Hotel & Hospitality Management

Questions: Analyse how food and beverage outlets can use tools such as Five forces analysis and the VRIO concept to ensure the y meet their strategic objectives. Define these concepts from a food and beverage perspective In your answer discuss the competitive nature of the Sydney food and beverage industry Provide examples of bars and restaurants that exemplify these concepts Evaluate how food and beverage outlets use menu engineering to maximise profit. Answers: Introduction The report discusses the effectiveness of different strategic tools such as Portes Five Forces and VIRO in food and beverage industry. It is evident that food and beverage industry have turned out to e a large business market in the recent time. With innovative marketing strategies, the investors are leaving no stone unturned to meet the demands and needs of customers. The organizations in the food and beverage industry are in the rush of developing their marketing strategies to cater to the needs of customers. Thus, the report uses different strategies tools such as Porters five forces analysis and VRIO. The report starts with an overview of these tools from food and beverage perspectives. Defining the concepts from a food and beverage perspective Micheal Porter developed a framework by which the competitive advantages of the organization in food and beverage industry can be evaluated in the market in which they run their business. This particular framework deals with an analysis of different forces that influence the ability of the business to compete in the market. Considering the scenario of the global market in which the bars and restaurants such as Bulletin Place and Lobo Plantation run their operation the concept of Porters five forces analysis is applied. Figure 1: Porters Five Forces analysis (Source: Hitt, Ireland Hoskisson, 2012) Threats of New Entrants- The old bar and restaurants such as Bulletin Place and Dead Ringer in Sydney, in spite of providing long term services to people, have to deal with some coming external threats. As the country has stable economy, traders building a small firm could access the market quite easily. The threats can be domestic or international; it exists due to the nature of the industry. Thus, it is observed the entry barriers in Australian food and beverage industry is comparatively high. According to the current operation of Bulletin Place in Sydney, it can be mentioned that newcomers may have to face some external issues as Bulletin Palace gained a huge popularity due to its services of years. In addition, the existing organizations in food and beverage industry are running their operation for decades. Thus, the new entrants may find it difficult to challenge the market of those organizations through pricing or products. Bargaining Power of Suppliers: The bargaining power of supplier in food and beverage industry in Australia is comparatively high as the country is economically developed. The competition is Australian food, and beverage industry is comparatively high; thus, the suppliers have multiple options to produce raw materials. Bargaining power of Consumers: The bargaining power of customers of the organizations food and beverage industry in Australia is high. This happens because some large organizations are running their business for a long time providing a high quality of similar products. Thus, the customers have an alternative to carrying the bargaining power. In this context, Gupta Malik (2012) added that if a particular product is launched in a particular market where the customers do not like the taste; thus they do not buy the product. However, in the developed countries like Australia, the consumer base is quality sensitive. This increases the bargaining power of the customers. If the small organization such as De Bortoli Wines wants to penetrate the market, they will have to focus on developing the quality of the products. Threats of substitutes: The threats of substitutes for the companies in food and beverage industry are comparatively high. The industry has multiple organizations that are providing either small or large substitutes products. For this particular reason, the small organization such as De Bortoli Wines has to assure that they offer a product that is not limited and demanded by the customers. Competitive rivalry: As mentioned by Gellynck et al., (2012), the industry rivalry for the organizations in food and beverage industry in Australia is high. The large organization like Lobo Plantation is considered as the dominant of food and beverage industry of Australia. Thus, there is a high level of competition among these organizations. Moreover, the needs and demand of customers in food and beverage industry are changing with time. VRIO Analysis This particular analysis helps to analyze the internal resources and capabilities of the organization in food and beverage industry. This also helps to compare organizations competitive advantages as well as disadvantages relative each other. Resources and Capabilities Value Rarity Imitability Organization Distribution YES (Bulletin Place) YES NO YES YES (Lobo Plantation) YES NO YES Value: The organizations in food and beverage industry pay more attention to its distribution on the fountain market with restaurants and other fast food firms. Whereas the retail distribution of the products is significant, there is a larger range for fountain sales. As mentioned by Horbach, Rammer Rennings (2012), distribution through the channels of the global market has turned out to be valuable in maximizing the distribution network of the organizations. The distribution network of the bar Bulletin Palace could be different from