Strategic And Responsible Innovation Management In The Australian Restaurant Industry

Company Description

Discuss about the Strategic and Responsible Innovation Management.

Banaitja Restaurant is planning to open a Restaurant in Northern Australia with its decoration and themes entirely structured based on several historical events of Australia. This brand is new and thus they are preparing a business plan in order to understand the market of Australia so that they can prepare their organization accordingly. Banaitja Restaurant is attached with the most popular financing service provider organization of Australia named as Australian Mutual Provident Society (AMP Australia). However, the management of the restaurant knows it clearly that entering into the restaurant business of Australia is not an easy task as the industry is highly competitive with periodic overcapacity, low margins and low entry barriers. On the other hand, according to Piercy (2014), the amount of substitutes in the market is also quite high. This is the reason that the organization is implementing a unique idea as a competitive advantage in the industry. Not only that, the organization has also established a set of goals for themselves, which includes repeat business, offering healthier foods to the customers, location and right food in order to attract the potential customers.

The mission of Banaitja Restaurant is to serve fast hot or cold sandwiches with huge verities of salads with specific recipe focusing on Australian and Asian cuisines. According to Walker (2015), in Australia a large number of students belong from Asian countries such as India and China and none of the restaurants in the country offer Indian and Chinese foods and beverages. Therefore, the organization is planning to target this specific segment of the market. As mentioned by Fitzsimmons and Fitzsimmons (2013), there are several other challenges remain in the Australian market and this is the reason that the organization is conducting a complete marketing research to point out those issues and challenges as well as the benefits and advantages they will have.

Banaitja Restaurant is a North Australian based organization that is starting their new venture by opening their restaurant. The organization is connected with one of the most popular financing organization of Australia, which is AMP Australia. AMP Australia is helping Banaitja financially and helping to them to gain a superior position in the Australian Service Industry. The owner of the restaurant is north Australian citizen and that the reason they named their organization as Banaitja that means creator deity or God as per native beliefs. They have also decided to design the restaurants based on the well renowned historical events of Australia, China, India and other Asian countries.

New Business Idea

Australia is famous for its service organizations such as restaurants and hotels. All the hotels and restaurants are offering several types of foods and beverages based on the customer demand. However, Banaitja has come up with a new business idea by giving a cultural and historical tough in the restaurant. The design of the restaurant will be structured based on the history and culture of Australia and other countries such as India and China. The management of the restaurant will organize different places for different types of customers. For example, for an Australian customer the serving area will be different from an Asian customer. The organization is also planning to offer newspapers and magazines to the international customers based on their country. For example, an Indian customer will be able to have an Indian newspaper or magazine.

This diversity will also be applied on foods and beverages. Based on the country and culture the customers will be offered foods and beverages. However, the customers will also be free to order any food or beverage. The main attraction of the business will be different types of salads including Caesar Salad, Greek Salad, Watercress and Sesame Salad, Homemade Potato Salad, Italian Eggplant Salad and Maury Island Cranberry Arctic Salad.

(Source: E. Dobbs 2014)

Threat of New Entrants (Moderate)

A number of quick service restaurant chains such as McDonald’s, Burger King, Pizza Hut, KFC and Domino’s dominate the Australian restaurant industry. Those global brands are exceptionally valuable and have gained strong customer loyalty and recognition. The specialty of these brands is its consistent quality and service. According to Jayawardhana and Weerawardena (2014), McDonald’s is the leading restaurant brand in Australia that has adapted their marketing orientation to suit Australian cultures and social norms. This not only helps them to strengthen its brand but also helps them to avoid consumer disaffection. Therefore, it can be said that as a presence of some well-renowned brands, new entrants struggle to compete as their brands are unknown and advertising campaigns are expensive. Besides, the existing firms already have the resources to retaliate uncompromisingly via pricing promotions which stops the new players from entering the market (Al Shibly et al. 2015). However, Banaitja has a strong support of AMP finance which will allow them to deal with these issues.

Threat of Substitution (Moderate)

In Australia, threat for substitute is high for Banaitja as food can be purchased almost everywhere through numbers of online and offline foodservices. However, according to Rothaermel (2015), the expediency is the value-adding service component of the service that reduces the threat of substitutes in the Australian restaurant industry. Consumers can cook at their homes but this lacks the element of convenience that the people require nowadays. Although, there are a numbers of fast food restaurants in the Australian market the latest trend of the obesity has ensured that the current business idea of nutrias food will be highly profitable. Therefore, it can be stated that ready meals are substantial threat for Banaitja Restaurant.

