The business environment is continuously changing in today’s competitive world and i.e. strategic planning has become a key challenge for business and managers. The business expansion offers new opportunities and perspective, but there are risk and cost attached. (Johnston & Bate, 2013)
Tapping new business areas such as penetration in the existing market or entering new market poses a situation and environment which is out of control as well as knowledge of the company. Therefore, strategic planning is vital for the company to achieve long-term success and survival for the company. (Wittmann & Reuter, 2013)
The growth, as well as the expansion of the business, is categorised into three groups which are international expansion, diversification as well as vertical integration. Moreover, companies achieve growth either through internal or external growth. (Johnson et al., 2013)
Porcini’s Inc. is a family owned restaurant which started its operation in 1966 in Boston in an Italian-American neighbourhood. Over the years restaurant has grown in many other states in the US. In 1989, the group sold the controlling interest to the ‘group of private investors’ who consequently, expanded the business to downtown and shopping mall to compete with full-service restaurants. The Porcinis an Italian restaurant operating in the US is planning to expand and diversify its operations because of market saturation and competition. The initial scanning of the company business environment has highlighted an option for the company of opening a new Italian fast food chain ‘Porcinis Pronto’
However, these strategic options enclosed number of problems for the company. Hence, this report will examine the ‘strategic management’ role in the expansion of the restaurant, the ‘internationalization’ of the business, ‘marketing management’ for the new segment in the US; as well as it will analyse the importance of ‘’operational strategy’ for the company.
In 2011, Tom Alessio, who is serving as marketing president at Porcini’s has announced that company is facing issues and challenges associated with expansion and growth of the restaurant business. The dilemma faced by the business is that domestic market (US) is saturated with a full-service chain restaurant. Then again, business is looking to expand overseas but as a small regional company, it neither has skills, resources or brand power to achieve overseas growth strategic option. (Heskett & Luecke, 2011; Hitt et al., 2012)
|The problem is that company have a limited amount of capital and real estate to achieve growth of the business. The issue can be overcome if the company adopted the franchising or syndication model of ownership. Therefore, company need effective ‘strategic management’ in order to ensure business select the right strategic option and implemented.||This business expansion had resulted in challenges and risk for the business. Porcini’s is slow growing private enterprise which has to roll out the new limited menu outlets quickly in order to establish itself as power brand. Therefore, the ‘marketing management’ is an important area where business needs to establish and effective target the market to establish itself as power brand.|
|Another significant challenge for the restaurant is analysing and developing its international business capabilities through understating and applying the internationalization. The lack of internationalization experience has limited the growth and expansion opportunities for the company in the international market.||The introduction of the technology to improve the processes and operations by the competitors requires company to use art of equipment to maintain its competitiveness. Moreover, hiring the right employee and need of quality management is critical for the long-term success of the company. Therefore, efficient operational strategy is fundamental to maximise the chance of success.|
The purpose of this integrated case study is to conduct the case study analysis of the Porcinis Pronto along with the recommendations to overcome the strategic problems. The study will analyse the internal position and external environment of the business to ensure it is successfully expanded in the US and in the international market. The goals are to evaluate the current strategic position of the company to devise appropriate business expansion strategy which is supported by the effective marketing plan. Moreover, the internationalization plan for the company needs to be developed as well as operational strategy need to be elaborated and aligned with company resources.
The Chapter 2 will enclose detail discussion and evaluation of the situation of the company. Moreover, chapter 3 will analyse the problem statement in the case, literature review relevant to the problem as well as proposed plan for analysis of the problem based on the secondary data. The chapter 4 will present analysis and finding analysed based on the literature and secondary data from the previous chapter. Furthermore, chapter 5 will propose a solution to the Pronto problem along with recommendation and plan of action. In addition, scope, as well as limitation of the study and scope of future research, will be highlighted. At last, not least, chapter 6 will include the application of the learning to another organization in the different industry.
Porcini’s is an Italian restaurant and operating in the US for more than 40 years. However, the recent business environment in the US has raised a number of problems for the business. The management of the restaurant has evaluated an option of expanding the business the business, but an initialling review shows that restaurant market in the US is saturated and been the small regional player it is difficult for the business to compete in the market.
The problem faced by the business is that domestic market is saturated with a full-service chain restaurant as well as been a small regional company as well as the lack of the resources and brand power has resulted in limited option availability for the company. (Heskett & Luecke, 2011)
Porcini’s Inc. is facing the problem that how it will expand in the local market. The company is planning to market development and open small limited menu restaurant. However, business is unclear which expansion method it should. The lack of resources and skills has resulted in a dilemma for the company to select the appropriate strategic option and align the resources of the company with its objectives. The problem is company have strong competition in the industry and there are numbers of competitors offering fast food, single as well as full service chain restaurants. The table below shows the company competitors in the segment.
Source: Heskett & Luecke, 2011, p.10
The data shows that company have strong competition in the existing market. The company is planning to diversify its business operation and start the new Pronto and target a new market. The company is unclear about its plan as there is a lack of the strategic planning in the company. The uncertain situation has made it less clear for the company which strategy to follows and how to response to the competitors as well as achieve the business growth. The strategic planning company is uncertain about the alternatives and options available as well as fails to align the resources with its objectives of expansion. (Mintzberg & Lampel, 2012)
Porcini’s is as mall Italian restaurant with limited resources and brand power. Moreover, it is planning market development and start a different but related fast-food chain. Therefore, it is important that to develop and marketing plan which help the company to build strong brand. For the success of the business it is important that it create and retain the customer. The launch of the limited menu restaurant requires the business to attract new customer and make them believe Porcinis offer better value of money. The graph below shows the market share of the in the restaurant industry.
