Competition is a key setback for Massarella Catering Group since it has affected its revenue level and the company’s market share. The corporation has managed to develop its operations by opening new restaurants in different areas of the country. The paper examines competition issue in the industry to determine ways the company can deal with the challenge to ensure growth and profitability. Tourism is core to the success of the business since the company depends on tourist to offer its services. Technological changes have shifted the business activities of the organisation in the sector forcing them to create new technology that will aid the business to increase its profits. The management has focused on brand and product development to ensure that the services provided meet the needs of the market. Implementation of the recommendation will enable the company to regain market control hence improving stock turnover ratio and increasing its revenue. Furthermore, the company will grow its market share by executing the proposed competition strategy.
Table of Contents
Massarella Catering group offers hospitality services in UK market. The business is family owned which started in 1864. It began its operations by providing ice cream to the market and late grew to over 120 restaurants and cafés. The company is over 2000 employees. The firm has opened its restaurants in retail stores, garden centers, departmental stores and shopping centres to capture a wide market. The goal of the corporation has been to develop brands that meet the retail requirements of the market. The vision of the company is to enhance clients experience and ensure maximum profits. The firm focuses on developing a great brand name by providing quality services to clients (Massarella Catering Group, 2017). To capture a wide market, the firm has developed a wide brand portfolio.
The company has experienced some business challenges in the market leading to reduced profit in the year 2015. Massarella ice cream sale level has reduced due to seasonality of the product and raising competition. In addition, the rate of stock turnover has reduced due to high competition in the market. The final issue affecting the company is increased the cost of operation, which affects the pricing of its products in the market. Ice cream market is affectd by high competition from different firms offering similar product (Aken, Berends, & Bij, 2012). The growth of technology has increased competition level since consumers are more informed about the services being offered and the different prices for similar services (Zhou, 2003). This has increased business competition at a global level since technology development has enabled companies in the industry to connect to clients in different areas (Knowles, Diamantis, & El-Mourhabi, 2004). The changing consumer expectation in the hospitality sector affects the business activity since companies have to change their products and services to meet the changing demand (Anderson & Chartered Institute of Personnel and Development, 2004).
Major hotels in the country have merged to gain a competitive edge and ensure they control the huge market share. This made it difficult for new business to survive since they cannot offer similar services at the same price as that offered by large companies (Mullins & Dossor, 2013). Place of destination plays a major role in competition since the tourists have decided where they will visit and during which period (Harorimana, 2010). Hospitality companies can influence the decision of the tourist by providing information relating to attractive locations near the business and why clients should come and visit the area (Baum, 2006). Technology has helped in this approach since companies can offer information through their websites hence enabling the consumer to make informed decisions. Companies have little control over the choice of a tourist destination. The customer has to decide if he or she is attracted to the sites and if the cost is worth the experience (Knowles, Diamantis, & El-Mourhabi, 2004). If the destination is unique and famous, hospitality businesses benefit from it hence ensuring growth.
Positioning is a key factor is gaining a competitive strategy since it determines the level of access of the business to locals. A firm must identify a favourable physical location that will enable it to capture its target market (Miller, 2012). Location of the firm is influenced by infrastructure, population, target market, and natural sites available (Probert, 1997). Restaurants are opened in areas where there is high population density to provide a market for the products and services offered. In addition, the area must have adequate infrastructure for easy access to business by customers (Enz, 2010). For businesses that focus on a specific market segment, it must identify the potential market for its services before making an investment decision. Competition affects the rate of stock turnover hence reducing the revenue made from operating the business (Lalkaka, 2006).
It is indispensable for executives to understand the concept of strategy and why it essential in business. The strategy should entail both long-term and short-term objective and ways they will be attained by the company (Nyheim, 2014). They provide direction to all the stakeholders of the company since they offer the steps to be undertaken to achieve the set goal. To develop a competitive strategy, organizations must undertake a competitors’ analysis to determine the strategy their using, strength, and weaknesses (Harorimana, 2010). This helps the management to determine what they ought to do to capitalize on the identified weaknesses. That said, competitors’ analysis helps the organization to determine the services needed in the market but are yet to be met by their competitors (Kamel, 2003). This provides a business opportunity, which can be utilized by providing the services needed. Strategy formulation and implementation help in setting a sense of direction in the company (Knowles, Diamantis, & El-Mourhabi, 2004). This should include what the company is offering, what need is being satisfied, and ways the services or goods will create utility for the customers.
