Strategic management is the art and science of formulating, implementing and evaluating cross-functional decisions that will enable an organization to achieve its objectives. It involves the systematic identification of the firm’s objectives, nurturing policies and strategies to achieve these objectives, and acquiring and making available these resources to implement the policies and strategies to achieve the firm’s objectives.
Strategic management, therefore, integrates the activities of the various functional sectors of a business, such as marketing, sales and production to achieve organisational goals. It is the highest level of managerial activity, usually initiated by the board of directors and executed by the firm’s Chief Executive Officer (CEO) and executives. The success of a company is due to the awareness of the company of its external environment with the anticipated concerns, prediction of trends and generation of ideas.
This automatically would lead to the identification of opportunities and threats, which are considered by managers as they strive to develop strategic direction and formulate and implement strategies. A leading scholar in strategic management, Michael Porter defines strategic management as “the scope of an organisation over the long term; which achieves advantage for the organisation through its configuration of resources within a challenging environment, to meet the needs of markets and to fulfil stakeholder expectations. In essence, it is the environmental elements that need to be explored and identified to determine the business direction. Therefore, this process is defined by researching and identifying the strategic analysis, strategic direction, strategic formulation, strategic implementation and strategic evaluation effectively. The external environment can be divided into the operating environment and the organisational environment. The starting point for managers is to consider the macro-environment factors. Firstly, political factors must be considered.
Governments enforce rules and regulations within which the company must operate, such as subsidies or lenient tax laws for new businesses. At the opposite end, governments can close companies that do not comply with the enforced laws. Therefore, compliance with the laws would prevent illegal activities for the company which promotes financial security and firm value. Secondly, economic factors play a great role in creating growth and profits for the stakeholders of a company, particularly with owners and customers. Critical factors include economic growth, inflation rates, credit availability, foreign exchange rates and inflation rates.
Thirdly, socio-cultural factors or trends affect people according to their geographical region and can be important in a three-pronged way: they can create opportunities for companies by way of responding to the local community’s needs by offering gym facilities in a hotel. This would effectively create more business for the hotel by standing out of the crown with this differentiating factor to their business. Furthermore, baby-boomer couples who decide to have families later in life would enjoy higher standards. Therefore, a family-friendly cruise line would successfully respond to this demographical need.
Awareness and compliance of society attitudes can assist a company to avoid problems where they would be perceived as a “bad corporate citizen”. Such examples could be where an organisation does not cater effectively for vegetarian eaters by including limited menu choices. Lastly, a positive reputation of a company amongst stakeholders such as customers and suppliers would increase the demand of its products and lead to increased opportunities. The fourth criterion is technological factors that play a vital role in a company’s operating environment.
The recent technology boom has created new gadgets, services and products in the global marketplace where virtually anything and everything can be located on the World Wide Web. Organisations are now faced with new and improved ways to provide basic services to customers and a major challenge for managers is to locate the most appropriate technology innovations for their business. The organisational environment of a company is defined by its stakeholders, including the owners, managers, employees, suppliers, competitors, government agencies and the media amongst others.
Each group of stakeholders have varying degrees of influence in an organisation’s success. The relationships between the stakeholders in the organisational structure can be a source of competitive advantage for the company. This study will aim to critically evaluate the strategies implemented by Chopstix Chinese Restaurant Ltd, located in Nairobi, Kenya with an emphasis of discussing how various environmental factors have contributed to the success and failure of these strategies.
An insight will also be included in how the company handled the difficulties that arose together with an overview of what improvements can be made. MAIN BODY Chopstix Chinese Restaurant is a family-owned company founded in the early 1990’s in response to the changing social trends in Kenya. As the average customer was now becoming more sophisticated in their tastes, Chopstix, in turn, introduced a sophisticated variety of Cantonese cuisine for all customer demographics.