Source: Heskett & Luecke, 2011, p.10
The graph shows those smaller restaurants are more efficient and profitable compared to large competitors. The data analysis shows that Olive garden has large market share whereas other groups have less than 4% of the market share. To tackle the stiff competition from the establish well-established chain full-service restaurant as well as fast food restaurants, it is important to understand the commercial environment in order to bring strategic sense to the marketing activities of the company. Therefore, the company need to position itself in a distinct manner which helps to attract and retain customers.
The domestic market for the company is saturated and company needs to address the potential expansion of the business. The large restaurants have expanded their horizons across borders, but Porcini is a small company has the restraint of resources and brand power. The initial analysis of the business shows that there is potential for the business to expand globally but due to lack of skills and expertise, it is not viable for the company. The operation outside the domestic markets helps the company to increase its sales and diverse its operations.
The big players have successfully expanded their business across borders, but Porcini has failed to enter the foreign because of the limited exposure and experience. The lack of the company exposure in areas such as market selection, mode of foreign entry, market regulation, the size of the market as well as preference and taste of the host country customers has restricted the company international expansion.
The analysis shows that Porcini has large area for the restaurant along with seating area and company revenues are competitive. However, to open the new restaurant company need to manage operations in an efficient manner. The issues surrounding the business expansion is the introduction of the new bonus system, getting the right people for the quality service, quality management and introduction of the technology which remains critical to achieving the continuous success after the business expansion. Therefore, it is important that company deploy effective operational strategy in order to improve the efficiency and effectiveness of its operations.
Source: Heskett & Luecke, 2011, p.10
The company is facing problems which are a selection of the right option and strategy for the market development. The lack of the strategic planning has restraint the company to align the resources to its future expansion plans and selection appreciates the strategic option for business expansion. An important area is the development of the market for the limited menu restaurant of the company.
The strong competition in the market and selection of the right strategic option is a key concern for the company. The market of the competitors is significant when to compare with the company and therefore, it needs to the position, selection and targeting the right market segment is critical for the brand and market development for the company.
The company needs an effective marketing plan in order to response to the competitors and successfully capture the new market. The lack of resources and brand is limited and company failed to capitalize the opportunity exists for the business in the international market. The company need to understand the process of the internalization and how it can enter the foreign market.
The recent development in the market such technology, company focus on the quality as well as the new performance system needs an effective operational strategy. Therefore, this case study is focused useful for the restaurant for effective strategic management, marketing planning, internationalization and operational strategy of the company.
Porcini’s Inc. is facing the problem that how it will expand in the local market. The company is planning to market development and open small limited menu restaurant. However, business is unclear which expansion method it should. The lack of resources and skills has resulted in a dilemma for the company to select the appropriate strategic option and align the resources of the company with its objectives.
Company is unclear about its strategic position and strategic planning process.
18.104.22.168 Problem Analysis: SWOT and Resource based view
According to Hollensen (2015), SWOT (strength, weakness, opportunities and threats) is an important strategic analysis tool which provide basis for the strategic planning of organisation. (Hollensen, 2015)
Source: adapted from Pahl & Richter, 2009, p. 6
Strength and weakness
The Strength of the SWOT analysis is highlighted by Pahl & Richter (2009) and assessing the theory underlined that SWOT is quick and comprehensively model build the picture of the business resources. Moreover, the advantage of the SWOT analysis is that it helps to create balance between internal and external environment of the organisation. The model is that is help to understand the business position through address the internal resources as well as the external constraints present to the business. (Antony, 2012)
On the other hand, Fifield (2008) highlited the limitation of the SWOT model is that it does not prioritise the issues or does not offer solution to the problems. SWOT might highlight the number of option and strength of the company but it cannot indicate which option is best for company or prioritise the opportunities. (Ferrell & Hartline, 2010)
Resource Based View
According to Montgomery (2011) the resource based view focus on the competitive advantage of the company through matching its internal capabilities and resources with external environment of the business. (Montgomery, 2011)
Strength and Weakness
The strengths of the resource based view is that it enables the companies to develop and sustain the competitive advantage using the company own resources. The resources of the company are valuable, rare, imitable is difficult as well as it is non-substitutable. (Nothnagel, 2008) Moreover, it is believe that resources are source of the performance and sustainable competitive advantage. (Dinsmore & cabanis-brewin, 2014)
In contrast, resources based view has its limitation for the firm that unique and difficult to imitate resources are difficult to find and firm might have resource which have short-term advantage. (Henry, 2008) Moreover, the resource based view is difficult to achieve, have limited applicability and the resources of the firms may not necessary enough for the competitive advantage. (Hill et al., 2014)
The problem is company have strong competition in the industry and there are numbers of competitors offering fast food, single as well as full service chain restaurants
22.214.171.124 Problem Analysis – Porter five Forces
According to Porter (2008) Porter five forces is useful framework to analyse the level of the competition in the market. (Porter, 2008)
Source: adapted from Magretta (2013), p. 65
Strength and Weakness
The strength of the model is that it evaluates the structure of the industry structure is key factor behind the profitability and competition in the market. The model is useful to evaluate existing market environment which help the companies to develop their future strategy. (Magretta, 2013) The model is useful to analyse the supplier power (concentration and importance), bargaining power of the buyer (volume, brand and price), threat of new entrants and threat of substitute as well as allows determining the attractiveness as well as profitability of the industry. (E. Dobbs, 2014)
The limitation of the model is that it examines the market structure as rigid but due to change in technology and innovation industries are subject to rapid development. (Hollensen, 2015) The numbers of factors such as pace of change, industry overview, dynamic market structure as well as impact of the non-market forces are ignored. The rapid changes technology and globalisation has changed as well as market and sales attributes varies significantly. (Roy, 2011)
The uncertain situation has made it less clear for the company which strategy to follows and how to response to the competitors as well as achieve the business growth.
