Ellens Stardust Diner - Case Study Example

Ellen’s Stardust Diner Introduction Ellen Stardust Diner is among the top theme restaurants in New York thanks to its singing waiting workforce.The Diner was opened in 1987 and it is based on a retro 1950s theme. Ellen Stardust has retro- themed artefacts including photos, an indoor train and a drive in theatre that display performances from the 1950s making it highly popular among the young and old. The Diner serves classic meals including the conventional potpie for the affluent, American meat loaf and creamy shakes. The restaurant also offers catering services to parties including birthday parties, Christmas parties and weddings. The Diner is open on all days of the week. The diner was opened after Ellen’s Café was closed and it was the first 50s themed diner and its waiters dressed in poodle skirts (Ellen’s Stardust Diner 2013). It opened a branch in Times Square named Stardust Dine-O-Mat in the 1990s and was the venue where Sarah Jessica’s Parker character in the movie New Year’s Eve was shot (Ellen’s Stardust Diner 2013). The diner featured in the American Idol show when a former employee contested in the show. A number of alums of the diner singing waiting staff have proceeded to have thriving careers on American Idol and Broadway. Current staffers have received significant acclaim with musicals at the NY Musical Festival. Some of the successful singers who began their careers at the diner include Alysha Umphress (Shirley), Kevin Ray, Stephen Tyler Davis and Brandon Ellis. The diner is viewed as a discovery ground for young and talented singers. In fact, the restaurant’s former staff members are known to feature in most Broadway and off- Broadway platforms including In the Heights, South Pacific, The Lion King, Jersey Boys and Avenue Q (Ellen’s Stardust Diner 2013). This paper analyses the company’s macro environment and microenvironment issues that are likely to determine the diner’s success in London West End. Company Analysis Ellen Stardust Diner is a privately owned company operating from a single location in Broadway New York. The annual revenue estimates range between $50 mil. - $100 mil (Ellen’s Stardust Diner 2013). The diner operates in the hospitality and restaurants industry and offers competitive services in these industries. The restaurant currently employs 250- 500 qualified employees (Ellen’s Stardust Diner 2013). The restaurant is known to be home of the well-known singing staff and this has made it one of the most popular hangout joints in New York. The restaurant serves conventional traditional dishes for the affluent and conservative customers and convenient foods that are preferred by the young and busy generation. The Company’s Macro environment: PESTLE Analysis The UK particularly London West End has been reported to have the highest consumption of fast foods globally. London West End has varying cultures and various tastes that contribute positively to the restaurant and entertainment industry. The fast food industry is reported to have grown by 5.2 percent to reach an approximated value of over $2.2 billion in the year 2008 (Petusevsky and Whole Foods, Inc., 2010:89). Fast food joints and restaurants dominate the food industry in the UK (Newman, 2007). The external aspects that could impact on the diner’s success in London West End includes demographic forces, economic forces, natural forces, technological forces, political forces, cultural forces. Political Forces These forces relate to the extent to which the government affects and controls business operations. Before venturing into London West End, Ellen’s Stardust Diner must consider the political requirements including the national minimum wage and the tax rates subject to companies in the food industry (Brown and Harwood, 2010: 56). It also important to take into consideration that quality and hygiene regulations differ between countries and this will affect the quality of food offered in the market (Barrow, 2011:45). The UK government has been mounting increasing pressure on businesses in the food industry to promote healthy eating and the diner should be ready to comply with these regulations. London West End is the right place for the diner to enter as it can comfortably keep with the political forces influencing business in London West End. Economic Forces Economic forces are highly important to the food industry. This is owing to the fact that economic forces such as inflation and cost of capital impact on businesses. Diners and restaurants are a luxury therefore, people must spare a disposable income to spend in them. The cost of setting up a food joint is relatively low, hence there are numerous companies entering the industry (Schmidt, 2010: 78). Franchising is an important aspect in the food industry as well recognized brand names get a higher number of customers. London West End has one of the most well recognized food joints and Ellen’s Stardust Diner should consider this fact before venturing into the market. During a recession, fast food restaurants perform better than traditional restaurants as the price of food is the most important aspect. Ellen’s Stardust Diner should consider this fact and come up with friendly prices for various market segments. Cultural Forces Cultural forces have a huge impact on consumers’ tastes and purchasing decisions. The population in West End is health conscious and is attracted to conventional foods such as the ones offered at Ellen’s Stardust Diner (Petusevsky and Whole Foods, Inc., 2010:78). The other important cultural aspect to take into account is the population’s attitude towards eating out. Fortunately, the population at London West End likes eating out which would be an advantage to the diner. Demographic Forces These trends in population influence the customers’ tastes and preferences. The London West End population is mainly made up of middle-aged adults. These individuals lead a busy lifestyle and