Business Strategy in Chinese Restaurant South Beauty - Example

Business Strategy in Chinese Restaurant "South Beauty” Table of Contents Table of Contents 2 Introduction 4 Purpose and Structure of Report 4 About South Beauty Delicious Restaurant 4 External Analysis 4 PESTEL Analysis 4 Political Environment 4 Economic Environment 4 Social Environment 5 Technological Environment 5 Legal Environment 5 Environmental Situation 5 Porter’s Five Forces Analysis 6 Bargaining Power of Customers 6 Bargaining Power of Suppliers 6 Existence of Substitutes 6 Barriers to Entry 6 Internal Rivalry 7 Internal Analysis 7 SWOT Analysis 7 Strategic Options 8 Porter’s Competitive Strategies 8 Cooperative Strategies 9 Directional Strategies 9 Recommended Strategy 11 Conclusion 11 References 12 Introduction Purpose and Structure of Report About South Beauty Delicious Restaurant South Beauty Delicious operates as a leading restaurant in Beijing, China. The restaurant company hails its brand through opening up a number of outlets in different upscale areas of Beijing and also based on customer services generated by a number of gorgeous staffs. It has also earned accolades and recognitions during 2011 in terms of rendering Sichuan and Chicken dishes that contribute in attracting potential customers to visit the restaurants (The Beijinger, 2014). External Analysis PESTEL Analysis Political Environment The political environment of China is observed to act as the dominating factor governing the other macro parameters of the country relating to economic, social and legal context. In China, the political environment earns greater significance to the legal environment where the later operates as a tool in implementing the legislative decisions (Li, 2007). Economic Environment The economic environment of China is observed to enhance the position of the country in the international marketplace. The economic potential of the country is mostly influenced by the industrial and services sector and also by the growth of the private sector in the region. In terms of foreign trade, China during 2008 is observed to gain a third rank relating to other global nations which further reinstates its strong economic position (Australian Business Consulting & Solutions, 2014). Social Environment The larger section of the population of China relates to the age group ranging from 25 to 54 years which consists of 47.2 percent of the total population. The current growth rate of the population in China is around 0.44 percent while a larger section of the total population lives in urban areas like Shanghai, Beijing, Guangzhou and Shenzhen (Central Intelligence Agency, 2014). Technological Environment The technological environment of China reflects considerable potential which in turn contributes in enhancing the competence of the other factors relating to social, economic and political sectors. China is observed to encourage the growth of technological innovation that contributes in enhancing the competitive advantage of the country (YAU, 2002). Legal Environment The legal environment of China is observed to work in a close tie with the political and legislative system of the country. The current legal system is evaluated to considerably promote the entry of foreign direct investment in the country that reflects on its growing significance compared to the political situation of the region (PLMJ International Legal Network , 2014). Environmental Situation China is under potential criticism owing to the growth of air pollution and also in the potential emission levels of greenhouse gases. The above environmental issues are observed to potentially affect the social and economic situation of the country (Xu, 2014). Porter’s Five Forces Analysis Bargaining Power of Customers The bargaining power of customers in China relating to restaurants like South Beauty is high nature. Customers expect these restaurants to generate the needed value additions in terms of the food quality and ambiance and also relating to the manner the foods are served and packed by the restaurant staffs. South Beauty restaurant focuses on production of non-Chinese food in addition to the above qualities to counter the bargaining power of customers (Wittmeyer, 2013). Bargaining Power of Suppliers South Beauty focuses on sustaining an effective relationship with its suppliers such that it aims in governing the quality of the food products delivered by the suppliers. The restaurant company through spontaneous communication and relationship building activities with its suppliers contribute in reducing their bargaining power. This helps the restaurant company to gain quality raw materials at competitive prices (Foodnut, 2010). Existence of Substitutes A large number of local restaurants operating in different populated regions of China like Beijing and Shanghai act as an effective substitutes to the South Beauty restaurant. These restaurants act as low cost substitutes to customers offering them with Chinese food and thereby helping