Marketing and Operations Strategy - Nandos Hong Kong Cafe - Case Study Example

Marketing and Operations strategy: Nando’s-The Hong Kong Cafe Executive Summary: The following report will undertake a long term appraisal of the Hong Kong market where a restaurant Nando’s is concerned. The report would outline a division of the market segment that Nando’s would target, the strategies that would be employed in attracting the targeted consumer; the problems that would likely face Nando’s by way of operations and resource management along with an overall review of the business model based on which Nando’s would function. Hong Kong Hong Kong is a small city of about 1100 sq. km. but has a large population of about 7 million. Hong Kong is one of the most oft-visited tourist spots in Asia. The tourist traffic exceeds over 10 million visitors per year, which has brought in revenues of more than US$10 billion in the fast few years (Nam N G and Y Li, 2000). The industry started being a real contributor to national GDP in the early part of the decade of the 1990s. Since then it fell into tough waters with the Asian economic crisis during 1997-98. It has recovered since then especially since the implementation of the service model in 2003 which has contributed to a large growth in the inbound tourist numbers from Mainland China. Cultural issues and challenges: 1. Given the last roll of migration, there are Chinese that reside all over the world. Given this fact, one’s understanding of the things that constitute the authentically Chinese is warped, giving one a lop-sided view of the situation. This creates a problem with understanding the cultures, demands and expectations from a business based in China (Hong Kong). 2. The problem of language-Mandarin is not easy to pick up, staff needs to be a mix of Mandarin and English speaking people-to cater both to tourists and to nationals 3. Relationships in China are very formal, which means that for an outsider trying to create a sense of warmth and homeliness is difficult. Market Segment: The population of Hong Kong is 95 percent ethnic Chinese, while the remaining 5 percent hail from other communities. Hong also has a huge influx of tourists Hong Kong also gets a huge influx of tourists-In the first six months of 2010, Hong Kong received 16.9 million visitors from all over the world, representing a remarkable increase of 23.1% over the same period last year. Nando’s is located about 50 feet at a corner near the Tsim Sha Tsui Clock Tower, which ensures that the restaurant gets business from arrival of tourists. It is a 30 seated-restaurant, with its basic mission being to ensure that at any given point there are at least 20 people inside the restaurant. IN Hong Kong, Chinese make up 95% of the population with the other groups floating at around 5%[18]. The national census does not break down people of European descent into separate categories, nor are Chinese ethnic subgroups separated in the statistics. Mode of market entry The mode of market entry that has been employed in this case is that of foreign direct investment (FDI), which is, in essence, the direct ownership of facilities in a given country, involving transfer of resources-which in turn is inclusive of capital, technology, and personnel. This model of entry gives the owner a high degree of control in the operations and the ability to better know the consumers and competitive environment. However, it requires a high level of resources and a high degree of commitment. Reformulation of Business model Nando’s when opened, was primarily a single foreign distributor investment programme, wherein, foreign money was invested in the creation of a new brand at Hong Kong. The problem here however has been that with the imposition of restrictions in Hong Kong, it has become difficult to sustain business due to, first, the complex structure of taxation and added costs of dual taxation; second, with the unique manner of business conduction in Chinese dominated Hong Kong, and third of the issue of product differentiation. The first thing that the business will now look to do is that it will look at finding strategic partners to pick up stake in the business so that its overall structure changes from 100 per cent FDI to a mix of local investment and FDI. Also there is a scope for the inclusion of strategic alliances in the ultimate management of the business for the establishment and the ultimate strengthening of the business. Potential Strategic alliances: College canteens and cafeterias which are looking for partners in the food segments Home delivery services which offer quick service and are in possession of the logistical infrastructure needed for all such operations Business enterprise centers (like the ones that are looking for party partners and weekend vouchers for heir employees We intend to focus our efforts in finding a small number of strategic allies (abut six) with whom we can focus on formation of long term relationships.   When marketing an event it is necessary to keep in mind the scope of the intended audience and the fact that this would be in direct relation to how and where the advertising would have to be placed (Keillor, 2007). The promotion of a snack bar/fast food restaurant in Hong Kong would hinge to a certain extent on the success of the marketing plans made by the entrepreneur. The most important aspect of the marketing mix however would be the promotion and the medium that would be used (Chaston, 1998). Promotion strategy should reinforce market segmentation i.e. the theme of ‘Food for everyone’ needs to be expanded. Therefore the campaign has to be inclusive and try and attract the teenagers, the children and the adults. Advertisements on hoardings and pamphlets which would be handed out should be based on the theme of fun for family, couples and kids. Promotion strategy would also include contests held over the radio, and on newspapers. An SMS or a texting campaign is an economically viable yet effective medium of again getting noticed. The best way of ensuring footfalls however is to try and manipulate the cyber world.  