Queens Head Analysis - Case Study Example

School: Topic: Queens Head Case Study Lecturer: Contents Overview 2 Assessment of operational systems 3 Key strengths and key weaknesses 3 Evaluation of the restaurant 4 Trading position 4 Sales 5 Average spend per head 6 Food gross profit 7 Wages 7 Summary of the restaurant’s position 8 Analysis of performance 8 The budgeting position 8 Conclusions and application 9 Future recommendations for the food and beverage operation 9 Advise about converting the other hotels restaurants in the group to a Giuseppe’s 10 References 11 Overview The hospitality industry is one of the most competitive due to the perfect market structure practiced within the industry. As a result of the perfect market structure, new entrants come onto the market each day, posing stiff opposition to existing industry players (Weaver, 2004). it is for this reason that it is important that existing players such as Queens Head position themselves in such a way that ensures that they are not disadvantaged at the hands of new entrants and existing competitors. The case study therefore seeks to assess the operational systems of Queens Head to know how effectiveness the systems are in the face of ongoing competition. The case study also looks at the performance of the restaurant in the last few months and makes recommendations as to how the restaurant can be well position in the existing market to gain competitive advantage (Cyrek, 2009). Assessment of operational systems Key strengths and key weaknesses Information on the operational systems of Queens Head exposes key strengths and weaknesses as a food and beverage operation which must become the basis for making any recommendations for the future. The table below outlines the strengths and weaknesses of the company. Strength Weakness Visible production cost management systems A well organised organisational structure Available of futuristic ideals aimed at promoting existing operations Effective leadership from Cullum Sustained high levels of customer loyalty Low bargaining power of supplier due to in-house production Absence of any market research or business planning to support proposed growth agenda Lack of innovative operational change in the past years Declining business performance in past two years Seemingly clear theory-practice gap in place Clear lack of engagement with customers to know what their needs from the restaurant would be Too much operational work centred round Cullum Evaluation of the restaurant The evaluation of the restaurant as to whether or not it has made money is done under six major themes which are given below. Trading position Queens Head lack a clear tradition position within the market in which it competes. This point is clearly admitted by Cullum who sees the development of specific destination trade as the answer to future growth. Meanwhile, Davis (2005) emphasised the importance of having a clearly identified trading position as an effective tool for growth and competitiveness. This is because the trading position used by the company helps it to develop a competitive advantage which makes it become a preferred choice over competitors due to its position. It is possible to use either Porter’s generic strategic positions or Bowman’s strategy clock to identify a trading position which will become the strategy around which Queens Head will undertake its marketing. Sales To get a better understanding of the sales that have been made by the company in past 12 months, a quantitative graph is generated based on the company’s trading account. Figure 1: Sales trend in the past 12 months Source: Queens Head Trading Account The graph above shows that Queens Head has failed to maintain a steady growth in sales in the past 12 months. This applies to both in food sales and drink sales, which is a very worrying situation the restaurant can be finding itself in now. This is because the sales made by the company determine its revenue inflow, which is also an important determinant of capital position for competing on the market through publicity and promotions (Agarwal and Helfat, 2009). As sales have not experienced any significant growth, it will be very difficult for the restaurant to have sufficient funds which are committed to market growth areas that are capital intensive (Dornbusch, Fischer and Samuelson, 2007). Average spend per head The average spend per head for Queens Head can be found as the measure of the economic activity of the restaurant’s customer. This can also be interpreted to be the mean income that the restaurant earns per customer who uses its services (Maneschi, 1998). To find this, it is important to find the balance between how much the restaurant spends on each person as against how much each customer contributes (Minkov, 2007). In this, it would be stressed that the Giuseppe’s menu that is currently used seems overly ambitious for how much the restaurant charges or gets from customers. This is because apart from the actual meals served, the Giuseppe’s menu comes with additional value added services which seem not to have been accounted for by the restaurant. Example of the value added service is the arrangement and appearance of the surrounding of the eating place. Food gross profit In the context of food gross profit, it would be noted that the regardless of the fact that there is an unfavourable average spend per head the restaurant has managed to perform well in maintaining an acceptable food gross profit. This is because unlike overall food sales, the balance made from food expenditure which yields the food gross profit has been improving with time. There are a number of reasons that could be assigned to this including the fact that at Queens Head there is an overall operational cost control through the use of many different strategies and techniques. Some of this includes the reliance of part time workers and the use of second hand equipment. Clegg, Hardy, Lawrence and Nord (2013) emphasised that when there is growing gross profitability in the midst of unstable gross sales, it shows prudent internal management of funds. Wages From the trading account given, it would be noted that the company has not had a stable trend of wages in the past 12 months. This could be the reason of several factors including the need to use different number of workers depending on the trend of demand at the hands of the restaurant. Aula (2011) however emphasised on the importance of ensuring a remuneration system that can be considered motivating and appealing enough to win the attention and commitment of workers. In the current circumstance, it would be said that even though the company may be making a lot of saving from its approach to wages, it is important to consider the overall impact of wages on worker motivation. Summary of the restaurant’s position Queens Head’s position is not one that can be described as competitive enough. This is because from the case of the restaurant and its accounts, it is seen that the company stands in a disadvantaged position where it is possible for any well organised new entrant or an existing competitor to gain competitive advantage of it. The result of this can be said to be the fact that the company has failed to clearly identify a market position that will help it gain competitive advantage. In the light of this, the company continues to depend on customer loyalty instead of creating its own brand image which could become an attraction factor for new customers of the company. Analysis of performance The budgeting position From the interview, Cullum sounded all confident about Queens Head which had the prospects of growth in the next few months. However, the trend of facts and figures for the company does not seem to suggest same. Indeed when it comes to the management of businesses in competitive markets such as the hospitality industry, it is important that managers will make a lot of meaning from their quantitative indicators which are largely from facts and figures deduced from company accounts. This however does not seem to be the case at Queens Head now as there is overreliance on what the company is qualitatively projected to achieve rather than what it has quantitatively achieved. With this said, it is important that the company employs the use of key performance indicators (KPI) which can be said to be thorough and extensive. The use of the triple bottom line KPI which assesses financial, social and cultural sustainability of hospitality industry players would therefore be recommended. Conclusions and application Future recommendations for the food and beverage operation Going into the future, there are a number of recommendations that will be made for Queens Head restaurant. Grater part of the recommendations will focus on the need for the restaurant to have its own identified marketing strategy and market position. As Cullum already makes mention of offering unique level of food quality and personal service, a differentiation trading position would work well for the company. Already, there are glimpses of the differentiation strategic position being used within the company but this cannot be said to have been well utilised. The glimpse of differentiation is seen with the Giuseppe’s menu which seeks to add additional value as the frontier of differentiation strategic option provides. However, there is a clear imbalance between the use of differentiation in theory to how it is being practically implemented. To apply differentiation effectively, it is important that the company will commit more funds to marketing and publicity which will draw the attention of the public on the company’s value added services. Once this is done, it will be possible for the company to increase its prices and thus improve sales. Advise about converting the other hotels restaurants in the group to a Giuseppe’s A very straightforward advice that is linked to the recommendation for the overall food and beverage operation will be given. This has to do with the fact that before converting all other hotels restaurants into Guiseppe’s it is important that the company will ensure that it has already done the marketing, research and promotion needed to ensure that the conversion will come with the adaptation of the differentiation strategic option. Once this is done, it will be possible to charge higher prices than what is used at the industry level. A refusal to do this will however result in a situation where the conversion will come with higher production cost which cannot be broken even with the revenue generated (Chetty and Campbell-Hunt, 2004). References Agarwal, R. and Helfat, C.E. (2009). Strategic renewal of organizations. Organization Science, 20(2): 281–293. Aula, M. (2011). Strategic Reputation Management, New York: Routledge Chetty, S. and Campbell-Hunt, C. (2004). “A Strategic Approach to Internationalization: A Traditional Versus a ‘Born-Global’ Approach”, Journal of International Marketing, Vol. 12, No. 1, pp57-81. Clegg S., Hardy C., Lawrence T. and Nord W. (2013). The Sage Handbook of Organization Studies (2nd ed). London: Sage, 255-283. Cyrek, C. (2009). "Pizza Hut going after wings market". Dallas Business Journal. Vol. 6 No. 2: pp. 45-68 Davis, D. (2005). "Intra-industry Trade: A Heckscher-Ohlin-Ricardo Approach". Journal of International Economics 39: pp. 201–226. Dornbusch, R., Fischer, S. and Samuelson, P. A. (2007). "Comparative Advantage, Trade, and Payments in a Ricardian Model with a Continuum of Goods". American Economic Review Vol. 67 No. 5: pp. 823–839. Maneschi, A. (1998). Comparative Advantage in International Trade: A Historical Perspective. Cheltenham: Elgar. Minkov, M. (2007). What makes us different and similar: A new interpretation of the World Values Survey and other cross-cultural data. Sofia, Bulgaria: Klasikay Stil Publishing House. Weaver, R. (2004). Ideas Have Consequences. University of Chicago Press. Read More