in catering to the local cultures. The threat imposed by the substitutes is countered by South Beauty through the generation of innovative and standardised food products which contribute in creating a distinct brand image in the Chinese restaurant market (Velamuri & Leiping, 2011). Barriers to Entry The barriers to entry for foreign competitors are not so rigid in the Chinese restaurant market. Owing to the above fact, many foreign restaurant companies like McDonald’ and KFC has gained the opportunity in opening up restaurant outlets in the region. Growing demand of Chinese customers for western food products has further triggered the growth of due competition (Menipaz and Menipaz, 2011). Internal Rivalry The internal rivalry in the restaurant sector of China is largely enhanced through the growth of large number of regional restaurants that focus on the generation of different types of cuisines for the local population. Internal Analysis The internal analysis of South Beauty reflects that the restaurant company tends to attract potential customers pertaining to business and high profile backgrounds. Internal decors generated in the form of glass floors and spot lighting contribute in the creation of an effective ambience which in turn tends to attract a large number of customers. Further, the situational factors concerning the restaurant like being built within a high class mall is taken to help in the gaining of high profile visitors to the restaurant. Different types of non-Chinese dishes along with a variety of beverages are produced by the restaurant to help cater to the needs of customers of South-East Asian countries. This parameter also helps in enhancing the internal potential of the company (Foodnut, 2010). SWOT Analysis Strength Brand Name Innovative product offerings Product varieties Attractive ambience Weakness Lack of promotional activities conducted through use of diversified media Lack of communication with potential stakeholders Opportunities Opportunity for international expansion Growth opportunity based on increasing demand Threats Growth of entry of foreign firms Change in demand of consumers Strategic Options Porter’s Competitive Strategies The competitive strategies as identified by Michael Porter can be identified as follows. (Gupta et al., 2007) Cost leadership strategy is identified as a generic strategy that aims in generating competitive advantage in the form of reducing costs and gaining on profits and also in the form of reducing prices of commodities to gain on market shares. Cost focus strategy is, deciding on the price structure relating to the needs of specific markets. Differentiation strategy on the other hand, relates to the incorporation of needed innovation to enhance the quality of the products and services. It also relates to the development of new products and also in the creation of new marketing and sales channels to help in gaining a larger number of customers both in new and existing markets (Gupta et al., 2007). Cooperative Strategies Cooperative strategies relate to the development of effective cooperation by an organization with other organizations in the related industry in the form of developing strategic alliances and other types of partnership agreements or joint ventures. Formation of strategic alliances contributes in enhancing the competitive advantage of the organizations to compete in the international markets (Tebboune, 2008). Directional Strategies Directional strategies are effective corporate strategies that contribute in choosing the right direction relating to generation of growth, stability or focusing on generation of due retrenchment. In terms of using the growth strategies, the business organization is required to either focus on generation of vertical or horizontal growth to gain needed concentration in the existing market. Vertical growth is enabled in that the business organization expands its capabilities to incorporate the activity of supply and distribution of merchandises to potential customers. It thus, contributes in development of the value chain for the business enterprise. Horizontal growth strategy is enabled by a business organization either through enhancing on the product range or in expanding the existing market for products or services. Organizational growth and expansion is also enabled through aiming at diversification into related categories with the use of Concentric Diversification or into unrelated categories by focusing on Conglomerate Diversification (Srinivasan, 2012). Different types of modes can be undertaken by a business organization to gain an entry into a foreign market. The business organization can focus on the development of joint venture and partnerships with other firms in the foreign country. Similarly, the development of licensing and franchising agreements can also be made to help in generating greater penetration in the new market. Acquiring of a foreign business entity and formation of mergers with international firms also