Customers in the hospitality industry have varying tastes and preferences, which must be met by business in the sector. The differing taste and preference enable a company to develop a wide range of product and services that will enable the consumers to solve their needs. This can be achieved by undertaking market research and development (Enz, 2010). Organisations have to allocate adequate resources for the research department to enable them to predict future demand for the customers and ways they can develop the services and products to meet the identified demands (King & Anderson, 2001). The hospitality sector is heavily affected by the changing taste of the consumers. Furthermore, the companies have to deal with the issue of cultural different of customers, which affects their service demand. For instance, different cultures have their unique diets, which they prefer. These forces the company to determine which diet to offer based on the target market and the demand for the ice cream (Harorimana, 2010). The company has to keep watch of the emerging trends the industry and market to determine how they affect the company and ways the firm may benefit. For instance, the company ice cream product demand is affected by seasonal changes. Although most adults consume ice cream, their consumption is determined the season in the country (Knowles, Diamantis, & El-Mourhabi, 2004). During the warm months, the sales level of ice cream increases since there is need to consume a cold product.
The high rate of competition affects the prices of the ice cream in the market and the profit margin since companies want to gain control by reducing their ice cream prices. Price change affects the level of demand of the consumers are price sensitive (Baker & Doran, 2007). This means that the product will have less demand if its price is higher than other substitutes. Hotels are affected price changes by competitors since they affect the customer’s purchasing decision (Kaufman, Lashley & Schreier, 2009). When setting the market price of a product or service, the managers have to determine the prices of similar services and the impact of price changes in the market (Kangas, 2003). Operation cost also affects the pricing of services in the market. When the operation cost is high due to human and capital resources needed to provide and produce the service or goods to the market, companies are forced to sell their products at a higher price. Businesses operate to create value for the shareholders by providing returns that will satisfy the shareholders (Knowles, Diamantis, & El-Mourhabi, 2004). This means that the company must sell its products at a price that will enable it to gain profit.
Brand strength and company’s public image affects the level of sales of specified service in the market. Brand recognition plays a key role in determining the rate of stock turnover. This is because the consumer relates more with a brand that has already been tested and provides the needed utility for the clients (Harorimana, 2010). Hospitality companies have developed premier and distinctive services that enable them to gain a competitive edge by distinguishing their product. However, it has become difficult for enterprises to scale the businesses due to competition (In Goksoy, 2016). The company‘s public enables it to gain a good reputation in the market hence affecting the purchasing decision of the clients. The consumers can relate to the company that offers quality services in the market and they meet their expectations (Enz, 2010). For instance, providing food or drinks based on the consumers’ needs will encourage them to purchase again in the company.
The customers taste changes has affected Masserella Catering Group since its ice cream demand is seasonal. Ice cream is mostly purchased during the warm season hence affecting stock turnover during the cold season. The company also faces high competition from other major hotels such as Lime Wood and Ampersand Hotel. Competition affects the profit made by the company from the sale of ice cream since it reduces its market share. The family business is forced to deal with other emerging restaurants in the UK, which offer similar services hence forcing the company to reduce its prices. Despite opening more than 120 cafes and restaurants, the firm is unable to control the market. Some of the new locations are expensive to run since they make little sales. The challenge for the company is that other major companies such as Costa and Starbucks offer a wide range of products and services, which encourage customers to purchase from them since they get all what they need in one location.
The location of Massarella cafes and restaurants enable them to attract more customers since they are located urban areas, which have a high population. Some of the cafes are in gardens to target customers who are in their leisure activities. Despite its strategic location the firm is affected by changing seasonal demand of ice cream, which can increase competition and increase customer’s education. The firm has integrated an elaborate website that provides customers with information about the company, service, and products offered, pricing, and any changes in the service delivery. The business is has decided to go back to ice cream market to increase its productivity in the market. However, the company is faced with increasing operation cost due to the cost of raw material and human resource factor. This has forced the company to retrench some of its employees to reduce the cost of labour hence increasing the profit margin. However, despite the retrenchment process, the company is still experiencing high operation cost (Yaeger & Sorensen, 2009).
