Importance of Competitive Advantage in the Hospitality Industry

The aim of the following report is to make a business report that will focus on making an in-depth evaluation of the strategies, which are utilized frequently by the restaurant and bar managers. In accordance with the aforementioned aim of the present report, the focus of the following report will be to identify the role or significance of competitive advantages in the hotel and hospitality sector. Thereafter, it will be necessary to identify the frequent strategies, which are applied by the restaurant as well as the bar managers in order to accomplish competitive advantages. Finally, by identifying and reviewing the issues with the application of competitive advantages’ strategies, the report will suggest some relevant and fruitful steps for mitigating the identified issues and earn competitive advantages more successfully.

Acquisition of competitive advantages in the hotel and hospital industry is significant as per the reason it helps the industry in pursuing a sustainable approach as well as corporate social responsibilities (Molina-Azorín et al., 2015). Most importantly, the authorities of hotel and hospitality industry for acquiring brand value, strengthening brand position and increase profit margin, apply varied strategies. Therefore, the present report will concentrate in understanding which strategies are used for accomplishing which particular organizational aspects and responsibilities. 

One of the fundamental roles of competitive advantage in the hotel and hospitality industry is to examine the economics of a business organization by concentrating on the particular organization’s ability to acquire excess returns on capital (Pereira-Moliner et al., 2015). At the same time, it is the role of the competitive advantages to link the business strategy essentially with the fundamental premise of finance as well as capital markets for a long period. It has been identified that without the help of competitive advantage, an organization cannot have an impressive extent of economic reasons to exist in the market. Therefore, it is understandable that the aspect of competitive advantage is a determining factor for the sustainable existence of a business organization.

In this context, it is essential to mention that competitive advantage is a particular activity, which helps an organization in creating a sustainable value over its chief competitors. According to Michael Porter’s definition of competitive advantages, business firms should acquire competitive advantage by three steps, which are cost leadership, differentiation and focus (Leonidou et al., 2013). With the help of competitive advantage through cost leadership, a business organization can successfully pursue a low cost operation for production, while a “non-price” attribute is successfully displayed by a hospitality organization through the strategy of differentiation. On the other hand, in order to narrow down product lines, geographic markets as well as buyer segments, it is essential to become “focused firm” by acquiring the focus approach of competitive advantages (Nieves et al., 2014). Therefore, the above information is indicative of the fact that competitive advantage is essential in acquiring revenue growth, in minimizing production cost and for increasing brand awareness.

Strategies for Gaining Competitive Advantages in Bar and Restaurant Industry

However, competitive advantage is also required for a hospitality organization for accomplishing a long-term marketing success. Competitive advantage makes the facet of profit to be secondary product and by perceiving profit as a benefit as well as an excess of returns over the existing expenditure, a hospitality organization gathers a long-term economic stability in the market (Mihalic & Buhalis, 2013). Here, it is essential to mention that competitive advantage requires being unique as well as sustainable yet relevant. Nevertheless, prior to examine which strategies are being used for gaining competitive advantages, it is essential to mention that core competency or competitive advantage serves as a collective learning within a business organization. It is a collective learning in terms of making coordination among varied organizational skills (Saeidi et al., 2015). At the same time, it is to keep in mind that without the help of core competencies, it is not possible for an organization to integrate multiple sections of technology.     

In the context of hospitality industry, it is consider that the sector is considered as a flexible sector, which provides abundance of opportunities to earn impressive revenue. Therefore, understandably in the highly-competitive hospitality industry, competitive advantage is required for staying at the front line and chiefly for having a potential brand personality.   

As it has been identified above, there are three main strategies, which are used by the business sectors in order to earn successive competitive advantages – cost advantages, differentiation and focus. It has been identified that specifically, in the restaurant industry, cost leadership, defensive strategies and alliances are applied mainly. It has been identified that most of the bar or restaurant authorities use the place and price to be their chief aspects for applying the strategies of competitive advantages. Most of the time, restaurant or bar owners use the following strategies to earn competitive edges –

• They use a location, which proves convenient for attracting their chosen segment of target market
• They provide customer specific customized service as a successful strategy of competitive advantage
• They provide varied other services for free of cost, like free wifi connection, fun rides and music or performance shows (He et al., 2013)

On the other hand, varied times restaurant managers provide free home delivery of foods through online service. However, in the contemporary era of online marketing and online business, free of cost home deliveries have become common. It has been identified that currently for the bar or restaurant managers, identifying as well as analyzing the strengths and weakness of the competitors has become a frequent strategy for the restaurant or bar managers of the contemporary era (Espino-Rodríguez & Lai, 2014). The particular strategy helps them in applying new and innovative ways of serving people that would be beyond any kind of imitation. Most of the time, the strategies are applied on the products and manufacturing styles. For example, bar managers apply different and innovative techniques in making cocktails, mocktasils and other sorts of drinks with varied products and quality alcohols.

