Strategic Management Report on Prezzo - Essay Example

Table of Contents Pestle Analysis 3 Political 3 Economic 3 Social 3 Technology 3 SWOT Analysis 5 Value Chain Analysis 5 The Ansoff Matrix 8 References 9 Strategic Management Report On Prezzo Which Includes A Strategic Analysis And Strategy Formulation Company Background Prezzo is a branded restaurant operator owned and managed by Prezzo PLC in the United Kingdom. The first Prezzo eatery was first established in London in 2000 (The Sustainable Restaurant Association, 2014). Despite intensive competition from the UK’s market, the company has experienced steady growth over the years, evidenced by its continual growth of branches that are currently 200 and located across the UK (BDO, 2013). In addition, the restaurant has successfully developed world class status, thereby competing with key brands such as Pizza express and Strada. In 2011, the company’s chief executive was awarded the restaurateur of the year in the Caterer and Hotel Keeper Awards (Harden 2012). The restaurant has positioned itself as an eatery venue for a contemporary menu with an Italian cuisine touch. Vis a vis, its menu mainly includes pizzas, salads, pasta and grilled dishes. The restaurant expanded its service portfolio in 2013 by introducing Cleaver, additional venues that specifically offered American fare including chicken, ribs and burgers (Restaurant Portal, 2014). Currently, Prezza has a total of 3290 employees with revenue of £ 179.19 million and an EPS growth rate of 10.07 % (Hardens, 2013). Prezzo is also a member of the sustainable restaurant association (SRA), therefore, highly committed to protecting and conserving the environment. External Strategic Analysis External strategic analysis of Prezzo restaurant was conducted to evaluate the impact of the external environmental factors on the performance and growth of the restaurant in the UK market. Changes and trends of the UK restaurant industry were assessed using the Pestle strategic analysis tool. Pestle Analysis Political The government of UK highly regulates the food industry to manage the prevalence of lifestyle and food related chronic disease such as obesity. The government therefore interacts with Prezzo operations through health regulation, such as the policy on GM labelling for products containing genetically modified food, Good and Services tax on food prices and the issuance of licenses (Euro Monitor, 2014). However, Prezzo has managed to forge close relationships with governing authority through a mutual relationship, hence minimum interference with its operations Economic There has been steady growth of the UK’s food industry for the last six years. According to a report by the Guardian (2014), the UK’s restaurant industry was experiencing a resurgence after the 2008 economic recessions. The market has been characterised by a rise in consumer expenditure and a forecast of UK GDP growth of 1.9 % for the year 2015 according to IBIS World Report (2014). Cumulatively, these factors have significantly facilitated the expansion and growth of Prezzo branches in the market Social The food and restaurant industry in the UK is highly hinged on the busy lifestyle of UK citizens. Furthermore, the Italian cuisine provides Prezzo with a niche for the majority of UK consumers whose preference for foreign dishes has heightened. Prezzo has further branded itself as a premium eatery venue, thereby attracting younger families with diverse cultural heritage Technology Technological advancement in the industry has played key role in the growth of the Prezzo restaurants. Online marketing through internet and social platforms such as Facebook has developed an unprecedented customer base of youths who are techno-savvy. Nevertheless, Prezzo has been in the forefront of IT integration into its operations through websites, Facebook pages, twitter accounts, computerised billing and order taking systems (The Guardian, 2014). Legal and Environmental As a restaurant operator, Prezzo is obligated to observe numerous regulations pertaining to food and beverage production through compliance with the food standard agency in the UK market. Therefore, Prezzo operations have been highly dependent on government set operating hours, labour and employment laws, tax requirements and environmental certification. Prezzo has further been in the forefront of environmental protection through its membership of SRA (The Sustainable Restaurant Association, 2014).Howeve, majority of the regulations have positively streamlined operations in the industry thereby creating a conducive market. Internal Analysis Internal analysis of the Prezzo chain of restaurant primarily focused on highlighting the strengths, weaknesses and operational competencies of the restaurant based on the internal environmental factors. Vis a vis, SWOT analysis and value chain strategic management tools were employed to examine Prezzo’s internal environment. SWOT Analysis Strengths Opportunities Large portfolio of restaurants across UK market Wide range of location Large number of employees Unique Italian cuisine Premium branded pizza menu Strong customer loyalty Seamless integration of technology Introduction of American food culture Continual growth of UK’s restaurant industry Introduction of celebrity chef menus Development of leisure and retail restaurants The ability to spread overhead over multiple revenue centres. Weakness Threats Lack of organic pizzas limiting the target market Premium pricing strategy Dilution of market share due to increased competition High price of food commodities Soaring energy prices Value Chain Analysis Source : Johnson et al (2011) Summary of the External and Internal Analysis According to BDO (2013) the analysis of the UK restaurant industry indicated continual steady recovery from the 2008/09 economic recession. The restaurant industry was further noted to be fastest growing sectors of the UK economy. Despite stringent regulatory framework by food agency in the industry, government policies had minimal distraction on the operation of restaurant venues in the market. The external industry was highly dominated with supportive infrastructure and esteem political goodwill for growth of restaurant businesses. The PESTEL analysis thus indicated that there existed insignificant deterring factors to disrupt the continual growth of Prezzo restaurants. Similarly, analysis of the internal environment of Prezzo through the SWOT analysis also exhibited favourable internal factors in terms of the market strengths and opportunities