A Stakeholder Analysis for SCOB - Research Paper Example

1. Undertake a stakeholder analysis for SCOB Who are the stakeholders? Freeman (1984) described stakeholders as: “group or individual who can affect or be affected by the organisations activities.” Stakeholders include communities, suppliers, consumers, shareholders, employees and managers. Stakeholders are the ‘building blocks’ of an organisation, as the organisational objectives are formulated through the evaluation of stakeholder’s interests and trade-offs between various interests of stakeholder groups. This allows development of organisational strategy, and appropriate management decision and control systems to implement the strategy. SCOB stakeholder analysis has been summarized in the table below. Table 1. Stakeholder Analysis Stakeholder Analysis Director There are three directors, who are interested in maintaining and constantly improving a profitable business. Shareholder There are nine shareholders, who have a vested financial interest in the company. They are concerned with gaining a return on their investments through continued growth and profitability of SCOB. Staff Staff include chefs, kitchen-staff, waiters, runners and management, who are concerned with secure source of income, possibilities for career enhancement, and job satisfaction. Customer and patrons Customers and patrons of the restaurant are interested in having a delicious meal in comfort, good service and attractive surroundings in addition to receiving value for money. Suppliers Suppliers of food and wine are concerned with developing their own business, and value the business connection and the opportunity to make money. Service providers Other contractors may also be stakeholders in the business, although their association will be more occasional. For instance, the company’s lawyers, electricians, plumbers etc will have an interest in maintaining relations with the client and making money. Sydney Harbour Foreshore Authority SHFA are the statutory body responsible for the maintenance of the historically and culturally significant waterfront locations in SCOB’s precinct. Sydney City Council SCC is a government department stakeholder. SCOB will need council permission for renovations and the council will be responsible for providing them with services such as waste collection etc. It is not possible to consistently satisfy all stakeholders, and the interests of some groups will dominate the competing requirements of others. Management’s choice of which needs to fulfil may reflect their attitude to stakeholder management; whether it be strategic management motivated by financial performance, or an intrinsic belief in a moral responsibility to advance stakeholder interests. How can SCOB manage and monitor its relationship with the stakeholders: a. What do they need to do to satisfy the stakeholders? SCOB must recognise stakeholder`s needs and try to create value for them as “Companies exist to create wealth, so the most direct contribution they can make... is to create long-term value on an economically, social and environmentally sustainable base” (Elkington). Stakeholder satisfaction should be incorporated into the organisational strategy, and their success should be a measure of organisational performance. Although the SCOB is aware of their responsibilities towards stakeholders, their strategy hasn’t been sufficiently developed to fully address shareholders needs. SCOB needs to incorporate them in their strategy development and decision-making directly. For example, with SHFA they can organise meetings to discuss the common goals of the two organisations and how they can work together to form a mutually beneficial relationship. Their planned renovations form a large part of their bid to meet stakeholder interests, as they need to upgrade the premises to comply with regulations in relation to disabled access to facilities and occupational health and safety regulations in the kitchen and workspace. b. How do they know when they have met stakeholder interests? SCOB must update their reporting methods to reflect their responsibilities to stakeholders. At the moment they only produce profit and loss statements at the end of each quarter. Performance measurement is crucial for SCOB to monitor and manage its relations with stakeholders. Performance measurement systems, such as the balanced scorecard, assist the company in identifying the stakeholders’ objectives, creating measures, comparing the measures to targets to see whether the objectives have been met, and designing initiatives for improvement. 2. Developing and explaining an appropriate and coherent competitive and operational strategy for the case organization Competitive Strategy SCOB must first evaluate the design, implementation and management of its internal business processes. Business processes have been defined as: “a set of logically related tasks performed to achieve a defined business outcome” (Davenport and Short, 2003 p.100). In the SCOB case, these processes include taking an order, cooking a meal, mixing a drink and so forth. By evaluating its existing business processes, SCOB can gain significant insight into its business’ operational workflow and take appropriate action to correct and improve its business processes. This can be achieved by adopting a business process improvement (BPI) approach to its business. The application of BPI philosophy SCOB can result in a number of benefits (Harrington, 2007), including: Greater efficiency in its operational performance; Improvements in workforce cohesion and business culture; Improvements in operational workflow and product quality; Greater focus on customers’ needs; and Improved performance through greater control of its business processes Thus, in order to maximise its performance and