Managing Food and Beverage Operation

Question: Discuss about the Managing Food and Beverage Operation. Answer: Introduction In the era of twenty-first centuries, the world of business changing in a very quick pace. This process makes it difficult for the business industries to keep pace with this change. Strategic planning is an important concept in this regard as effective strategies help to give the businesses the desired competitive edge over its competitors. On the other hand, strategic planning helps to analyze different aspects of business and the result of the analysis assists on taking effective decisions for the business (Smith, 2012). It is required for any industry to analyze the internal as well as external environments in order to gain a clear view of the current business position. The restaurant and bar industry is one of the fastest growing industries in the world. Numerous numbers of restaurants and bars can be seen all over the Australia. The large number of businesses in this industry contributes to increase the competition among them. Here comes the need for strategies in order to get the competitive edge. In this regard, Porters Five Forces Analysis and the VRIO Theories are two of the most important tools for the managers of this industry to make the perfect strategies for their businesses. The main objective of this study is to assess how the VRIO Theory and Porters Five Forces Theory of competition can help the restaurants and bars in getting the long term competitive advantage and increase the profitability of their businesses. Porters Five Forces Model Analysis As per Porter, (2010), the analysis of the external environment of any industry is the foremost factor to make strategies for the organization. In this regard, Porters Five Forces analysis is one of the most important tools to analyze the external environment of the industry. There are five important factors in the Porters Five Forces analysis. They are rivalry among the existing competitors, threat of new entrants, threat of substitutes, bargain power of the suppliers and bargaining power of the customers (Dobbs, 2014). In case of the restaurant and bar industry, the managers need to analyze these five aspects for getting competitive advantage. Porters Five Forces Analysis is considered as one of the most practical and credible solution for competition. It is important for the managers to take into consideration of this model while preparing strategies for the business. Porters Five Forces Model is assessed in details below in relation to the restaurant and bar industries in Austral ia: Rivalry among the Existing Competitors: The restaurant and bar industry in Australia has been growing in a very fast pace and this process contributes to the emergence of numerous number retardants and bars in this country. Thus, it is important for the restaurant and bars to stay in the competition. In this regard, the managers of this industry need to find out the factors that are affecting the competitive rivalry. There are various reasons. Some of them are 1) the existence of large number of firms, 2) the slow growth of the market, 3) high fixed cost, 4) very high storage cost, 5) low switching cost, 6) low product differentiation 7) high exit barriers and many others (Rothaermel, 2015). All the restaurants and bars want to achieve the maximum market share in revenues and profits. The managers need to use some tactics to gain the long term competitive advantage. First of all, they should set a competitive price so that the particular company can be differentiated from the others. After that, the managers should introduce the some creative distribution channels to make the operations more creative. The most important tactics are to maintain a healthy relationship with the customers and to provide better services to them. These steps will help the restaurants and bars in retaining the existing customers (Rachet, 2014). Threat of New Entrants: Another effect of increasing the competition in the restaurants and bar industry is the increasing number of new restaurants and bars. One of the reasons is that this particular industry does not require any high level of investment (Tauman, Weiss Zhao, 2015). On the other hand, there is not nay requirement for obtaining any kind of patents from the government to carry on the business. All these reasons contribute to a large number of new entrants in the industry. Here also the managers of the restaurants and bars need to formulate some strategies so that the new entrants cannot affect their business. The managers need to make a strong customers base with their high quality products and efficient services which will be tough to break for the new entrant. On the other hand, the managers need to establish a strong network of suppliers. There should be innovation in the products of the existing companies so that it becomes hard for the new entrants to enter in t he restaurants and bars industry (Akhter, Rahman, Rahman, 2014). Threat of Substitutes: Substitute products are those kinds of products which need the demand of the consumers but they are available in another market. This is a serious kind of threat for the restaurants and bars industry. Now-a-days, the major substitute for the restaurant is virtual or online food delivery chain or the online restaurants where people can get all the products of restaurants are a comparatively low price than the restaurants (Porter Heppelmann, 2014). There are certain factors that work behind the high threat of substitutes. In this case, the switching cost of the customers is low and the substitute product can be obtained in much lower price. On the other hand, the quality and the performance of the substitute products are equal to the actual product. Thus, to get the long term competitive advantage, the managers of restaurants and bars need to adopt a competitive price strategy that can give a fight to the substitute products. Various innovative services like hom e delivery of the foods of the restaurants, complimentary gifts with the products of the restaurants and bars and others can help them in