126.96.36.199 Problem Analysis: Ansoff Matrix and Porter Generic Strategies
According to Schawel & Billing (2012) to understand and evaluate the growth strategies of the company, it is important to understand the current and future markets as well as customers of the company. (Schawel & Billing, 2012)
Source: adapted from Proctor, 2014, p.268
Strength and Weakness
The examination of the Ansoff matrix is useful to understand the growth option available to the company and evaluate the option base on the need and resources of the company. (Hussain et al., 2013) The product market growth strategy helps the firm to understand which segment it should focused. Firm should focus on the leverage of existing resources, purse the additional segment, product new product to meet the need of the customers or diversify outside the existing market. (Meldrum & McDonald, 2007)
The model review has highlighted that the limitation of the model is useful that it does not take account of the market-pull and therefore, it ignores the forces which are external to the market. (Proctor, 2014) Moreover, the model fails to suggest that which new option and approach is best for company or prioritise the opportunities. (Afuah, 2009)
Porter generic strategies
According to Porter (2008) the selection of the appropriate business strategy is important to achieve success in the chosen market. (Porter, 2008)
Source: adapted from Sehgal, 2010, p.34
Strength and Weakness
The advantage of the model is that it focus on the alignment of the generic strategy with the strategic decision of the business is critical for the success of the business. (Kossowski, 2007) It suggest that can purse the cost leadership which is useful to achieve market share while reducing cost or maintain the existing price based on the uniqueness and better proposition offered by the company products and increase the profits. (West et al., 2015)
The limitation of the model is that it does not provide understanding and clarity on the industry. The changes in taste and fashion as well as economic scenario are ignored. The model restricts the firm to its parent industry. (Cunningham & Harney, 2012) Therefore, the taking the two extreme position either cost or differentiation and ignoring the middle portion is difficult or less suitable approach in today’s highly competitive world. (Lowy & Hood, 2011)
Porcini’s is as mall Italian restaurant with limited resources and brand power. Moreover, it is planning market development and start a different but related fast-food chain. Therefore, it is important that to develop and marketing plan which help the company to build strong brand.
The launch of the limited menu restaurant requires the business to attract new customer and remain profitable
188.8.131.52 Problem Analysis: Marketing STP model
According to Hess & Daly (2013) the STP (segmentation, targeting and positing) tool is useful to create effective marketing plan. (Hess & Daly, 2013)
Source: Adapted from (Blattberg et al., 2011), p.43
Strength and Weakness
The STP model is effective model which helps to measure the gaps in the market and communicated effectively with the target potential market. The evaluation of the market allows developing the segment in the market which further referred to target market. (Altmaier & Hansen, 2011) The three stages of the model include segmentation which is useful to identify the bases for the segmentation, targeting which is useful to evaluate the commercial attractiveness of segments. (Bowman & Gatigno, 2010)
The limitation of the segmentation approach sometime fails to because it highlights the potential of the market which limited the wide range of audience which may buy the company product. The problem with the STP model is that it does not study the consumer behaviour. (Brounstein, 2011) The problem with STP is if company select and interpret the wrong segment then it might not able to achieve enough return as well as this model fails to highlight the cost involve to reach particular segment. (Gbadamosi et al., 2013)
Restaurant develop marketing mix to attract customer and strong brand
184.108.40.206 Problem Analysis: Marketing mix and Kapferer Model Brand Identity Prism
According to Richter (2012) Marketing Mix is analysis tool used is used when company offer new product and services. It is useful to what factors company should consider before it brought product to the market. (Richter, 2012)
Source: adapted from Fifield, 2008, p.518
Strength and Weakness
The strength of the model is that it allows the company to decide how to make offer to the customer and make profit. The marketing mix helps to position the product effectively in the market and helps the company to maximise the impact on the target market. (Bowman & Gatigno, 2010) The each four components are examined and study in relation to each other. The 7P’s of the marketing is useful to control internal as well as external marketing environment constraints. (Lamb et al., 2012)
The drawback of the marketing mix is that in the recent when service made up the large portion of economy it relevance has and in order to deploy it to services it is usually extend with three p people, process and packaging. (Hollensen, 2015) However, the model could result in offering unimaginative product or price which does not reflect the true value proposition. The cost, size and competitor reactions are ignored. (Donnelly et al., 2009)
Kapferer Model Brand Identity Prism
According to Kapferer (2008) the brand identity prism is useful to understand the human trait associated with the brand in order to understand what consumer thinks of the brand. (Kapferer, 2008)
Source: adapted from Kapferer, 2012, p.163
Strength and Weakness
The useful of the model is that it helps to understand the effective brand development variables which help the firm to develop and understand the branding process. (Proctor, 2014) The model is used as powerful tool to assess and evaluate the position of the brand. The brand analysis helps the company to create communication strategies which translate into building strong brand. (Chernatony, 2010)
The constraint of the model includes the personality and self-image concept which is difficult to elaborate because of the personality construction and identification is difficult to define along with complex adaptive behaviour. (Aaker, 2009) The brand personality traits and dimension defined by the model fails to consider the personality and need of the individuals such as recurrent traits. The model emphasis on the internal perspective and measure validity remain a critical issue. (Abbing, 2010)
The lack of the internationalization experience has restraint the company from the potential for the business to expand globally but due to lack of skills and expertise it is not viable for the company
Lack of the internationalization experience and business opportunities analysis
220.127.116.11 Problem Analysis: OLI model and Investment Theory
Internationalization — Dunning Eclectic Paradigm
Devinney et al (2010) highlighted that Internationalization is known as the process in which company involvement increase in the international markets. (Devinney et al., 2010)
Source: adapted from Cantwell, 2015
Strength and Weakness
The strength of the model is that it is useful for the firms how are planning to expand their horizons across borders. It helps the organisation to evaluate their capabilities and chose the effective strategy to enter the foreign. (Etemad, 2010) The Dunning Eclectic Paradigm (OLI model) is useful to understand is the best possible option for the company to enter the foreign market.