resource utility, SCOB must align its business processes with its business strategy (Yen, 2009). Furthermore, Abudi (2010) states that a business must “continuously analyse and refine their processes to ensure they are doing business as effectively and efficiently as possible.” SCOB should establish a competitive strategy, after evaluating its business. According to Segal-Horn (1998 p.77), a business competes in its market by “deliberately choosing a different set of activities to deliver a unique mix of value.” This unique mix of value can be achieved through either a differentiation or cost leadership model, depending on the desired target market and market position of the business. SCOB`s unique harbour front position, combined with high quality food and service, allows SCOB offer a high quality dining experience. SCOB is not a cost leader, and is focused on obtaining ‘a higher than average check’ (West and Olsen, 1990 p. 74), and a higher than average turnaround. SCOB should continue to adopt a market differentiation approach. Alternative option for a competitive strategy section The competitive strategy of the business is focused on the way the business positions itself in its market in relation to its competitors. The business is concerned with how it will compete in that market. According to Porter (1998), a business competes in its market by ‘deliberately choosing a different set of activities to deliver a unique mix of value’. This unique mix of value can be achieved through differentiation or cost leadership, depending on the desired target market and market position of the business. A business utilising a cost leadership strategy looks for a value through lowering its cost. It achieves this though economies of scale, technology and using cheaper resources. Contrastingly a business implementing the differentiator strategy looks for value through high quality and product difference (Langfield-Smith,1997) SCOB has positioned itself in the market as a differentiator as it has tailored its activities towards delivering a unique, high quality dining experience, through the combination of a unique harbour front position and high quality food and service. They are more focused on obtaining a higher than average check then a higher than average turnaround. By following this strategy the Oyster Bar tries to provide something that is unique to both the precinct as well as more generally for restaurants and bars. Operational Strategy SCOB can achieve their objectives through their operational strategy, as the operational strategy addresses how the various functions of the organization contribute to the particular business strategy and competitiveness of the organization. SCOB management has asserted that there was no seafood restaurant in Sydney that rivalled them in terms of class and location. According to the management, the closest substitute was Jordon’s Seafood Restaurant in Darling Harbour. However, the management didn’t feel that it was a threat (Jordons, 2010). SCOB management has been mindful of other ‘unique’ experiences in the area, including the Quay restaurant, which has been listed as one of the world’s best restaurants. The restaurant might be a real competitor in terms of providing an upmarket dining experience in the area. Cafe Sydney is another restaurant, which boasts of similar high quality views and food. SCOB has made investments in menu and wine advice for procuring the best quality seafood possible. There has been a constant focus on improving kitchen processes. The operational efficiency during peak periods in the kitchen fits with this strategy. The main aspect SCOB needs to address is brand loyalty, which has been largely dismissed to this point. By creating brand loyalty SCOB can not only differentiate itself in the market but it also further enhance aspects, such as quality, efficiency, workflow, business culture and customer satisfaction as addressed by Harrington (2007). Increasing business through brand loyalty has a significant flow on effect to other areas of the business. SCOB can develop brand loyalty by offering specials to businesses in the area such as discounts and corporate accounts. Such specials will help SCOB forge a relationship with the nearby businesses, with the aim of creating a favourite place for lunch meetings with clients and drinks after work. At present, SCOB’s demand is elastic and is highly correlated with level of activity in the Quay precinct, which is affected by seasonality, weather and events such as the opera. By creating brand loyalty SCOB can reduce the impact of seasonality on its business, as brand loyalty can help the business to have a constant flow of customers. The increased flow of customers and stability can allow SCOB to maintain staff in the longer term and reduce staffing volatility, which ultimately provides a better means of managing staff and operations which will ultimately increase service quality and efficiency. The increased flow of customers can also be seen as having a double sided effect so to speak. By increasing service standards through not only training of staff but also through efforts to keep good staff in the long term, service and customer knowledge can be preserved. Long term staff members will be able to better relate to and identify the needs of the clients. This will further enhance SCOB’s brand loyalty and quality. 