The key strategic challenge in Mr. Chip restaurant business is a way to achieve a competitive advantage over the competing restaurants in the market. Thinking about what makes the restaurant special is essential since it gives the restaurant a competitive edge. For instance, if the restaurant specializes in gluten-free pizza, there is a need to identify within this niche how the restaurant can differentiate from all others. The cost and product differentiation are competitive strategies that seek competitive advantage for the business in the market. With this competitive strategy, Mr. Chip will differentiate clearly from its competitors, thus enhancing the company profile and attracting more customers.
Considerably, competitive advantage is considered as the advantage of business over the competitors, which is gained through providing great value to the customer either by offering greater benefits in service or lowering prices. Identifying competitive advantage requires the business to observe the customer buying patterns. Reflecting upon why customers spend time in the restaurant will offer precise information to realize the competitive advantage (Asamoah and Chovancová, 2011). This is because there is a need to differentiate the fast-food brand to offer the client a reason to choose it over the competitors.
Continually building a brand by listening to customers leads to improve awareness and customer loyalty. Ideally, understanding the market and customers enables to build a long-lasting relationship. Branding not only leads to the personality of the business but also shows how consumers perceive the business (Islami, Mustafa, and Latkovikj, 2020). This can enable the restaurant to establish an effective differentiation strategy through product and cost differentiation.
Cost Leadership and Differentiation Strategy
Ideally, the relative position of a restaurant within the industry is determined by its profitability. Thus, there is a need to establish a strategic advantage to ensure a successful restaurant. Cost leadership describes when the restaurant offers the same and similar services and products to the customers at a lower price as compared to its competitors (Sidhu and Mather, 2017). When the restaurant set to be a low-cost provider, the source of cost advantage varies and depends on the structure of their business. This may include the proprietary of technology, pursuit of economies of scales as well as other factors such as access to raw materials. As a low-cost provider, the restaurant has to exploit the sources of cost advantage to sustain and achieve overall cost leadership. The ability of the restaurant to offer similar services or products at a lower price than its competitors will offer a competitive edge for the restaurant (Frank, 2012). Considerably, cost leadership will attract a large market share since a large number of potential customers consider paying lower prices for acceptable quality.
Striving to be cost leaders demands for efficient daily operations to ensure the operations costs are as low as possible. Through this, the restaurant store can be superior since it can serve food at a low cost and low price (Genoveva and Siam, 2017). Relatively to maintain the cost leadership advantage, there is a need for a speedy for orders. Thus the process of preparation must be easy to execute and learn to reduce the failure rate. For instance, rather than offering a sit-down service, the restaurant can offer drive through operations only. This enables the restaurant to serve the customers efficiently rather than indoor seating. Constructing a drive through is cheaper since the utilities required are lower and require fewer employees. These savings enable the firm to provide burgers and pizzas at very low prices and still remain profitable.
In product differentiation, the restaurant seeks to be unique among its competitors through widely valued dimensions by the consumers. This entails selecting several attributes that many customers within the industry consider important. Thus, the restaurant can uniquely position its self by meeting customer demands and is rewarded through its uniqueness. To ensure an effective differentiation strategy, there is a need to have good research and development, effective marketing, and the ability to offer high-quality products and services (Kaur and France, 2018). In this case, the restaurant can offer unique foods and services that are more attractive and outstanding as compared to other fast-food restaurants. Considerably, when consumers identify that the food and service are different from the competitor, they are likely to pay more.
Superior product and service quality
One of the most effective ways to differentiate a fast food restaurant is through emphasizing on high a superior product and service quality. Ideally, the success of fast-food brands entails differentiation in taste quality and effective advertising, which is backed by great service and product (Wei and Davis-Ngatai, 2017). Food is the main method of differentiation; thus the analysis of the current menu may be required. Discovering the high profit and high selling items as well as the low selling and low-profit items can shine a light on the demands of the customers. Relatively, high levels of demographic tailoring and meal customization, such as meeting the demands of a particular subset such as millennials, will be valued greatly by consumers. Mr Chip should focus on a specific target market, the millennials who show great interest in fast foods. Therefore, the should ensure that the type of food and service focus on the millennials.
Superior taste and food quality
Developing superior taste and quality is a good opportunity for differentiating with other competitors. The term fast in fast food restaurants is the root of differentiation for fast food brands. Efficient service experience is central to differentiation (Kharub, Mor, and Sharma, 2018). For instance, Mr Chips need to relocate from town streets to highway exits makes it efficient for customers (Wei and Davis-Ngatai, 2017). Considerably, moving to highway exist will be less stressful area for the customers since there is less traffic on the road such as during the weekends.
