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Hospitality Strategy Design and Execution Seminar Case Study 1 Situational Analysis (1 Page)This is a synopsis of the case. Briefly summarize the case in your own words and evaluate the internal and external issues that are being faced.SWOT Analysis Construct a 4 table SWOT quadrant and perform a SWOT analysis.SWOT items should be specific with have quantitative support.Problem Statement What are the issues the product/service are facing? Keep it brief but challenge yourself to be concise. This should be written as a statement not a questionDevelopment of Strategies (2 pages)Use the Types of Strategies document and Identify (3) three strategies.These strategies should be developed based on the information from the situational and SWOT analysis.Identify the type of strategy from the document and explain the specific strategy you would pursueRecommendations (1 to 2 pages)Evaluate each strategy and chose the one you feel would be best. Discuss why this strategy would succeed, identify internal or external issues that would be a challenge in implementing this strategy, and discuss consequences of the strategy failing. FormattingDouble space, Times New Roman Font (size 12) hosp4060_case_study_guidelines__1_.docx hosp4060_types_of_strategies.docx fine_dining.pdf _hbr_tools_swot_guide.pdf Unformatted Attachment Preview HOS4060 Hospitality Strategy Design and Execution Seminar Case Study 1 1. Situational Analysis (1 Page) a. This is a synopsis of the case. Briefly summarize the case in your own words and evaluate the internal and external issues that are being faced. 2. SWOT Analysis a. Construct a 4 table SWOT quadrant and perform a SWOT analysis. SWOT items should be specific with have quantitative support. 3. Problem Statement a. What are the issues the product/service are facing? Keep it brief but challenge yourself to be concise. This should be written as a statement not a question 4. Development of Strategies (2 pages) a. Use the Types of Strategies document and Identify (3) three strategies. These strategies should be developed based on the information from the situational and SWOT analysis. b. Identify the type of strategy from the document and explain the specific strategy you would pursue 5. Recommendations (1 to 2 pages) a. Evaluate each strategy and chose the one you feel would be best. Discuss why this strategy would succeed, identify internal or external issues that would be a challenge in implementing this strategy, and discuss consequences of the strategy failing. 6. Formatting a. Double space, Times New Roman Font (size 12) HOSP4060 HOSPITALITY STRATEGY DESIGN & EXECUTION SEMINAR Types of Strategies Integration Strategies 1. Forward Integration: Gaining ownership or increased control over distributers or retailers. Example: Budget-Rent-a-Car opening rental shops in Wal-Mart stores. Best Used When: a. When an organization’s present distributors are especially expensive b. When the availability of quality distributors is so limited as to offer a competitive advantage c. When present distributors or retailers have high profit margins 2. Backward Integration: Seeking ownership or increased control of a firm’s supplier. Example: Hotels, Inc. purchased a furniture producer. Best used when: a. When an organization’s present suppliers are especially expensive or unreliable b. When the number of suppliers is small and the number of competitors is large c. When an organization has both capital and human resources 3. Horizontal Integration: Seeking ownership or increased control over competitors. Example: Federated Department Stores, the parent of Macy’s and Bloomindales acquired May Department Stores. Best used when: a. When an organization can gain monopolistic characteristics in a particular area or region without being challenged by the federal government b. When an organization competes in a growing industry Intensive Strategies 4. Market Penetration: Seeking increased market share for present products or services in present markets through greater marketing efforts. Example: Coca-Cola spent millions to advertise new zero calorie drink called Coca-Cola zero Best used when: a. When current markets are not saturated with a particular product or service b. When the usage rate of present customers could be increased significantly 5. Market Development: Introducing present products or services into new geographic area. Example: Bank of Americas purchased a 9\% stake in China Construction Bank. This is their first big move into China. Best used when: a. When new channels of distribution are available that are reliable, inexpensive, and of good quality b. When an organization is very successful at what it does c. When new untapped or unsaturated markets exist 6. Product Development: Seeking increased sales by improving present products or developing new ones. Example: Advanced Medical Optics is using acquisition to obtain all medial aspects of eye care, from laser surgery to contacts. Best used when: a. When an organization has successful products that are in the maturity stage of the product life cycle b. When an organization competes in an industry characterized by rapid technological developments c. When major competitors offer better-quality products at comparable prices Diversification Strategies 