The ‘O’ highlight the ownership advantage which helps the firm to understand whether it can enter the foreign market based on the ownership and manage through licensing. The next important aspect of the model is ‘L’ which represent the internationalization advantage and company can export in the foreign market. At last, not least, advantage (I) is based on the distinctive business proposition in which company make the foreign direct investment. (Ramasamy et al., 2012)
The drawback attached with OLI model is that it does not address the FDI problem with horizontal or vertical motives of the business. It does not address the merger and acquisition associated with entering the foreign markets. (Purkayastha, 2015)
The model fails to highlight the impact of the institutions reforms, economic situation as well as impact of the new business model such outsourcing and off-shoring. The emerging market and developing markets present different scenario and opportunities for the firm compare to traditional business approaches. (Ellram et al., 2013)
The Uppsala model is useful to analyse the internationalization process of the firm and the stages through firm internationalized. (Andersson & Holm, 2010)
Source: Adapted from Andersson & Holm, 2010, p.283 (Andersson & Holm, 2010)
Strength and Limitation
The advantages of the Uppsala model is that it can apply to small and medium size firms and company can effectively deploy it to expand in the international markets. (Hess & Daly, 2013) The model is useful to understand the advantage firm can gain ion the foreign market based on the economic opportunities and resource of the firm. The understanding of the determinants and alignment of the business resource and competence with the foreign market is useful for the firm to capitalise the new market opportunities. (Ghauri & Santangelo, 2012)
The limitation of the model is that it ignores globalization and technology has brought new opportunities but there are associated problems attached to them. (Chowdhury, 2015) The U-model does not analyse the dynamic business environment and view the internationalization model as internal activity and does not account the external environment along ignore the competitive forces in the market. (Ulf Holm et al., 2015; Ito & Rose, 2007)
The issues surrounding the business expansion is the introduction of the new bonus system, getting the right people for the quality service, quality management and introduction of the technology which remains critical to achieve the continuous success.
New bonus system and getting the right people for the quality service
18.104.22.168 Problem Analysis: Performance appraisal and TQM
According to Deb (2009) Performance appraisal involves the systematic review and process to access the performance of the individual employee in related to establish the productivity against the pre-defined standards. (Deb, 2009)
Source: adapted from Lloyd, 2009
Strength and Weakness
The advantage of the performance appraisal is to determine the compensation for the employees such as salaries, wages and bonus. This helps to ensure that rich people are placed for the right job as well as assess the position of the individual for future growth and development. (Kressler, 2013)
Moreover, performance appraisal helps to evaluate the performance as well as used to influence the habit of the employees. The advantages of the performance are that it ensures that employees are paid properly; compensations reflected the capabilities of the employees as well as maintain effective communication between the employee and employer. (Grote, 2013)
The limitation of the performance appraisal is that the defining of the standard and scales might represent the inconsistency of the system. What consider being acceptable but not meeting standard might create the problem. (Coens & Jenkins, 2010) The subjective and personal bias of the manager is another issue. The training and expertise of the managers, the rating system and skills and knowledge of the employees enclosed biased risk and system may fail to identify the problems. (Falcone & Tan, 2013)
Total Quality Management – TQM
According to Oakland & Morris (2013) TQM is structural as well as comprehensive approach to manage and improve the quality of the product and processes based on the continuous feedback. (Oakland & Morris, 2013)
Source: adapted from Mandal, 2009, p.81
Strengths and Limitations
The strength of TQM model is that it enables the organisation to increase its performance and productivity. TQM is useful to reduce the cost of quality (internal and external failure) as well as increase customer satisfaction. (Ooi et al., 2011)
TQM makes the organisation customer focused and employees become involve in the continuous improvement. It is a useful tool to enhance the productivity and quality as well as integrated across the organisation horizontally as well as vertical integration to involve the external stakeholders. (Fazlollah et al., 2013).