The restaurant’s excellent location between the city centre and affluent residential suburbs, together with efficient service speed soon earned an enviable reputation within a few years. Throughout its 19-year history, there have been some favoured strategies employed by the owners, which have been both profitable and disappointing for the business. In beginning to analyse the strategies employed by Chopstix, it is important to consider the boundaries of the restaurant industry in Kenya.
Chopstix caters in providing food service for patrons. Additionally, the managers must consider the level of competition in order to precisely define who the competition is. Chopstix is a private company, however, as the restaurant sector in Kenya is fairly young, in comparison to organisations in the United States, for example, the owners took a broad view to define who the industry competition was: all restaurants in Nairobi. External elements that affect the business environment of Chopstix can be considered.
A leading scholar in this field, Michael Porter, evaluates the forces of competition that determine the level and type of competition in the particular industry so that the company in questions can understand how to position itself in relation to these forces, determine their particular competitive advantage to estimate the expected profit. Porter’s five forces model is particularly important in analysing how Chopstix can gain the competitive advantage by understanding the opportunities for market entry that would not attract attention from other competitors.
As a result, Chopstix managers would be able to effectively alter specific actions if their implementation is unsatisfactory in its outcome. A strategic influence that has greatly, if not solely affected Chopstix’ success is the bargaining power of customers. As a food and beverage provider, Chopstix is heavily reliant on the economic power of customers, who create the demand for the products, which in this case is Cantonese cuisine. Porter identifies conditions where customers are most powerful and these can be considered in turn.
Firstly, customers display greater degree of bargaining power when they are few in number. As a small establishment, Chopstix cannot afford to lose its customer base, which consists of local business executives and affluent families. Secondly, when customers make a large and regular number of purchases, they can often dictate price discounts or special services. Chopstix has had to respond to the influx of new Chinese restaurants in Nairobi by promoting features about certain cuisine dishes and providing discounts to loyal customers to maintain a good profit margin.
Chopstix has managed to maintain the excellent product standard throughout its history, which has also been plentiful in quantity. As price is often an issue for the typical customer, the quantity of servings has allowed the establishment to rear a competitive edge over other local restaurants. Furthermore, customers are determined to obtain a better deal. This is particularly an issue for Chopstix’ managers of late due to the expansion of the catering industry in Kenya at the turn of the twenty first century.
Consequently, the increasing choice of Chinese restaurants raises the competition between industry competitors, thus leading to a decrease in prices, which in turn promotes vertical integration where the customer now moves backward and becomes its own supplier. The purchase of Chinese ingredients, which act as a substitute and become an indirect competitor when it is readily available with the attraction of lower costs than those costs of restaurant services. Lastly, customers’ bargaining power increases due to the information advantage about profit structures of organisations.
These factors have greatly influenced the strategic activities for Chopstix’ owners who constantly have to remain a step ahead to maintain a competitive advantage over the industry competitors. Another force that has an impact on Chopstix’ strategic planning are the suppliers who are susceptible to raising their prices and reduce profitability for the business. In the somewhat niche market of Chinese restaurant suppliers in Kenya, there are few in number, thus raising the bar of competition even more. It is very much a seller’s market and suppliers have chosen their own prices.
As Chopstix is located at a crux between the city centre and residential neighbourhoods, competition is cutthroat to secure prices and deliveries. Furthermore, Chopstix prides itself on providing excellent quality and a speedy service. Poor quality of materials is non-negotiable, therefore raw materials such as meat and seafood cannot be substituted. The owners therefore must pay very high prices as a dependent customer of the suppliers, which has a detrimental effect on overall profits for the business.
New entrants in the market increase competition within the sector as they add introduce new products, thereby decreasing profits and prices. Entry barriers such as economies of scale are a force that keeps new entrants at a distance. However, this is not particularly effective in the restaurant sector in Kenya, as buying high priced fresh foods in bulk create storage and consumption problems for smaller establishments, as opposed to restaurants within hotels which could use hotel storage facilities as well as their own.