3. Management Control System (outline and research) Strengths SCOB is one of few waterfront restaurants on Sydney Harbor SCOB offers unobstructed bridge view SCOB has higher than average profitability SCOB has development approval for reconfiguration of leased restaurant space. SCOB is sought by patrons within the vicinity of Opera House, Royal Botanic Garden, and the seaport makes a great impact SCOB offers good food and wine SCOB has knowledgeable staff, and offers high quality of service Weaknesses SCOB is not popular among all age groups, and the majority of patrons are 30 plus groups, corporate and tourists with a considerable deep pockets. SCOB has small office, and the kitchen is in not hygienic. No change is possible without the permission of the nodal authority of SHFA SCOB has seating arrangements for only 120, which can be elevated Opportunities The recent change with the Bar Act allows the service at any given point of time. As a result, the governing body has increased the focus on its sailor and several concoctions are ready to be served The unique menu with specified Oyster products is the essence of the existence of SCOB. The uniqueness has been nurtured over a good 22 years, and the control and commend over the niche market is well established. The specific position has played a key role in the success of the organization Threats The organization has virtually no marketing activity. Oblivious of the present scenario, the system banks on goodwill factor that has been generated through the passage of time. The stiff competition can derail SCOB`s business plan Research What are management decision and control systems? Management Control Systems are the multiple control mechanisms used in assisting managers in the use of human and financial resources, to achieve the best possible outcome for the organisation. Their aim is to translate the strategic goals decided upon by management into measurable outcomes at an operational level. MCS aid managers in decision-making, planning and implementation of measures. The different types of MCS include: Planning controls which decide which direction the organisation should take and influences employees to focus on this direction. Cybernetic controls, which use benchmarks to compare actual performance to performance aims, in order to evaluate its success. Cybernetic controls use systems such as budgets, financial measures, non-financial measures and hybrids. Reward and compensation controls, which link rewards to effort, Administrative controls, which influence employee behaviour through organisational design and structure; and Cultural controls, which influences behaviour through the values and beliefs of employees. Balanced Scorecard We are using is a Performance Measurement System (PMS), which incorporates the following MDC systems: PMS gives the most comprehensive view of the organisation’s performance. Performance measurement is vital to the organisations because it allows for ex ante control; identifying what management wants to happen, ex post control- signifying whether objectives were achieved, supports decision making, and motivates participant behaviour (which links to incentive schemes). Comparison between measures achieved and benchmarks desired identify the organisation’s strengths and weaknesses. It is, therefore, useful for performance evaluation, planning and strategic implementation. We believe that merely focussing on financial performance measures, as SCOB has done in the past, is insufficient as a measure of an organisation’s success and wellbeing. This is because they are incomplete measures, they may be misleading and they do not provide enough of a long-term outlook. Therefore, we will be using the hybrid measurement technique of the Balanced Scorecard System (BSC). The BSC Systems translates a company’s strategic objectives into a coherent set of performance measures (Kaplan, Norton 1993) to reflect four perspectives: the financial perspective which emphasises shareholder value, the customer perspective which focuses on value creation for the organisation’s patrons, the internal perspective which looks at the inner functions of the organisation, and a learning and growth perspective, which focuses on improvement in innovation and skills. By seperately addressing the four different perspectives the BSC can allow SCOB to better evaluate and allign the effect of the the 3 separate components within SCOB. Alignment of the components will allow SCOB to better achieve it’s stratergies. As each different compenent undertakes different process alligned at ultimately achieving SCOBs competitive and operational strategy. (not sure if worded 100% right but trying to link it what she said about the separte business components and also link in SCOBs stratergy as outlined in the operational and competitive section) The BSC outlines the main critical indicators within each perspective to help focus the company’s strategy/vision. Lag and lead indicators show whether or not the organisation is performing as expected. Lag indicators identify the organisation’s progress towards its stated objectives, whilst lead indicators relate to business processes and provide more actionable information. MDC System Objectives Measures Targets Initiatives Financial Increase sales Net revenue Increase revenue by 10 percent next quarter Increase advertisements; Increase word of mouth advertising Increase operating efficiency Operating margin Decrease operating margin by 5 percent next quarter Improve staff efficiency; Decrease overhead Increase income Net income Increase income by 10 percent next quarter Increase sales; decrease operating margin More effective budgeting Budget Reduced variances UTS Students to produce a report on the company including budget Return on expenditure Labour revenue/dollar revenue Maintain appropriate ratio Monitor ratio on a weekly basis Return on investment Economic value added Create higher value for shareholder Payout dividends on profits earned Customer Increase customer awareness Customer awareness Increase patrons and visitors by 10 percent next quarter Increase web presence (number of hits on website); increase print advertisements Increase customer satisfaction Customer