the channel of Lobo Plantation. In addition, with the number of soft drink, alcoholic items and other fast food, the popular restaurant like Lobo Plantation attracts the people. As a result, the number of visits of customers increases. The frequent visits of customers help Lobo Plantation to extend the operation network increasingly. This expansion has helped the organization to control over a large market share in food and beverage market. Rarity: The analysis indicates that the capacity of distribution network of the restaurant like Lobo Plantation is poor as the firm frequently delivers its products to a number of buyers globally. On the contrary, the large restaurant like Bulletin Palace has also produced a large number of beverage items including the fruit juice to soft drink items. The organization has gained the competitive advantages by implementing a straightforward and effective channel design. In this context, Hacklin Wallnfer (2012) added that the significant business relationship for such large demanding distributions of products is mere to acquire. In this context, the restaurant Bulletin Place has adequately maintained its relation. Imitability: As stated by Hazen, Hall Hanna (2012), the push and pull distribution approach of the bar and restaurants can be limited to its basic fundamental essence; however, the capacity of the network is unique. Conversely, it is also identified that to increase the distribution network, Bulletin Palace made a big investment. For example, the firm has set up a new bar namely Dead Ringer. The small firms in food and beverage industry in Australia could apply this particular strategy to maximize the distribution network. Organization: The restaurant like Bulletin Palace gained the ability of exploiting their distribution by entering into a new market. The organization has established Dead Ringer to increase the market share and gain significant control over the market. For example, the country Mexico lacks proper alcoholic products. The organization could realize this fact and largely distribute and advertise in Mexico. As mentioned by Rossi, Vrontis Thrassou (2012), producing alcoholic products in Mexico, the organization could provide the opportunity to people in Mexico to satisfy their needs. Conversely, the restaurant like Lobo Plantation utilizes the distribution channel through the collaboration with large firms in the same industry. This relationship could help the small bars to tie its products and services with other industries as well as distribute the products efficiently (Pauwels et al., 2012). From the above mentioned discussion on the strategic tools such as Porters Five analysis and VRIO analysis helps to understand that organizations in food and beverage industry are dealing with the marketing challenges and gaining profits from the competitive market. The economically developed country such as Australia provides multiple business opportunities to the organization to implement different strategic tools. Discussing the competitive nature of the Sydney food and beverage industry The food and beverage industry in Sydney has experienced a significant pressure on its operation from the series of drivers. These drivers may include continued stability in the larger economic environment, strong Australian currency, and competitive scenario of food and beverage sector as well as increased cost of building a business in Australia than other developed countries (Hair et al., 2012). The economic rank of Australia is on the top as one of the largest growth economies among the developed countries across the world. Conversely, it is also observed that the food and beverage sector of Australia did not experience the growth as expected similar to other economically developed countries. As mentioned by (Priem, Li Carr, (2012), a combination of lower investment as well as the fiscal restaurants could like impact on producing goods on the domestic front, whereas the cost pressures currently have minimized the manufacturing sectors capacity to deal with the competition. Australia is considered as the big food and beverage producer. The organizations in food and beverage industry in Australia tend to import some products from a neighbouring country such as New Zealand. The large city such as Sydney presently has major concerns regarding the population, health, nature foods and meal solutions. As mentioned by Steg et al., (2012), the increasing private label sector in Sydneys retail is another lucrative opportunity for the exporters of other cities. It is observed that the global beverage industry was predicted to increase from $1.58 trillion in 2009 to nearly $1.78 trillion in 2014 (Keupp, Palmi Gassmann, 2012). On the contrary, Teece, (2012) mentioned that retail sector in Sydney is fragmented. The leading players of the wine sector, Accolade Wines and Treasury Wine Estate have 45% of all branded wine sales. Some large organizations such as Bulletin Place has its range of alcoholic products and it is controlling 60% of the liquor market. However, t here have been certain growth drivers that influence the food and beverage industry. For instance, due to the increasing forces of discount market chain, the large restaurant like Lobo Plantation has become concerned with stepping up their individual products. It is observed that the organization currently accounts for the single quarter of the food and beverage market. Also, it is also identified that there is an increasing demand for food and beverage in Sydney with 40% growth in the production as well as consumption of beverage products in last few years. As stated by Dezs Ross (2012), the annual growth in last few years in demand of between 