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Competitive Advantage of Restaurants

Info: 2849 words (11 pages) Essay
Published: 13th Sep 2017 in Business

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  1. Introduction

Companies consistently obtain a greater level of profits than rivals receive a competitive benefit (@@@). Various concepts refer competitive advantages as a method of clarifying how operation decision or sale factor is capable of leading to exceptional financial performances. In order to obtain a competitive advantage, an organization must produce remarkable values for customers by proposing lower fares than rivals in the equivalent sector; or by supplying unique service that customers have the willingness to pay at a superior fee. Utilizing this definition, a restaurant must construct a competitive strategic plan that is capable of establishing a fruitful as well as long-term position in comparison with its food service opponents. Only improving on the effectiveness of operating cannot supply a competitive advantage, since even if an organization produces a valuable measure, the opponents will make effort to imitate it. Thus, just by imitating the most excellent practice, larger firms will not only expand their appearance on customers, but also earlier than their opponents. Additionally, if every rival gets complete advancement in functional efficiency, an enhancement will not literally be noticed by any customers. The stake does not rely just on the fulfillment of the similar activities as opposing firms. Firms hoping to acquire a competitive advantage via long-term uniqueness in fare or expense are condemned to receive substantial recessions. A variety of full-serviced casual dining restaurants, such as TGIFridays or Harvester, which were once acknowledged as the first-rate competitors with regards to ”operational efficiency” are now facing a downturn in profitability. Aggressive competition is regarded as the practice against the firm’s capacity to sustain distinctness in applicable prices and expenditures. To decide whether between a restaurant and others are in one identical food sector there are or not similarities with regards to parallel price and parallel expenses, it is advised to take advantage of Porter’s VCA, particularly since those dissimilarities are driven by the activities of the restaurants’ managers. The value chain of a firm is a series of all activities happening within it and produces values and creates expense. Activities, and value chains where they are contained, are the keystone of long-term competitive advantage.

  1. Discussion

In order to achieve and maintain a competitive advantage against other rivals, a restaurant fundamentally has to decide between the two selections (Porter):

  • To decide the most effective method to challenge, and in this choice, the restaurant might search for obtaining goods or service which it can obtain at lower expenses than the ones from opponents, or by differentiating, increasing values in sectors that consumers acknowledge the importance.
  • To decide the activities that the restaurant hopes to gain competitive advantage.

Beginning from the notion that a firm’s strategic plan should be decided in a pathway leading to a beneficial relations between applicable fare and applicable expense, Porter (@@) stated that the competitive advantage of a firm is connected to the production of higher values, for the efficient utilization of capitals. Thus, competitive advantage is provided by the remarkable performances accompanied by the capacity to manage in a tenable approach of high fares, low expenses, or both. To better acknowledge the tactics that should be conducted to have impact on the fares and expenses, the restaurants’ manager should diagnose the levels of current activities happened in the restaurant, the ones that form the stuffs where it is superior at. The sorts of activities which a restaurant executes for designing, producing, selling, distributing as well as supporting the goods via a variety of services is known as the value chain. In proper sequence, the value chain is a component of greater value systems or common congregation of the activities participated in producing values for the eventual consumer, no matter who execute these activities.

Value chain term was proposed by Porter, yet, most of the managers utilize it to mention a set of linked activities. However, numerous managers neglected the significance and intention of the value chain. The value chain is crucial since it is an extremely efficient instrument, via which a manager can decompose the firm into its related activities strategically, in order to concentrate on the ones that are origins of competitive advantage. Therefore, fundamentally these particular activities can be determined within a restaurant, which lead to higher fares or lower expenses. Via this framework, restaurants’ managers can classify methods to decrease expenditure and differentiate goods and service they implements within their restaurants. As said above, Porter has illustrated that competitive advantage is formed as well as sustained when a firm get the primary activities either exceptionally lower prices, or extremely better than rival companies. Diagnosing a restaurant is relied on increased values that are gained by executing every activity. In an opponent diagnosis, there might be a circumstance at which this method might not be efficient, and a clarification for this could be that with regards to expenses, the restaurant might decide to volunteer for being more costly in order to become strongly differentiated goods, or might decide to reduce all activities that is not a leading factor for cost, so that they can secure the dominance of expenses. In fact, the common standard is that the major activities are executed distinctly, and those assisting activities are more of the homogeneity. The standard appears to be convincing because the establishments of competitive advantage relies explicitly on the execution of the primary activities in a firm.