satisfaction Positive responses after random surveys Improve service time; Improve customer experience % of customers referred Increase referrals by 10 percent next quarter Offer referral benefits Number of complaints Reduce customers complaint to less than 3% Analyse previous complaints and study industry trends and take proactive measures Build customer base % of patrons that have visited more than once 5 percent of local population Offer specials to businesses Average customers in off-peak months 60% of peak average Lunch/dinner specials; Platter/banquet specials; Customised events 15% of patrons are loyalty members Implement a loyalty reward program; Privilege access to partner products and services Internal Business Processes Resize staff Re-estimate cost to company Lean staffing Optimize staff schedule; Re-define roles for multitasking Adopt ISO certification ISO 9001 certification Quality control Develop a standardized system of working Reduce overhead and waste Estimate cost of overhead and waste Reduce Optimize stocking; and Just-in-time preparation Improve customer service time Percentage of times where targets are/aren’t met Targets to continually be met Develop set of targets for how long customers should spend at each point of the experience Improve quality Number of dishes re-worked/sent back 3% of all mains Analyse trends and take proactive measures Efficiency of service staff Average number of tables served by each waiter 3-6 tables at any one time? Greater focus on weather forecasting and estimation of demand to sustain necessary staff levels Learning and growth Maintain highly trained staff Employee retention Retain all good employees Provide staff access to specialized training programs Enhance staff knowledge in food/wine Employee skills Develop employee competence Mandatory training in wine knowledge for all new staff; Continuing education programs for experienced staff Staff morale Employee retention rate per 6 months 85% retention Team building and social activities Time spent on employee training Increase Focus more attention to on-the-job training Establishing strong supply networks Frequency of inadequate supplies/supplies not on time 5% per month Commit to top suppliers by signing exclusive contracts Review menu items Number of times a dish has been ordered Improved POS systems – maintain database of customers (previous orders, number of visits etc) Incentive/reward system Successful implementation of incentives that align with the performance measure and targets established by the BSC can motivate employees to act in the best interests of SCOB. Currently SCOB already has a basis for a reward system in place through with their tip allocation system. However the current Tip allocation system is based on a tiered approach. If SCOB could structure the Tip allocation system with a greater linkage to individual employee’s performance then they could use the tips to drive performance. Intrinsic and extrinsic rewards: -salary increase - development opportunities - reputation within organisation - appreciation/satisfaction.recognition A reward and recognition program should target important issues including increased word of mouth advertising; increased staff morale; increased staff loyalty; creation of working environment that is positive; and increase profits. A summary of the system has been described below. Objectives Measures Targets Incentives or Rewards Financial Increase sales Net revenue Increase revenue by 10 percent next quarter Attractive pricing and offers Increase operating efficiency Operating margin Decrease operating margin by 5 percent next quarter Performance based compensation and reward system Increase income Net income Increase income by 10 percent next quarter Bonus for employees More effective budgeting Budget Reduced variances Allocate surplus in innovative schemes Return on expenditure Labour revenue/dollar revenue Maintain appropriate ratio Offer benefits to employees such as movie tickets to family, etc. Return on investment Economic value added Create higher value for shareholder Payout dividends on profits Customer Increase customer awareness Customer awareness Increase patrons and visitors by 10 percent next quarter Offer attractive and interactive website for engaging customers Increase customer satisfaction Customer satisfaction Positive responses after random surveys Offer incentives to employees such as “employee of the month” % of customers referred Increase referrals by 10 percent next quarter Offer referral benefits such as access to premium partner products Number of complaints Reduce customers complaint to less than 3% Develop programs such as “number of hours without complaints” Build customer base % of patrons that have visited more than once 5 percent of local population Offer specials and develop special programs such as access to premium products from partners Average customers in off-peak months 60% of peak average Develop special programs for select customer groups 15% of patrons are loyalty members Implement a loyalty reward program; Privilege access to partner products and services Internal Business Processes Resize staff Re-estimate cost to company Lean staffing Skill and cost based staffing Adopt ISO certification ISO 9001 certification Quality control Achieve certification and display certification Reduce overhead and waste Estimate cost of overhead and waste Reduce Display cost savings to employees Improve customer service time Percentage of times where targets are/aren’t met Targets to continually be met Offer rewards to staff for performance such as family meal tickets Improve quality Number of dishes re-worked/sent back 3% of all mains Include quality in performance evaluation measures Efficiency of service staff Average number of tables served by each waiter 3-6 