The problems of TQM include the implementation of the TQM in the organisation represent the challenging situation. The cost and time involved in the implementation process are significant as well as employee motivation is a problem. (Goetsch & Davis, 2014)
Another important perspective is that TQM will bring massive changes in an organisation which employee fears and i.e. changing culture and employee empowerment is a problem. (Miranda Silva et al., 2014)
The research design and methodology have important implication in terms of the success of the research success and to achieve the objectives of the research. The research approach used in this report is case study approach because of the flexibility to analyse and summarise the data.
According to Maxwell (2012) case study approach allow to analyse and summarise the scenario and multiple problems into a single approach. In addition, Denzin and Lincoln (2011) supported the argument by adding that case study approach is most effective way to analyse and evaluate the problem through direct observation.
The qualitative research is useful to understand and assess the motivation, reasons and opinions through providing deep insight into the problem. It is useful to examine the behaviour as well as perceptions to develop reference on specific issues and problem. The qualitative approach along with interpretative analysis would allow developing a deeper understanding of the human action and behaviour. (Flick, 2015)
The distinctive advantage of the qualitative approach and case study approach is that it allows understanding how and why questioning from wider context through generalisation of the results. The qualitative approach is useful to develop an understanding of the social event which helps to derive the result and validate the findings. The advantage of the qualitative approach helps to analyse the problem from a wide range of theories, concept and models which help to generalise the results and findings. (Hussain, 2011)
According to Yin (2013) case study approach offers the flexibility to answer how and why problem especially in a situation when research has not direct control over the problem. Case study approach generalizes the problem from wider context through exploring the outcome in wider context. The results and finding of the case study offer deeper perspective and insight of the problem which gives more compelling and validate the result. (Pahl & Richter, 2009)
The use of the qualitative approach and case study would allow studying the problems faced by the porcini Inc. through developing an understanding on the wide range of problems for the company. The study of the relationship among the variables and concepts would allow developing an understanding of various problems faced by the company. (Bergh & Ketchen, 2009)
The data used in the case study is qualitative secondary data which already exists as well as collected for other purposes. The secondary data analysis involves textual and document analysis and secondary data is derived through a wide range of academic journals books, websites and official publications. (O’Reilly & Kiyimba, 2015)
The qualitative secondary data is a cost-effective approach as well as time efficient to answer the problem. The research does not have to research the inclusive population as well as secondary data analysis allows the theory consolidation to synthesise the findings to answer the problem. (Marshall & Rossman, 2010)
This section of the case study enclosed detail analysis of the each problem based on the theories and model discusses and evaluated in previous chapter 3.
The table below summarize the internal (strength and weakness) and external (opportunities and threats) of the Porcini’s.
(Aschemann et al., 2012; Ferrell & Hartline, 2010)
(El Shafeey & Trott, 2014; Auster et al., 2011)
(E. Dobbs, 2014; Donnelly et al., 2009)
(Schawel & Billing, 2012; Taylor, 2012)
(Henry, 2008; Magretta, 2013)
|The characteristics of the customers as well as identification of their needs allow to categorise and effectively range the market.|
|The market targeting would allow the company to determine the commercial attractiveness of the segments which ensure company can achieve reasonable profits and remain competitive in the market.|
The position is useful to identify what kind products are demanded and expected by the segment of the market. This would allow positioning the product based on the characteristic of the segment.
(Donnelly et al., 2009; Ferrell & Hartline, 2010)
|Product||Porcini new menu is based on the existing product range of the company which to evaluated according to needs of the segment of the market.|
|Price||Company have offered a limited menu, but the pricing of these products are same as the dine restaurant. Therefore, the company should evaluate its pricing policy.|
|Place||The porcini new restaurant will be operational at the location identified by the management but needs to carefully consider whether this represents the larger market.|
|Promotion||This involves the decision such as promotion strategy of the company to attract the customer response.|
|People||The people represent the staffs of the company which are vital for the quality customer service offering for the porcini.|
|Process||The limited menu restaurant involves different processes when compared with existing service of the company. Consequently, it is important to make the right decision which ensures profitability while quickly serve the customers.|
(Barrett & Weinstei, 2015; Dibb et al., 2012)
|Brand Personality||Porcini pronto is new concept as well as company is small player in the market and i.e. it effectively needs to develop brand character.|
|Culture and Value||It important that company communicate and use the quality reputation to project customer trust in the company.|
|Customer self-concept||Porcini is new brand and therefore, it is likely that company needs to position itself for the customers.|
|Brand physique||Company should continue its focus on the quality food and high quality customer services.|
|Customer reflect image||This represents how customer perceived and reacts against the product and services of the company. The porcini concept is new as well as brand affordability and performance is area of concerns for customers.|
|Ownership advantage||The ownership advantages represent the tangible assets of the company which includes the design of the process and quality of the product. Porcini have ownership advantages which it capitalise when entering the foreign market.|
|Internationalization advantage||The reduction in transaction cost and improves control over the operations is important. Porcini is unlikely to start the internationalization process based on the internationalization.|
|Location advantages||The location advantage represents the interest of the company in terms of low-cost labour and raw materials in the new geographical. However, in the case of the porcini this approach does not offer value.|
(Cantwell, 2015; Chowdhury, 2015)
|No regular export activities||Porcini offers products and services which cannot be exported.|
|Export via independent representative||Company products and services cannot be exported, but it can start operations in collaboration with a representative which would allow the company to develop market knowledge as well as commitment decisions.|
|Establishment of subsidiary||Once company developed the market knowledge and understand the commitment then it can proceed with opening a subsidiary in the nearby location.|
