Restaurant Group PLC Management - Case Study Example

MANAGEMENT REPORT OF RESTAURANT PLC GROUP Name Course Tutor Date Executive Summary The report is divided into five sections. The first section introduces the report by giving an overview of the organization and a highlight of what to expect in the report. The second section then evaluates critically the environmental audit of the organization through the use of SWOT/TWOS analysis frameworks. Additionally, the section also conducts an evaluation of the hotel industry in the UK as well as the Porters Five Force analysis of the Restaurant Group PLC. The next section evaluates the strategic direction of the Restaurant Group PLC using the Ansoff and BCG matrices. The next section then conducts an SAFS (Suitability, Acceptability, Feasibility, and Sustainability) framework. The next section then makes the necessary recommendation that the board would be wise to consider and concludes the report by highlighting some of the major items tackled in the report. Table of Contents Executive Summary 2 Table of Contents 3 Introduction 4 Analysis and Critical Evaluation of the Organization’s Environmental Audit 5 Internal and External Environment 5 SWOT and TWOS Analysis 5 TWOS 7 Industry Analysis 8 Porters Five Force Analysis 8 Analysis of Restaurant PLC Group’s Strategic Direction 10 Ansoff Product/Market Matrix 11 Market Penetration 11 Market Development 11 Product Development 12 Diversification 13 BCG Matrix 13 Restaurant PLC Group’s Strategy 16 Suitability 16 Acceptability 16 Feasibility 17 Sustainability 17 Conclusion and Recommendation 17 Recommendations 17 Conclusion 18 Bibliography 19 Introduction The restaurant group plc also known s the Group or TRG is an organization that operates 422 restaurants and pub restaurants (TRG, 2014). The organization trades brands such as Chiquito, Garfunkel’s, Benny’s and Frankie. Additionally, the organization also operates concessions business that is spread in over sixty sites and most importantly the UK airports (TRG, 2014). The organization has the key objective of increasing shareholder value. To fulfill the objective the organization has a clear cut strategy that is deployed which is meant to build a business capable of breeding a sustainable long-term as well as expanding cash flows. The group’s focus is on leisure, pub restaurants and concessions (TRG, 2014). The major target market segment of the group is the casual dining market. The market is laden with barriers to entry and therefore the organization targets various segments for ensured cash flow and profits realization. The group offers good value for the money paid by its clients in the best surroundings as well as excellent services from a committed and dedicated team (The Restaurant Group PLC, 2015). The organization ensures growth through its four brands. The management team is very competent and is boastful of market leading expertise (The Restaurant Group plc, 2013). The concessions business run in a complicated and dynamic market yet still delivering exiting and best foods and drinks to the clients (The Restaurant Group PLC, 2015). The organization also prides itself to be an excellent service provider and having a passion driven workforce. Analysis and Critical Evaluation of the Organization’s Environmental Audit Internal and External Environment SWOT and TWOS Analysis To assess an organization’s progress and therefore evaluate its strategic direction SWOT and TWOS are used. SWOT analysis refers to a framework where the organization’s strengths and weaknesses are assed alongside the opportunities and threats that are likely to be in place due to the external environment (Hamel, 2015). In this framework the internal factors that covers the strengths and weaknesses are assesses as well as the external environment that comes from the opportunities and threats (Hamel, 2015). The Restaurant Group PLC has various strengths. First off, there is diversified income that is assured by the different brands such as Frankie’s and Benny’s, Coast to Coast, Chiquito and Garfunkel’s (The Restaurant Group plc, 2013; The Restaurant Group PLC, 2015). This is mainly propagated by the committed workforce that is diversified. The group also has a strong corporate strategy that is reflected in the governance framework headed by the board of governors. The company employs more than 12000 individuals annually (The Restaurant Group plc, 2013). The company also reviews its menus twice per year and the nutritional and calorific contents of the foods are maintained. The organization encourages healthy lifestyles through salt reduction and encouraging physical activities (The Restaurant Group plc, 2013). The organization tests on products and facilities at its suppliers so as to ensure that standards are met. The other strength is the consumer value oriented culture. The staff also undergoes scheduled training programmes. The workforce is therefore skilled and well engaged. There are also weaknesses that are likely to hinder Restaurant plc Group from attaining its objectives. Poor customer services especially when the number of customers is high in some seasons and the diversity of customers as well (The Restaurant Group PLC, 2015). There are also many brands (seven in total) that can easily confuse customers and to the worst cause brand dilution. The other weakness is the turnover of employees who find greener pastures everywhere. The organizational structure as it is