Din Tai Fung Strategies for Achieving Competitive Success - Case Study Example

Strategic Competence Plan Name: Course: Institution: Tutor: Din Tai Fung Strategic Plan for Achieving Competitive Success Executive Summary The following report outlines a plan for Din Tai Fung to achieve competitive success in the Australian food retail and restaurant industry. Din Tai Fung is a Taiwanese company with subsidiaries in Australia. The Australian subsidiary has achieved considerable business growth and is one of the key players in the industry. Because of the competitive nature of Australia’s food retail industry, Din Tai Fung has been forced to focus on way of cultivating new and innovative business strategies t remain competitive. Some of these strategies include expanding market coverage, emphasizing on quality and sustainable production. Although the company suffers from financial instability and a relatively small market share, it is determined to bolster the scope of its business through geographic expansion and by designing special offers for different market segments. This initiative will see the company improve its market share as well as sales revenue. Table of Contents Strategic Competence Plan 1 Name: 1 Course: 1 Institution: 1 Tutor: 1 Din Tai Fung Strategic Plan for Achieving Competitive Success 2 Executive Summary 2 Table of Contents 3 1.1 Company Background 4 1.2 Strategic Marketing Competencies 5 2. SCOPE OF THE STRATEGIC COMPETENCE PLAN 5 2.1 External Environment Analysis 5 2.2 General Economic Environment Analysis 6 2.4 Customer Analysis 7 2.5 Internal Resource Assessment 7 2.6 Analysis of Internal Competencies (Strengths and Threats) 8 2.6.1 Strengths 8 2.6.2 Threats: 9 3.1 Market Analysis Summary 9 3.2 Market Plan Implementation 9 3.3 Din Tai Fung’s Corporate Social Responsibility and Sustainable Supply Chain Management Strategy 10 4. CURRENT AND FUTURE OPPORTUNITIES AND THREATS RELATED TO MARKETING: THE ENTERPRISE ARCHITECTURE 12 4.1 Strategies for Overcoming Competitive Forces 12 4.2 Strategies for Corporate Success and Action Plan 13 4.3 Strategic Marketing Mix for Din Tai Fung 14 Conclusion 17 This strategic competence plan has created a framework upon which Din Tai Fung’s success competencies are based. The plan has given a detailed analysis of the company’s external and internal market strengths and weaknesses, as well as, customer and competitor profiles. The paper indicates that Din Tai Fung faces some important weaknesses, which may significantly which may have deleterious effects on its business growth as well as marketing objectives. One of these weaknesses is that the Australian food retail and restaurant industry is saturated with numerous players, both domestic and foreign, which makes it difficult for any company to realize quick expansion. Nevertheless, Din Tai Fung’s management is determined to expand the demographic and geographic scope of its market coverage. This initiative will involve among other strategies opening up of new production and distribution centers in the country. This will not only boost the company’s sales objectives but will also facilitate marketing penetration. Accordingly, the company needs to make efforts in improving market experience as this is crucial in enhancing customer loyalty and brand image building. 17 References 17 1. INTRODUCTION 1.1 Company Background Din Tai Fung is a famous Australian restaurant that specializes in preparing steamed buns. The company originates from Taiwan but has subsidiaries in several counties including Australia, the United States, Singapore, Japan, Indonesia, Malaysia, Thailand and South Korea. In addition to buns, Din Tai Fung sells seaweed, chicken soup, mung bean noodles and bean sprouts. The company has been successfully operating in Australia for about two decades and is a prominent payer in Australia’s food retail and restaurant industry. The company aims to differentiate its products by offering high quality services and by embracing high levels of health and safety standards. Over the years, the company has expanded its branch network throughout Australia and has subsidiaries in the country’s major cities and urban centers. This expansion strategy has ensured that Din Tai Fung remains afloat in Australia’s competition-paced restaurant industry (Din Tai Fung website, 2012). 1.2 Strategic Marketing Competencies Din Tai Fung’ marketing objectives and business mission aim at enhancing overall profitability, business growth and realization of competitive advantages in the long run. These expectations are realized by capitalizing on opportunities and strengths presented by Australia’s food retail market and by developing an all-inclusive marketing strategy. In particular, Din Tai Fung aims to achieve the following business competencies as part of its long term growth and development strategies: i. To rapidly increase market share by increasing the geographical and demographic scope of target market and by offering innovative and highly competitive products. ii. To continually increase production capacity based on market needs and customer