U.S. industry info for full service restaurant/night club - Research Paper Example

U.S. INDUSTRY INFO FOR FULL SERVICE RESTAURANT/NIGHT CLUB Introduction 1. US Restaurant Industry and Sh-Boom The US restaurant/night club market is characterized by fast food, dining-out, full service dimension. With the global economic recession affecting the industry at every level - service volume, sales volume, revenue volume and profit margin - dining out habit of the Americans has been taking a roller-coaster ride, sharp rises and sharp falls. In such a scenario both restaurateurs and night club owners need to know how industry is evolving strategically and operationally. According to the US National Restaurant Association (NRA) in 2010 12.7 million people are employed at approximately 945,000 restaurants while sales would more likely be in the region of $580 billion by the end of the year (www.restaurant.org). This latter figure in fact represents a 2.5% growth rate over 2009. Consumer demographics and menu specialties all point towards a fast expanding industry though with more concern for health among the many potential consumers. Against this backdrop it's necessary to consider the strategic evolution of the industry to its current level of development by using a strategic analysis with reference to Sh-Boom in New York. 2. Analysis 2.1. PESTEL Analysis The strategic and operational environments of the restaurant/night club industry in the US have been evolving with particular PESTEL centric characteristics. The PESTEL environment of the US restaurant/night club operations so far has been characterized by predominantly political, economic, social, technological, environmental and regulatory issues (Gay, 2009). Already the political environment of the industry is heavy with its organizational approach based on corporate sustainability design and planning activities. All this is intended to benefit the customer with healthier and greener menus. 6.1. Political Impact Fast food industry in particular and the restaurant business in general have been exposed to a very high level of political outcomes in the US. Its strategic external environment of competition is subject to a series of ups and downs and global markets exerted a lot of political pressure on managers. Despite all this the industry has been successfully operating in a politically super-charged environment of competition. Political developments that impacted on the industry operations in the US can be divided into events with an exclusively local impact; and events with far reaching political undertones. Politically motivated legislations have become a common order, especially targeting the big restaurant chains like McDonald's, KFC and Burger King (Jennifer, 2003).Local legislators often dispute the claims of the industry that its restaurants are not resorting to unhealthy practices like using cheap and harmful ingredients including oil. 2.2. Economic Impact Economic implications have had a telling impact on restaurant/night club business operations. For example monetary policy measures were adopted to curtail money supply and similarly inflation and recession have had their impact on its operations by way of a fall in demand of which the most remarkable was during the last few months though sales are now picking up. 2.3. Social Impact Social influences in the strategic competitive and operational environments of the US restaurant/night club industry have a far reaching impact on their organizational outcomes and corporate governance. The dining out habit of the Americans has gone a long way socially. Full service and half service restaurants have become the frequenting spots of many Americans who gather at these places for both meals and social intercourse. 2.4. Technological Impact However it is the technological environmental influences that impacted heavily on the organizational goals and outcomes of the industry as a whole. Particularly its operations need to be updated in keeping with new developments in food processing technology. 2.5. Environmental Impact The US restaurant/night club industry's operational environment is also characterized by a greater degree of involvement in promoting corporate sustainability programs outside its day to day operations. For example the industry has been influenced by advertisers' and bloggers' interaction on environment related problems such as climate change and greenhouse effects.. 2.6. Legal/Regulatory Impact Legal/regulatory environment has been perhaps the most significant factor that impacts on the industry's strategic corporate environment - strategic competitive and strategic operational environments - to such an extent to bring about what could be described as "a virtual war of strategic response to regulatory regimes". Regulatory environment has had a telling impact on operations of restaurants though such regulations often have the desirable effect of quality improvement and cost reduction too. 3. Micro-analysis Sh-Boom restaurant in St. Lawrence County in New York offers a variety of foods on a broader customer friendly menu that cuts across all ethnic foods ranging from American to Korean and Chinese. With restaurants at more than 31 locations in the US, the restaurant chain has a middle level presence with customers and suppliers. Most of its customers are middle class Americans and the restaurant has a higher level of appeal to the old because of its portfolio of healthy food. Its supplier networks of sea food and vegetables span across North Carolina to New York. While the chain has no competitive edge over bigger chains in supply chain management related economies of scale because it's smaller when compared to bigger chains, still it has a specialized VRIO framework (Hillman, & Keim, 2001). The company shareholders and employees are considerably elated over the recent policy changes at Sh-Boom. Its current expansion strategy is aimed at capturing sizeable market shares from its bigger rivals like Burger King and McDonald's. Shareholder value has been constantly rising at a rate roughly equivalent to the big five chains that top the market concentration ratio. As for the other supply firms that are closely connected with Sh-Boom there are those sea food and meat processing plants which supply the former with its requirements. 