Hiller and Associates - Research Paper Example

Hiller and Associates Executive Summary Hiller and Associates’ mission is to offer a facelift to the world hospitality and food and beverage industries to meet the changing demands. Since the inception of the Hiller and Associates, the goal of the company was lofty but eventually, Hiller and Associates has clearly defined its market and the potential it holds. The Australian hospitality industry has experienced a touch of modern supply and designs like never before, thanks to the vitality that Hiller and Associates brought into the market. It has been a rare venture for a corporation to deal in food and beverage consultancy as well as in building and design sensitive to the needs of the market. Led by the growth of the hospitality industry, Hiller and Associates has achieved success by responding to offer state-of-the-art designs and consultancy. A wide range of products targeting the ever diversifying market solves the needs of restaurants, bars kitchens and now commercial catering industry. The company provides one of the best products mix touching the market, but the possibility of expansion to other areas will certainly need to be explored. The most appropriate expansion plan could not be carried out without taking the best analytical caution. Towards this end, the Hiller and Associates management needed to carry out a feasibility study in line with the expansion needs and circumstances in the market. The already available information about expansion was consulted from model franchising deal engaged by Dell and Wal-Mart. In order to understand the Australian hospitality industry, studies were conducted to capture the views of the main market players in retailing, to learn about the possibility of a franchise deal. The purpose of the feasibility study was mainly to explore the opportunity that lie ahead for expansion of the company if franchising was to be conducted through a retail establishment already in the market. International market penetration was held as an objective in the long run. The most important findings in this feasibility study illustrate the importance of franchising in order to enhance the expansion possibility of a company. The Australian market segmentation illustrates the need to promote the operations of the company, bearing in mind the rare product mix and growth opportunity that the company holds. Alternatively, the benefits of a franchise engagement are pointed out in light of the chances of market diversification that Hiller and Associates could venture into in the future (Pinson and Jinnet, 2006). The recommendations of this feasibility report include the positive move that Hiller and Associates could make in engaging in a franchise with a retail outlet already established in the market. Alternatively, market diversification that the Hiller and Associates management stands to gain from in the event that the franchise decision is adopted could act as the stepping stone to owning retail outlets dealing in its products alone. It is therefore projected that the company stands to gain by franchising its distribution plans through an established retail outlet for maximization of growth and expansion. Table of contents Page No Introduction 4 Authorization 4 Limitation of the Study 4 Market Situation 4 Cost 4 Size and Ownership of the Organization 4 Hiller and Associates Background Information 5 Suitability of Franchising (TELOS 6 Technologic 6 Economic 6 Operations 6 Legal Feasibility 6 Schedule 7 Market Analysis 7 Hiller and Associates Franchise Potential 8 Growth and Expansion 9 Recommendation 9 Conclusion 9 Hiller and Associates Franchising Assessment Authorization Following the realization of recent growth at Hiller and Associates, the management of the company initiated market research as an initiative to explore the opportunities that the company holds to expansion. This is in line with the objectives of the company in offering the best for the hospice industry which can not be achieved without learning the market situation. In the market research report, it was found out that the company needed to offer some form of facelift to its marketing and distribution enhancement. Bearing in mind that the company lacked retail infrastructure, it was suggested that growth could be enhanced by improving retail possibilities. A pilot study was done at a retail outlet in Melbourne and it was found out that the sales figure in the city grew by a whooping 34 per cent in the first quarter of last years’ trading period when compared to the previous period. A specified study in the feasibility of a nationwide and maybe in future on the international market was authorized by the management. Limitation of the Study Market Situation The limitation of the study was mainly in locating a similar market situation where the company entering into franchising had a similar product range as Hiller and Associates’. This is as mentioned earlier, the Hiller and Associates’ product range is the only in the Australian market is the only of its kind. Dealing in catering designs, products and consultancy in food and beverages is a unique mix that the market lacked information about (Fullen, 2005). Cost A thorough practical study covering the international market ambition could not be performed. This was only possible in Australia and partly in New Zealand which had a single office already set up to pave way for the international market. Size and Ownership of the Organization The company is an independently and privately owned business that has been in the market for over thirty years, and the feasibility study limitations of a similar type of business were inherently faced by this study. The management did not plan, at least in the long run to venture into partnerships that would compromise its existence as a private entity. Franchises go with some legal implications that could result in financial implications and the management was reluctant to risk for such kind of engagement. History of Hiller and Associates Background Information Hiller and Associates was initiated as an original business by the Hiller family (Syd and Marilyn) in 1980. The company was started as a food dealing business on the Sunshine Coast in Australia, offering a range of beverages as well. The real business idea was initiated when their eateries were fitted with the rare design of fitting in the market in Australia by the, by use of stainless