A particular entry barrier that has been successful for Chopstix has been product differentiation. Although there are more than a few restaurants in Kenya that offer Cantonese cuisine, there are not many who have as long a company history as Chopstix. A loyal customer base has been established due to being one of the first Chinese food competitors in the Kenyan market through consistent advertising and viral networking. However, this has not totally hindered the arrival of new entrants. Chopstix’ owners and managers have to continuously revise menus and track customer preferences to maintain a competitive advantage.
Over time, this has led to Chopstix embracing the need for distribution channels to block competition by way of putting pressure on third parties not to provide some services for new competitors. Government policy has been a continual entry barrier for expansion of smaller establishments. In developing countries, government agencies do not extend effective inter communication as our developed world compatriots. Therefore, continuous visits from local food and hygiene officers as well as health department officials prevent new competition to an extent.
An entry barrier on the rise on the local community is the products that serve as a substitute for the food and beverage service-the entry of vast varieties of Chinese ingredients in local supermarkets. Chinese food is somewhat of a luxury food industry within Kenya. However, this is now changing and other segments of society such as working professionals are becoming substitutes. This has had an impact on the formulation of strategic direction for the business as Chopstix’ managers must now have more commercial awareness of the needs of other market segments. A current problem facing the business is the aspect of trategic drift. Strategic drift occurs when the organisation develops certain strategies based on the historical and cultural influence but these fail to keep up with the current trends of the changing environment. Chopstix’ history and unique culture have established over long periods of continuity, which have formed the competitive advantage Chopstix has enjoyed over its competitors. However, as expected, successes of past strategies have been relied upon by the owners, thereby leading to unwillingness to change. Importance must be given to the company’s 19-year history, coupled with the organisational culture (i. . a shared way of operating the business). In this case, the power of enforcing strategies or any transformational change lies with the owners, who have based their decisions on how recent performances have paved out. If a strategy has been successful in the past, this is the suitable platform to base all future strategies upon. As a result, care is not given to current organisational trends, as any uncertainty is dealt by looking at familiar solutions that have succeeded in the past. A view can be given to the company’s cultural influence on the strategic implementation.
Hofestede has defined culture as a taken-for-granted-way or paradigm in doing things which can be identified in looking at the company’s organisational culture. Chopstix’ organisational culture is defined through its mission value of providing quality and speedy service to its customers. This is strength of the company and can be reflected in to good market share Chopstix retains in the Kenyan catering industry. The rituals embedded in the company such as the waiter uniforms that have remained the same throughout the company’s history, maintaining politeness to all customers and health and hygiene standards have served as successes.
However, with new trends always on the increase, a weakness in the cultural web of the company would be using third party intermediaries to appeal to other customer demographics or perhaps failing to establish a company portfolio on the Internet. These would be transformational changes for Chopstix which would cause major upheaval in the routines for staff members, by way of increased responsibilities for managers and support staff that previously lay with the managers only. I believe recognition of current lags in the company’s everyday routines is important in the first instance.
As a small establishment, I would not recommend changing all current routines and rituals that would cause major upheaval and confusion to staff and customers. The vision of the owners of wanting to do everything and anything should become more concise. Chopstix is anxious of being left out as competition between food and beverage service providers is becoming more competitive, with the younger generations preferring trendy coffee houses and shopping malls where there is an abundance of cuisine choice.
Vision focus on customer demographic is key to formulating strategies that build upon the company’s existing culture and at the same time, reach out to customers by way of promotion via advertising or participation in local food festivals and fairs. Decisiveness is autonomous with both transformational and incremental change, and a passion to win or to have the upper hand on the competition should be enforced with the key staff members of the company. Incentives should drive staff members to go the extra mile in retaining customers, so that they are not seen to be “hanging about” or sitting idly.
Strong performances in customer retention should be recognised by management and rewarded. This would aim to boost staff morale, which in turn would strengthen relationships between customers and staff, thereby releasing the shackles that form on such relationships. The company wants to keep those employees who are passionate, innovative and creative about customer service. Therefore, the owners should encourage an approachable platform to suggest solutions to existing problems and not make decisions without maintaining a degree of tolerance of opinions of senior members of staff who represent the company on an everyday basis.