|Production and manufacturing||The market knowledge and experience of the company would allow starting the full-scale operation in the more distant market. The knowledge and expertise developed over time allow to successfully capitalizing the market.|
(Vahlne & Johanson, 2013; Chowdhury, 2015)
|Define expectation||Porcini must set the performance standards and expectation from the new employees in order to effectively integrate the bonus scheme. The standards should clear and easy understood by the employees. The goal congruence is critical at this stage through effective communication.|
|Measure and evaluate||The criteria against which employee’s performance will be judged are critical for the success of the bonus system. The standard should be SMART (specific, measurable, achievable, relevant and time-bound).|
|Provide feedback||The comparison of the actual performance with the standard helps to evaluate the level of the performance.|
|Record performance||The results discussed with employees to ensure that possible solution is discussed to develop understanding. The feedback should have a positive influence on the employees|
(Brounstein, 2011; Deb, 2009; Falcone & Tan, 2013)
|Commitment||The TQM requires the strong commitment from all employees as well as management of the company. The commitment of the senior manager would ensure that the processes and activities are implemented at all stages everyone is part of the bringing the improvements.|
|Culture||The TQM culture ensures that everything in the organisation is committed to improve the quality and increase the efficiency of the processes.|
|Continuous improvement||The continuous improvement involves making small increment changes rather big revolutionary change.|
|Cooperation||The senior management support, as well as the integration of everyone, will ensure that company objectives are achieved in an efficient manner.|
|Customer focus||The customer focus represent that all activities are task are performed in such manner that the ultimate benefit is deliver to the customer.|
|Control||It involves reviewing and benchmarking the processes as well as acting to recognise, communicate and revise the procedures according to the requirement and performance.|
(Fazlollah et al., 2013; Corredor & Goni, 2011)
The company should purse the market development because it is feasible option for the company. The new ventures would enable the company to offer the products to different segment of the market.
1.0 Market Development
2.0 Differentiation strategy
Porcini should identify measure the gaps in the market and communicated effectively with the target potential market. The evaluation of the market allows developing the segment in the market which further referred to target market.
|Ø Product||Porcini new menu is based on the existing product range of the company which to revaluated according to needs of the new segment.|
|Ø Price||The pricing decision involves what price should be charged to the customers|
|Ø Place||The porcini new restaurant will be operational at location but must reachable by the larger market.|
|Ø Promotion||The new restaurants require significant level of promotional activity.|
|Ø People||The availability of the staff is critical decision for effectively service of delivery.|
|Ø Branding||Company needs to develop strong brand personality as well as project the culture which helps the customer to self-concept assertions with Porcini.|
OLI model helps the organisation to evaluate their capabilities and chose the effective strategy to enter the foreign. The analysis shows that Porcini have ownership advantage which it capitalise when entering the foreign market.
|Ø Collaborative operations||Company products and services cannot be exported, but it can start operations in collaboration with a representative which would allow the company to develop market knowledge as well as commitment decisions.|
Ø Resource Alignment
Porcini plans to enter the foreign market it adopts strategies and align resources to meet the condition of the international market
|Ø Establishment of subsidiary|| |
Once company developed the market knowledge and understand the commitment then it can proceed with opening a subsidiary in the nearby location. This represents a strong opportunity for the company to capitalise in the foreign market.
Porcini needs to deploy TQM to improve its operation and maintain the quality of service and food. The TQM will ensure that company remains committed to provide high quality service as well as increase the efficiency of the processes.
There are a number of theories and model used in this study to examine the various issues and problem at the Porcini. However, there are still models and theories such as stakeholder theory, value chain, business life cycle and experience which could have been used to evaluate the problems and are not included in this study because of the time and size limitation. It is difficult to examine the various in-depth areas and generalized approach has to develop an overview of the problem.
The PEST model to examine the political, economic and legal issues could have help to understand the future direction and opportunities in wider context. Moreover, the data availability is a significant challenge because the data evaluated is limited to a case study published and there is no additional internal or company information was available to evaluate the company position in broader context. At last, not least, the application of the model and result are generalized by the researcher which could have a different perspective for the Porcini. (Hair et al., 2012; Bettis et al., 2014)
The case study analysis adopted the limited perspective of the examining the existing problems of the Porcini rather examining the market opportunities as well as evaluation of the growth option for the company. The opportunity maximisation approach can help the restaurant to appraise different growth options which could help the Porcini to capitalise the local market development as well as internationalization benefits.
Moreover, the research in terms of how a restaurant can transfer the market-based knowledge to support the growth in both local and international market. The study on how could economic and political perspective effect during the expansion of the restaurant. The examination of the consumer behaviour and market analysis could be examined in order to meet the demand and need of the customer in border context.
The purpose of this chapter is to apply the learning from the Porcinis case study to McDonalds, a fast-food giant which have a presence around the world. The purpose of selection the fast food chain (McDonalds) is the similarity with ‘Porcini Pronto’ new fast food concept business. The understanding of the problem and current situation and problems of McDonalds will enable to develop better insight of problems of the fast food chain and knowledge transfer will highlight who they issues can be resolved.
McDonald’s is the biggest fast food chain which have experienced tremendous local and international growth over the years. However, this growth has resulted in problem and weakness and initial secondary data shows that company is facing issues such as managing customer loyalty, low-cost competitors, bad PR, food scandals in international markets, poor performance, supply chain problems and investor pressure as well as unhealthy and complicated menu.