steel and other trendy kitchen equipment. Initially, the company began dealing in commercial catering services and products, most of which included second hand line of equipment. With time, the business started to deal in new equipment and fitting products, shifting completely from food services to near complete kitchen solutiona offering company. There was a growing demand for the second hand line of products already and with introduction of new line of operations, it got even better with a massive demand rise. The company had to move out of the Sunshine Coast and cover the increasing customer base. During all this time, the company had just a few outlets like it does to date, due to lack of retail outlets infrastructure. Enlarged business was now dealing in a complete kitchen and hospitality design and fit out solutions offering venture. The initial name of the company was Hiller and Associates Commercial Catering Products, changed to Hiller and Associates which was later to form a department dealing with building and architecture known as Hiller and Associates Qld Pty Ltd. Other products offered in the range include ovens, grills, coffee machines, display bars, ice machines, peelers, food displays, cutlery, refrigerators, beverage dispensers, blenders, coffee grinders, vending machines, bakery equipment, chicken rotisserie, toasters, cook tops, dough rollers, microwaves, kebab machines, hotdog machines, meat mincers, preparation benches, mixers, vegetable cutters and dishwashers among many others. Later, the company was to evolve to cover the wide range of customers it has today from restaurants to hotel and bar design, fitting and catering solutions. The Australian market has no replica of the position held by the Hiller and Associates operations. Over the years, Hiller and Associates has been capable of transforming other areas such as nursing homes, schools, infirmaries, and takeaways that has given the company a special niche. The employee base has grown from mere chefs to professional food and beverage consultants to architects and engineers. The team of employees takes the customer’s ideas and converts them completely to meet the customers’ needs. The company is therefore about thirty years old in operations, although much change has taken place from the initial business idea that the pioneers had. This has been demonstrated by the shift from operation base from South Coast alone in the beginning to the vast coverage from North Queensland to Victoria to New Zealand. Some of the major projects of the company are The Edge Restaurant & Bar and Brisbane International Airport. The company distributes its products and services through the use of regional warehouses and office fronts located in a few cities across Australia. New Zealand has not yet had a fully operational warehouse and office for complete distribution. The main promotional strategy that the Hiller and Associates company employs involves the internet and brochures that rare distributed through the warehouses. Media commercials are also a good promotional channel utilized by the company. Suitability of Franchising (TELOS) Technologic Since the franchise does not involve technological engagements, technology was not considered as a determinant issue in the dealing. The only part of that technology could play a part was found out to be in the networking intricacies with the franchisor. It was found out that in all situations the technological capacity that the company needed in terms of personnel and expertise was within the facilitation needs of the franchise (Tang, 1996). Economic Basing the franchise on the Melbourne pilot assessment, it was clear that the cost/ benefit consideration was favourable, at least in the short run. The benefits in terms of sales volume and returns outweighed the cost drawbacks. However, the final franchise deal will depend on the agreement that the suitable franchisor will accept. Legal Feasibility Legal issues will be dealt with within the flexibility offer that the company will avail. Franchises bind the parties and the legal agreement that the company enters into will have to be discussed in detail to unravel the implications that it presents. According to Armbruster, (2006) the Dell and Wal-Mart example can be copied in that the parties were flexible to negotiate and maneuver around the legal binding. Operations The retailing problems at Hiller and Associates revolve around the distribution practices which can be resolved by helpful partnerships. The sales volume were found to be tied to the inadequate supply and distribution network that Hiller and Associates has. The pilot study performed at Melbourne bears witness to this. Schedule There are many ways of entering into a franchise as far as schedule is concerned, the best being in shifts, in terms of volume and retailing dependence. 25 per cent of distribution of Hiller and Associates’ products will be negotiated over a period of four years. This means that the possible negotiation provision that the company will bring on the table will target a period of four years to facilitate full entry into the retail distribution (Clifton and Fyffe, 1977). However, legal implications of exit could make the plan to be optimized for the agreement and comfort of the parties. Market Analysis The industry assessment was aimed at identifying strength areas that franchising will bring to the growth agenda of the company. Weaknesses highlighted can be internalized I order to remove barriers to effective development. The most suitable franchisor will have to be capable of running the deal effectively and support Hiller and Associates in managing the flow of its products. The cost of franchising against that of running business as usual is expected to be lower due to distribution cost already incurred by the company, prompting better alternatives. Apparently, the company lacks a clear distribution channel that would enable the type of growth that a company thirty years old with a beautiful and ambitious growth opportunity could have. The best opportunity for the company to gain the extra benefits of market penetration could be heightened by the entry into a partnership with an established retail outlet. Franchising has enabled businesses without an outlet infrastructure to meet better market penetration at a reduced cost (Loudon et al, 2006). There is a reduction in market penetration cost in that the already existing