now is very rigid thus impeding the introduction of new products. The company also has coverage only in the UK instead of the world’s largest markets. The structure of the organization is costly to maintain. The opportunities for Restaurant plc Group are numerous. First off, there is the growing demand of the population in the UK that demand casual eating. There is changing customer habits with most embracing eating out due to socio-economic factors such as the ageing population, more women in the corporate world and busy lifestyle among others. The number of passengers visiting the UK is also increasing (The Restaurant Group plc, 2013). There are a growing number of graduates seeking to work in the industry. The strong financial background of the organization also presents another opportunity (The Restaurant Group plc, 2013). There are also home deliveries that can be catapulted by online presence since the company does not do this (The Restaurant Group PLC, 2015). The weaknesses of the company include increase in taxes and debts (The Restaurant Group PLC, 2015). Secondly, there is the rise in some industries that will attract the employees leading to high turnover (The Restaurant Group PLC, 2015). Thirdly, there is intense competition from its peers in the foods and leisure industry (The Restaurant Group plc, 2013). The other threat is inflation that will mean that the costs are shifted to the customers in the form of high pricing. There are also strict government standards that must be met as well as occupational health and safety standards. Environmental regulations that are strict also make the performance of the organization to be at crossroads (The Restaurant Group PLC, 2015). TWOS TWOS is an example of SWOT analysis that involves making steps similar to SWOT analysis. In this framework the external factors (Threats and Opportunities) are looked into and then the internal factors (weaknesses and strengths) examined last (Hamel, 2015). The ability to leverage on the opportunities is then evaluated at the same time threats and strengths used as tools to outdo weaknesses and minimize threats at the same time. Strengths Excellent Customer Service Competent workforce Many units across UK Mature Economy Opportunities High end customers Travelers Marketing and Technology Ease of accessibility by customers Weaknesses Suppliers are only from UK Poor customer service Poor marketing strategies Opportunity New Suppliers Enhanced services Embracing E-marketing strategies Weakness Reliant on UK employees Poor marketing strategies Limited use of technology Threat Less diversified workforce Intense competition New entrants and competitors with efficient and effective technology Strength High street giant Cost efficiency Long term relationship with suppliers in British Threat Poor market representation New markets New low cost international suppliers Industry Analysis Both the corporate and leisure travelers are projected to increase in the coming years. The number of global visitors is predicted to increase due to Chinese and other Asian visitors. The supply and demand for hotel and leisure demand is therefore assured (Brotherton, 2012). London still remains the best region where the hotel market is mature compared to other regions. As per guest dynamics there has been the rise of millennial who reach young adulthood around the millennium that demand innovation, value for their money and are information oriented (Brotherton, 2012). The market is remaining to be competitive as there are many players in the hotel industry reflected in the continued high levels of supplies flowing into the market with about 18000 bedrooms being added to the initial number. Some of the key players in the industry include Whitbread, Intercontinental hotel, Hilton, Bespoke Hotel and Hay Market among others (Brotherton, 2012). Porters Five Force Analysis The UK hotel industry is robust and dynamic. The recent financial crisis of 2009 causing recession in the UK had an impact on the performance of the industry (Roy, 2009). To evaluate the competitiveness of the industry as well as the attractiveness of the market porters five force framework if used. Through this framework the power of TRG will be visualized (Roy, 2009). The aim of using this framework on TRG is to evaluate the potential profitability of its products so as to understand the strategic direction of the company. Potential Entrants As the market is the hotel industry is much diversified. However, due to the attractiveness of the market there is a threat of entrants (Roy, 2009). Whitbread, Hilton and Intercontinental which are well established hotels may try out the market at any given time (Brotherton, 2012). This is because of the increasing number of tourist and millennials who are visiting the UK (Nicholls, 2014). There are barriers to entrants that relate to economies of scale, brand equity and customer loyalty, the government regulations and policies, and capital requirements (David, 2005). Entry barriers for the competitors are relatively high being that TRG’s brands are already well established and the location of the brands is also enhanced all throughout the UK (Nicholls, 2014). Additionally, the services and products offered by the competent workforce that reflects in the pricing too offer TRG a cost advantage over the competitors and the incumbents. Supplier Power The suppliers are widely accessible across the UK and are in large numbers. This then