feedback. iii. To increase investment in R&D so as to determine the best production, distribution and marketing strategies. The company has realized that it can only achieve this competence by engaging experts in R&D. 2. SCOPE OF THE STRATEGIC COMPETENCE PLAN 2.1 External Environment Analysis The Australian food retail and restaurant industry is highly competitive and unpredictable (Sylvie, 2011). As such, Din Tai Fung’s success in this industry is subject to numerous external factors such as strong competition from other companies as well as changes in economic trends, which affect consumer spending and changes in lifestyles. Another important external factor in Australia’s food retail and restaurant industry is that all companies work under strict government regulation. Companies are required to adhere to various statutory regulations imposed by federal, state or local governments. Technological changes are another important external factor that influences Din Tai Fung’s business in Australia. The company has to regularly update its production systems in response to changes in technology in order to facilitate timely production and delivery of products to the market. 2.2 General Economic Environment Analysis The most important economic factor that impacts adversely on Din Tai Fung’s business performance is the fluctuations in the exchange rates of Australia’s currency. Since the company imports most of its raw materials, fluctuations in exchange rates affect its ability to obtain the raw products in a timely manner. In addition, the company’s profitability is affected by constant changes in prices of raw materials and this negatively impacts on the company’s ability to obtain resources in a timely manner. Australia’s successful agricultural industry provides much of the raw materials (foodstuffs) in the food retail and restaurant industry. 2.3 Socio-cultural and Demographic Analysis As of 2010, Australia had a population of 22 million people majority of whom lived in urban centers. Christianity is the min religion in the country though a considerable number of Muslims, Jews and Hindus exist. Although Australia’s population is culturally diverse, English is the main language of communication. Since most of the Australians are of British descent, the people share lots of cultural similarities with the people of the United Kingdom, Canada and Britain (ABS, 2010). In the last few years, there have been efforts by the Australian government to attract immigrants into the country to boost workforce. This has made Australia a multicultural community and as a result, food vendors have to consider the issue of cultural heterogeneity when distributing food products. 2.4 Customer Analysis Din Tai Fung’s customer analysis is reflective of customer demographics, market segments and transaction-based opportunities. The company produces greatly varied products for different categories of customers from all ethnic and cultural backgrounds. In addition, Din Tai Fung has special recipes for the people of south East Asia. The segmentation of market is a major source of competitive advantages and success and has enabled the company to stay competitive in the industry. The company has developed a well known brand name and serves its food fresh and tasty and at a reasonable price. 2.5 Internal Resource Assessment Din Tai Fung is currently operating under a steady growth trend and its financial and business performance have grown considerably well for the last ten years. In order to remain competitive, the company has employed the most modern and efficient production systems which are complemented by the efforts of its committed and skilled employees. The company has employed hundreds of employees in Australia to assist in various areas of production and marketing. There is a national managing director who is responsible for supervising the company’s business operations. In addition, Din Tai Fung has a highly skilled sales team that oversees the marketing of its products and service in Australia. As of 2010, the Din Tai Fung embarked on a strategy of expanding business scale in order to match the ever increasing customer demands and hence realize strategic objectives (DTF, 2012). 2.6 Analysis of Internal Competencies (Strengths and Threats) 2.6.1 Strengths i. Din Tai Fung offers its products at affordable prices. The company has long realized that low-cost leadership is a cheap strategy for penetrating markets that are characterised by strong competition as is characteristic of Australia’s food retail industry. For this reason, Din Tai Fung sells its food products at discount prices. ii. Convenience is another notable and important strength that Din Tai Fung enjoys over its competitor. The company has opened several branches throughout the country. Its products are sold in convenience stores as well as schools and hospital canteens. iii. The other strength is that the company offers fresh, hygiene and high quality products. Din Tai Fung is strongly committed to improving the efficiency of its production facilities. The company aims to offer healthy, clean and safe products. Indeed, the company has managed to build a positive market reputation by strictly adhering to food safety standards. iv. Skilled workers in production: Din Tai Fung has employed about 200 employees most of whom are highly experienced in making and serving Australian culinary. This means that Din Tai Fung is capable of ensuring quick delivery of authentic products and hence creates a long-lasting image. 