Differentiation through customer service
Differentiation through customer service is a great challenge among many fast-food brands. Therefore, Mr. Chip can focus on better customer service for the millenials since most fast-food restaurants rely on gimmicky service rather than considering customized or personalized customer service. To foster effective customer services, the restaurant should create a customer-first culture where the guest experiences are personalized (Hanaysha, 2016). Ideally, a personalized service goes along with an attractive and memorable experience that leads to repeat guests.
Additionally, streamlining the wait times through the integration of modern technology may reduce the long waits. For instance, the company can focus on home delivery or drive-in operations to boost the quality of service and differentiate itself from competitors. Additionally, a fast-food restaurant that encourages its customers to rely on technology is positioning its self as a more efficient, progressing, and more customer-friendly. Therefore, leveraging customer satisfaction through superior customer service is essential in maintaining a good reputation for the guests.
Differentiation through health-conscious and superior nutritional value
Figure 1: A graphical representation of healthy food consumption; source, (Statista, 2019)
With reference to the graphical representation above, there is an increased cultural trend towards more health-conscious eating patterns, Mr. Chip can focus on differentiation through health-conscious and superior nutritional value. The restaurant can compete effectively through a differentiating itself as a healthy option. As consumers are increasingly becoming health-conscious, fast food restaurants are launching products that are health conscious as well as drafting health-linked communications plans (Wei and Davis-Ngatai, 2017). Mr Chips should have health restaurant menu that will incorporate whole grains and vegetables as well as Limit sodium and calories. For instance, the burgers are the top menu item in the fast food restaurant. However, with the increased health consciousness, plant based burgers should be offered in the restaurant. Mr Chips needs to focus on plant based offerings in their fast food offerings. Therefore, as the guest tastes are shifting to healthier meals, Mr. Chip can differentiate itself from the long-standing reputation of fast-food restaurants as being unhealthy.
Through creating an effective brand, Mr. Chip will position itself better in the eyes of the consumers. Through analyzing detailed information offered by the customers and continued market research, the restaurant can acquire essential information to determine an effective marketing mix, which includes the restaurants visited, the prices consumers are willing to pay, and products that are well received in the market. To attract and maintain customers to the restaurant, there is a need to offer a good experience to the customers. There is always a need to create value for the customers through differentiation. Considerably, differentiation always gives the guests a reason to choose a restaurant over others. Through cost leadership and service differentiation strategy, the restaurant will have a good reputation and attract more customers. Understanding how to get an edge in the market through differentiation will enable the restaurant to attract and retain clients as well as build a strong brand in the market. Robust differentiation will help build a strong brand, thus creating a competitive advantage for the restaurant. Therefore, through a focus on a competitive strategy through greater differentiation on cost and service, as well as an excellent fast-food business model, Mr. Chip fast food Company will enhance the company’s profile and attract more customers.
Asamoah, E.S., and Chovancová, M.I.L.O.S.L.A.V.A., 2011. The theory of consumer behavior in fast food marketing: Strategies for competitive advantage. Recent Researches in Economics, pp.51-56.
Frank, B., 2012. The formation of consumer attitudes and intentions toward fast-food restaurants. Managing Service Quality: An International Journal.
Genoveva, G., and Siam, S.T., 2017. Analysis of marketing strategy and competitive advantage. Journal of Economic & Management Perspectives, 11(1), pp.1571-1579.
Hanaysha, J., 2016. Building brand equity through customer service: A study on the restaurant industry in Malaysia. Journal of Research in Business, Economics, and Management, 5(5), pp.678-685.
Islami, X., Mustafa, N., and Latkovikj, M.T., 2020. Linking Porter’s generic strategies to firm performance. Future Business Journal, 6(1), p.3.
Kaur, H., and France, A., 2018. Gaining a competitive advantage in the fast-food industry.
Kharub, M., Mor, R.S., and Sharma, R., 2018. The relationship between cost leadership, competitive strategy, and firm performance. Journal of Manufacturing Technology Management.
Sidhu, S., and Mather, G., 2017. How to increase the sales revenue using a focus differentiation strategy.
Statista. (2019). Vast Majority of Americans Interested in Healthy Foods. Available at: https://www.statista.com/chart/16796/us-interest-in-healthy-food/
Wei, H., and Davis-Ngatai P.S., 2017. How to gain a competitive advantage in the healthy fast food industry?.
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