The similarities of the both companies ‘McDonalds’ and ‘Porcini Pronto’ would enable better transfer of knowledge and rigorous evaluation to apply the knowledge under similar business models. (Little, 2015; Gensler, 2015; Lutz, 2015)
Therefore, the aims is to apply management theoris and models to analyse and evalute the problems faced by the companies in context which are common fro both companies and propose solution to company problems,. At last, not least, conlcusion and recommedations are propsoed to overcome the problems at the company.
McDonald’s starts its operations in 1964 which operate globally under both company-owned and franchised restaurants. The company have operations in distinct geographic in US, Europe, Asia as well as Africa and the Middle East. The company have uniformed menu globally with slight modification according to local tastes and preferences. The company operates under franchise agreements in which franchise is responsible for capital investment while company have a long-term lease of the land and building and an agreement lifespan is 20 years.
However, in the development licence agreement franchisee is responsible for the land and equipment and company received royalties and initial fees. The company have approx. 5300 restaurants globally under licences and franchise system. (McDonalds.com, 2015)
The menu of the company is big and complicated serving a wide range of items which has failed to keep up with taste and preferences of the people. The significant issue is many products are out-dated (no new products) and have labelled as unhealthy because of artificial ingredients. The extra value meals on the company menu are 16 with wide range of variations and this has resulted in failure to concentrate on the star products of the company. (Berman, 2015)
Company product offering in the ‘China’ was undermined because food safety concerns as one of its supplier were found providing expired meat. Moreover, company face demand and product problems in India where western-style food have less popularity, as well as company, face social and legal challenges because of the ‘Beef burgers’. The social and social challenges are undermining company revenues and brand in the country.
The political standoff between the Moscow and Washington hurting the company in the ‘Russia’ and company has faced number of legal and regulation challenges imposed by the Russian government. At last, not least, the economic problems in the Latin America, Italy and Greece have hit the sales of the company where company have declining sales. (Financial Times, 2015)
The poor financial performance and customer service have hit the company growth and revenues. According to CEO of the company, the loss of the customer and failure to attract new customers has resulted in the sales decline. The company has failed to innovate and bring new health products to the market as well as its processes of cooking present significant problems. McDonalds is gaining a reputation of poor customer service, pay structure, low and unhealthy food quality as well as its failure to bring new product to the market. (Wahba, 2015)
Boston Consulting Matrix (BCG) assess the position of the company products in order to make a decision what should be continued and make the further investment, as well as the products which should be divest. (Schawel & Billing, 2014)
Stars are the company products which generate large amount of cash based on the market but they consume large amount of cash based on the growth rate. The amount of revenues earned from these products are net with the amount of money spend on these products. The analysis shows that company products such as McPollo, McShakes as well as McChicken BBQ are star which have high growth rate. If star maintain high market share then there is possibility that they might become cash cows when the growth rate decline. Therefore, company should maintain these products. (Ellwood, 2014)
Cash Cows are the company product which have high market share in low growth rate. The market is mature for these products, but these generate high return compare to growth rate. Overall, cash cows products generate more cash when compared with the amount consumed. Cash cows are a vital source of revenues to support other product as well as generate profits. The Analysis shows that company cash cows include Hamburger, BigMac, McBacon, and McNugget which are a vital source of revenues for the company. (Griffin, 2011)
A question mark are the company products which consume a large amount of cash because of rapid growth but have a low market share as well as does not generate enough cash. The question marks have the potential to become a star and possibly ten in cash cow. McDonald’s product analysis shows that Chicken cheeseburger, McSalad, Quarter Pounder is a question mark for the company and should analyse these products further. (Proctor, 2014)
Dogs do not have low growth rate as well as low market share and therefore, Dogs neither generate cash nor do they consume cash. Dogs have the cash tied up and there is little potential for products to expand. McDonald’s product analysis shows that Mcfish, McWraps and McArabia and company should divest these products. These products have large amount of capital invested and i.e. important candidate for the divestment. (Schermerhorn, 2013)
The significant factors which affect McDonalds are trade agreements, political conflict between US government and Russia, tax issues in various countries as well as health policies in various countries. The political factors are significant impact on the operations and revenues of the company. For example, in Russia Company has been in problem because of political sanctions imposed by the Russian government which consequently decrease the revenues of the company. (Bensoussan & Fleisher, 2012)
The notable economic issues faced by the McDonalds are economic condition in Europe and emerging markets. The exchange rate is problems which result in translation and transaction risk for the company. The increased cost of the input by the local supplier and food safety has increase the cost of input for the company. (Rugman et al., 2012)
The demand for the healthy life style and low demand for western food in the markets such India represent significant economic risk for the company. The low acceptability of company product in new markets based on the taste and preference also represent challenge for the company. Company product experienced bad PR because of negative health impact as well as it requires high level of customization according to local taste and preferences. (Rugman et al., 2012)
The cost of equipment which is required for the productivity and automation is high. To deliver quality service and produce products based on local ingredients and taste requires significant investment in research and development. The technological cost and changes in order to maintain performance and productivity are high. (Morrison, 2011)
The lean system involves systematic thinking and approach to identify and elimination of waste as well as non-value added activities. The fundamental approach for behind the lean systems is the development of the employees along with continuous improvement in the product and services. The benefits offered by the lean systems include cost reduction; improve profitability, staff and customer satisfaction, reduce lead time and defects as well as increase customer loyalty and market share.