Industry Attractiveness (Porter’s Five Forces)

Competitive Rivalry (Strong)

According to Thornton et al. (2016), McDonald’s and Burger king rules the burger segment in Australia and the rest of the market is fragmented with many global chains and independent operators such as Quay, Attica, Momofoku Seibo, Marque, Vue de Monde and Sepia. As mentioned by Ryu et al. (2012), the competition is mainly cost-based as the firms are regularly investing in their services in order to outnumber its competitors. On the other hand, exist cost is also low in the Australian restaurant industry and capacity can be increases easily through franchising. However, the biggest weapon for gaining a position in the Australian restaurant industry is branding which Banaitja does not have now.

Power of Buyers (Moderate)

The market competitiveness in Australian restaurant industry is enormously high that increases the buyer power. Besides, the customers are price sensitive with no switching cost among the providers. However, according to Ryu et al. (2012), the leading restaurant and fast food brands are trying to reduce the buyer power in Australia by offering a product range that will cater for the entire demographic segment rather than one specific segment. Besides the firms are also trying to implement high brand value and customer loyalty to reduce the buyers bargaining power. Therefore, it can be stated that Banaitja will face a moderate amount of buyer power when they will launch their business in the market.

Power of Suppliers (High)

According to Cavusgil et al. (2014), power of supplier is relatively high in Australian restaurant industry than any other industry. The bargaining power of suppliers is known as a reversal of the power of buyers. This force is also called as the market of inputs. The suppliers of raw materials, labor and technical services carry a moderate amount of influence on the organizations. The bargaining power of suppliers is considered as high in restaurant industry Australia as they suppliers hold the key for the raw materials such as meat. All the restaurants and fast food organizations of Australia offers foods related to meat. None of the organizations has the infrastructure to produce meat on their own. They will have to rely on several supplier organizations for that. It would be no different for Banaitja restaurants as they will have to maintain a amicable relationship with the suppliers in order to run their business properly. Therefore, the suppliers will have the opportunity to dictate terms as per their advantage.

(Source: Yüksel 2012)

Political Factors

According to Parsa et al. (2012), from the political prospective, Australia is considered as a safe destination for investment. The political and regulatory atmosphere of the country is stable, open and progressive that helps the investors with to gain confidence and certainty. Besides, the political system of Australia is highly efficient in responding challenges related to economy. The Australian Government has been ranked in the top two countries as a most adaptable country that can frequently change its policies to match the changes in any business industry. Therefore, it is highly expected that Banaitja will have proper and appropriate help from the political policies of the Australian Government.

Economical Factors

Restaurant industry of Australia is known as the peak organization that includes nearly 40,000 restaurants and caterers in the country. The industry is responsible for achieving some $15 billion per annum which is contributing highly to the economy of the country. Besides, the economy of the country is also stable and wealthy which is investing highly in its restaurant industry. Besides, as a result of good looking economy and increased amount of earning by the citizens, the buying behavior has also changed significantly (Butlin 2013). The people are more happy to buy foods from restaurant either offline or online. Besides, the restaurant industry of Australia largely contributes to the economy of the country; therefore, the Government is also looking after the industry by implementing suitable rules and regulations to help the restaurant industry.

Social Factors

Recently most of the countries and their health care departments have taken a big step to minimize the effect of obesity on the citizen. Several health care events and programs sponsored by the Government are also implemented to increase the awareness among the people about healthy lifestyle (Zhang et al. 2013). Australia is one of the top counties that are affected by the problems related by obesity. Therefore, the Government of Australia is also trying to increase the awareness among the people so that they can reduce the consumption of fast food (Porter and Tanner 2012). This is the reason that many fast food players are feeling pressure in the restaurant industry of Australia. According to Thomas (2015), none of the fast food chains or restaurant chains of Australia provides healthier foods to its customers. Most of the foods contain a huge amount of calorie which can hit the restaurant industry of Australia. This is place where Banaitja Restaurants can avail a great opportunity. For the existing restaurants it is tough to restructure the entire menu in order to provide healthier food. However, as Banaitja is just starting their business, they can easily include number of healthier foods in their list, which will attract health concerned customers of the country (Nielsen and Parker 2012). This is the reason that the organization has already decided to offer a huge number of salads to its customers. However, as the organization is going to target the international students, the chances are low that offering healthier foods can attract them, as the students are not much concerned about their health.

Technological Factors

Consumer familiarity with new technology is increasing day by day. Therefore, the fast food firms are using social media websites to reach and communicate with the existing and potential customer base. For example, McDonald’s is the ninth most “liked” brand on Facebook. Besides, according to (Franks et al. 2014), 83% of the total population of Australia is habituate in online food buying. Therefore, it is obvious that a restaurant or fast food brand that has an online website possesses a great competitive advantage over other brands. Therefore, Banaitja is recommended to implement their online site as soon as possible right after launching their restaurant. Besides, it is also essential to develop a Facebook page to communicate with the potential customer base in order to increase to brand value (Kucukusta et al. 2014).