The main strength of the company is that it offers quality products and has a positive public image in the market. In addition, the organization has an adequate budget to implement changes and enrol a new investment plan. Massarella controls a huge market share in the market hence enabling it to be less sensitive to price changes by other firms. However, the growth of technology and its competitors threatens the market share enjoyed by the company hence the need to develop measures that will enable the company to retain its customers (Rothwell, Kazanas & Rothwell, 2003).
Competition problem faced by the company in offering ice cream can be solved by determining the appropriate competitive strategy to implement. The company may consider changing its pricing policy to enable it to sell premium services at a high price while the ordinary products and services are offered at competitive price (Harigopal, 2006). To gain more market share and retain its customers the company can use focus, differentiation, or low-cost leadership strategy.
Differentiation approach entails distinguishing ice cream offered by the company on the basis of their attributes such as packaging. Differentiation helps the firm to differentiate its products from other goods in the market due to their unique features (Kavoossi, 2000). This can be achieved by analyzing consumer behaviour to determine ways certain changes such as design affects their purchasing decision (Webster, 2000). Differentiation creates uniqueness and ensures customers are satisfied with the products and services offered (Sims, 2007). The firm can differentiate its cafes by providing food and beverages with unique taste or packaging designs (Watkins, 1998). The approach should be used when if the cost of differentiation is low or if the clients are ready to pay extra for premium service. If the differentiation cost is high, the company will be forced to increase its market prices of its services and products hence affecting demand level (Information Resources Management Association & Khosrow-Pour, 2003).
The company can also implement low-cost leadership by analysing its high operation cost to determine what activity is unnecessary for the delivery of ice cream to customers (Price, 2011). The firm ought to lower the cost of production by examining its source of raw material to determine if the cost can be reduced (Floyd, 1997). In addition, the HR needs to undertake human resource assessment to determine if the number of employees needed by the company and the reward to be provided to employees without straining the cost of production (Hinkin, 2005). Cost reduction will enable the company to reduce its market price for products without affecting the profit margins. The aim is to provide the services at a lesser cost compared to the competitors (Homann, Koslowski & Lütge, 2007). The management should focus on monitoring cost drivers to determine areas that require a change to reduce variable cost. The firm should consider economies of scale as an approach to reduce cost since production in large volume reduces cost (Potts, 2007). The management also needs to analyse the experience curve since experience in an activity helps in cost reduction since the firm is able to develop new production technique through innovation (Knowles, Diamantis, & El-Mourhabi, 2004). Resource sharing for similar activities and outsourcing activities requiring specialists who are expensive to higher will also help the company in its efforts to reduce the cost of operation (In Uhl & In Gollenia, 2014).
Feasibility and sustainability of cost leadership strategy should enable the management to determine of it can implement the strategy. Managers have to make daily operation decisions affecting the company expenditure. The firm management should ensure that the decision is aimed at reducing the cost of operation and outperforming its competitors (Carnall & By, 2014). Massarella management ought to ensure full capacity utilization of all the resources available to avoid wastage wish is expensive for the company. The firm needs to change its value chain to enable it to use direct marketing approach to reduce the product cost (Day & Wharton School, 2004). Marketing is a major contributor to increased production cost. This can be solved by using new technology to market the organisation’s product. The company can also re-engineer its service delivery model to eliminate activities with less value (Sturman, Corgel, Verma & Cornell University, 2011). To reduce on fixed cost such as rent, the company should ensure that the rent expenses do not exceed a specific amount by relocating to a new location where rent cost is low (Patten, 2007).
Focus approach entails concentrating on a small market segment. This is achieved by undertaking a market assessment to determine market segment they can focus on (Deckop, 2006). The management should determine the services and products with high returns for the company and focus on providing them to the market (Wood & Brotherton, 2008). Focusing enables, the company reduces its expenditure by eliminating other activities (Cummings, 2008). In addition, it enables the firm to develop goods or services that are specific to the consumer satisfaction.
