Operation management: Hard Rock Cafe
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Published: Tue, 16 May 2017
It is widely acknowledged that operation management has become obviously an essential ingredient for corporate survival and growth in a highly competitive market. Indeed, operation management which is defined as activities that relate to the creation of goods and services though the transformation of inputs to outputs, makes enormous contribution to generate directly customer value and gain competitive advantages for business development (Jay Heizer and Barry Render, 2010, p.36). In other words, operations management plays a strategic and tactical role in satisfying customer needs and strengthening their competitive position in the market place. Therefore, sheer evidence has indicated that many companies consider operation strategy as a key success factor to drive their expansion. Hard Rock Café, one of the most universally recognized trademarks, is good example for this.
The purpose in this essay is to analyze the problems in depth operation management strategy in Hard Rock Café as a result of drawing essential conclusions in relation to their strengths and weakness. In addition to this, the essay also highlights the opportunities and challenges of Hard Rock Café in expansion plan in “gateway” cities like Hanoi.
QUESTION 1: OPERATION MANAGEMENT STRATEGY OF HARD ROCK CAFÉ
It is undeniable that Hard Rock Cafe has become one of the most successful internationally recognized brands anywhere in the world. The first key success of HRC is its mission which is to spread the spirit of rock’n roll by creating authentic experiences that rock. This mission statement is represented core value which HRC is willing to bring to customers and love music people over the world. With immortal commitment and motto “Love all – Serve all – Take time to be kind – All is one – Save the planet”, HRC has built differentiated cultural value worldwide. The meaningful slogan has not only inspired intensively but also made positive influences to change people’s mind and behavior. Actually, HRC has created as a wonderful destination welcoming everyone regardless of age, sex or social background.
The second key success is implementing effectively and flexibly corporate strategy and business strategy. With the goal of expanding the company’s activities, growth strategy is the most effective corporate strategy for HRC. Indeed, it provides an opportunity for HRC to achieve growth in sales, assets and chance to take advantage of experience curve to reduce the cost of production thereby increasing profit (Wheelen & Hunger, 2004, p. 138). HRC has utilized successfully international entry options in a horizontal growth to expand in international market. By expanding products into other geographic locations through franchising, HRC has achieved higher market share and established the presence in many countries.
In term of business – level strategy which is about how to compete successfully in particular markets (Gerry Johnson, 2010, p. 7), HRC’s performance is driven by differentiation strategy to aim at broad mass market and involves the creation of a product or service that is perceived throughout its industry as unique (Wheelen & Hunger, 2004, p.119). In particular, in the service sector, HRC has extended their product differentiation through experience differentiation which engages a customer with a product through imaginative use of the five senses, so the customer “experiences” the product (Heizer & Render, 2010, p.68).
The third key success is operation management strategy especially in term of product design, human resource and location. It is widely accepted that product design in service sector is challenge because they have unique characteristic and high customer involvement. Therefore, in order to implement business strategy, HRC has created innovation in manufacturing by mass customization which requires that people, process, units and technology reconfigure themselves to give customers exactly what they want, when they want it (Heizer & Render, 2010, p. 83). This makes flexibility and quick responsiveness for ever changing environment. In fact, HRC does not only provide a custom meal but also a dining event. The result is low cost, high quality and making numerous contributions to product development. However, under the control of mass customization, no staff knows what the next customer will want. Therefore, it is becoming increasingly difficult to predict the actual customer demand and create a long term vision of the company’s product.
Furthermore, HR offers their customers with “differentiated experience” through quality and unique food, music memorabilia-packed atmosphere, big-screen videos, and active staffs who can tell story. The survey has indicated that score of quality food and service is not 7 in the rank from 1 to 7, the food and service is failure (Heizer & Render, 2010, p. 56). It implies that quality of good and service in HRC is very good. Moreover, HRC is worldwide rock ‘n’ roll symbol with significant role as collector storing important mark in this music flow like “living museum” because of its unparalleled memorabilia collection of classic guitars and other instruments, posters, costumes, lyric sheets, photos and more. The result is a “dining experience” rather than a meal. In addition to this, customers also experience some tweaking of menus for local taste thus appealing many tourists from over the world (Heizer & Render, 2010, p. 83).