are highly concerned about their health and weight issues. These forces determine the standard of living that people adopt (Schmidt, 2010: 78). The lifestyle adopted by the people in London West End is similar to that of the New Yorkers as they are busy and sophisticated. Establishing Ellen’s Stardust Diner operations would be appropriate basing on the demographic forces in the market. Technological Forces Generally, there is low technology in the restaurant industry. However, the ongoing success in the restaurant industry can be attributed to technological advancements in the sector. The diner has to install an Electronic Funds Transfer at Point of Sale (EFTPOS) that enables payment using debit and credit cards (Schmidt, 2010: 79). In addition to, for the diner to compete efficiently with other players in the region, it will be required to employ online marketing strategy to reach the target population. The diner should also adopt a computerized billing system and order taking that will improve efficiency and competitiveness. Ellen’s Stardust Diner employs the latest technology in its production and billing operations therefore can operate successfully in the target market. Natural Forces The government has been putting increasing pressure on restaurants to become adopt ‘green’ practices. Recycling is a key issue in the environmental campaign meaning that the diner must use recyclable material and use alternative sources of energy to gain the significant opportunity to gain increased customer loyalty (Greenpeace, 2012). The diner serves various delicacies made from animal products therefore, important measures should be undertaken to respect the animal rights. The dramatic rise in global oil and energy prices and this has a direct impact on the prices of foods and drinks that are served in the diner (Schmidt, 2010: 80). In summary, an environmentally friendly restaurant creates a positive image in the minds of consumers as they get the perception that the food they are eating is healthy. Ellen’s Stardust Diner should go ahead and venture in the new market as these natural forces will work for its benefit. Segmentation Analysis The diner should purpose to cater for the needs of a diverse customer base in London West End. This is by establishing a cozy environment that makes everyone feel appreciated and welcomed in other words, the menu should offer a variety of meals for the different market segments. A close analysis of the market leads to the discovery of the following market segments. The businessperson segment represents individuals who work all day and stay up through the night. Businesspersons are busy and need a place where they can spend their money on good food, drinks and tips. The restaurant should come up with meals and drinks that are suitable for this market segment. The second most important market segment is family. Family demands a diner with friendly service and an accommodative menu (Valentine, 2012). This will not be a problem for Ellen’s Stardust Diner as their menu offers a suitable menu family. The third segment is happy couples that prefer a sophisticated and intimate atmosphere that encourages people to go on dates in this restaurant (Tönnis, 2007:77). The fourth segment is made up of tourists who visit the region during the summer. The diner’s atmosphere is highly attractive and its 1950s theme will be a major selling point to this market segment. Finally, there is the high-end singles that has a sophisticated taste and demand. The diner should come up with a striking décor, excellent service and organise classy events such as wine tasting to attract customers in this market segment. Porter Five Analysis Buyer Power The fact that not everyone appreciates traditional meals and service, the buyer power with regards to the restaurant is weak. Additionally, the major fast food companies in London West End have established proper market intermediaries making it difficult for the diner to set up its operations in the new market (Petusevsky and Whole Foods, Inc. 2010: 67). Some of the major restaurants in the market have invested heavily in their brand name hence Ellen’s Stardust Diner will have to keep up with the competition established by these firms. In this case, buyer power is significantly reduced by customer loyalty to other brands in the market. Supplier Power The most important input in the food market is the food itself. Luckily, the UK and London in particular has a concentrated food supply. Food suppliers not only concentrate on the fast food sector but also on the restaurant sector. It is important for the company to look for suppliers that offer quality foods at affordable prices. It can therefore be concluded that the supplier power in the new market is high (Petusevsky and Whole Foods, Inc. 2010: 68). The labour laws in London West End are strict and this strengthens employees further proving that supplier power in the market is high. Threats of New Entrants There are specific barriers of entry in the UK market that are subject to companies wishing to set up their operations in the market (Schmidt, 2010:14). There may be some limitations imposed by the local authority on the type or number of restaurants that can operate in a given area. Ellen’s Stardust Diner should be aware of the fact that it is complex for a new comer to make profits or do well in the initial stages of its operations (Petusevsky and Whole Foods, Inc. 2010: 69). This can be attributed to low customer loyalty. Furthermore, it may be difficult for the company to get a location in busy streets or prime locations. The cost of establishing restaurants is relatively low and this leads to increased competition in the market. In summary, the threat of new entrants in the market is high. Threat of Substitutes The threat of substitutes, as there are numerous options in the food industry that are viewed as being cheaper and more convenient (Kilne and Botterill 2007: 3), face the restaurant