tables at any one time? Include staff efficiency in performance evaluation measures Learning and growth Maintain highly trained staff Employee retention Retain all good employees Provide subsidized specialized training programs to staff Enhance staff knowledge in food/wine Employee skills Develop employee competence Provide subsidized specialized training programs to staff Staff morale Employee retention rate per 6 months 85% retention Develop incentives such as “Employee of the Month” for boosting morale Time spent on employee training Increase Develop incentives for staff interested in enhancing learning skills such as access to specialized database or special training Establishing strong supply networks Frequency of inadequate supplies/supplies not on time 5% per month Invite suppliers to develop supply chain strategy Review menu items Number of times a dish has been ordered Prepare list of most ordered items or least ordered and improve menu continuously 4) Describe and justify a specific type of business intelligence system that could be used to support your decision and control system. Business intelligence systems allow better management of daily operations; and generation of frequent and voluminous reports. Such investments are necessary for operation of modern business enterprises. Business intelligence is a logical extension of the use of IT to improve profit and performance (Williams and Williams, 2007). Ritzer-Ross (2008) recommended the use of business intelligence tools to enable management to sense and respond to business conditions that keep changing rapidly, forestall problems, outpace the competition, and match customer demands. The use of business intelligence allows identification of opportunities for competitive positioning; development of new products; promotion and service offerings. An example of such as system is Micros System, which has tools for identifying customer ordering and visitation patterns. This allows design of promotions for select patrons. The system also allows identify program members, who haven`t recently visited the restaurant, and lure them with offerings. The system has enabled Ruby Tuesday maximize its four percent of annual sales spent on marketing. According to Michael Porter`s competitive forces model, the forces are bargaining power of customers and suppliers; competitive rivalry; threats from new entrants; and threats from substitutes. According to Davidson (2006), customers have a high bargaining power, which is enhanced by restaurants being located to close proximity to each other. The range of pricing already known, gives the customers an option about which restaurant to dine in. The bargaining power of suppliers is low, as there are many suppliers and each one can substitute the other. Competitive rivalry is low as SCOB has offerings that are able to distinguish themselves from competitors. There are relatively low entry barriers, and there is a threat of new entrants entering the business. SCOB has leveraged on differentiation; innovation; growth; alliances; and other strategies to position itself in the market. The value chain analysis allows creation of more customer value. Activities include logistics; operations; outbound logistics; marketing; sales and service. Business information should be analyzed by the use of business intelligence systems. Such systems allow supporting and process information such as recipes, staff, supplier information, and accounting. Challenges facing SCOB include customer satisfaction; monitoring food standards; investor relations; threat of substitutes; growth; and investments. A business intelligence system would be a good solution for SCOB`s challenges. The system would allow integration of company`s internal systems such as suppliers; accounting; human resources; and recipes. This system will allow analysis of sales trends, track costs on a daily basis, or product mix. 5) Identify the problems associated with implementing the system(s) and explain how it can be implemented with as little organizational disruption as possible. According to Davidson (2006), six reasons have been attributed for the failure of information systems in the food industry. These include project cancellation; user resistance to information systems; system crashes; lack of user understanding of information systems; bad system performance; or information systems not meeting expectations. Project cancellation can result from poor management. Also, scope or management activity can result in project failures. In order to avoid these failures, SCOB management must not underestimate the complexity of planning, and engage in the development and training required for change in processes, or ways of doing work. A project management approach is required to roll out the system. There should be an emphasis on reducing over reliance on external consultants, or overstating expectations. Davidson (2006) found that organizational factors such as unfamiliarity with technology; non involvement of affected employees; and insufficient employee training could result in information systems failure. In order to overcome these failures, SCOB should embark on a companywide awareness and transformation program, where employees are ready and trained to handle the new system for accomplishing work. References JORDONS. (2010). Jordons Seafood Restaurant. Available: http://www.jordonsrestaurant.com.au/home.html. Last accessed 13 May 2010. Ritzer-Ross, J. (2008). Work Smarter. Hospitality Technology. 34. Davidson, R. (2006). Enterprise Resource Planning. Available: http://russelldavison.blogbeee.com. Last accessed 13 May 2010. Williams, S. and Williams, N. (2007). The business value of business intelligence. The Profit Impact of Business Intelligence. 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