Product Development: The only sustainable source of product advantage is a superior product development process. Advantages based on design, fortunate timing, a comptitor5’s misstep, or even a lucky break cannot be sustained (Cooper, 2001). Such factors cannot be relied upon to create successful products over the long term. An inferior development process would make advantages based on such factors short lived. A superior process would consistently identify the best product opportunities define competitive products and ensure that these are brought to the market a lot faster.   Product development is a process, which takes insights into the consumer needs and wants, combining them with the available skills and technologies available to a given company. This ultimately results in the transformation of products. Usually the process could be similar for all products developed within a company. Although there are product differences, the approach to project-team organization, project management, decision-making, planning and indeed the approach too many of the specific steps could be consistent. In fact, there could even be a high degree of similarity in the product development process from company to company.   In the context of the restaurant, one would have to work forward on the assumption that consumers in South East Asia, irrespective of whether they are nationals or tourists would look favorably on product that has been indigenously developed-tourists for the novelty value; nationals for the ethnic feel. The idea here therefore would be that the first step to the development of the menu should be to ensure that there is a team of culinary experts in place-even if one assumes that the food served would be of the instant variety. This would mean that while a regular chow mien could be served, the sauces being served should be reflective of the Chinese feel of it, without being too bland or too spicy. Variations of the standard product would be advisable, making the consumer feel special and the restaurant experience worthwhile. Also, in case of the local audience the cafe would remain to make the food as non-fussy as possible. Repositioning of the brand The AIDA model should find application here. The model basically states that in order to get a customer interested one has to first gain attention, thereby arousing desire which would ultimately lead to action. This also means that the price that the customer will have to pay needs to be worth the service that he is being provided (Nickels and Wood, 76) This means in simple terms that the customer has to feel that he is getting value for his money. The product being sold here would be defined, not just in terms of the food being sold but the casual eating experience- cleanliness would be paid special attention to; waiters would be trained to be friendly to the consumers-coming above the age old cliché of the hostile Chinese waiter; the interiors of the restaurant are done in a bright colors, but special lighting has been installed giving the illusion of light sunny feel in the day time and warmth and coziness during the evenings. Marketing Mix: Standardisation 1) Industry Analysis: There is a definite demand for generic leisure offering franchises although much of the industry is largely unregulated and ill defined (Allegra Report, 2008). Most services that are on offer within the area are aimed at the posh more upscale client, with high end products that cost a lot as opposed a neighborhood coffee-shop. Accordingly niche opportunities to provide services within the F&B industry do exist within the small-medium range expenditure clients. 2) Seasonality: It is estimated that the business would witness decline in the months of December-January when because of the holidays the local tourist traffic dribbles down to a bare minimum and most colleges and universities remain closed. 3) Competitors: The business main competitors are similar to potential allies: Other restaurants: Especially those that are focused on snacks and fast food services High-end eating chains Other coffee shops providing similar product and menu lists and catering to a similar clientele Adaptation Consumer Relationship Management: Importance in integration with marketing plan The second most important part pf the CRM strategy that would be followed by any given company is that: “you will not be trying to sell a single product to as many customers as possible. Instead, you will b trying to sell a single customer as many products as possible-over a long period of time, an across different product lines. To be able to do this you will need to build relationships with individual customers on a 1:1 basis” (Peppers and Rogers, 1993). Brand equity is in essence the level of awareness that is created about the brand in a given market. Brand equity would mean, first, the creation of a strong base of customer oriented relationships that are created and maintained through the usage of virtual communities (Kossecki, 2007). The idea to help in the creation of a brand reputation that is based in essence on the growth of brand identification with certain qualities. Second, it means the value that the company attributes to its consumers by referring to their loyalty.  The idea here therefore would be to retain consumers through quality and service and creation of new consumers through marketing and promotion. Peter Drucker stated, “The purpose of a business is the creation of customers” (Kotler and Phillip, 2002). Implied in these words and his work is the importance of keeping this same customers and of growing the depth of the consumer relationship with the company. Most consumers are only profitable in the second year that they do business with the company. Given the fact that most customers would initially cost the firm some money, the only way for the business to do well over long periods of time is to ensure that the customer that comes the first time keeps coming back for longer periods (Anderson and Kerr, 2001). Given this basic format of reality in the management of a given business venture, one can state safely that customer relationship management can be cultivated to be the strongest weapon in the management’s arsenal.   