Environmental factors

As a result of high amount of awareness among the countries in terms of environmental pollution, environmental lobbyists and governments are pressuring the fast-food firms to become more green. Burger King has already faced a big challenge as in Australia the Government has restricted the destruction of forest which used to help the organization to increase the beef production to meet the demand for beef-burgers. On the other hand, recycling of products is another major issue faced by the Government of Australia that they are trying to maintain at any cost (Jeston and Nelis 2014). As a result, most of the restaurant organizations have already adopted recycled packaging. Therefore, before starting their venture, Banaitja must consider these factors and must structure their restaurants to support meet these governmental rules and policies.

Legal Factors

Legally the taxation policies and all other policies of Australia are supportive to the restaurant industry of the country. However, recently the restaurant organizations are dealing with a serious problem which is false negative reviews of the customers (Lucas et al. 2013). A research conducted by R & CA members show that almost 61 percent restaurant chains are concerned with this problems, as they believe that these comments can play a major part for the other customers while selecting a restaurant brand (Finkelstein 2013). Therefore, The restaurant industries have requested the local Government to enforce powers to ACCC to investigate issues of misuse and also requested to implement rules and regulations so that restaurant owners can have the right of reply when negative review is posted. Besides, it is also demanded that a user must reveal his identity when making a post in any review related website which will ensure that whether the customers has really faced any issues with the restaurant or not.

(Source: Armstrong et al. 2014)

Product

Banaitja will have to understand that customers have other priorities and places to spend their money. Therefore, before offering menu items to the customers they will have to put considerable emphasis on it. It is important that the restaurant brand must conduct a market research to understand the customer requirements and spending behavior. However, requirements and demands of the customers change over time. According to Sacks et al. (2015), what is attractive to the customers today might not attract them tomorrow. That is the reason the organization is focusing on various food options in order to meet the demands of all the customers. On the other hand, to meet the healthy needs of the customers, Banaitja is also going to provide several salad items to its customers. As the organization has targeted the international students of Australia, their products will also include food products that are famous in those countries.

Price

As mentioned by Mintz and Currim (2013), the perception of a customer is an important determinant of the rice charged. Customers have a habit of drawing their own mental picture of what a product if worth. Sometimes the companies offer low price for a product to gain competitive advantage over the market rivals. However, according to Huang and Sarigöllü (2012), customers might feel that the quality is being compromised and that is why the organization is able to offer such low prices. On the other hand, offering high prices is also a threat as the chances are high that other market rivals are offering same product in a lower price. In Australia, market competition is tremendously high, Therefore, Banaitja will have to adjust their product prices so that customers do not judge its product based on price but on quality.

Promotion

The only best promotional tool that Banaitja can sue is online advertisement. It is already mentioned that 83% of Australia’s population is using internet to gain knowledge about anything (Pavlou and Stewart 2015). Therefore, the organization can open their online website to reach to the customers. On the other hand, opening a Facebook page will also help the organization to communicate with the customers and to attract them by offering gift coupons and special discounts. The organization can also use some traditional promotional steps such as television advertisements, newspaper advertisements and advertisements through magazines.

Place

In the marketing mix place is not only indicates the physical location or distribution points but also encompasses the management of a range of processes that serves to bring the products to the customers. Currently, Bnitja has selected North Australia to start their venture which is strategically good decision as the organization is North Australia based which will allow them to operate with a minimum transportation cost. In its initial stages of business, low transportation will help Banaitja to gain a competitive advantage over the market competitors.

Market needs or customer needs in Australia in terms of fast food have changed a lot in past few years. As a result of several Governmental projects, the citizen of the country are now aware of the threat carried by obesity. They also know that excessive fast food consumption is the major factor of obesity. Therefore, the demand of fast foods is reducing slowly but steadily in the country and the customers are looking for healthier foods.

Market trends in Australian restaurant industry includes higher amount of investment to develop new concepts like different menus and outlets and services. According to Grün and Dolnicar (2015), fast food customers of Australia are the most demanding and in terms of quality of the food and service of the food. They also possess higher expectations from the restaurant brands while visiting their places. From many years, McDonald’s and KFC have done several experiments with concept stores that offer health care meals, gourmet ingredients and table services to acquire a superior position in the Australian market. Banaitja will have to do same or something better than this to gain market share in this competitive market place.

Market growth of Australian restaurant industry is getting smaller as the people of the country are choosing healthier foods. Healthy eating campaigns by the local Government achieved enormous success as one in three happy meals sold in Australia includes a healthier meal (Lee et al. 2016). Therefore, the fast food industry one the verge of facing a crisis in customer demands. For Banaitja this is an opportunity, they are already planning to add healthier foods in their menus, which is for sure, will attract more customers.