industry. The major threat facing the industry is the fast food business that provides cheaper and convenient solutions for customers (Petusevsky and Whole Foods, Inc. 2010: 89). However, a considerable number of consumers demands foods that are prepared in a restaurant. The threat of substitutes in the food industry is high. Rivalry of Existing Customers The competition for customers in the food industry is immense as various companies in different segments compete to gain the largest market share. As earlier stated, the fast food sector dominates the food industry (Petusevsky and Whole Foods, Inc. 2010: 90). These fast food joints are also strategically located meaning that rivalry for existing customers is high. The Company’s Micro Environment: SWOT Analysis This includes its products and services, suppliers, marketing intermediaries, customers, competitors, publics. As a result, the SWOT analysis will be used to analyse the company’s micro- environment that will be used to determine the success of the diner in the new market. Strengths One of the major strengths of the diner is the kind of meals that are served including some of the traditional American dishes. In addition to, the retro 1950s theme is fascinating to conservative customers. The diner offers a wide range of catering services to parties and events and it is opened every day of the week therefore highly convenient to all customers (Ellen’s Stardust Diner 2013). The diner is home of the most successful stars in the music industry and this creates the needed attention for the diner. This contributes positively to the diner’s brand name and this will help the company in launching its operations in London West End. The restaurant takes matters of food safety and health issues seriously, as food checks are conducted at all points of production. Weaknesses Numerous weaknesses are present in the diner’s microenvironment. To start with, the diner operates a single branch in the US and therefore does not have the appropriate resources of financing to introduce its operations in the UK. Secondly, the restaurant industry in the UK is highly completive and dominated by fast food joints. Most of the restaurants in London West End are operated by franchise and this mounts more competition on the diner. The recent development in the industry is dubbed ‘fast casual’ which is contrary to the tradition style that is adopted by Ellen’s Stardust Diner (Ellen’s Stardust Diner 2013). The diner has a limited work force and this makes it difficult for it to expand its operations to a new market. Although the company generates considerable revenue from its single establishment, this revenue is insufficient to start operations in new markets. The diner does not have well-established market intermediaries making the access of inputs and supply of food difficult in the new market. The company will have to come up with an effective marketing strategy to keep up with the competition and market conditions in London West end. Opportunities A considerable section of the Londoners is conservative will be attracted by the traditional theme in the diner. The restaurant is home to some of the most renowned stars in the US and they could employ the same strategy in the new market to attract a high number of customers. The habit of eating out has gained increasing popularity among the middle aged and young generations. The diner should take advantage of this opportunity to increase their sales in the new market. People have become more conscious about their health leading to increased demand for low calorie and high fiber foods. The diners should take advantage of this lifestyle change to sell healthy foods and drinks to the target market segments. Threats Consumers are adopting a healthy nutrition and this could pose a challenge Ellen’s Stardust Diner that serves foods that are rich in calories. There is increasing competition from well-established fast food companies including KFC, Burger King, Byron, Subway and BoBoQ and other local medium- sized companies (Winterman, 2011). Tough economic conditions and recession has a negative income on the consumers’ disposable income and this affects the sales as the number of consumers eating out reduces drastically. Finally, the healthy and safety regulations are becoming more stringent and this increases pressure on the diner to product high quality foods and drinks. Conclusion In summary, the above discussion gives an in-depth analysis of the forces in the macro environment and microenvironment that would impact on the restaurant’s success in London West End. The analysis of these forces is done by using some of the most important tools in the business analysis including a PESTEL framework, Porter Five Forces and the SWOT analysis. The above discussion reveals that London West End is the right market for Ellen’s Stardust if only the diner is ready to make some major adjustments. References Barrow, C. (2011) Starting a business for dummies, John Wiley & Sons. Brown, A. & Harwood, S. (2010) International business: globalisation and trade, Pearson Custom Publications. Ellen’s Stardust Diner (2013) Ellen’s Stardust Diner, viewed 09 January 2014 . Greenpeace (2012) Solutions to deforestation, viewed 09 January 2014 . Kilne, S. & Botterill, J. (2007) ‘From McLibel to McLettuce: childhood, spin and re-branding’. Society and Business Review, vol. 2, no. 1, pp. 45- 65. Newman, O. (2007) Online business sourcebook, Walter de Gruyter. Petusevsky, S. & Whole Foods, Inc. (2010) The whole foods market cookbook: a guide to natural foods with 350 recipes, Crown Publishing Group. Schmidt, C. (2010) Report for venture investors: on the emerging market: personalised nutrition, GRIN Verlag. Tönnis, R. (2007) Business Plan: YummY - Der gesunde Fast Food Store, GRIN Verlag. Valentine, M. (2012) Families get a taste for fast casual dining, viewed 09 January 2014 . Winterman, D. (2011) Food labelling, viewed 09 January 2014 . Read More