Value chain analysis and Competitive advantage in the food and beverage industry

Describe about the Hospitality Management for Competitive Business Environment.

In the present competitive business environment, organizations have to improvise several strategies in order to achieve sustainable growth and strategic objectives. Particularly in the food and beverage industry, effective utilization of the operational process and supply chain management process has become one of the important aspects for the organization. Organizations have to understand the needs and requirements of the customers to implement strategy that can actually help organization to gain competitive advantage in the market. Many studies have highlighted the fact that availability of high quality products and services in the food and beverage industry has created difficulties for the organizations in order to gain competitive advantage in the market (Van der Wagen & Goonetilleke, 2015). Furthermore, organizations dealing in the food and beverage industry focus towards the expansion of businesses worldwide in order to enhance the revenue at the new level. Therefore, it enhances the difficulty level for the organizations to gain competitive advantage in the market. On the other hand, value chain analysis reflects a strategic tool that helps organizations to analyze internal activities in an effective manner. In this report, the focus will be on a Sydney based restaurants that has able to fare amount of share in the Australian food and beverage industry. The report will conduct an in-depth value chain analysis of the Sydney base food and beverage organizations. The report will also focus on several factors of the Australian food and beverage market in order to identify the best possible way for the Sydney based dining restaurants to gain competitive advantage in the market.

As per the article by Mok, Sparks & Kadampully (2013) sustainability and growth of an organization in a specific industry depends on prime two factors. Firstly, the focus will be on the development of supply chain management in food and beverage industry to gain competitive advantage in the market. Secondly, the organization will have to focus on the sustaining its position in the market. As mentioned by Davis et al. (2013) supply chain management and competitive advantage is proportionately related to each other. Thus, all the organizations dealing in the food and beverages industry will have to focus on the areas in order to survive in this extremely competitive market. The competitive advantage of the organizations in the food and beverage industry is heavily depended on the expected values that are derived from the services and products. As highlighted by Brotherton (2012) food and beverages organizations are focusing on two possible factors namely low-cost advantage and differentiation advantage. It has been analyzed that when customers are able to evaluate the superiority of the services or products, they will pay higher price for it. On the other hand, low-cost advantage describes the total amount of cost undercut of the organization for the customers. Many studies have highlighted that organizations will have to analyze the two pricing strategies in order to evaluate the best possible strategy for the organization.

Advantages of low-cost and differentiation strategy

Advantages of low-cost and differentiation strategy:

The food and beverage organizations have to pay attention towards the utilization of proper supply chain management in order to gain competitive advantage in the market. It can be mentioned that the supply chain management include services and products differentiations so that it can able to attract customers in an appropriate way. The organization can able to gain competitive advantage when customers perceive that the provided products and services are unique in the market. For instance, if organization able to provide high quality product and services, it will definitely influence people to purchase food products from the organization (Patiar, 2016). Organizations will also have to include several factors for ensuring different advantages in the market (Harrington, Ottenbacher & Powell, 2014). The factors include availability, unique features, incurring fewer risks and superior quality products and services in order to attract customers to avail services from food and beverage industry. On the other hand, it is to be noted that at the time of implementing different strategies helps organizations to gain advantage in the marketing in a different way. The first way to enhance the price until the time it influence the current share of the market. On the other hand, low-cost advantage is enabling the two prime functionalities of the organization. The first functionality focuses on the maintenance of the reduced prices of the offered service and products (Robinson, Solnet & Breakey, 2014). Other functionalities focus on the match the prices so that it can able to create positive impact on the profitability of the organization. Many studies have identified that lot of organizations are not able to fulfill competitive advantage in the market. In this situation, majority of the restaurants gets confused in order to utilize low-cost differentiation and differentiation advantage strategy effectively in the market. As a result, it creates direct impact of the revenue level of the restaurants.