The primary target market for Banaitja is the normal Australian citizen. However, they understood that fact that a large amount of the country’s population includes international students. They also figured out that students from Asian countries such as India and China are facing some issues to cope up with the prices of fast foods in the country (Dolnicar et al. 2012). Therefore they have also decided to include Indian and Chinese foods in their menus to attract those international or migrated students towards their restaurant.

In order to analyze the feasibility of the proposed business, it is important to undertake financial projections of the project that aims at providing the investors about the projects profitability (Kauko and Palmroos 2014). Financial projections for a new business or project comprise sales forecast, breakeven analysis, profit and loss projections and cash flow statements (Wang 2014).

From the above discussion about the market opportunities and the ability of the management to successfully implement the proposed business plan, it can be stated that the market has huge potential for the restaurant business and restaurant sector is expected to grow in a fixed rate of 10 to 8% per year. The overall restaurant market in the Northern area of Australia is estimated to be around 0.75 million and the project aims at capturing the 10% of the market share (Soofi and Cao 2012). The table below represents the expected sales for five consecutive years in AUD per year and average customer that are expected to visit the restaurant. In addition, the customer spending is estimated to be AUD 20 for each visit to the restaurant. Further, the sales is dependent on many factors such as customization of the products and the quality of service provided to the customers, these factors are taken into consideration before determining the sales forecast.

Product/ Year	1	2	3	4	5
Units (customers)	3750	4312.5	4959.4	5,703.3	6,558.7
Sales @ AUD 20	75,000	86,250	99,188	114,066	131,175

(Source: As created by author)

            Cash flow represents the total amount of money invested into the business at various points of time and also the money taken out from the business (Kingdon 2012). For this project the money is sourced from the investors own end and no loan or other source of income is considered as the business is primarily a partnership business. Therefore, the total investment of 100,000 AUD is the prompters own capital. The closing balance for the year “0” represents the provision for the “work in capital” for the first year of the project before the business starts generating its own surplus. The cash flow summary for the project is presented as –  

Cash Flow Summary
Year	0	1	2	3	4	5
Net Cash flow For Period	88,000	9,500	14,495	15,566	22,007	35,181
Opening Cash Balance	0	88,000	97,500	111,995	127,561	149,568
Closing Cash Balance	88,000	97,500	111,995	127,561	149,568	184,749

(Source: As created by author)

It is the most important element of financial projection that provides information about the profitability of the project.

Profit and Loss forecast
Year	0	1	2	3	4	5
Revenue	0	75,000	86,250	99,188	114,066	131,175
Cost of sales	0	37,500	43,125	49,594	57,033	65,588
Gross profit	0	37,500	43,125	49,594	57,033	65,588
Expenses/overheads
Premises (rent, rates)		5,000	5,000	5,000	5,000	5,000
Wages and salaries		15,000	15,450	15,914	16,391	16,883
General expenses		6,000	6,180	6,365	6,556	6,753
Interest and bank charges payable		0	0	0	0	0
Lease payments		2,000	2,000	2,000	2,000	2,000
Depreciation		0	0	0	0	0
Other expenses		5,000
Total expenses/overheads	0	33,000	28,630	29,279	29,947	30,636
Profit before tax	0	4,500	14,495	20,315	27,086	34,952
Tax @25%			4,749	5,079	6,771	8,738
Profit after tax		4,500	9,746	15,236	20,314	26,214
Dividends			0	0	0	0
Transfer to reserves		4,500	9,746	15,236	20,314	26,214
ROEI		5%	10%	15%	20%	26%

(Source: As created by author)

Breakeven point is that point where the total expenditure to the project equals the total revenues generated from the project, beyond this point the company enters a stage where the total revenue surpasses the investment and produces profits for the business. Breakeven analysis enables the investors to determine when the project would be able to yield positive revenues.

Conclusion

After analysis the present market condition of restaurant industry of Australia, it can be mentioned that this is the perfect time for Banaitja to start their restaurant business in the country. Most of the existing restaurant brands of the country are offering fast foods that includes high amount of calories and are the major reasons of obesity. Therefore, slowly but steadily the customers are rejecting the major brands such as McDonald’s, KFC and Burger King. Banaitja is going to start their business with not only a historical tough but also a mission to serve healthier food to the customers which will obviously provide them a competitive edge over its upcoming market rivals. On the other hand, it is also seen that the Government of the country is very much friendly and helpful to the existing industries of the country; therefore, Banaitja will also have support from the Government policies and rules.  The only threat the organization will face is high supplier power. However, currently it is not possible for Bnitja to open their own meat production houses; therefore, the only option for them is to maintain a friendly relationship with the supplier organization so that it can continue to gain the organizational goals.

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