3. SWOT Analysis of Sh-Boom SWOT or strengths, weaknesses, opportunities and threats analysis is a technique used by business analysts to identify and analyze environmental factors that influence a business organization's performance in a variety of ways, including its decision making and corporate behavior (www.marktforschung.de)Per V. Jenster (Author) > Visit Amazon's Per V. Jenster Page Find all the books, read about the author, and more. See search results for this author Are you an author Learn about Author Central . 3.1. Strengths Strengths in this market environment are an internal organizational quality that enables the business to survive and compete against its competitors. Scale economies with market expansion that came with some big acquisitions and mergers have helped some restaurant chains like Burger King and Taco Bell to reorient themselves strategically towards meeting surging demand in niche markets for health food and drink. 3.2. Weaknesses A weakness is also an internal organizational problem that affects it negatively while giving an opportunity to rivals such as accumulating bad debt (Fine,2009). 3.3. Opportunities An opportunity comes basically from the external environment such as recovery from recession. Sh-Booma restaurant and night club segment has to be thoroughly ready. Already during the last few weeks there has been a considerable jump in sales at restaurants in the US. How best smaller restaurateurs would respond to this new demand tend will ultimately determine the overall market outcomes such as customer satisfaction, customer value creation and loyalty benchmarking. 3.4. Threats Finally a threat is also a basically external matter. The rising US Dollar vis-a-vis other major currencies in the world is a big challenge to the average restaurant. Basically when the USD rises against other currencies, people tend to purchase imported instant food and drink. This reality is not altogether lost on the restaurateur. 4. Porter's Five Forces Outlined below are the Porter's Five Forces and their strategic weight on the competition policy of Sh-Boom in St. Lawrence Country in New York (Porter, 2008). 4.1. Supplier Power Supplier power refers to the degree of freedom that suppliers have over the firm which buys supplies from them. So does Sh-Booma in Saint Lawrence Country in New York. The food and drink providers have to procure supplies from suppliers in the open market where rules of competition might threaten individual companies' strategic objectives as well as others. For example each restaurant has to employ a variety of marketing techniques to procure supplies in order to meet its customers' demand. The response depends on a number of other variables such as the concentration ratios in the supplier industries, the availability of and the degree of dependency on credit, macro-economic variables, e.g. interest and business tax rates and a host of other factors. 4.2. Buyer Power Buyer power is perhaps the most effective force with far reaching consequences for the business that the company or the industry has to face. For instance customers of restaurants carry such weight in the decision making process of the individual company to such an extent that they can drive prices down if they happen to boycott a certain restaurant chain thus affecting the entire industry. 4.3. Competitive rivalry Rivalry or competition in the restaurant market segment is almost intense because existing scale economies of individual competitors would serve as the stepping stone to a price cutting war. At any given time a particular restaurant chain can have excess capacity and thus the slightest hint of cost and productivity benefits associated with the probable winning over of market shares of rivals would compel them to act quickly and decisively (Porter, 2009). 4.4. Threat of substitutes As a corollary of the above, there is an ever increasing tendency for smaller restaurants to sell substitutes at lower prices. Indeed there are customers who would be on the lookout for such cheaper joints claiming to provide substitutes for expensive meals sold by big names. 4.5. Threat of new entrants Finally Porter's Fifth Force is about the threat of entry by new firms and it has a very negative impact on the existing firms in the industry. Here what matters is the cost of production. Those restaurants whose costs are higher will be compelled to shut down. But nevertheless the existing level of competition is further exacerbated by the threat of new entrants. In fact idle scale economies in the industry have forced authorities to reorient competition towards achieving price-service-value synergies at the expense of undesirable outcomes associated with free entry. 