Question:
Discuss about the Strategic Analysis of Nando’s Restaurant.
Strategic Management Process is essential as this helps the organization in defining their strategy. It is the continuous process wherein the organization decides proper implementation of the strategies as this will keeps on appraising the success as well as progress of the implementation through proper assessment (Yüksel, ?., 2012). Proper strategic management steps have to be followed by Nando’s restaurant as this will help in:
The Porter’s Generic Model is properly used by the respective restaurant as this will help them in gaining proper competitive advantage and their performance will be improved as well. The generic strategies that are applied by the respective restaurant in order to provide focus on the cost leadership, differentiation strategy, focus on cost as well as on the cost leadership.
Proper research has to be conducted as this will help in proper innovation as well as development. This will enhance the strategy and this will help in delivering high quality products as well as services. Similarly, proper focus strategy has been applied by the company as this will help them in understanding the dynamics of the market as well. Proper SWOT analysis has to be conducted by Nando’s restaurant as this will help them in analyzing the strengths as well as weaknesses of their restaurant and apply different strategies to improve the quality of the restaurant.
Porter’s Five Forces Analysis of Nando’s restaurant
Force 1
Rivalry in the market – The rivalry of between the organizations in the market is the most important force of the Porter’s five force model. The level of the rivalry between the organizations is an important factor that determines the pressure of the competition. The industry is considered to be a disciplined industry if the level of the competition between the organizations is low. The high level of competition in the market results in the extreme rivalry between the organizations. The more number of organizations of the same kind in the market increases the competition between the organizations(Afonso and Vieira 2012). The growth of the market in which the organizations are operating results in the fight of the firms for acquiring their share in the market.
The higher the fixed costs of operating in the market, the greater are the competition between the firms. The barriers related to the exit of a product and the rivals who are diverse in nature increases the competition in the market as well. The service sector is the fastest growing in the recent times. This has led to the entry of many organizations in the market. The Nando’s restaurant also has many rivals in the market(Agarwal, Grassl and Pahl 2012).
Porter’s Five Forces Model
Supplier power – The suppliers are an important factor for Nando’s restaurant. The suppliers have the power to decide the price of the raw materials that are required by Nando’s. The cost of the raw materials decides the ultimate price of the products of the restaurants. The restaurant industry is considered to be in the service sector. The services provided in the restaurants are directly dependent on the prices decided by the suppliers of that restaurant. The other factor that affects this sector is the power of the staff or the labour of Nando’s. The costs associated with the labour of the restaurants are another important factor that affects its operations. The power of the supplier is more if the number of suppliers of any particular product is less in the market and the costs related to the switching of the suppliers is more (Afonso and Vieira 2012). This situation makes the suppliers much more powerful.
Power of the buyers – The customers of the Nando’s restaurant are considered to be the buyers of the services provided by the owners. The power of the customers influences the operations and profitability of the restaurants. The customers are more powerful if the same type of services is provided by the other restaurants. The customer has the power to choose and this determines the profitability of the organization. On the other hand, if the number of restaurants is less in the same sector the customer has less choice and hence the prices can be controlled by the restaurant owners. The prices are regulated by the choice of the customers if they have more choices of restaurants (Al-Araki 2013). The power of the buyer to set the price is more if the competition is less and the power of the buyers is less if the competition is more.
Threats related to the substitutes – The third force in the Porter’s five force model is the threat that is posed to the owners of Nando’s restaurant due to the presence of their substitutes. The availability of the substitutes contributes to the changes in the cost related to the service of the restaurants. The threat related to the substitutes is more prevalent if the demand of the particular service changes with the change in the price of that service. The price elasticity of the services is affected by the substitutes available in the market. The increase in the substitutes of the service increases the demand for that service as well. The reason being the availability of that service is more in the market. The closest substitute of Nando’s, for example in the same cuisine, contributes in the change in the prices of the services of that restaurant (Babatunde and Adebisi 2012). The threats related to the substitutes of a particular company that endangers the competition of that organization arises from outer industries.