presents less threat to TRG. Additionally, TRG maintains a good reputation with its customers and has a well established relationship (Nicholls, 2014). Threat of Substitutes Whitbread, Intercontinental Hotel, and Hilton among others are serving in the same hotel industry as is the Restaurant Group PLC (Nicholls, 2014). These competitors are likely to offer low prices for the same products provided by TRG (Roy, 2009). However, the only advantage is that TRG has already taken care of this in its pricing strategy that is customer value oriented. Convenience and proper pricing of TRG cannot be provided by other substitutes including the incumbents such as Hilton. Bargaining Power of Buyers There are other hotels that are in the same industry targeting the same segments as TRG (Roy, 2009). The customers are therefore left with the choice of determining where they will get their services from (Nicholls, 2014). Hilton and Intercontinental each has its own brand that the customers can choose over TRG (Nicholls, 2014). The buyers are quality oriented that is at the center of TRG. Competitive Rivalry There is considerable number of competitors in the hotel industry and the distribution is even across the UK. Some of the aforementioned companies have their brands well spread and some even in locations where TRG has its units (Nicholls, 2014). The industry is large and well matured indicated by the less impact the 2009 UK recession had on it (Brotherton, 2012). The loyalty of customers to the brands is amazing in the UK. This is further backed up with the loyalty and demand that has seen TRG increase the number of units that sell its brands (Nicholls, 2014). The Restaurant Group is well established and has moderate to no threat of being acquired. Analysis of Restaurant PLC Group’s Strategic Direction There are different tools that can be used to analyze the strategic direction of an organization. For the scope of this report the Ansoff and BCG matrices will be used. Ansoff Product/Market Matrix Market Penetration This is a growth strategy where the business lays its core focus on existing products into existing markets (Henry, 2009). The Restaurant Group PLC in its products and various widespread business units has the ability to do better in the current market than it is currently doing. Since the brands of the organization are doing way better the organization should consider establishing loyalty schemes as well as customer relationship management that will help it identify the loyal customers and leverage on them for its own good (Bachmeier, 2013). The second strategy the organization should consider is countering the competitors in any way possible (David, 2005). The organization should invest in aggressive marketing campaigns that are backed up with a good pricing option to make the market unfavorable for the competitors. This can be done by a well conducted market research (Bachmeier, 2013). The organization should further dominate the market by further increasing its presence in the UK than it is currently (TRG, 2013). The possible way to do this is to start home and office delivery as well as corporate services such as conferencing and events. Lastly, the organization should consider increasing the market share of the products this can be ensured by advertising, online marketing, sales promotion and personal selling (David, 2005). Market Development This strategy involves the selling of products in areas where the product has minimal or no existence (Henry, 2009). The best way the Restaurant Group PLC should do this is to avoid over-dominance in the UK and try out other market in other geographical locations such as major cities in China, France and USA (Brotherton, 2012). The other best strategy for the organization is to come up with new distribution channels such as exploring the e-commerce and mail order system. The company should also have different pricing strategies or policies that are aimed at attracting diverse customers as well as create new marketing segments (Bachmeier, 2013). Instead of focusing on the brands alone the company should consider including diet programs for the sick so that they cater for the needs of every one. The products should also be repackaged and the least performing brands rebranded (Bachmeier, 2013). This strategy is very risky than the previous one as targeting new markets has its own challenges. Product Development This is a strategy that will make the business introduce new products into the existing markets (Henry, 2009). The business in this case should develop modified products that appeal to the existing markets as well as new competencies (David, 2005). The hotel industry in the UK is very dynamic and competitive; this calls for a product differentiation move so as to remain competitive. Most hotels such as Intercontinental group plc and Whitbread plc are some of the nearest competitors to TRG (Brotherton, 2012). TRG should therefore invest more in research and development to get a deeper insight of the consumer needs and then adjust accordingly (Bachmeier, 2013). TRG should also through a well established customer relationship management system get the insights of the customers on what they need integrated into the services and menu of the various units. TRG should also think ahead of its competitors and be the first to market products in the market (Bachmeier, 2013). Diversification As the name suggests, this strategy is mostly aimed for new