With regard to supporting activities, the answer is more nuanced problem as they may be common to several strategic segments. Virtually all segments are likely to experience high influence from organizations’ management, the culture of the organization or the way of organizing.
The reason which required the construction of the internal value chain of an organization also applies to the sharing of 
work between this and its various partners, upstream and downstream of it, so that there can be set a new value chain, called the external value chain.
External value chain must be drawn to take account of other participants in the business of the organization who have a significant influence on internal chain. These key participants are those who have a real and decisive influence in obtaining competitive advantage and this category may include: major suppliers, distribution channels and market sectors, i.e. the rearrangement of marketing sectors. 
External value chain is in fact an analysis of pathways in which organizations operate, with a major influence on the creation of an organization’s competitive advantage and enables highlighting existing links, in terms of activities between participants in succession: suppliers – organization distributors – customers.
Through this analysis of the external value chain, it can be made possible [4]: 
  • to observe the current distribution of activities between the organization, suppliers, distributors and customers and comparing costs with obtained benefits;
  • to explore possible ways of reducing costs through better coordination between the organization and its suppliers and distributors and even the transfer of activities in order to reduce cost of sales;
  • Other forms of image-sharing activities or tasks and examination of a balance of forces between the “actors” of the chain. 
The construction and analysis of the value chain, both external and internal, have as essential purpose the understanding of ways to add / re-add the value of products and services offered by the organization. The re-awarding of value is to refuse trivializing products and thus recreating a differentiation of the offer from that of competitors. In this respect, the external value chain must be designed so as to allow the organization to maximize creative capabilities, and thus exploit the internal value chain.

Particularly in the restaurant industry, its different cultures also have an effect on producing values, since cultures consist of the way individuals execute the services and meals, which if it succeeded to enhance the competitive advantage as well as is challenging for rivals to imitate.

Depending on the food service sector to which managers targeted, several types of activities are crucial for the competitive advantage to a certain extent. It is critical for manager and stakeholders to analyze important values forming activities that are particular to an exact sector. In the circumstances of numerous rival business standards (such as: fine dining restaurant with take-away option), it is critical to follow the value chain for each of them, and then to determine the dissimilarities among the opponents. Progressing on the next stage in the value chain analysis, following the outline phase of the food service sector that the restaurants is component of, is to design and then compare it to its own value chain. As to compare, the value chain of the restaurant is placed aligned with the sector chosen one and again it will be diagnose the distinctions of both. The function of this observation is to recognize these activities within the food service sector that the restaurant performs as well as to acknowledge all main steps as in the progress of values production. The step is also a method to make comparison whether the vale chains of rival restaurants, and via this it could be clarified which value producing activities of individual restaurant are and the dissimilarities among those restaurants with regarding to values production. If after the comparison step, it can be diagnosed that both are identical, the restaurant can claim that both businesses are enrolled in a rivalry for becoming ”the best”. Thus, the analysis can assure that the distinguished restaurants do not want to obtain the ”uniqueness” for the reason of holding a competitive advantage. Subsequently, the long-term achieved profits from the food service industry can be decreased.

Advancing on the analysis of the value chain, Porter (@@) suggest concentrating on the elements which decide the fare for these activities which create or might create an influence on differentiations. With regards to this, the restaurant could form greater values of the products or service supplied by executing several activities in a different method, or implementing other activities than the ones of rivals by permitting them to increase values without rising the calculated expenses. The values for purchasers can happen along with the whole value chain as well as can derive from: restaurant or meals’ designs, the choices of ingredient utilized or the cooking process, or the experiences during the period of having meals there or after/before services and assistances. Whether the customer is a huge group or only a person, analyzing how it matches into the general value framework is crucial to address the appropriate way to produce values for the consumer.