Threat related to new entrants in the market– The entry of new restaurants in the market is another threat for Nando’s that is taken into consideration. The new entries in the market have an effect on the level of competition between the organizations. However, there are many barriers related to the entry of the new firms. The barriers to the entry in the market are the factors that define the characteristics of the industry itself. The rate of the entry of the fresh organizations is reduced due to the barriers that are present in the market. This helps the old firms to maintain their profit levels (Dimitrova 2016). This theory holds true for the restaurant or service industry as well. The barriers in the market are related to the policies made by the government. The policies made by the government sometimes restrict the entry of the new organizations.
Strengths
The restaurant has global chain in many countries around the world and operates more than 750 restaurants. The countries in which the restaurant has its branches include, Botswana, Namibia, Zambia, Asia, UAE, Europe, including Ireland, United Kingdom. The other countries also include United States and Australia. The restaurants are spread in more than 40 countries. The most famous dish of the restaurant all over the world is the Grilled PeriPeri Chicken. This is the signature dish of the restaurant and they are famous in the market for this particular dish. The food of this restaurant is healthy in nature and the taste is also superior as well (Nandos.com, 2017). Nando’s was named as the world’s topmost marketing brands by the magazine named Advertising Age. Nando’s opened its branches in Ireland in the year 2008. The restaurant was opened in the technological hub of the country Dublin. The other branch was opened before this in the year 1992 in United Kingdom. The style of the restaurant changed in the United Kingdom. The takeaway style was changed and a mixed service was started. The décor of the restaurant in this area was changed. Nando’s won the award of the best place to work in the year 2010from the Sunday Times (Abraham 2013). The sauces and the marinades made by the restaurant were sold in the markets of the United Kingdom.
Weaknesses
The main weakness of the restaurant includes its focus towards only the chicken related items. This reduces the opportunities of the company in the vegetarian market. The restaurant chain operates its branches only in the metro cities all over the world. The restaurant had to face many controversies during the phase of its operations in many countries (Adl et al. 2013). The advertisement that was run by the restaurant in the year 2002 in Australia had been related to a political controversy. In the year 2009 Nando’s had to face another controversy in South Africa related to the political situation in the country. The restaurant faced another controversy in the year 2011 in South Africa itself which was related to the shows of a famous celebrity. Another big controversy that was faced by the restaurant was due to the “Black Card” that they offered to the celebrities so that they could be offered free food from the restaurant along with their family. These controversies had an adverse effect on the reputation of the restaurant and acted as a weakness in their expansion operations (Afonso and Vieira 2012).
Opportunities
The restaurant chain has many opportunities in this area as the service sector is experiencing huge growth in the recent years. This growth can be encashed by Nando’s. Ireland is also a growing economy and the restaurant can plan for expansion of its operations in the other cities of this country as well. The people of the country are fond of eating and are welcoming towards any type of cuisine. This is great opportunity for Nando’s to grow in Ireland. The restaurant can grow further by adding items in its menu including vegetarian items as well. The technological environment of Ireland is strong and Dublin is the technological hub of the country. Nando’s needs to plan for an ecommerce expansion in the country (Agarwal, Grassl and Pahl 2012). This will increase the visibility and the reach of the organization as well. The digital platform can act as a huge opportunity for the restaurant and its growth in the next few years as well.
Threats
The competition in the market of Ireland has increased in the recent years, which has led to intense pressure on the profitability of the restaurant as well. The increase in the number of restaurants in the country has led to the decrease in the revenue of restaurant and thereby reducing its profitability as well (Al-Araki 2013). The competition of Nando’s in Ireland include restaurants like, Kai Café and Restaurant, Farmgate Café, An Port Mor, County, Gregan’s Castle, Mourne Seafood Bar, Newforge Dining Room, The Brewer’s House, The Fumbally. These restaurants offer both take away as well as dining facilities, which is offered only in some of the restaurants of Nando’s. The restaurants also provide a vegetarian menu which is required to increase the customer base of any restaurant. Nando’s has to face tough competition of this type in the Irish market which has led to the decrease of its profitability and the revenues (Ayub et al. 2013).