The firm needs to invest more in research and development to enable it to forecast possible changes in technology and consumers’ preference. This will enable Massarella to provide products that reflect the changing consumer expectation. Technology research will help the firm in determining how its competitors are using technology and possible usage of technology to improve service delivery (Dalay, 2009). In addition, the company will predict possible future technological growth hence enabling it to determine what should be changed in the company. The research will enable the company to develop quality services and goods, which will improve its public image (Cory & Slater, 2003).
Evaluation of the Solution
To determine the suitability of the solution, one can examine each solution by checking the suitability, feasibility, and acceptability. To determine the plans suitability the management should first analyse all the cost incurred by the company in ice cream production to determine if they can be reduced and develops a plan to reduce variable cost (Enz, 2010).If the strategy is implemented as planned, the company will experience growth in sales of ice cream and market share. In addition, the firm will increase its revenue hence solving the issue of reduced profit in the last five years (Sengupta, 2006). The low-cost strategy will enable the company to compete successfully with other firms offering ice cream hence gaining a competitive edge (Chon & Maier, 2010). Furthermore, the management will reduce the budget need for operating the business hence enabling it to invest in other activities.
The management should focus on low-cost production since it eliminates the problems of low-stock turnover rate, reduced profit, and the high cost of production. The management should be actively involved in cost reduction efforts to ensure that the operation decision made do not affect the strategy implementation success (Knowles, Diamantis, & El-Mourhabi, 2004). However, the solution may be ineffective if most of the expenses incurred are fixed. It is difficult to scale down the cost service delivery when the expenses are fixed (Vogelsang, 2013). Furthermore, eliminating some of the activities in the production process may affect the quality of the service or product hence affecting the brand image (Blazey, 2008). The plan is suitable compared to other solutions since it does not involve extra cost hence making it easy to implement. However, the employees may reject the change if it is evident that they will lose their jobs (Cammett, 2007). Lack of corporation from employees may affect their productivity hence making it difficult to utilize all the resources effectively.
The business solution exhibition was an exciting experience for all the group’s members as we attracted with different people. The questions asked related to the business solution provided for the company. This enables us to discuss the implementation process and possible limitation of the suggested solutions to the business problem. They platform was beneficial to the group since we learned more about the need for strategy, ways of developing an effective strategy, and implementation process. The visiting fellows allocated to our group were very interactive, which enabled as to share more on organization management and solution development. Most of the question related to problem identification and the process of selecting the appropriate solution. In addition, there were discussions relating to the process of evaluating the success of a solution after implementation. We also had a heated debate on the role of management in change implementations. The visiting fellows wanted to understand more on the influence of managers in strategy implementation success. We were able to share our opinion on this issue and provide a theoretical explanation on the topic.
During the expedition, the visiting group wanted to understand more on the hospitality industry and ways technology has affected the sector. Furthermore, they wanted answers on competition environment of the sector. The discussion did not end without some differing arguments where some argued that it is difficult to control competition since their no limiting factor for new entrants. However, the group held that established firms have a better experience and can lower their prices to discourage new entrants. Us time progressed some of the visiting fellows lost focus on the topic where they began asking questions unrelated to the topic. However, the group leader was quick to identify such occasions and reminding them of the need for being objective in the discussion.
The discussion was fruitful since the visitors brought new insight on other possible solution where we discussed how they could be used to solve the business problem. We later compared them with what we had proposed to determine which solutions were effective in dealing with the business challenge. Each group member was tasked with explaining a specific section of the report to ensure that all were involved in the process. We amazed by the level of understanding the visitors had on the hospitality industry due to the questioned they asked and the suggested they brought up for consideration. We spent hours discussing the report where we analysed each solution to determine what is the company needs to implement it and ensure that it gain a competitive edge. We also discussed the issue of changing consumers’ needs in the hospitality industry and ways companies are dealing with the issue. The experience enabled me to appreciate the need for brainstorming when developing a solution for businesses since it enables us toanalyse different aspects of the business. In addition, the business exhibition enabled the group to understand the importance of teamwork since we were able to answer the questioned raised since we acted as a group.