2.6.2 Threats: i. The most detrimental threat in the food and restaurant industry is that most of the products offered are highly perishable and hence there is need for urgency in distributing the products to the market. ii. There is a strong market competition in Australia’s food and retail industry because there are several fast-food restaurants in the country. iii. The company’s marketing efforts also suffer from weak promotion strategies. As a result, the company has not penetrated some of the lucrative markets such as those dominated by the McDonalds. 3. MARKET ROLL-OUT STRATEGIC COMPETENCE PLAN 3.1 Market Analysis Summary Australia’s food retail and restaurant industry is upward growth-oriented as are many other industries in the country. There are a number of factors which are attributed to this scenario: first of all, the high numbers of foreigners and tourists visiting Australia each year have made it necessary to develop appropriate infrastructure and facilities for accommodating the catering needs of these people. The second reason is that Australia is a culturally diverse country in which different people have different culinary and delicacy needs. These two factors have made the industry to be upward growth oriented. Moreover, Australia’s relatively stable economy is a critical factor in the growth of the food retail industry. 3.2 Market Plan Implementation Din Tai Fung has embarked on a word to mouth strategy to solicit feedback and recommendations from customers. Although the company’s main offices are based in Canberra, it has built partnerships with other companies particularly suppliers and continues to strengthen branch network across the country through direct and indirect acquisition of customers. Direct customers include individual retailers and buyers of the Din Tai Fung’s products while indirect customers refer to strategic partners. One of the company’s long term strategic aims is to increase its presence in major towns and cities in Australia in the next few years. A possible way of achieving this objective is by building franchises with strategic partners throughout the country. In line with the company’s mission statement, Din Tai Fung is committed to controlling and streamlining the supply chain process so as to shorten the distribution and delivery time. For this reason, the company sources some of the materials used in the production process from local producers and suppliers such as Cole’s and Wal-Mart. This initiative is an important competitive success strategy and is crucial in facilitating rapid production and delivery of products to the market and will have long-term impact on Din Tai Fung’s growth and profitability. In order for the company to maintain high standards of hygiene and safety, the company’s food products are diced, packed and distributed by selected vendors. 3.3 Din Tai Fung’s Corporate Social Responsibility and Sustainable Supply Chain Management Strategy Corporate social responsibility, also called corporate citizenship is a social obligation requiring companies to be responsible in their businesses and to encourage their business partners to do the same (Pratley, 2001). Din Tai Fung’s corporate social responsibility is about taking actions, achieving results and maintaining open communications with its customer and other stakeholders. Din Tai Fung works with its suppliers and distributors to promote socially responsible business practices as part of the company’s supply chain strategy. Accordingly, the company has developed its own CSR code of conduct for suppliers, which details how the company expects the suppliers to treat their employees. For instance, Din Tai Fung has embarked on sustainability project to improve conditions for workers in the wheat industry in Australia. This has in turn helped promote good environmental practices in Australia’s land based agricultural industry. Although Din Tai Fung purchases a small portion of Australia’s wheat products, the company and its suppliers instituted grower standards which have greatly improved working conditions in the farms and have hence made farming a sustainable business. One important CSR approach by Din Tai Fung is engaging the community through community-based and social projects. These projects have become a vital form of development assistance by socially responsible companies. These projects have given rise to a kind of economic relationship between the community and the company and haves helped the community to become embedded in corporate supply chain strategy in order to develop a sustainable business platform. Din Tai Fung also donates part of its pretax profit to corporate philanthropy as part of efforts to be socially responsible. The company donates its contributions through NGOs, which create and support programs that directly improve the health and wellbeing of poor children (DTF, 2012). 