Political factors
The political environment in Ireland is unstable and this has been a negative factor in the growth of the industries in this country. The establishment of a government that has stability has become an important issue even after the general elections that were held in the year 2016. This help the country to increase the cost-competitiveness. The exit of UK from the European is another factor that is likely affect the political condition of Ireland (Babatunde and Adebisi 2012). The implications of the exit of United Kingdom from EU will be quite high on Ireland. The Irish industries will be hugely affected in the process. The two main political factors that will affect the environment of Ireland in the current times are the effect of Donald Trump’s new policies for the American government and the Brexit effect. The decision that will be taken by Trump regarding the trade related factors with America, will have huge effects on the rest of the world as well. The second most important issue in this case is the decision of United Kingdom to make the British Exit or Brexit. The policies and the conditions which will be related to the exit will have an effect on the rest of the members of the European Union (Clardy 2013). The Brexit effect will thereby influence Ireland and the various industries of the country as well. The fall in the economy of the country due to this effect will influence the restaurant sector as well.
Economic factors
The economic factors of Ireland are heavily dependent on the international trade related to the country and it is influenced by the global markets as the economy of Ireland is of small size. The economy of Ireland was totally based on the agricultural income of the country before it joined the European Union in the year 1973. The Ireland economy was totally dependent on the UK market (Dimitrova 2016). After the country became a member of the European Union, the trade rules of the EU related to the members and the decision to build IDA or the Industrial Development Agency to endorse Ireland was a boost to the economy. The economy of the country managed to grow mostly in the 90’s. The economy was strengthened with the financial assistance of the European Union. The global financial crisis from the year 2007 had led to a fall in the financial systems of the European Union as well. Ireland was also a victim of this financial crisis which had spread globally. The dealings between the banks from all around the world had stopped and the credit facilities were no more available (Fleisher and Bensoussan 2015). The Irish banks had invested huge amounts for giving loans to the property dealers and this had left the banking system in a huge mess. The crisis was strongest in the year 2010 and thereby the government appealed for financial assistance on an international basis (Whelan et al. 2015). The falling economy of the country had an adverse effect on every industry in the country and thereby the service sector was also affected. Nando’s had opened its branch in Ireland in the year 2008, which was the time of acute financial crisis in the country. The revenues of the restaurant in Ireland after the establishment of its flagship restaurant was high, however, the restaurant had to cut their profits to remain in the market (Franek and Zmeškal 2013). The economic situation of the country therefore had an effect on the profits of the restaurant.
Social factors
The Irish people are fond of the Italian and French cuisine. Nando’s is a restaurant that originates in Africa. However, their famous dish PeriPeri Chicken is liked by the people of every culture and from any region as well. The Irish cuisine is majorly affected by the Italian and the French style of cooking. The people of this country are passionate of their food and they are welcoming towards any type of cuisine. The African style of food of Nando’s restaurant has been welcomed in this country and the restaurant has flourished its operations (Frynas and Mellahi 2015). Ireland has a mix of different cultures and the people of this country represent these cultures and their style of cooking.
Technological factors
The technological growth of Ireland in the past few years have affected the business enterprises of the country. The analysis of the data of the customers, the systems of managing customer relationships and the communications related to social media has changed a lot. Ireland is a small country however it has become the hub of creativity of the human brain (Gander 2017). Ireland has proved to be the most important technology hub of Europe in the recent years. This feature of the country is attracting more and more foreign companies to invest in this sector. The technological revolution in Ireland started after the opening of many technology companies in the country. Dublin is now considered to be the technological capital of Ireland. The city has become the multicultural capital of Europe as well. The companies from outside the country are investing more and more in this city and it is on the way of becoming the technological leader of Europe. Dublin is almost ready to give competition to the technological hub of USA, that is, Silicon Valley. Dublin is a city that is becoming the hub for the start-up companies who are ready to invest in Ireland. Nando’s had opened its branch in this budding city of Ireland, Dublin (Haron 2015). The restaurant had started its operations in this area in the year 2008. The flagship restaurant was opened in Dublin in the year 2011. The technological changes that were taking place in Ireland during this phase also had an effect on the operations of the Nando’s restaurant. The restaurant has now opened its ecommerce website to keep in pace with the changes that are occurring in the technological environment. The management of the database of the customers, taking the feedback related to the services of the restaurant and many other factors were now linked to the technological changes (Kaikobad, 2015). The restaurant also has facilities like gift cards, membership of the restaurants, ordering food online in the website that is designed for Nando’s restaurant. This way the technological environment of Ireland has affected the operations and management of Nando’s.