7. Related Diversification: Adding new but unrelated products or services. Example: UPS acquired Overnight to diversify its packaging into the trucking business. Best used when: a. When an organization competes in a no-growth or a slow-growth industry b. When adding new, but related, products would significantly enhance the sales of current products 8. Unrelated Diversification: Adding new, unrelated products or services. Example: Tupperware Corp. has entered and is growing its skin and beauty business through BeautiControl. Best used when: a. When revenues derived from an organization’s current products would increase significantly by adding the new, unrelated products b. When an organization’s present channels of distribution can be used to market the new products to current customers Defensive Strategies 9. Retrenchment: Regrouping through cost and asset reduction to reverse declining sales and profits. Example: Viacom is selling noncore assets including its theme parks, publishing business, radio stations and movie theatres. Best used when: a. When an organization has a distinctive competence but has failed consistently to meet its goals b. When an organization is one of the weaker competitors in a given industry c. When an organization is plagued by inefficiency, low profitability, and poor employee morale 10. Divestiture: Selling a division or part of an organization. Example: Goodyear Tire and Rubber sold its North American farm-tire business. Best used when: a. When an organization has pursued a retrenchment strategy and failed to accomplish needed improvements. b. When a division needs more resources to be competitive than the company can provide. c. When a large amount of cash is needed quickly and cannot be obtained reasonably from other sources. 11. Liquidation: Selling all of a company’s assets, in parts, for their tangible worth. Example: A123 Systems filed for bankruptcy and sold all its tangible assets to Johnson Controls. Best used when: a. When an organization has pursued both a retrenchment strategy and divesture strategy and neither has been successful. b. When an organizations only alternative is bankruptcy. c. When the stockholders of a firm can minimize their losses by selling the organizations assets. CASE SYNOPSIS Six months after opening her restaurant, Stacy Brokaw was experiencing problems. From an operational stand point things seemed to be going well. Her restaurant had been reviewed favorably by a regional magazine and she was attracting a small but regular group of customers. On the other hand weekly sales were consistently 30\% below her forecasts and she had lost $45,000 during her first six months of operations. A survey conducted among current customers suggested that many would prefer a more family oriented environment. She also opened at a time when the US economy was going into a steep decline. Stacys dream had been to open a fine dining establishment in her home town. She had worked very hard to make this opportunity work, but now it seemed to be slipping through her fingers. At the end of the case Stacy is struggling with how to respond to this situation. INTRODUCTION Six months after opening her restaurant, Stacy Brokaw was feeling the pressure mounting. Weekly sales were consistently 30 percent below what she had forecasted while operating expenses were pretty much on target. The latest financial statements showed sales of $526 thousand and losses of over $45 thousand for the first six months of operation. This compares to her forecasted numbers of $1.5 million and a profit of approximately $97 thousand for the first year (see table 1). Clearly, things were not going as planned. Stacy had opened the restaurant with the idea of bringing fine dining to the small east Texas town of Jackson. On the positive side, the restaurant had attracted a small group of loyal diners. They seemed to enjoy the food and atmosphere and demonstrated their loyalty by coming to Fine Dining once or twice a week. The bar area had also attracted a loyal group of regulars. People commented that it was nice to have an upscale bar that was both quiet and smoke free to carry on conversations. At the time of this case only about 20 percent of the restaurants in town were smoke free establishments. Another plus was that Fine Dining had been reviewed favorably by a Texas magazine. Since that time she noticed an increase in the number of out of town diners, especially on weekends. Stacy felt she was clearly doing something right, but she was also hearing some negative feedback. She conducted a survey and found that many customers were turned off by the formality of the restaurant. They didnt find it to be a very good atmosphere for families and felt that it was more appropriate for a special night out. Parents of young children found the restaurant to be a particularly bad choice. Both the food and the atmosphere were inappropriate for young children. Of course this was true, but the fact that people were complaining about it forced Stacy to consider whether fine dining was a good choice for Jackson. Many people seemed to want a different type of restaurant. Another problem was that her timing seemed to have been really bad. The restaurant opened just as the economy started experiencing a downturn (December 2007). While Jackson was