When strategies are formulated and implemented, it is vital from the outset that they are identified clearly as to the type of strategic change envisioned for the company. For example, Chopstix would wish to formulate a company website to attract customers. This reconstruction change would need to be rapid; it would cause upheaval in time management of manager duties in constantly checking and updating the reservation log book. However, it would not change the culture of the business, or the way the business operates.
Menus would be available online, as they are in the restaurant and details about the company history would be available online, which every waiter would know about in order to answer customer queries in this regard. A strategic feature of this change that the owners and managers would need to consider is a force field analysis of such a change. Through analysing and detailing what aspects of the company’s situation would change and how this would contribute to a desired deliverable, will the company be able to succeed in such an endeavour.
Many features of Chopstix’ implementation of strategies has remained constant throughout its history. These include the autocratic power of the owners in implementing any form of incremental or transitional change. There will most unlikely be any changes as the business is a family venture. However, it can be said the true power lies with the managers who are the ‘enforcers’ of the change and have to make sense of the strategy in realistic, workable terms. Likewise, it is the mangers who are the face of the strategy to the customers when faced with customer enquiries or feedback.
This crucial bridge between the owners and the managers is the effective combination of a direction and participation style of managing change which has been incidental to the success of the business. It is therefore the owners who will be most affected by any kind of strategic change by way of a healthy profit margin. Similarly, the use of personal managerial control to establish a clear strategy paints a picture for the employees as to their role in such a change and who to look for in the case or questions or difficulties: the owners. This autocratic style has been successful for Chopstix and would probably remain so in the future.
However, the owners should be wary of staying with current social trends and keeping government political bodies at bay, such as Health and Safety officials. If an iron-clad autocratic paradigm is in place for all current strategies, this could have dire consequences for the business if the owners are the only ones to face urgent problems. It would be advantageous to have the managers exert the same control in such situations. This can bring about short-term successes for the company, particularly for support of stakeholders such as customers. CONCLUSION
A common theme that seems to link most organisations in the new century is the uncertainty of the faster pace of environmental change which has subsequently led to increased pressures on managers. The external environmental factors that play a great role in predicting social trends are those political, socio cultural, technological and economical factors that determine the strategic direction in achieving the long-term objectives of the business. Strategies are thereby differentiated through the various levels or departments in the company and implemented in a process of anaging change. The outcome is measured by the effectiveness of the strategy by way of customer feedback, improved market position and revenue management. There have been various problems with the strategies implemented by Chopstix’ owners who hold the control in an autocratic manner. This in itself is a problem for the future. Reluctance to delegate control will eventually lead to problems and frustration amongst loyal staff members who may feel they are not rewarded for their efforts, thereby seeking employment elsewhere and taking valuable clientele with them.
Similarly, the owners cannot be present each time a difficulty arises, such as signing off health inspections, or paying staff wages. The owners would be rewarded with increased staff morale which would go the extra mile in retaining the best employees. Another difficulty that has arisen when implementing strategies is the strategic drift that has formed due to the owners’ reluctance in exploring other methods of strategy implementation. As discussed above, the owners have employed a participation and direction style in managing change.
I believe a stronger pull to the participation factor would be successful. In this way, managers would be advisors to the owners as to the blockages or adjustment of strategic manoeuvres. The managers should be able to recommend their changes for readjustment, without feeling nervous in taking the initiative. Likewise, the owners should encourage an approachable setting where managers are not intimidated to voice their ideas. There is great uncertainty in the hospitality industry in keeping with current customer demands and trends.
This study aims to look at an organisation’s progress with the times by looking at the advantages and disadvantages of uniform strategic management together with enforcing strategic change. There is ample opportunity ahead for Chopstix in the current market and there should be an ongoing discussion between the owners, managers and stakeholders as to what changes are needed and the best way to implement this change. Through a concise analogy of environmental and operational elements Chopstix will emerge a stronger company with a clearer vision, and above all, an even greater market share.