VIVO Analysis as a Strategy to Increase Brand Loyalty

It has been identified at the same time that, restaurant owners prefer to include the VIVO analysis (Value in and value out) in terms of increasing their competitive edge. The aim behind doing so is to satisfy customer need as well as to increase brand loyalty. In terms of VIVO analysis, restaurant or bar owners first identify the consumer behavior and demand and thereafter continue to modify their services and food products. The particular assessment of customer demand is generally done in time of designing value proposition. The VIVO analysis therefore can be perceived as a quick analysis for deciding which of the proposed values should be considered with utmost priority, so that an impressive amount of brand loyalty. Precisely, brand loyalty is the expected value that the restaurant owners are desiring to impose upon the minds of the customers (David & David, 2016). Thus, the strategy of pursuing VIVO analysis can be considered as a tactic of giving right value to the customers and procuring same amount of value from the customers.   

Besides, various times restaurant managers prefer to make humble interaction with the customers as a strategic step for strengthening the aspect of brand loyalty. It has been found out that managers of bars like Bentley, Bar Americano and Donny’s prefer to change and modify their menus as well as the components of the drinks to satisfy their existing customers as well as to approach the new ones (Marchi et al., 2013). It is to mention in this respect, that there are several bar and restaurants, managers of which prefers to pursue competitive analysis along with market analysis on monthly or half-yearly basis in order to stay well-informed about the ongoing tactics of their competitor as well as about the dynamic behaviors of target market. The particular strategy works suitably for the restaurant and pubs in sharpening their individual core competencies. It has been also identified that following the transformational and transactional leadership style, restaurant and bar managers use the strategy of motivational leadership for encouraging their employees, so that they can give their complete effort (David & David, 2016). In such cases, it is to say that the organizational aspect of employee retention and performance management is utilized for increasing the competitive edge. For restaurants like McDonald and KFC efficiency of the employees is one of the core components (David & David, 2016).  

Most significantly, in the era of digitalization and information technology, managers of most of the pubs and restaurants prefer to utilize the information technology as a weapon for achieving and increasing the competitive advantages. Managers of restaurants and bars use the information technology for achieving some of the most significant factors of competitive advantages, like low cost leadership, product differentiation, concentration on market niche, maximizing intimacy with customer and supplier (Saeidi et al., 2015). With the help of information technology, restaurant and bar managers can successfully implement an efficient and effective customer response system. An efficient customer response system helps a restaurant manager in linking customer behavior with contribution, production and supply chains. At the same time, with the help of an efficient customer response system, bar and restaurant managers can even lower distribution as well as inventory causes (Espino-Rodríguez & Lai, 2014).

Motivational Leadership and Information Technology as Strategies for Competitive Advantage

On the other hand, information system helps in enabling new products, services and at the same time helps in bringing potential changes in the customer convenience in using the existing products. For example, “mass customization” is one of the most frequently used strategy that helps in offering individually customized services by using similar resource of production (He et al., 2013). Managers in five star pubs and restaurants mainly use the particular strategy. Most significantly, managers of pubs and restaurants use the information technology for acquiring a distinct market focus and thereafter serve the particular narrow target market. In the hospitality industry of the contemporary era, the aforementioned strategy has become a big success. With the help of the particular strategy, restaurant managers serve better to the target market than their competitors do.

Besides, with the help of information technology, the restaurant and pub managers successfully acquire the ability to analyze the data in order to acquire finely tuned marketing strategies. In this context, it is to mention that one of the accomplishing factors of competitive advantage is to gain an intimacy with the customers as well as with the suppliers. Varied restaurant and bar managers use information technology only for facilitate direct access from the suppliers directly to the production schedule (Marchi et al., 2013). Furthermore, by using information technology of restaurant managers can successfully let the suppliers to decide their timing of supplying materials to the restaurants. It has been understood that the aforementioned strategy is helping the restaurants and pubs in enhancing “switching costs”. At the same time, the particular strategy helps the managers making a strong relationship with the suppliers, which leads to increase the loyalty of the suppliers.