The fundamental area behind the lean philosophy is a waste reduction, quality control, empowerment and problem solving. The lean systems are based on the demand in order to achieve continuous improvement as well as waste reduction. (Krajewski et al., 2015)
McDonalds has failed to innovate and bring new health products to the market as well as its processes of cooking present significant problems. McDonalds is gaining a reputation of poor customer service, low and unhealthy food quality as well as its failure to bring a new product to the market. The lean system could help the company to improve product packaging design, improvement in cooking processes design, better organisational and personal control as well as effective production planning and control. (Melnyk et al., 2011)
In this section, knowledge and skills developed during the ‘Porcini Pronto’ case study will be transferred and applied to the McDonalds. The knowledge developed from the conception and management of the restaurant is transferred to another food retail sector.
Porcini and McDonalds are both food retail sector and facing high competition. Nevertheless, the Porcini have distinct competitive advantage of Italian food whereas McDonalds have standard food. The need of the standardization of processes is high as well as economies of scale could help the McDonalds to reduce cost and improves profitability. Therefore, cost leadership strategy is vital and important source competitive advantage and increased profitability.
The market share of the McDonalds in new markets such as India is relatively low because of lack of the product which suit the taste and preference of the company. The market penetration and product development could help the McDonalds to increase market share as well as manage the needs of the customers.
The porter five forces will help the company to identify and manage the competition, supplier and customers in the new market. The recent food security scandals in china could help the company to determine the power of supplier and design supplier management strategy as well as arrange new sources of the supplies.
The size and price of the McDonalds menus are relatively complex and complicated which has affected the profits and product offering of the McDonalds. The new menu size and pricing can help the McDonalds to offer products which are valued and preferred by the customers. This could the McDonalds to improve the productivity and profitability as well as improve the processes.
The new product strategy could help the company help company to address the diverse need and taste of the customers in the new markets. For example, development of the non-meat products for the Indian customer and Halal food in the middle market is critical requirement in order to succeed in these markets. Therefore, company advertising the right product in these markets could help the company to earn a profit and penetrate in the market.
The new product and market pose significant risk for the McDonalds in terms capital investment and revenues derived. The segmentation approach would allow the McDonalds to identify whether a new segment of the market is reachable and profit and amount of return company can achieve. The target approach would allow reaching the segment of the market that requires the products of the company. At last, not least, positioning would allow to position product in the market for the customers who are the primary market for the McDonalds products.
The launching of the company product in the new distinct market can be managed through brand identity prism. For example, launching new product which is based on the taste and preferences of the new customer in delivers market. The factors such as product problems in India where western-style food have less popularity, as well as company, face social and legal challenges because of the ‘Beef burgers’. The social and social challenges are undermining company revenues and brand in the country. The brand identity can help to overcome such issues as well as provide the products and services of the company.
The size and power of the McDonalds offer a number of opportunities in terms of capital investment in the new market as well as achieve a better return on the investment. Internationalization process based could help the company to reduc4 cost in order to achieve the ‘economies of scale’ and ‘economies of the scope’. Moreover, current internationalization advantage could help to a reduction in transaction cost and improves control over the operations. In addition, the location advantage represents the interest of the McDonalds in terms of low-cost labour and raw materials in the new geographical.
The problem of the poor performance and productivity at McDonald’s can be managed through TQM system. The TQM requires the strong commitment from all employees as well as management of the company. The commitment of the senior manager would ensure that the processes and activities are implemented at all stages everyone is part of the bringing the improvements. The customer focus represents that all activities are task are performed in such manner that the ultimate benefit is delivered to the customer. The company would able to increase cooperation among the employees as well as deliver a product which is valued by the customers.
The salary and bonus structure at McDonalds has remained a problem and this has raised the conflict and demotivation among the employees. The standards should clear and easy understood by the employees. The goal congruence is critical at this stage through effective communication. The comparison of the actual performance with the standard helps to evaluate the level of the performance. This would allow the McDonald’s to design an effective bonus and payment system.
McDonald has a complex and complicated menu and therefore, it needs to simply its menu and pricing structure. The oversize menu has made it difficult for the customer and company to generate profits and better productivity. McDonald’s needs to invest on its star products such and McChicken BBQ which have high market share in high growth area. The portfolio analysis is important for the business and company should maintain the Cash Cows to for case generation. Nevertheless, McDonalds Dogs products should be divested the McWraps, McArabia to release cash and invest cash elsewhere.
McDonald’s should conduct detailed macro-environment analysis to overcome the political, economic and legal issues. The political analysis will help to avoid investment in the high-risk country. The changing economic scenario such as Greece could be avoiding ensuring company investment is safe and generates better return. The exchange rate risks much high for the company because of fluctuation and this could minimise through economic analysis. All the same, the legal changes can be avoided such tax and employment law can overcome with the help of macro-environment analysis. McDonald’s can overcome political oppression; manage the economic condition, the cost of input and changing lifestyle and demand for healthier food.
The lean system implementation can help the company to overcome the performance and productivity issues. The Lean system can help the company to eliminate the non-value added activities which simplify the processes and reduce cost. The poor customer service, quality of the product as well as delivering product and services in timing manner can overcome the reduction in sales and profitability. McDonalds is gaining a reputation of poor customer service, pay structure, low and unhealthy food quality as well as its failure to bring new product to the market. The problems can be overcome using the lean system which offers the opportunity in terms of product development, processes improvement and remove the activities which do not add value to product and services.
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