contribute in gaining over the existing market and distribution potentials of the acquired and merged companies. The use of Greenfield investments though costly in nature helps the business organization to gain independent controls over the market and distribution bases to expand into newer territories (Andexer, 2008). The capturing of customer id and reward is potentially to help in generating needed database effective for meeting of the changing needs of its customers. Marketing Strategy The aspect of marketing strategy is considered as an effective tool to for the business enterprises to be used through synchronization of the product, pricing and place parameters to help generate effective penetration in the existing and/or new markets (Ferrell and Hartline, 2012). Market and Product Development The strategy related to market development would contribute in generating a greater market share through focusing on penetrating the existing market through the use of reduced or penetrated pricing. Similarly, the development in the existing product portfolio would contribute in offering to the customers’ new product ranges. Market development activities can also be generated through promotions and public relations which contribute in creating a modified and enhanced market for existing product ranges (Rafinejad, 2007). Recommended Strategy Relating to the case of South Beauty, the restaurant is required to focus on the use of the marketing strategy. The application of the marketing strategy would enable the company to generate needed modification along its existing product and service structure to help in meeting the needs of the different international markets. An Open Innovation strategy can also be put into place where the restaurant company can effectively focus on incorporating the views of different nutritional and dietary experts. This strategy would contribute in enhancing the product quality and to gain the trust of the consumers. The restaurant company can also focus on the use of different types of promotional activities conducted through the use of different types of media channels such that the same helps in effective market penetration both in the existing and new market area. South Beauty can also essentially focus on generating cost leadership by focusing on the niche markets and the same helps in generating greater market penetration. Development of partnerships and joint ventures of South Beauty with other foreign firms would contribute in gaining potential entry and expansion of South Beauty in the foreign markets. Conclusion South Beauty restaurant operating as a restaurant that caters to the need of the elite and business class consumers is evaluated based on different types of strategic tools. The restaurant earns popularity in China owing to its exquisiteness in terms of attractive ambience and diversified product offerings. Analysis conducted through use of strategic tools reflects the growing competitiveness in the macro and micro business environment of the company. This requires South Beauty restaurant to focus on market expansion and product development such that the same would contribute in enhancing its market share and business revenue for the future. References Andexer, T., 2008. Analysis And Evaluation Of Market Entry Modes Into The Asia-Pacific Region: Based On The Example Of A German Sme In The Industrial Goods Business. Grin Verlag: City. Australian Business Consulting & Solutions, 2014. The Economic Environment - An Overview. 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Plmj International Legal Network , 2014. Legal Environment In China. [Online] Available At: Http://Www.Plmj.Com/Xms/Files/Newsletters/2014/Fevereiro/Legal_Environment_In_China.Pdf [Accessed 27 September 2014]. Rafinejad, D., 2007. Innovation, Product Development And Commercialization: Case Studies And Key Practices For Market Leadership. United Kingdom : J. Ross Publishing. Srinivasan, R., 2012. Strategic Management: The Indian Context. New Delhi : Phi Learning Pvt. Ltd.. Tebboune, D.E.S., 2008. The Rationale Behind Strategic Alliances In Application Service Provision. United States : Idea Group Inc.. The Beijinger, 2014. South Beauty 俏江南. [Online] Available At: Http://Www.Thebeijinger.Com/Directory/South-Beauty [Accessed 27 September 2014]. Velamuri, S.R. & Leiping, X., 2011. Modern Thinking Turns Traditional Food Into $400 Mil. Business. [Online] Available At: Http://Www.Koreatimes.Co.Kr/Www/News/Biz/2014/09/342_82990.Html [Accessed 27 September 2014]. Wittmeyer, A.P.Q., 2013. Why Dont Chinas Top-Ranked Restsurants Serve Chinese Food?. [Online] Available At: Http://Complex.Foreignpolicy.Com/Posts/2013/05/01/China_Top_50_Restaurants_Chinese_Food [Accessed 27 September 2014]. Xu, B., 2014. Chinas Environmental Crisis. [Online] Available At: Http://Www.Cfr.Org/China/Chinas-Environmental-Crisis/P12608 [Accessed 27 September 2014]. Yau, S.-T., 2002. Science And Technology In China. Harvard Asia Pacific Review, 6(2), Pp.37-43. Read More