spared the worse of this downturn, most businesses that offered luxury goods and services were starting to experience a drop in sales. This did not bode well for a fine dining establishment. There was one thing that Stacy knew for sure. Fine Dining was not attracting enough diners to sustain its operations. She had worked very hard to make this opportunity work, but now it was slipping away. Things needed to change quickly if she was going to keep the doors open. The problem is that she had no clear idea of what to do. THE COMMUNITY Jackson has a population of about 33,000 with around 61,000 in the county. A regional state university with a student population of approximately 11,500 is also in the town and serves as its second largest employer. The largest employer is a chicken processing plant on the South side of town. There are several medium-sized manufacturing facilities in the area, as well as a mediumsized medical community. There are about 11,600 people living in the county who are between the ages of 18 and 24. This group mostly consists of college students and constitutes a relatively large pool of labor for retailers in the area. The median annual household income in this county is $27,271. Also, only about 22 per cent of the 22,500 (4950) households in the county have incomes above $50,000 per year. This last number is relevant because this restaurant is positioned in the market as a fine dining experience, and it offers the atmosphere and service that goes with that position. Jackson is about 20 miles from Covington, a town that is slightly larger and wealthier. This contiguous countys median annual household income is about $5,000 more at $32,004. That county has about 25\% or 7350 households with $50,000 or more of income. Stacy included Covington when considering the viability of her restaurant and the two towns are probably in close enough proximity to be considered a single trading area for specialty products. The towns, considered together, are about one or one and a half hours driving time from any other larger town, so this trading area is very isolated and rural in nature. BACKGROUND Stacy Brokaw is a well know figure in Jackson. Her late husband was a former faculty member and president of the local university. After his untimely death, she opened up a bakery and cafe (Brokaws). Brokaws is a very popular and unique lunch spot in downtown Jackson. It is a very small operation that caters to a somewhat upscale clientele. The menu consists of light sandwiches, salads, and quiches and deserts consist of various pastries prepared in-house. Brokaws is frequently packed with diners and usually requires a reservation. Hours are limited to lunch only, and Stacy does a limited amount of catering on the weekends. Stacy also recently ran for and won a seat on the local City Council. The idea for opening Fine Dining came about when an upscale Mexican restaurant, La Castilla, went out of business. The restaurant was in a prime location. It was in an historic house located on nearly 3 acres of land on a main street near the university campus. The building was two stories with a total space of 10,000 square feet. The parking lot was built to hold 112 cars. The house had recently been thoroughly and very tastefully renovated. The lower level consisted of a number of rooms that could be closed off for private events and there was a wrap-around porch that had been closed in and overlooked a manicured lawn and large oak trees. The upper level contained the bar and restrooms. It was located across the street from a chain pharmacy and a small Cajun restaurant and next door to an empty restaurant building that recently went out of business. Stacy sensed there was an opportunity to open a fine dining establishment in Jackson and that this location was the perfect spot. It also helped that the property owners were desperate to find a new tenant and were willing to work out a below market lease agreement. The lease was turnkey, meaning that the equipment and fixtures were included. Due to the building having been recently renovated, all equipment and fixtures were in excellent condition and ready to use. The only equipment that needed updating was the computer system. POSITIONING There are four full service competitors in Jackson, but Fine Dinings menu, atmosphere, and service level gives it a very unique position. Of the competition, two offer specialized menus (Italian and Chinese), one has a mixed menu but is a step down in quality and service, and the fourth is a closed (members only) club at the local, full service hotel. Stacys strategy was to position Fine Dining as a step above the competition in terms of food quality, service, and atmosphere. In keeping with ambiance, prices were to be higher than the competition. Competition in Covington include an exclusive country club with its attendant golf course and restaurant. Of course, this is a members only establishment. There are also a few high-end chain restaurants that offer nice dining experiences, but are a step below that being offered at Fine Dining. The total planned sales of Fine Dining for the first year was to be from two sources. The sitdown restaurant receipts were expected to comprise about 70 to 75\% of sales, and catering was to provide the rest. Sales from catering is more