As mentioned by Sisson & Adams (2013) food and beverage industry signifies largest manufacturing sector in Australia. Many studies have highlighted the fact that competition in the food and beverage industry has increase at the rapid rate in Australia. As a result, most of the organizations have faced huge amount of difficulties in implementing strategies so that it can able to gain popularity in the market. It has been analyzed that around 47% of the total retail market is captured by the food and grocery sector. Therefore, total amount that is spend in the food and grocery sector is estimated around $90 billion (Lashley, 2015). It highlighted the kind of competition that organizations in Sydney is facing to sustain its position in the market. The prime food and beverage product in Sydney includes dairy, seafood, grains and wine. The sector also focuses towards providing different types of food products in order to develop effective channel in the market. Furthermore, organizations also focus on the maintenances of flexibility within the industry so that it can influence for the effective utilization of supply chain process. Furthermore, food and beverage industry has greater impact over the economical position of Australia. In addition, food and beverage industry also creates lot of job opportunity and investment opportunity that help to increase the competition level in the market.

Present market condition in the Sydney’s food and beverage industry

As mentioned by Ogle, Ogle & Williams (2014) Sydney’s food and beverage industry is extremely dynamic and also diversified towards the needs of the customers. In fact, different ranges of food products in the Sydney market also highlighted the ethnicity and cultural diversity of the country. It is also have to be mentioned that Australian food products are influenced by the European, Asian and Eastern flavors. Moreover, all the food and beverages organizations in Sydney are also focusing towards providing superior ambience to the visitors so that they can increase the satisfaction level of the customers. For instance, Tang Hui Restaurant has focuses on to provide a diverse range of impressive ambience and foods in order to gain competitive advantage in the market. The restaurant is developed in such a way so that people can feel relax and comfortable with the families (Van der Wagen & Goonetilleke, 2015). Furthermore, the organization also focuses on providing clean and healthy atmosphere so that people can able to enjoy at their fullest. On the other hand, another popular Sydney base restaurant namely The Dining Room focuses on the maintenance of safety standards in order to gain competitive advantage in the market. In fact, the organization tries to invest more in the supply chain process so that people can get the products at the highest quality. The organization also considers the impact of climate change impact on the taste and preferences of the people. Therefore, it always tries to provide innovative food products to gain competitive advantage in the market.

It can be assessed that number of bars and restaurants in Australia has grown in a rapid rate over the past few years. For that reason, restaurants have tried to add value to their provided products and services in order to gain competitive advantage in the market. For instance, The Cuban Place has focuses towards the maintenance of superior quality ambience in order to attract people from all across the world. Moreover, “YAYOI Japanese Teishoku Restaurant” also is situated in the middle of the city (Köseoglu, Sehitoglu & Craft, 2015). Therefore, it helps people to visit the restaurants in a much more frequent manner. The effective utilization of products and services has provided “YAYOI Japanese Teishoku Restaurant” the opportunity to gain more popularity in the market. In fact, it also has provided organization the opportunity to market their products in an appropriate way.

The high quality food, commendable services and unique ambience settings in the Sydney restaurants are emerged as the prime factors that can help to gain competitive advantage in the market. Furthermore, the restaurants have tried to implement the assessment process regarding the needs of the customers so that it can able to utilize supply chain process in an effective way. Thus, maintaining the unique value of the products and services helped organizations to maintain its position in the competitive market. Furthermore, many studies have highlighted the fact that Australian foods and beverage industry is focusing towards the utilization of advance tools and technology so that it can able to fulfill the needs of the customers in an effective way (Pirani & Arafat, 2014). Therefore, it has influenced the increasing competition rate in the food and beverage industry in the Australian market. Furthermore, Australian government is also focused towards the implementation of several rules and regulations so that it can provide assistance for the new entrants in the food and beverage market (Pizam, Okumus & Hutchinson, 2013). Thus, it highlights the fact that organizations dealing in the food and beverage industry are provided with the extensive opportunities so that they can able to sustain its position in the market. Now, it is obvious that all the rules and regulations are applicable for the bars and restaurants as well. Thus, it highlights the fact that all the restaurants and bars are focused towards providing additional value to the customers so that it can help to increase the level of competitive advantage in the market.