4. CURRENT AND FUTURE OPPORTUNITIES AND THREATS RELATED TO MARKETING: THE ENTERPRISE ARCHITECTURE 4.1 Strategies for Overcoming Competitive Forces Din Tai Fung’s business is subject to several internal and external forces. Some of these forces and the ways of overcoming them are: i. Threat of substitute products in the market: Din Tai Fung can overcome this competitive force by establishing low switching costs and by adopting a high level of product differentiation to make its products more unique in the market. In addition, the company can cope with the threat of substitute products by improving the quality of its products and the performance of its production systems and marketing teams. ii. Force of purchasing power of suppliers: it is possible for Din Tai Fung to overcome this force by hiring independent suppliers and by engaging exceptional market researchers to determine best ways of securing stable suppliers. iii. Threat of new market entrants: Australia’s food catering and restaurant industry has low barriers to entry and as such, it is open to new entrants. Din Tai Fung can cope with this force through brand development and by using specialist knowledge in building customer loyalty. iv. Buyer power: the net impact of this market force depends on how innovative Din Tai Fung is in developing and offering appealing substitute brands. It is also imperative for the company to expand the demographic and geographical scope of its market segmentation so as to attract more customers. 4.2 Strategies for Corporate Success and Action Plan i. Offer low cost products: the best strategy for gaining market competencies is for Din Tai Fung to become a low cost leader in the industry. Although it is hard to achieve and sustain this objective in the long run, it can greatly help the company in targeting price-conscious consumers and hence influence them to like the company’s products. To be successfully implemented, this strategy will require that the company adopts low overhead costs in addition to streamlining the production process. ii. Emphasize on special features: it is important for Din Tai Fung to remain committed to making its products and services stand out from those of the competitors. This important strategic competence can be achieved by offering food products with different ingredients and in different flavors. The company’s management can positively influence this initiative by emphasizing on the quality of packaging. iii. Create a market niche: Din Tai Fung can create a market niche for its products by embracing sustainable and green production and medically healthy food products. It is also important for the company to consider special and vulnerable demographic characteristics such as age. iv. Development of relevant market promotional strategies: this success strategy can have far-reaching ramifications on the company’s marketing plan. It is important for the company’s management to consider all means available to produce and get the best products to the market. Part of this success strategy includes placing adverts on the internet, the print media and television. This will help make the company’s products known to a wider customer base including teenagers (Joyce & Woods, 2008). v. Strategic positioning: Din Tai Fung aims to set up new production and distribution facilities across Australia. These facilities should be positioned strategically taking into account special factors such as market demographics and production costs. vi. Adherence to local laws: it is important for Din Tai Fung to ensure that it produces its products under strict observance of rules and regulations including those set by tax regimes. It is also important for the company to adhere to the import policy and regulatory procedures in ensuring that the right products are shipped from abroad. 4.3 Strategic Marketing Mix for Din Tai Fung Din Tai Fung’s marketing mix consists of people, place, price, product and promotion. These elements are at the core of the company’s marketing strategies and will help in the realization of strategic competencies. The articulation of each of these market mix elements is as follows: i. Product: Din Tai Fung puts a lot of emphasis on developing a unique food menu that appeals to a wider range of customers. To this end, Din Tai Fung engages market research services in determining customer needs as well as changes in customer preferences. In order for the company’s marketing efforts to meet customer changes, the management takes great care to ensure that new choice of products do not interfere with the marketing of existing product choices and that customers’ choices are not influenced to the detriment of the company’s marketing efforts. Essentially, Din Tai Fung’s ability to attract a high number of customers will vary at different points and in accordance with changes in product lifecycle (Sylvie, 2011). ii. Price: Customer’s perception of quality and value is important in Australia and it influences the price at which products are sold (Smith, 2006). In fact, majority of Australian food consumers like to make mental pictures of the value and quality of different product brands before making the decision about which brand to buy. To this end, Din Tai Fung should be determined to offer high quality products while remaining a low cost seller. Although Din Tai Fung is relatively small compared to other companies such as McDonalds which leads the industry, the low cost strategy will significantly help attract a large number of customers and thus enhance the company’s market penetration efforts. This will in turn be crucial in increasing sales revenue and also in gaining competitive advantages. iii. Promotion: Smith (2006) has noted that product promotion is crucial to the ongoing success and growth of any business regardless of market size or financial base. Product promotion impacts on a business’s ability to realize long-term strategic objectives such as the ability to penetrate hostile markets or markets with strong barriers to entry. Din Tai Fung’s promotion objectives should be tailored to cover various aspects of marketing communication which include advertising. Besides advertising, it is imperative for the company to engage different promotional methods such as door drops, sales promotions and point of sale displays to help create stable brand awareness. According to Joyce and Woods (2008), the primary aim of product promotion is to develop a strategic market campaign that provides the most fascinating marketing experience to customers. The initiatives can be creatively complemented by such efforts as in-store promotions, which encourage potential customers to try the products and to keep buying the product. iv. Place: In his book, Pratley (2001) has noted that place, as an element of market mix is not only about the physical location of a company but the alignment of location with management processes as well as marketing strategies. Din Tai Fung strategically chose Australia’s capital as the starting point for its successful entry into the South Pacific. Australia has a large concentration of people from different countries. Din Tai Fung’s production and distribution outlets are strategically distributed throughout Australia and this has made the company to be accessible to the customers. Moreover, the company has long term plans to set up new production and distribution in other urban centers in Australia. This initiative will significantly increase Din Tai Fung’s market share and will be critical in the realization of long term marketing objectives. v. People: employees at Din Tai Fung have been specially trained to offer customer friendly and prompt services. Din Tai Fung has recognized that employees are important in realizing strategic competencies and as a result, the company engages the most innovative human resource management strategies and practices. These HR practices include competitive packages to match trends in the industry. Moreover, the company has implemented flexible work programs, which is an essential recognition of employee’s personal commitments. Conclusion This strategic competence plan has created a framework upon which Din Tai Fung’s success competencies are based. The plan has given a detailed analysis of the company’s external and internal market strengths and weaknesses, as well as, customer and competitor profiles. The paper indicates that Din Tai Fung faces some important weaknesses, which may significantly which may have deleterious effects on its business growth as well as marketing objectives. One of these weaknesses is that the Australian food retail and restaurant industry is saturated with numerous players, both domestic and foreign, which makes it difficult for any company to realize quick expansion. Nevertheless, Din Tai Fung’s management is determined to expand the demographic and geographic scope of its market coverage. This initiative will involve among other strategies opening up of new production and distribution centers in the country. This will not only boost the company’s sales objectives but will also facilitate marketing penetration. Accordingly, the company needs to make efforts in improving market experience as this is crucial in enhancing customer loyalty and brand image building. References ABS (Australian Bureau of Statistics) 2010, Retail Trade, cat no. 8501.0, Canberra. Din Tai Fung Australia 2012, din tai fung, viewed 1st June 2012 from, www.dintaifungaustralia.com.au Joyce, P & Woods, A 2008, Essential strategic management - from modernism to pragmatism, Butterworth Heinemann; London. Pratley, P 2001, The essence of business ethics. Prentice Hall Essence of Management Series: London, pp100-108. Smith, W 2006, Product differentiation and market segmentation as alternative marketing strategies, The Journal of Marketing, vol.21, no.1, pp.3-8. Sylvie, J 2011, Brand parody: a communication strategy to attack a competitor, Journal of Consumer Marketing, vol.28, iss.1, pp.19-26. Read More