5. Porter's Generic Value Chain Against this backdrop Porter's (1998) Generic Value Chain analysis can be used to study Sh Boom's primary value chain activities and its supportive services. It has been placing emphasis on internal value creation thus passing the benefits to customers. This unique corporate proposition is more likely to sustain it in the long run in this market segment. The relative attractiveness of a market segment depends on profit margins. Sh-Boom so far has not incurred large scale losses that many of its rivals have suffered. This marketing cum financial outcome has helped the company to overcome much of the competition against its current operations. Porter's Diamond Model Michel Porter's Diamond Model can be applied to understand St. Lawrence's County in New York for Sh-Boom's strategic position (www.bsinessballs.com). 1.1. Factor conditions Factor conditions are those resources such as physical and human. New York in general and St. Lawrence County in particular are endowed with a lot of resources. However according to Porter certain resources like knowledge can be enhanced to compensate against other shortcomings. Sh-Boom might use human resources such as specialized labor as chefs to create a culture of exclusive cuisine and dining in the county. 1.2. Demand conditions Innovation by Sh-Boom can have a positive impact on demand for specialist cuisine of the restaurant in St. Lawrence County. Demand for such cuisine in NY is on the rise and especially the restaurant is able to identify the demand trend for health food. Its varied salads on the menu would appeal to the average New Yorker. 1.3. Related and supporting industries Supply firms such as those meat, sea food and veggie suppliers and processors can innovate to such an extent that new technologies might be used to achieve variety in tastes and food quality. 1.4. Firm strategy, structure and rivalry This is the fourth determinant of the firm's competitiveness. Sh-Boom's strategic orientation towards the middle-market segment of the diner helps it to achieve some good synergies related to out-of-home dining habit of the average American. However competitors are very much present in St. Lawrence County. 1.5. Government New York state government and the St. Lawrence County administrators all can adopt regulatory frameworks for further enhancement of quality of food and efficiency of service. Though prices might not be controlled government intervention can bring about a shift in quality of food and drink. 1.6. Chance events Since chance events are beyond the control of Sh-Boom's management there can be some positive and negative developments for its business coming from the external environment. For example already there is the problem of an ever increasing presence of copy-cat restaurants in NY. Even St. Lawrence the trend is the same. Since they are making use of chance events like recessions to capture market shares Sh-Boom would have to be careful. TOWS SWOT and TOWS are the same concepts. However TOWS is used as a special approach model by some business strategists. Sh-Boom can effectively use it for strategic advantage in developing customer, competitor and external environmental conditions for its own advantage. It can be used to achieve certain orientation processes such as customer care strategies that rivals might not be aware of for some time (www.mindtools.com). SBU Strategic Business Unit is a framework adopted by companies to achieve specific growth in specific areas of the business. Rather than focusing attention on the whole business or organization the management can solved problems in one single department or section. Sh-Boom can benefit from this approach by focusing on its service parameters (www.cba.ua.ed). VRIO Value, rarity, inimitability and organization (VRIO) framework can be used to achieve a specialist value creation process at Sh-Boom. For example customer value creation can be achieved through its specialized resources. Similarly its resources ought to be rare in NY. If the restaurant uses common resources with its competitors, consumers would not see any difference. Again its resources should not be imitable by rivals. Finally the organization as a whole must have distinct identity in creating brand loyalty among consumers. REFERENCES 1. Fine,L.G.(2009). The SWOT Analysis: Using your Strength to overcome Weaknesses, Using Opportunities to overcome Threats. CreateSpace. 2. Hillman, A., & Keim, G. (2001). Shareholder value, stakeholder management, and social issues: What's the bottom line Strategic Management Journal, 22, 125-139. 3. Jennifer,T. (2003). Fast Food, Fast Track: Immigrants, Big Business, and the American Dream. Westview Press. 4. Porter, M. E (2008), The Five Competitive Forces That Shape Strategy, Harvard Business Review, retrieved from www.hbr.org. 5. Porter, M. E 1998, Competitive Strategy: Techniques for Analyzing Industries and Competitors,Michael E. Porter (Author) > Visit Amazon's Michael E. Porter Page Find all the books, read about the author, and more. See search results for this author Are you an author Learn about Author Central The Free Press, New York. 6. Porter's Diamond Model, retrieved from www.bsinessballs.com on November, 10 2010. 7. SBU Analysis retrieved from www.cba.ua.edu on November, 10 2010. 8. SWOT Analysis retrieved from www.marktforschung.de on November, 10 2010. 9. TOWS Matrix retrieved from www.mindtools.com on November, 10 2010. 10. US national Restaurant Association retrieved from www.restaurant.org on November, 10 2010. Read More