In this context, an example can be considered. The internationally reputed food chain McDonald’s competitive advantage is considered as their successive factor and through the organization’s cost leadership strategy; the organization enhances their core competency. Considering McDonald’s strategy for achieving competitive advantage, it can be that the organization has successfully followed Michael Porter’s indication about competitive advantages. According to Porter’s theoretical point of view, a restaurant’s competitive advantage means the firm’s positioning. McDonald uses the cost leadership strategy and thereby offers their food at a very affordable price, which their competitors cannot even think of. Hence, the organization uses the cost leadership strategy to keep the daily-based operational cost as low as possible. Along with the particular strategy, the organization keeps an attainable cooking procedure, which is easy to learn along with a supportive management system; understandably it belongs to one of their strategies for increasing competitive edge.    

One of the key priorities of business managers is to achieve competitive advantage in business as it promotes retention of excess returns on capital for longer period. The need to develop strategies to achieve competitive advantage in business has been realized due to its advantage of providing the route to long-term marketing success (Wagner & Hollenbeck, 2014). However, in a highly competitive industry like the restaurant industry, achieving and sustaining competitive advantage is a challenging task.  As there are range of options available to customers both in terms of cost and service quality in restaurant industry, beating other in the field is not an easy task. To achieve strategic advantage over other competitors, restaurateurs or hotel managers will have to come up with innovative ideas that gives added value to customers and effectively combines the skills of the team to achieves competitive advantage (Fraj, Matute, & Melero, 2015).. However, some specific challenges faced in achieving this include the following:

Demanding consumers- With the availability of innumerous choices in hospitality industry due to access to travel app and other hospitality apps, consumers get the advantage to instantly review performance of  a hotel and its service. On that basis, they decide in a second regarding their choice of hotel. This indicates the demand and bargaining power of consumer is high in this industry contributing to major challenges particularly for new entrants in the hospitality industry. After the huge generational shift and rise in expectation related to technology among youths, attracting and impressing guest is an exceptional achievement (Mauri & Minazzi, 2013).  However, this requires tedious task such as constantly innovating and providing unique experience to them. Therefore, the need to continuously think of new ways to deliver services halts usual business process and come in the way of achieving competitive advantage.

Balancing investment cost and revenues: As the hotel property, location and ambiences determines its appeal with the audience, creating one such restaurant means huge investment for restaurateurs. Even with exceptional service and ambience, lowering cost to generate revenues becomes a major challenge in the industry (Jones et al., 2016). Hence, lot of efforts and time may go in cutting non-room service cost as well as maintain desired revenue for hotel.

Impact of social media on achieving competitive advantage- Social media has become a boon for some group, however from business perspective it has brought new means of criticism too. Due to new revolution in communication process with the advent of social media, engagement with customers has transformed completely. Hotel owners and restaurateurs are constantly in threat to receive negative review and online criticism instantly from the digital world due to one poor experience of customers. The loss is huge due to this because not one but many new customers are lost in the process. This make the process of achieving competitive advantage a challenging task unless a strategic process is not present to overcome the online criticism (Xie, Zhang, & Zhang, 2014). Therefore, restaurateurs now require new communication skills to engage and attract consumers even before they visit their hotels. Both market-based approach and research based approach would be needed by the hotel managers to sustain competitive advantage.   

Conclusion

From the above report, it has been understood that most of the strategies of competitive advantage for most of the restaurant or bar managers are related to cost leadership. It has been also identified that motivational leadership is also a key strategy for increasing competitive advantage as it the strategy helps in retaining employees and keeping them dedicated. However, the report has also indicated that some of the crucial factors, which prevent an organization from having their desired competitive edge, are lack of balance between investment cost and revenues, harmful impact of social media and changing demands of the customers. Therefore, in order to mitigate the aforementioned issues, restaurant and bar managers can apply the following –

• Application of product differentiation strategy and adopt the strategy after estimating the investment cost
• To combat with the dynamic demands of the customers, communication with the audience should be increased through social media (David & David, 2016)
• Use the negative reviews for obtaining a positive outcome, for example judge the negative reviews and take measures initially and respond back

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