retaining the existing customers and also can help them to attract new customers (Magretta, 2013). Bargaining Power of the Suppliers: Every business organization needs suppliers to get the required law material for the business. In restaurant and bar industry, various kind of raw materials are required. Bargaining power of suppliers refers to when all the suppliers of an industry can influence the price and availability of the products (Heimeshoff Klein, 2013). There are various factors that can increase the suppliers power. The Power of the suppliers increases when the price of the products can be increased without affecting the demand. When there is a few number of suppliers available in a particular industry, the suppliers become able to increase or decrease the price of the products. Thus, the managers of restaurants and bars need to adopt perfect strategies to avoid this kind of situation. This is the utmost responsibility of the managers to maintain a cordial relationship with the suppliers. Long term competitive advantage can be gained when there is sufficient number of su pplier available in that industry. However, there is not any control over the number of suppliers by the managers of that industry. Hence, it can be concluded that there should not be any monopoly in the suppliers market for long term competitive advantage for the companies (Haucap et al., 2013). Bargaining Power of the Customers: Bargaining power of the customers refers to when the customers have the power to influence the price of the products. It can be observed that there are a lot of customers in the restaurant and bar industry. Certain reasons contribute to increase the bargaining power of the customers. The first reason is that the existence of substitute products in the market. The customers can influence the price of the products when they have choices over the products (Fabbri Klapper, 2015). Another reason is the low switching cost. Customers dominates the price of products when the switching cost of is low. Other reasons are the low differentiation of the products, high price sensitivity of customers, high knowledge of customers about the products and many more. Thus, the managers of restaurants and bars should be able to introduce different kind of products with reasonable price. On the other hand, they should maintain a healthy relationship with the customers ( Ahern, 2012). Overall, they need to make an effective strategy in order to gain the long term competitive advantage. The product of a bar or a restaurant should be different from the other and only then the industry can increase revenue and profitability. VRIO Analysis VRIO theory or VRIO framework is considered as one of the most useful tools to assess a businesss internal resources and capabilities and to determine that whether they will be able to sustain the long term competitive advantage of the company. VRIO stands for Valuable, Rare, Costly to Imitate and Organization (Barney and Hesterly, 2006). These aspects are discussed below: Valuable: The first aspect of the VRIO framework is value that is whether the firm is able to add value by exploiting the opportunities. The resources which creates value to the organization is called the valuable resources of the organization and these resources contributes to give the firm the long term competitive advantage. On the other hand, the resources which do not add value to the organization is called the invaluable resources and they leads to the firm to competitive disadvantage. It is important to review the valuable resources of the organization (Chapman, 2012). Rare: The second aspect of the VRIO framework is rare resources. Rare resources refers to the resources which can only be obtained by the one company or for a very few companies. These resources can give any organization the necessary long term competitive advantage (Grnig Khn, 2015). On the contrary, the resources which can be acquired by a lot of companies can lead to long term competitive parity. However, the companies should, not ignore the common resources which have comparative parity, as they are valuable for the companies. The companies should take great care of the rare resources as they are the valuable resources of the company. Costly to Imitate: The third factor in the VRIO framework is imitation. As per this model, it is costly to imitate the rare product of a firm of the company do not have the access to that particular resource. It is easy for the firm that has rare resources to achieve the long term competitive advantage (Knott, 2015). There are few types of resources that are rare to imitate like the resources that were created due to any historical events; the resources that were created due to the cultural and interpersonal relationships of the company and others. Organized to Capture Value: The last aspect of VRIO framework is to organize the resources. The resources are not of any work if the company does not organize to capture the value. It is the responsibility of the company to manage the process, system and policies in order to exploit the opportunities of the firm. The companies can gain long term competitive advantage if they can organize the valuable and rare resources of the company. These are the main four attributes of the VRIO framework (Albrecht et al., 2016). In case of the restaurant and bar industry, the mangers should apply the theory of VRIO in order to gain the necessary long term competitive advantage. In order to do so, the managers of restaurants and bars need to follow certain steps. They are discussed under: Step 1: In this step, the managers need to identify the valuable and rare resources of the restaurants and bars. Tangible assets like machinery, building, land and others can easily be obtained. However, intangible assets like goodwill, intellectual property and others are not easy to obtain. Hence the manager need to find out the activities which can lower the cost without decreasing the value of the customers; the activities which inverses the value of the product; the employees having high level of skills; the unique selling proposition of the