This would therefore mean that the magic behind the successful initiation and implementation of a customer relationship management formula is not a mass marketing of standard products but the segmenting of consumers to follow the buildup of a true marketing relationship based on the perception by the consumer of one-to-one marketing (Dyche, 2007). This means not just an interaction with the consumer as an individual but also the development of custom products and tailored messages that are based on the unspoken needs of the customer.   Keeping this in mind, the Nando’s will first and foremost, the primary task for the entrepreneur would be the task of planning a strategy of product differentiation, given especially that product similarity disables branding. The process of product development needs to be structured, defined and managed. Investments will be made to facilitate the improvements of the processes so that all projects are able to reap its benefits. The process for product development can be segmented into seven interrelated elements each with its common set of pitfalls. The first thing that one could have to remember in the context of the process of product development is the issue of decision making. It has to be accepted hat all companies would have a set process of decision making where product development is concerned. Where the decisions making process is weak, delays due to indecision are common. In the long term this might even lead to a loss of opportunities, simply by virtue of an absence of understanding by the product champions on how to make the informal decision making.  Two other problems that face the business at present are those of business culture and management of human resources Business Culture: Importance of adaptation in success A business culture can be defined as a unique set of expectations and assumptions about how people are supposed to act in business. It therefore has to be remembered that what is considered ethical can vary from one culture to the next. Business behavior therefore needs to be localized in order to work with the newer expectations and meet the challenges that these impose. In any given business deal, effective communication coupled with a favorable first impression can go a long way in ensuring the success of negotiations. The second major factor that is evident now more than ever before is the fact that leadership is culturally contingent. This would mean, in essence that the views of the importance and the value that leadership holds varies across cultures. This is the dominant theme of the study carried out by House (2004) for the Global Leadership and Organizational Behavior Effectiveness Research Program. House in his study states that the status and the influence of leaders vary constantly as a result of the cultural forces in the countries or regions in which the leaders would have to function. The Americans, Arabs, Asians, Latin Americans French, germs, and the Russians, romanticize the concept of leadership and consider it extremely vital in both the political and the organizational sense of the term. In these cultures, leaders are commemorated with medals and titles and in the more organizational sense a cabin and a hefty raise at the end of the year. Focus on management of human resources The first function would be the management of human resources which would hinge on the effectiveness with which the cade is able to deal with the balancing the employee strengths in terms of outsourcing work, setting up jobs for locals and the movement in domestic workforce which would in most cases turn out to be expats and would manage the roles of leadership at the initial stages. Expatriate management is one aspect of HRM practices. Situations of foreigners working in third world countries would be bound to cause problems. With foreign investment continuously increasing, this has resulted in a high growth of foreign workers in China and will be likely to continue to increase. Expatriates are sent by an organization on a temporary work assignment in another country from their home country (Breaster, cited in Selmer et al, 2000). Expatriate management occurs special position in the Chinese context given the fact that there was an issue of the crux of the work being done in China having been outsourced. The recruitment strategy has to be implemented in a manner so as to meet the long term talent and man power needs while managing the periodic demands. Recommendations Nando’s may conduct franchising to expand its chain to Hong Kong. They have to work closely with the franchisee in order to maintain the high quality of food. One biggest advantages of franchising is that the local franchisee is more familiar with the culture, environment and legal system than people from the franchisor do. In conclusion, one might conclude that Hong Kong is worth targeting as it has a strong growing economy, with a medium size population. There is a need for streamlining the business so that one is able to ensure apt returns on investment. This would mean that the business has to significantly alter its mode of entry and operations. The steps that have been undertaken by the tourism department in order to successfully market all that Hong Kong has to offer are in fact nothing but compilations in a glossy package the cultural strengths that the country offers. This would mean a growing impetus for the hospitality industry for the country. The thing that Nando’s need to take into account is to understand well the Chinese culture, and respect it. And, make sure they are notified that what they can or cannot do under the Macau law. The idea for Nando’s would therefore be to ensure that it overcomes its challenges is that it is able to establish itself as leading restaurant, reaping the benefits of the tourism boom. 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