market outlet system is utilized to position both the distributor and the supplier in a better state than if they stayed independently (Trout and Rivkin, 1996). A good example is that of a manufacturing company that uses the retail framework established by a retail outlet at an enhanced cost agreement. For instance, Dell computer manufacturing company in the United States needed to enter into an agreement with Wal-Mart in order to reduce the cost incurred in distribution of its products. This was to position Dell as a nationwide distributor at a lower cost, despite not having the effective retail coverage on its part. The management of these two companies had to negotiate a deal that would facilitate the best interests of the two companies. This is because the decision to enter into franchising agreement puts the companies into a risky legal procedure. The companies agreed on the terms of the engagement such that it was not limiting in terms of time duration and cost. Hiller and Associates Franchise Potential Hiller and Associates is mainly located in South Coast, and The fact that the Hiller and Associates is not a retail establishment means that its distribution arrangement is under pressure to increase the market demand in its entirety. This means that the growth prospects of the company are limited by the distribution system. Borrowing a leaf fro the above Dell and Wal-Mart engagement, it can be projected that such a deal could boost the growth prospects to a higher level. The growing product diversity could well be taken care of by either creating a well defined retail network or outsourcing the services of an established outlet for the same. Creating the relevant retail network could be too expensive for the company since it is not feasible for a company offering such services as Hiller and Associates does (Whalley, 2010). The outsourcing possibility leaves the company in a better opposition which would enable the fast coverage of the entire market region without incurring the cost. According to the company’s expansion projections, it is only likely to increase by one branch in 2010 in Brisbane, partly due to the size and cost of the venture. The company’s range of products would fit in the franchise, since kitchen equipment and appliances would be suited in the retail engagement. The franchise structure would be applicable and facilitated by the fact that the company’s range of products covers other areas apart from retailable products, opening an opportunity to market for other products and services. For instance, the company will create a channel for its service department to be marketed. The equipment to be retailed will enjoy extended market coverage, enabling dissemination of the information touching on fittings and catering services. The sale of the fittings (stainless steel surface tops and covers) could diversify the market further. The sharing of costs in the distribution would leave the company in a better situation than when doing business alone. The company will apply the Dell and Wal-Mart negotiation platform to reach a flexible franchise fee and engagement terms. Legality issues of franchising will be analyzed and optimized to accommodate the company in a manner that the company will not be tied unfavorably. Legal expertise will be outsourced to ensure that the best offer is put across to favor the position of the company. The communication systems of the franchise will be negotiated to allow the progress of the partnership to be monitored closely. Growth and Expansion A prospect of growth by the company is highly projected to be probable. This is so considering that the pilot program tested with a pilot outlet in Melbourne recorded promising growth. According to Magretta (2002), lack of clear marketing network could as well be linked to below par performance in other departments. Despite recorded growth over the years, the growth could be enhanced by diversification of distribution network as well as aggressive marketing. International market coverage prospects could be started in the Pacific countries, by use of franchise engagements to begin with New Zealand which is already reached in the region. Legal structures of such an agreement in the international arena will be scrutinized. Conclusion It is feasible for a company without a clear distribution framework to engage in a partnership to enhance its market coverage. It is also supported by the pilot study findings done in Melbourne that franchising could boost the sales to favourable figures. Benefits of partnerships in marketing facilitate the reduction of costs placing the franchisor and franchisee in a better operation cost level. Recommendation . It is possible to run international distribution using similar plans for businesses planning to do international business. Considering the TELOS factors of Hiller and Associates, it is noted that the company is suitable for franchising. The organization further has prospects of achieving growth when franchised as shown by the pilot project in Melbourne. Hiller and Associates should facilitate the long overdue franchise project, with a leading retail outlet in mind. References Armbruster, W.. “Outsourcing a Key Element in Dell’s Strategy.” Journal of Commerce, (2006):1. Barber, J., & Nieman, G., (2004) How to franchise your own business. London, UK: Oxford University Press Clifton, D. S., & Fyffe, E. D., (1977) Project feasibility analysis: a guide to profitable new ventures. Wiley Fullen, S. L., (2005) Opening a restaurant or other food business starter kit: how to prepare a restaurant business plan and feasibility study. Ocala, FL: Atlantic Publishing Group, Inc. Loudon D., Loudon D. L., Robert E. S., & Wrenn B., (2006). Marketing research: text and cases. Binghamton, NY: Best Business Books Magretta, J., (2002) Why business models matter. Boston, MA: Harvard Business School Publishing Corporation. Pinson, L., & Jinnet J., (2006) Steps to small business start-up: everything you need to know to turn your business into a successful business. Chicago, IL: Kaplan Publishing Tang, S. L., (1996) Economic feasibility of projects: management and engineering practice. Hong Kong: the Chinese University of Hong Kong Press Trout, J. & Rivkin, S. (1996) The new positioning: the latest on the world’s #1 business strategy. New York, NY: McGraw Hill Inc. Whalley, A., (2010) Strategic marketing. Frederiksberg, Denmark: Ventus Publishing ApS, Read More