restaurant and bar and many others. After that, it needs to be found that which resources are rare in the organization and the resources which are costly for other companies to imitate (Lin et al., 2012). Step 2: After the identification of the valuable, rare and costly to imitate resources, the managers of the restaurants and bars need to find out the ways by which they can exploit these resources to gain long term competitive advantage. The resources will be of no value if they are not exploited for the use of the company. Along with this, the mangers need to find out some more factors like whether the company has enough motivation and reward system, whether the culture of the organization support organizational innovation or not, whether the organization has the suitable structure to use the valuable and rare resources or not and many others (HUSSAIN Terziovski, 2016). Step 3: The very next step for the managers is to take initiatives in order to protect the valuable and rare resources. The first thing the managers of the restaurants and bars need to do is to make the management aware about the valuable and rare resources. After that, the managers need to suggest the management the ways by which the resources can be used to minimize the cost of the operations. Lastly, the managers need to think that how the resources can be made more rare and more costly to imitate (Mathur, Jugdev Shing Fung, 2013). Step 4: The last step for the managers is to review the resources on a daily basis as value of the resources are changed over a particular basis. The competitors will be trying to imitate the resources and for this reason, review on a regular basis is required (Mudambi Puck, 2016). Conclusion From the whole study so far, it can be observed that there are two theories that can help the managers of restaurants and bars to earn the long term competitive advantage. They are Porters Five Forces Model and VRIO Framework. As per Porters Five Forces Model, there are five major factors that can decide the competitiveness in a particular industry. As per Porters theory, the managers of restaurants and bars need to make an effective strategy to get competitive edge. They must set a competitive price, must establish strong distribution channels, should maintain a cordial relationship with the customers and should provide better services to the customers in order to get the long term competitive advantage. Another important theory for competition is the VRIO Framework. As per this framework, there are some valuable, rare and costly to imitate resources in the organization. In order to get the long term competitive advantage, the managers of bars and restaurants first need to identify the valuable, rare and costly to imitate resources and then they need to use them to get increase the productivity of the organization. After that, these valuable and rare resources need to be reviewed on a regular basis. On the basis of the whole study, it can be concluded that the managers of bars and restaurants needs to assess Porters Five Forces Model and VRIO Framework to formulate strategies in order to get the long term competitive advantage. References Ahern, K. R. (2012). Bargaining power and industry dependence in mergers.Journal of Financial Economics,103(3), 530-550. Akhter, S., Rahman, N., Rahman, M. N. (2014). Competitive Strategies in the Computer Industry.International Journal of Technology Diffusion (IJTD),5(1), 73-88. Albrecht, C., Albrecht, C., Holland, D., Holland, D., Peters, M., Peters, M. (2016). Strategic revenue analysis.Strategic Direction,32(7), 32-34. Barney and Hesterly. (2006). The VRIO Framework: An Overview Chapman, R. J. (2012). Appendix 9: VRIO Analysis.Simple Tools and Techniques for Enterprise Risk Management, Second Edition, 587-588. Dobbs, M. (2014). Guidelines for applying Porter's five forces framework: a set of industry analysis templates.Competitiveness Review,24(1), 32-45. Fabbri, D., Klapper, L. (2015). Bargaining power and trade credit.Journal of Corporate Finance.(forthcoming). Grnig, R., Khn, R. (2015). Analyzing the Competitive Positions. InThe Strategy Planning Process(pp. 187-206). Springer Berlin Heidelberg. Haucap, J., Heimeshoff, U., Klein, G. J., Rickert, D., Wey, C. (2013).Bargaining Power in Manufacturer-Retailer Relationships. Dsseldorf Institute for Competition Economics (DICE). Heimeshoff, U., Klein, G. J. (2013).Bargaining Power and Local Heroes. Dsseldorf Institute for Competition Economics (DICE). HUSSAIN, S., Terziovski, M. (2016). Intellectual Property Appropriation Strategy and its Impact on Innovation Performance.International Journal of Innovation Management,20(02), 1650016. Ivory, C. J. (2013). UCF Research Guides: Business Research--Industry Analysis: Porter's Five Forces. Knott, P. J. (2015). Does VRIO help managers evaluate a firms resources?.Management Decision,53(8), 1806-1822. Lin, C., Tsai, H. L., Wu, Y. J., Kiang, M. (2012). A fuzzy quantitative VRIO-based framework for evaluating organizational activities.Management Decision,50(8), 1396-1411. Magretta, J. (2013).Understanding Michael Porter: The essential guide to competition and strategy. Harvard business press. Mathur, G., Jugdev, K., Shing Fung, T. (2013). Project management assets and project management performance outcomes: Exploratory factor analysis.Management Research Review,36(2), 112-135. Mudambi, R., Puck, J. (2016). A Global Value Chain Analysis of the Regional StrategyPerspective.Journal of Management Studies. Porter, M. (2010). Porters Five Forces A model for industry analysis.Quick MBA. Retrieved from https://www. quickmba. com/strategy/porter. shtml. Porter, M. E., Heppelmann, J. E. (2014). How smart, connected products are transforming competition.Harvard Business Review,92(11), 64-88. Rachet, B. (2014). PESTEL analysis and Porters Five Forces For Innocent Drinks Company.Docs. school Publications. Rothaermel, F. T. (2015).Strategic management. McGraw-Hill. Smith, R. D. (2012).Strategic planning for public relations. Routledge. Tauman, Y., Weiss, Y., Zhao, C. (2015). Bargaining on the Sale of a New Innovation in the Presence of Potential Entry.