is held by smaller companies. As the economic conditions are set to improve the Australian Café and Restaurant market is very much prospective to say the least. Based on the above analysis it may be summarized that starting a Café business in Sydney could be quite profitable. PEST Analysis PEST stands for political, economic, social and technological factors. All these factors are treated as macro environmental factors. Such factors can’t be controlled by the business. However these factors have direct influence on the business operations. PEST analysis helps a company analyze the business environment of a country before making the initial business investment decision. In the case the PEST analysis of Australia has been conducted, keeping Sydney as the focal point. Sydney is the largest city in Australia. Over twenty thousand people live in the central area of the city and over three million people in the greater area of Sydney. T happens to be one of the multicultural cities in the whole world. The city is very well facilitated with public transport including buses, taxis, trains, etc. The Airport is also located quite close to the city (Cowan, 2005, p.54). Political The government and other regulatory bodies are quite reliable and transparent. Three main political parties dominate the political system. All the political parties actively participate in welfare programs. Such political circumstances provide safe and secure structure for business investment. The legal system on the country is based on the statutes of English legislative system. As far as investment in Sydney is concerned, the Government holds the power in most of the areas related to economy. This includes exchange control, land assets, taxations, etc. Economic Australia has a strong economy. The per capita GDP of the country is at par with some of the dominant European countries. The country enjoys consumer confidence, healthy business environment, relatively high export prices for agro based products and other raw materials. According Australian Bureau of Statistics the current employment rate is lower than five. This is believed to be one of the lowest in the world (Nargundkar, 2010, p.235). Social English happens to be national language. This makes it easier for investors to invest in the market. Aussies are quite direct in the way they communicate. When it comes to food, there exists multiculturalism. Many foreign cuisines have had major influence over Australian food culture. Technological Factors Australia is the home of top class information and communication technology (ICT). ICT is available across all the major industries providing an excellent platform for the investors. The resultant business has been benefited by the improved technology. For example the restaurant business has been using the personal digital assistants (PDA). According the reports it has lead to increased accuracy and efficiency, better and speedier service and enhanced reputation. As far as Sydney is concerned the country has terrific telecom infrastructure. The domestic networks include the use of fiber optics, wireless and other satellite systems. Summary of PEST Analysis Based on the above analysis, Australia and Sydney in particular can be summarized as an idol place to start a business. The transparent political environment, strong economy is prime reasons for that. Those factors have also been complemented by the social and technological factors. Analyzing the marketing mix Marketing mix is a set of elements which the company can control or manage to its advantage for marketing purpose. Neil Borden termed these elements as the ‘Marketing Mix’. The elements of marketing mix are product, price, place and promotion; better known as the 4 P’s of marketing. For a new business it is extremely important to analyze the 4 P’s of marketing and formulate appropriate marketing strategy (Wenderoth, 2009, p.10). Product As per the above analysis it has been proposed that the business to start would be a café shop. Hence it is pretty obvious that the company would be providing Coffee to the consumers. However it needs to be kept in mind that the business would be entering service sector. Hence augmentation may be required to achieve product differentiation. In order to provide the best possible product the customer product research could be conducted. An in depth product research may help the company to analyze the needs of the customers. These needs could be pertaining to the exterior and interior appearance and theme, cleanliness, menu themes, menu variety, food quality, taste and preference, desired speed of service etc (Kolb, 2008, p.35). Price Pricing is believed to be a critical factor in the Australian food industry. Full scale price research can be conducted to set up pricing strategy. The company may go for price skimming, price penetration of even market based pricing. Keeping the size of the business and the position in business life cycle it is advised to opt for market based pricing. Based on the market trend the price could be set in the range of $2 to $15 (Frank, 1964, p.107). Place When it comes to place or setting up distribution channel; one factor needs to be kept mind: convenience. While choosing an appropriate location may not ensure success, choice of a bad location most certainly ensures failure. As it has been told before that the café shop would be located in Sydney. It is suggested that the café is located in Newtown of New South Wales. The reason for such a choice is the sheer reputation of the street. The people of Sydney know it mainly as a dining area (Rao, 2010, p.90). Promotion While devising promotional strategies the promotional mix needs to be kept in mind. This includes advertisement, sales promotion, personal selling, and public relations. Among these advertisement and sales promotion are likely to be the key. However, there would be a few constraints as it would be a new business, very few people would be aware of it. Therefore the main objective of promotion would be raise brand awareness. However there could always be issues related to budgetary constraints. One key element for promoting the new business could social media, especially Facebook and Twitter. Such mediums are a lot cheaper as compared to the traditional mediums. Add to that these mediums act as a great way to engage the users and raise brand awareness (Zarrela, 2010, p.45). Target Market The target market segement is likely to be mainly local residents belonging to the age group of 21 to 45 and other local businesses. The targeted customers are likely to office workers or students. This is because most of the children would be at their schools. Their parents could also be at the respective work places. Therefore the families may decide to go out on the weekends. People belonging to the age group of 18-24, mostly bachelors may decide hang out with friends on the weekends also (Brown, 2009, p.34). HR Issues The Café Shop may require employing several workers including cooks, cleaners, cashiers, waiters, managers. Hiring should be done from local communities as the locals are most likely to understand the psychology of the local customers. Conclusions In the conclusion it can said that Café and Restaurant market of Australia is a very much competitive one and it holds great potential; the café industry in particular. Things get even more encouraging, as it is seen that over 90 % of market share is held by smaller firms. Even during the economic down turn the Australian Café business was doing remarkably as it witnessed over one billion of coffee cup sales. Things are likely to get better as the economic conditions are improving. Just factors influence the starting of a Café shop in Sydney Australia. Sydney is the largest city in the county, having great transportation and technological facilities. Australian Economical and Political scenario for is ideal for making business investment. Deriving an appropriate marketing strategy the 4 P’s should be analyzed properly. Success of the business will rely greatly on the marketing strategy; hence the company should ensure that the 4 P’s of the business are in order. References Brown, L. 2009. Marketing and Distribution Research. Ronald Press Company: US. Burgemeister, S. 2003. Market analysis. GRIN Verlag: DE. Cowan, A. 2005. Risk Analysis And Evaluation. Global Professional Publishing: UK. Frank, N. 1964. Market analysis: a handbook of current data sources. Scarecrow Press: US. Henry, A. 2008. Understanding Strategic Management. Oxford University Press: UK. Kolb, B. 2008. Marketing Research: A Practical Approach. Sage : UK. Nargundkar, R. 2010. Marketing Research,Tata McGraw Hills Private Limited : India. Rao, V. 2010. Handbook of Pricing Research in Marketing. Edward Elgar Publishing: India. Wenderoth, M. 2009. Particularities in the Marketing Mix for Service Operations, GRIN Verlag: DE. Zarrela, D. 2010. The Social Media Marketing Book. OReilly Media, Inc: CAN. Read More