Legal factors
Ireland is in a good position in the business environment of Europe. The multinational companies of USA and UK have been investing and locating their offices in Ireland. The companies related to other industries like consulting services, export companies, entertainment companies, research and development companies and companies which are into online marketing as well (Korff, De Jong and Bles 2013). These companies have chosen Ireland to be their centre of business for the whole of Europe. They try to attract foreign investors with the help IDA or Industrial Development Agency which is sponsored by the government and is supported by the European Union as well. The trading structure and the laws related to the trading in Ireland facilitates and attracts new business enterprises in the country (Lorca 2012). The requirement of share capital in the country is at the minimum of around 1 euros and this helps to start the business easily and get it started. The different types of taxes that are applicable to the new business enterprises in Ireland include corporate tax at the rate of 12.50%. The other type of tax is the interest and dividend withholding tax which is related to the payment of the interest and dividend by the Irish companies (Phadermrod, Crowder and Wills 2014). Tax credit is given to the companies for conducting development and research. Ireland also has treaties related to double taxation which eradicates the requirement to pay tax twice on the gains or the income made by the company that are similar in nature. These changes have affected all industries including the service industry as well. The restaurants of this country will also face many changes due to this effect (Shabanova et al. 2015)..Nando’s restaurant will also be affected by the changes in the Irish economy and laws as they have their operations in many other countries.
Environmental factors
Ireland is a member of the EEA or the European Environmental Agency. The most prevalent form of pollution that was present in Ireland was the exposure to particulate matter, which had led to many deaths every year in the country. The other environmental factor was the individual choice of the people of Ireland (West, Ford and Ibrahim 2015). The most prevalent problems related to the environment in Europe are the particulate matters in the air, the nitrogen dioxide levels and the ozone levels. The authorities are planning to make strategies to reduce the pollution related to noise in these areas (Yüksel, ?., 2012). The restaurants also need to take care of this issue and further try to control the pollution by keeping a track of the pollution that is caused by the ventilation in the kitchens. Nando’s restaurant also has to follow the norms and the regulations that have been laid to protect the environment and reduce problems related to pollution (Sarooghi, Libaersand Burkemper2015).
Strategic Group Maps
Strategic Group Maps is used by Nando’s restaurant as this technique that will help in understanding the other restaurants that are dealing with the same kind of business and using the same model of business. Nando’s restaurant require to analyze the different other chains of restaurant that are operating in the same area and this will provide them a brief idea about their competitors in the market (Yüksel, ?., 2012).
Proper analysis of the competitors is essential and it is done by Nando’s restaurant as this will help in analyzing the key variables. The quality, advancement in technology has to be properly checked by the respective restaurant as this will help in providing a brief idea on providing better services in the market. This will help them in attracting customers as well.
Critical success Factors
The proper critical success factors has been properly applied by Nando’s restaurant as this will help them in understanding the different costs such as sales as well as food cost in comparison to the competitors in the market (West, Ford and Ibrahim 2015). The USP has to be properly understood as well as analyzed as this will help in understanding their cash flow as well as other legalities in their restaurant in comparison to other restaurants as well.
Conclusion
The discussion in this report is based on the analysis of the competitors of Nando’s restaurant and the analysis of the environment where the restaurant is operating. The analysis of the industry is based on Ireland where Nando’s operates in the city of Dublin. The industry analysis of the country is done with the help of the PESTLE framework, where the different factors of the industry are analysed based on the operation of the restaurant. The factors which are examined are mainly the political factors, economic, social, technological, legal and the environmental factors as well. These factors are analysed in relation to the operations of Nando’s restaurant in Ireland. The competitors of Nando’s restaurant are analysed with help of the SWOT framework. This framework is used to analyse the strengths of the restaurant over its competitors, the weakness of the restaurant, the future opportunities that the restaurant has and the threats that are posed towards the restaurant.
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