profitable, usually, so this aspect of the restaurant was expected to yield from 35 to 40 \% of the profit. Catering consists of both private inside parties and outside event. According to Stacy, net profit for this type of business is about 5-7\% of sales. OPERATIONS Stacy hired four full time managers; a General Manager, an Assistant Manager, a bar/floor manager, and a catering manager. In order to try to assure high quality food preparation, three chefs were hired. The executive chef and the chef de cuisine were full time positions, and the pastry chef was part-time. All of the managers and chefs were salaried positions. The business plan also called for hiring from 24 to 25 servers which consisted of 2 to 3 head waiters, 2 cocktail waitresses, 4 to 5 bartenders, 2 bar backs, 6 service assistants (bussers), and 6 janitorial staff. The wait staff was to be paid a beginning salary of $2.15 per hour plus tips. A tip pool system was used to help reward bussers and others who do not usually receive tips directly from customers. The owner was very specific and insistent about some policies relative to the wait-staff and their appearance and behavior. The servers were to wear uniforms which reflected the image of a fine dining establishment. The servers must buy their shirts and aprons and the clothes had to be either solid black or dark blue. The shirts could be open at the neck because no ties were required. Any tattoos could not be visible to customers, so, usually, the shirts had to be long sleeved. Fine Dining is a totally non-smoking establishment, even in the bar area. Because of this, the employees are not permitted to smoke anywhere on the premises, especially while in uniform. They were told to not smoke even off premises while in the FD uniform. The penalty for being caught smoking while in uniform is immediate dismissal. As one can tell, these policies are to protect and enhance the image of the restaurant in this small town. There was a relatively high turnover rate among the kitchen workers and wait staff, but this was probably related mostly to hiring students from the local university. For the most part Stacy received positive feedback concerning the working environment. She was strict about following the rules, but treated her employees with respect. Several had mentioned that they appreciated working in an environment in which they were never yelled at or intimidated. There was one incident that involved her head chef and several workers on the wait-staff. After a particularly heated argument the chef quit and left abruptly. He asked to come back the next day, but Stacey refused because she thought it would set a poor precedent for the other employees. Until she found a replacement she had to step in personally and rely on the other chefs to work overtime. This was very disruptive, putting a strain on the kitchen staff till a replacement could be found. Despite this relatively minor incident, Stacy felt very good about the operations of the restaurant. The quality of the food seemed to be consistently good. She had not received any significant complaints about the service and the atmosphere was exactly as she had envisioned. She had received a few complaints about the menu selection, but this was from diners who expected a more family friendly atmosphere. There was not much selection for children, but that was by design. After all, her intention was to create a fine dining atmosphere and she felt she had done a very good job of doing just that. CONCLUSION Stacy had mixed feelings about her new restaurant. On the one hand she was proud of what she had created. Despite a few kinks, the restaurant was running pretty well. On the other hand, Fine Dining was simply not creating enough volume. The restaurant was losing substantial amounts of money and Stacy could not keep the doors opened much longer if things didnt pick up. The lack of customers may be an indication that the local competition was simply too tough. Perhaps she had failed to differentiate herself enough to attract business from customers who were loyal to their old favorites. On the other hand it might simply be due to the fact that the local market was not able to support a fine dining establishment such as hers. This thought was particularly depressing. If the problem was tough competition she could figure out ways to become more competitive. If the problem was demographics she had few options. Stacy was beginning to feel her dream slipping through her fingers. Whatever she did, Stacy knew she had to be careful. Restaurants are particularly vulnerable to customer perceptions. If she made a big splash in the form of a major change in strategy it would send a signal to the local market that there was a problem. If people perceive that a restaurant is in trouble financially they tend to stay away. Of course, this could set up a downward spiral from which there was no escape. Whatever she did needed to be fairly subtle and needed to happen quickly. HBR TOOLS SWOT ANALYSIS Introduction Whether you are at the helm of a start-up, run an established line of business, or manage a product portfolio, you’ll get the most out of a SWOT analysis if you go in with a particular business objective in mind. Your objective may be to: • Prepare for st ... Purchase answer to see full attachment