10% to 30%. Furthermore, it is also identified that the food and beverage sector offer some opportunities with more people having food; however, demanding a high quality of products such as snacks and alcoholic items. As mentioned by Jiang et al. (2012), the Australian food and beverage sector would have experienced an annual growth rate of 6.6% from 2009 to 2014. Besides, there have been some marketing trends that are observed in food and beverage sector in Sydney. It is researched that New Zealand is one of the largest supplier of processed food as well as beverage products to Sydneys market. According to the records published in 2014 almost 18%, the overall imported goods come from 2010 (Gupta Malik, 201 2). Examples of bars and restaurants that exemplify these concepts There are a number of bars and restaurants in Australia that have observed a significant growth in food and beverage industry. One of the largest organizations is Coca-Cola Amatil Limited that has implemented the strategic tools such as porters five forces tool. In the implementation of competitive forces, it is observed that the force of traditional competitors is high as there are multiple types of competitors providing same products and services. For example, it can be added that PEPSI and Coca-Cola Amatil Limited, these two organizations provide almost the similar products and have a same pricing structure for the products. In this context, Horbach, Rammer Rennings (2012) commented that the force of traditional competitors could be high if the market contains several competitors with similar products and pricing strategies. Thus, to compete against the giants like PEPSI and CCA, the other organizations may have to implement advanced marketing strategy, as these giants do not hol d shares. Likewise, Coca-Cola Amatil has been running its operation for decades; thus, the level of entry is high. The new entrants may require high expenses. In this context, Dobbs (2014) added that forces of getting into a new market will be low when there are similar products and services like CCA and PEPSI has. On the contrary, the food and beverage industry has many substitute products that could pose serious threats to Coco-Cola Amatil (Hacklin Wallnfer, 2012). The customers may buy coffee, tea, juice and other beverage products that cost minimal difference in the price. Similarly, the bargaining power of customers is comparatively high as there other alternatives to the buyers such as PEPSI. The customers also have the power to bargain with the suppliers by offering cash. As mentioned by Dobbs (2014), the customers always prefer the most cost effective technique to increase their profits. Therefore, it can be mentioned that strategic tools such as Porters Five Forces analysis are effective to understand the current position of the organizations in food and beverage industry in Australia. The outcome of the analysis helps the organizations to implement marketing strategies such as product diversification, differentiation. The strategic objective of the organization in this industry is to develop the quality products, maximize sales and increase market share. Thereby, conducting a VRIO or Porters Five forces analysis, the organizations could learn about both existing as well as the new market, where they currently run the operation and will be running in future. Evaluating how food and beverage outlets use menu engineering to increase profit The restaurant operators should know the importance of keeping their food price in line. This is because food and beverage costs are combined with the wages of people as well as payroll expenses. As mentioned by Horbach, Rammer Rennings (2012), the food and beverage price covers 60-70% of the revenue. Menu engineering: The organizations in food and beverage industry currently are using the menu engineering tool control over the profits. The managers of the organizations acquire the information about menu items profitability with the help of menu engineering tools. As mentioned by Hacklin Wallnfer (2012), proactive planning, recipe design, as well as consumer pricing design, can be prepared by menu engineering tools. It is observed that menu engineering tools are not considered as the substitute for proper buying, food rotation and standard recipes. Further, it is also identified that a well-executed initial menu engineering effort could take the time to maximize restaurants profits by 15- 20% on an ongoing basis. It is also observed profit impact does not stop here. There are some particular ways based on which the organizations earn profits. The menu engineering process may include the techniques of costing the menu, categorizing the menu items, designing the item as well as testing the design menu. Cost a menu refers to the technique of breaking down each item on the menu to individual ingredients and calculate the exact cost to create each of the items as the engineering techniques largely depends on the profitability level of each product in the menu. The next phase of engineering menu used by the organizations to increase profits comes with the technique of categorizing menu items. Hence, the marketers tend to split the menu into different categories and section. Here, the category refers to the way the menu is divided at the largest level. The last phase comes with the technique of designing the menu. Hence, the part of the designing the techniques highlight the items that the outlets mostly want to sell. However, this technique can be acc omplished with a simple checklist. While designing the menu, it is necessary for the outlets to pay attention to consider the customer base. 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