products in new markets. Inherently this is a very risky strategy since the organization will be moving into markets that it has no or little experience (Henry, 2009). Prior to developing a differentiation strategy TRG should be clear about the gains from the strategy and conduct an honest assessment of the risks expected (Nicholls, 2014). The balance between the rewards and risks should then be maintained as the strategy could be highly rewarding if well planned (Nicholls, 2014). BCG Matrix In order to evaluate the Restaurant Group PLC’s strategic direction the identification of the business unit using BCG matrix is in order (Schermerhorn, 2007). This will give sense in assigning the necessary resources as well as appropriate strategies to satisfy the objectives of the group (Schermerhorn, 2007). The objective as aforementioned was to ensure customer value is maintained. The matrix assesses the level of growth in the market and the product’s market share relative to that of its competitors (Schermerhorn, 2007). The BCG matrix approach is reliant on the product life cycle concepts that can aid in the identification of the priorities that should be given to a given product portfolio. To make sure that the organization is creating a long-term value, it should at least have a portfolio or brands that have high quality and growth products that require cash input (Drury, 2005). Additionally, there should also be low-growth products that draw a lot of profits. The matrix relies on two dimensions that is market share and market growth. The higher the market share of a given product the faster its marketability, the converse is true. This would mean that the product is good for the industry. The BCG matrix has four categories; stars, cash cows, dogs and question marks (David, 2005). There are different measures for each of the aforementioned categories. The stars are the products that have high market share and growth altogether. These products use a large amount of cash and have a competitive edge in the market generating more profits (David, 2005). The restaurant group plc should make attempts to ensure that these stars do not become cash cows (Drury, 2005). The second category is the cash cows that refer to the products with the least market growth and high market share (Drury, 2005). The profits and the generation of cash are high even though investment is still required due to low market growth (Drury, 2005). These are the foundation of the company and should keep the profits high. The next category in the BCG matrix is the Dogs, which refers to the low market growth and share as well (Schermerhorn, 2007). The restaurant group plc should identify and weed out these dogs in the industry. However, expensive turnarounds should be avoided at all costs. The last category in the matrix is the question marks, which is high growth and low market share. These are the worst cash features of all due to the high demands that make them have low returns following low market share. If the restaurant group would not be able to stop the question marks products, the amount of cash can be absorbed and the dogs stopped. The restaurant group has seven different brands in the market. This includes Frankie and Benny’s, Chiquito, Garfunkel’s, Filling station, Coast to Coast, Home Counties and Pub Restaurants, and Brunning and Price (TRG, 2013). As of the BCG matrix Frankie and Benny’s, Chiquito and Home Counties and Pub Restaurants can be considered the stars this is because they have high market share and market growth as well (TRG, 2012). This is reflected in the number of units that have increased annually due to their demand from customers and high turnover rate as well as profit margins. The existence of similar products from Whitbread and Intercontinental restaurant groups, causes the Filling station and Coast to Coast be in the category of question mark the brands also have average units of 10 and 16 units respectively across the UK (TRG, 2012). However, brand loyalty among customers and proper placement in the market offers the opportunity for the company to do more in marketing them so as to increase their sales. Home Counties and Garfunkel’s and Brunning and Price fall in the category cash cows and should highly being that they have high market share but slow growth in the market compared to other brands (TRG, 2012). This said and done, the restaurant group plc has been able to market their products through the various brands and increased their market share using various approaches. There are different market entry modes annually as reflected by the annual growth of the units that offer each of the brands. However, trying franchising and joint ventures would be more efficient for the company because of the differing needs and the scarcity of resources to further enhance the performance of each brand (TRG, 2012). More resources should be allocated to the brands identified to be in the question mark so that there is a balance between the brands. This will not only lead to the realization of the objectives of the strategy of the organization but also increase profit margins. Restaurant PLC Group’s Strategy The strategy of TRG is based on customer value. To evaluate the strategy of the company as to whether or not it is the best the SAFS model will be used as outlined below. Suitability The overview of the strengths and weaknesses makes the strategy that TRG is currently using become less suitable. The