As per the article by Wang et al. (2013), value chain analysis is extremely important to gain competitive advantage in the market. Porter’s value chain analysis helps organizations to include all the factors that can create positive impact on the revenue level of the organization. Now, The Dining Room is focused towards maintaining all the activities that can provide additional value to the organization. For instance, The Dining Room has initiated effective inbound and outbound logistics operation in order to get competitive advantage in the market. Furthermore, The Dining Room is focused towards effective utilization of internet to implement effective marketing strategy for the organization. The value chain analysis also focuses towards the effective utilization of location to enhance the popularity in the competitive Sydney market. Thus, marketing activities of The Dining Room will include the effective utilization of infrastructure to gain competitive advantage in the market.  The Dining Room also focuses on the procurement process to gain cost advantage in the competitive market.

Figure 1: Porter’s value chain analysis

(Source: Arendt, Paez & Strohbehn, 2013)

As opined by Ryan (2015) menu engineering describes the study of maximizing popularity and profitability of several items in the food and beverage industry. Many studies have mentioned, “Menu engineering is not a random concept”. Menu engineering concept includes the following four steps:

Costing of the menu:

Costing of the menu describes the process of calculating the expected cost of different ingredients that is required to prepare a particular item. This step also represents the primary step of the menu engineering process (Arendt, Paez & Strohbehn, 2013). Studies have mentioned that organizations cannot skip this step, as it can create direct impact on the profit level of the organization. For instance, Palace Chinese Restaurant, specific personnel are recruited to handle the costing of the menu. The selected personnel possess in-depth knowledge regarding the cost of each ingredient. This step helps organizations to evaluate the kind of profit they can expect at a particular week or season.       

Categorize menu items according to the popularity and profit level:

The process of differentiating each item helps organization to differentiate the entire menu into several sections and categories. Different sections of the menu items include Drinks, Desserts, Entrees and Appetizers. Moreover, organizations can also divide categories in several sections (Al Yousuf, Taylor & Taylor, 2015). For instance, categories like entrees can be differentiate in the sections like meat entrees, vegetarian entrees and seafood entrees (Wood, 2013). As a result, it helps organizations or restaurants to develop menu in a sequential manner.

Design of the menu:

Design of the menu describes the process of highlighting the prime items that organizations want to sale in an increasing manner. As per the article by Wang et al. (2013), organizations will have to assess its customer base at the time of developing design for the menu. For instance, organizations will have to identify the items that customers want the most so that it can able to highlight the item in an effective way. Therefore, it is necessary for the organizations to place the most profitable item at that place (Boella & Goss-Turner, 2013). Restaurants also have to utilize evocative texts at the time of explaining different menu to the customers so that it can able to gain competitive advantage in the market.

Testing of the menu:

In this step, restaurants will have to analyze the effectiveness of the menu in the development of the businesses. It will help restaurants to identify the best possible layout to attract customers in an effective way. It has been identified that all the larger food and beverages organizations utilize menu-engineering technique for enhancing the profit level of the organization (Yang & Mattila, 2016). Therefore, it also helps restaurants to minimize the waste level, which will create positive impact on the profit level of the organization.

Conclusion:

The report has highlighted the significance of value chain analysis and competitive advantage in the food and beverage industry in Australia. The report has highlighted the fact that several restaurants in the Sydney have able to utilize value chain analysis in an effective way in order to gain competitive advantage in the market. Furthermore, the report has highlighted the fact that Australian food and beverages industry is getting extremely competitive in the past few years. Therefore, it has become necessary for the restaurants in Sydney to implement effective strategies in order to gain competitive advantage in the market. Moreover, the report also highlighted the fact that kind of impact that effective utilization of menu engineering technique can have on the profit level of the organization. Thus, it can be mentioned that restaurants in Sydney will have to focus on all the factors in order to gain competitive advantage in the market.

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