for Prezzo restaurants. Prezzo restaurant faced limited threats from its competitors which were in line with its weaknesses. From the SWOT analysis, Prezzo had successfully developed an extensive competitive advantage over its key rivals in the UK restaurant market. Furthermore, examination of Prezzo’s value chain identified pertinent success factors of the restaurant. The success factors included customer satisfaction, value for money services oriented and innovation through the integration of technology. Through implementation of the same value chain system to all its branches, Prezzo has ensured the delivery of quality hospitality experience in each of its 200 venues across the country. Trends in the UK Restaurant Industry Due to the increased anticipation of the country’s economic recovery, UK consumers have highly adopted eat out lifestyle. Consumers are increasingly visiting restaurants for the sole purpose of having eat outs (PwC, 2014). Astonishingly, the eat outs have not been limited to dinner only, young families are currently visiting eateries for breakfast, lunch and dinner. Furthermore, the eating out takes place at random periods, there isn’t the specific time of the day for eating out. Another key trend is the growing preference for pub and restaurant joints by UK consumers. According to a report by PwC (2014), branded pubs had increased their outlet share by 3.1 % in 2013. Consumers are increasingly visiting restaurant that have branded pubs in order to convenient drink after having eat outs. However, consumers have also become more health conscious in terms of what they consumers in restaurants. This has been driven by extensive statistics indicating prevalence of obesity and lifestyle related diseases in the UK (Mintel, 2014). Therefore, the concept of stealth health will likely be adopted by the leading restaurants in the market. However, the pricing of the food still remained a key determinant of the type of restaurant and food menu consumers were willing to choose. Naylor (2013) noted that value addition still holds a central position in customer satisfaction levels in the UK. Strategic Options With reference to the Ansoff matrix, there are four possible market – product combinations which could be employed by Prezzo to achieve additional growth of the business. The Ansoff Matrix Existing Products New Products Existing Markets Market Penetration Product Development New Markets Market Development Diversification Source: Johnson et al. (2011). Market Penetration: Prezzo restaurant could establish other venues with the same menu with the aim of increasing its market share. Market Development: prezzo chain of restaurant could be expanded to international markets such as the Asian market. Product Development: Introduction of new product portfolios such as Mexican cuisine Diversification: Prezzo should introduce branded pubs and further open up food stores in the UK market in bid to venture into new market sector. Recommendations In light of the identified trends in the UK’s restaurant industry, it is imperative that Prezzo realign its strategic management with market dynamics. Prezzo management should therefore incorporate stealth health to maintain the consumers who are increasingly becoming conscious of healthy eating habits. Vis a vis, Prezzo menus should offer an extensive variety to cater for each consumer’s needs. Additionally, the prevalence of eat outs indicates conducive environment for the establishment of more Prezzo venues across the UK. The management should hence continue to expand market penetration of Prezzo products. Similarly, consumers have been identified to prefer pub –restaurant joints (PwC, 2014). Prezzo should hence incorporate branding of pubs to maintain its competitive advantage in the market. At the same time , Prezzo management should continue to develop strategic partnership with the government inorder to secure its operations within the UK market as foreign company. References BDO, (2013). Restaurants and bars report December 2013. London: BDO. Euro Monitor.(2014). Full-Service Restaurants in the United Kingdom. [online] Available at: http://www.euromonitor.com/full-service-restaurants-in-the-united-kingdom/report [Accessed 8 Nov. 2014]. Harden (2012). Hardens UK restaurant survey 2013. London, Hardens. Hardens .(2013). Hardens UK restaurant survey 2014. IBIS World. (2014). Pizza Restaurants in the UK Market Research | IBISWorld. [online] Available at: http://www.ibisworld.co.uk/market-research/pizza-restaurants.html [Accessed 8 Nov. 2014]. Johnson et al. (2011). Fundamentals Of Strategy. Harlow, England: Financial Times /Prentice Hall. Mintel.com, (2014). The new eating out - four in ten restaurant goers in the UK interested in gourmet junk food | Mintel.com. [online] Available at: http://www.mintel.com/press- centre/food-and-drink/new-menu-trends-gourmet-junk-food [Accessed 6 Nov. 2014]. Naylor, T. (2013). Why is Britain obsessed with Italian restaurants?. [online] the Guardian. Available at: http://www.theguardian.com/lifeandstyle/wordofmouth/2013/may/03/why- britain-obsessed-italian-restaurants [Accessed 8 Nov. 2014]. PwC, (2014). Pubs and restaurants. [online] Available at: http://www.pwc.co.uk/hospitality- leisure/issues/pubs-and-restaurants.jhtml [Accessed 6 Nov. 2014]. Restaurant Portal (2014). Allegra Restaurant Brand Portal - Prezzo - SWOT Analysis. [online] Available at: http://www.restaurantportal.co.uk/Brand-Profiles/Profiles/Prezzo/5- SWOTAnalysis.aspx [Accessed 6 Nov. 2014]. The Guardian, (2014). Ending the queue: how digital payments give power to the people. [online] Available at: http://www.theguardian.com/media-network-partner-zone- ebay/queue-digital-payments-power-people [Accessed 8 Nov. 2014]. The Sustainable Restaurant Association. (2014). Prezzo | The Sustainable Restaurant Association. [online] Available at: http://www.thesra.org/restaurant/prezzo/ [Accessed 8 Nov. 2014]. Appendices Datamonitor .(2000). Restaurants In The United Kingdom. London, Marketline, A Datamonitor Business. Http://0- Search.Ebscohost.Com.Emu.Londonmet.Ac.Uk/Direct.Asp?Db=Bth&Jid=Fuxs&Scope= Site. Dobinson, N. (2007). Tourism Sector Monitor. 07-12, 07-12. [Victoria], Bc Stats. Edwards-Jones, I. (2013). Restaurant Babylon. London, Bantam. Fullman, J. (2007). England. London, Cadogan Guides. Lane, C. (2014). The Cultivation Of Taste: Chefs And The Organization Of Fine Dining. Http://Www.Myilibrary.Com?Id=577328. Marketline. (2003). Restaurants Industry Profile: United Kingdom. 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