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The upcoming stage in the VCA is to concentrate on activities that create expenses. For this, exceptional care should be distributed to the activities of a restaurant that produce a great or rising proportion of expense. Relative expense that is taken up by a restaurant is calculated by the cumulative expenditure of executing every activity in the value chain. As declared above in the diagnosis, there are or there might be distinctions between the expense system of a restaurant and the one from the opponents. Subsequently, every expense connected with each activity, consisting of not only explicit operational expenses and resource expenditures, but also implicit expenses that emerge when executing each activity should also be calculated to the most accurate extent. Thus, restaurants’ managers must identify particular implicit expenditure that can be eradicated if specific activities could be interfered with. Regarding each activity, the expense benefit or loss relies on activities which produce expenses or on numerous determinants influencing the relative expense. In favor of determining the actual values of expense diagnosis, all the information accessible to the restaurant should be researched, so that the managers can recognize which actions should be conducted to enhance activities.

3. Conclusions

The value chain analysis acts as an crucial role in the process of diagnosing restaurants’ competitive advantage since via this framework the managers can gain insights to the approach of actions for expenses and the impacts they ha on the tactics which the restaurant has conducted. Plus, via the value chain, possible resources for differentiating the food sectors or services proposed by the restaurant can be recognized. As an outcome to the VCA, restaurants’ managers are capable of seeing each activity not only as expenditure but also as things which should increase values regardless of how small-scale the completed restaurant is. Secondly, the impact of the utilization of value chain is that it pushes managers to observe beyond the boundary of their own restaurant as well as its activities, and to realize that they are components of a greater values structure, including other opponents. Consequently, each representative of the values structure needed to acknowledge the responsibility it has to fulfill during the entire process of producing values, no matter the length it takes to approach the eventual consumer. The self-reliance of the value chain has extensive associations. Thus, the authorization utilized cross boundary, for example, between the restaurants and their customers, or between the restaurants and their ingredient providers, or between the stakeholders of the culinary enterprises, can become as crucial to the strategic plan as the managements advanced within the restaurant itself. The value chain was a main innovation for the diagnosis of relative expenses and the values produced in a restaurant. The value chains assist managers to concentrate on activities that generate expenses and produce values for consumers.


Why are several restaurants more fruitful than others in an extended duration of time? The article has stated a variety of sources and capacities which are constructed in an internal extent, that are served as the foundation for competitive advantage. Actually, since the aggressive environment in the hospitality sector is becoming more unpredictable, a concentration on internal capitals might be a more stable and profitable way to strategies formation. In the recent time, researchers have illustrated that fare lower than opponents end up in lower profit per accessible customer. Obviously, this idea backs up the notion that in insecure periods, an organization is probably to guarantee an advantage by concentrating on customer orientation as well as to avoid the trap of switching tactics to match opponents’ behaviors. After utilizing the Porter’s VCA, it is crucial to the managers to select a strategic plan that make use of the company’s focus competency (@@). @@@ also stated that constructing information technology (IT)- reliance strategy will improve a restaurant’s capability. Other findings have illustrated the spending on intangible elements, such as branding and consumers’ contacts, or the food and beverage staff will support the profitability (@@@). Resources advancement is not just to leverage current sources; it is also considered with constructing new capacities for the prospect. Hospitality experts would be considered to concentrate attentions inbound by constructing, renewing, as well as steadily re-producing the resources essential to supply competitive advantages. As concentrating on internal capitals is recommended in period of unpredictability, opponents must not be neglected. In order to entirely acknowledge competitive behaviors, the restaurants’ managers should integrate the common definitions of market on the foundation of property category with other more significant definitions of opponents. Byrson @@@ also illustrated a cost-based approaches to define market and a more complicated procedure to gather opponents’ yield a brand-new and distinct view on the question supporting Porter’s analysis of who is your competitions.


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