opportunities are not fully explored and with the strategy, there is a high likelihood that the objectives of the organization will be half met. The strategy of increasing business units and less marketing should be well thought of and substituted with a viable one (TRG, 2013). For instance TRG should invest more on marketing and develop new units in an equal manner that would make the presence of all the brands equal. The brands are many and increasing the business units in an unbalanced manner may lead to the dilution of some of the brands as reflected in the number of units (TRG, 2013). TRG should therefore take a dynamic approach to ensure that as the units are increased, there is corresponding aggressive marketing campaign on the least developed products to ensure its sustainability. Acceptability The current weaknesses such as poor marketing strategies and dependence on customers from the UK as well as poor customer services reflects that the strategy is not too much acceptable. TRG cannot be able to convince the stakeholders that they can sustain the challenge from their competitors such as Hilton and Bespoke among others. There is a gap that requires a well conducted market research and the evaluation of the current trends in the UK hotels industry. The strategy is also acceptable on grounds that it has seen the debts reduce. Feasibility Combining the strengths the strategy TRG is using is to some extent feasible in terms of the manpower capacity, the returns on investments and the organizational structure of TRG (TRG, 2013; Evans et al, 2012). The profits that are continuously up scaling give a testimony that the strategy is feasible (TRG, 2013). Sustainability The strategy currently being used by TRG is sustainable. This is majorly because of the assured supply of the workforce who are trained in the organization and aligned with the culture of customer value preference (Evans et al, 2012). The brands are also rare and therefore cannot be imitated due to the fact that they are well known among the customer (TRG, 2013). The products being provided by the company should continue to be rare and inimitable by other competitors. TRG has the ability to invest in a good product development through research and development and consumer insights being that most of its customers are loyal to its brands. Conclusion and Recommendation Recommendations TRG group should consider tweaking their strategy in the manner predicted above so as to increase the market share of the brands that are not performing well. The current strategy is moderately feasible being that the returns of the company do not reflect the best it should be. A good and in-depth market research is in order for the company so that it can realize its position in the market among its competitors. Investing and focusing much of the resources to the specified brands as cash cows should make them stars so that they have equal high market share as well as market growth. Conclusion TRG is a well developed and established player in the UK hotel industry. The company’s key strategy is to offer customers value for their money. This has been ensured through competent workforce and quality that is delivered using the seven major brands as aforementioned. The performance and growth of the company is astounding, given that the annual profits keep increasing. The company has various strengths which it has harnessed to its advantages and also has some opportunities that have been identified above. Equally, there are threats and weaknesses that pull the company down making it risky especially in the competitive industry. Bibliography Bachmeier, K. (2013). Analysis of marketing strategies used by PepsiCo based on Ansoff's theory. München: GRIN Verlag GmbH. Brotherton, B. (2012). Introduction to the UK Hospitality Industry. Hoboken: Taylor and Francis. David, F. R. (2005). Strategic management: Concepts and cases. Upper Saddle River, NJ: Pearson Prentice Hall. Drury, C. (2005). Management accounting for business. London: Thomson. Evans, N., Campbell, D., & Stonehouse, G. (2012). Strategic management for travel and tourism. Oxford: Butterworth-Heinemann. Hamel, G. (2015). Difference Between SWOT & TOWS Analysis | Chron.com. Retrieved from http://smallbusiness.chron.com/difference-between-swot-tows-analysis-23169.html Henry, A. (2009). Understanding strategic management. Oxford: Oxford University Press. Nicholls, L. (2014, February 26). The Restaurant Group annual report 2014 - new openings as profits rise. Retrieved from http://www.bighospitality.co.uk/Business/TRG-targets-43-new-restaurants-in-2014-as-profits-rise Roy, D. (2009). Strategic foresight and Porter's five forces: Towards a synthesis. München: GRIN. Schermerhorn, J. R. (2007). Exploring management in modules. Hoboken, NJ: Wiley. The Restaurant Group. (2015). Vision & Strategy | The Restaurant Group. Retrieved from http://www.trgplc.com/vision-and-strategy TRG. (2012). Another Year of Growth: Annual Report 2012. Retrieved from http://www.trgplc.com/sites/default/files/file/TRG_AR12.pdf The Restaurant Group. 2013, “The Restaurant Group plc”. Retrieved from http://www.trgplc.com/sites/default/files/file/2013%20Prelims.pdf TRG. (2013). A Successful Year if Consistent Growth: Annual Report 2013. Retrieved from http://www.trgplc.com/sites/default/files/file/TRG_AR13.pdf TRG. (2014). Interim Report. Retrieved from http://www.trgplc.com/sites/default/files/file/Interim%20Report%202014.pdf Read More