In term of product packaging, it is evident that packaging for service will provide a tangible reminder of the product though logo. The logos contribute to reduce the perceived risk of purchase and can act as a form of reinforcement, thereby increasing the chance of repeat purchase in the future (Quester, 2006, p. 282). HRC’s logos are displayed high on city centre commercial buildings in order to build prestige and public visibility. For example, HRC in Vietnam is located in buildings Kumho Plaza in HCM City.
“In the new economy, competition is global, capital is abundant, ideas are developed quickly and cheaply, and people are willing to change jobs often. In that kind of environment all that matters is talent. Talent wins.” (Fishman, 1998, p. 104). The quotation indicates an important role of human resource in the knowledge economy. In other words, human resources are regarded as the most important asset making the differentiation for enterprises. Indeed, by success in HMR strategy in term of recruitment, T&D, and compensation, HRC has achieved competitive advantages.
At the cutting edge, the trend in the use of the website and homepage as recruiting devices has developed dramatically. By Internet recruitment method, HRC possibly gain an edge of attracting talent candidates through corporate website www.hardrock.com .In the website, HRC provides a place to post information of the company including history, human resource information and others. Especially, recruiting advertisement “This place is revolutionary… Why? Because you can be who you are – because who you are defines youâ€¦This isn’t just a job; it’s a way of life.” in the homepage do not only represented obviously HRC’s mission statement, but also impact positively on candidates’ mind and encourage them to express and respect themselves in HRC.
In addition to an effective recruitment method, based on corporate growth strategy, HRC has generated a high degree of labor diversity in term of ages and cultural background as a result of higher productivity and making competitive advantage for the company. This also enlarges the pool of applicants as well as contributes to build HRC’s culture.
From the firm’s respective, service staff is crucially important part as key determinant of customer loyalty because they are a core part of the product representing the firm’s brand. Therefore, it is necessary for the firms to recruit right staffs. The old adage “people are your most important asset” is wrong. The right people are your most important asset.” Jim Collins commented. Moreover, majority of HRC’s staffs are font-line staff who play a key role in anticipating customer’s needs, customizing the service deliver and building close relationships with customers thus creating customer loyalty. Hence, HRC has selected their staffs according to critical skills in job analysis including interest in music and ability to tell a story, bright and positive attitude (Heizer & Render, 2010, p. 445).
After recruitment, HRC has implemented training and development which are the heart of a continuous effort designed to improve employee competency and organizational performance (R. Wayne Mondy, 2006, p. 214). New employees have participated in an orientation program with 2- day training class for new employees. The purpose of this program is explaining the employment situation including the job, company history, policies and rules, compensation and benefits, corporate culture, dealing with change and socialization. Furthermore, it is admitted that one site pre- opening training in HRC is different and creative because they has utilized CD covering kitchen, retail, and front of the house service (Heizer & Render, 2010, p. 445). These results in stimulating ability of acquiring knowledge and improve studying spirit for new employees. In addition to orientation program, HRC’s staffs have participated in continuing employee training embracing 12-week corporate manager and ongoing training and development to broaden their skills namely interpersonal and technical skills, products and service knowledge and develop both personality and professionalism. Thus, there is no doubt that HRC employees are not only HRC has trained experience and professional workforce with competent in their job skills and passionate about music.
Moreover, HRC has provided a wide range of opportunities for employees to develop their career path by high level of internal promotions. Actually, 60% of the managers are promoted from hourly employee ranks. Additionally, HRC has created a breakthrough in building self-motivated staffs with employee bill of rights and substantial employee empowerment. It is acknowledged that the strategy of empowerment is the most useful way for HRC because the company’s business strategy is based on competitive differentiation in unpredictable environment. It implies that the employees can be internally motivated to perform effectively and increase the capability of self-control and self-direction to make good decisions and produce good ideas for operating business. Indeed, the staffs possibly find solution to service problem and make appropriate decisions about customizing service delivery and save time to seek permission from supervisor as a result of increasing customer satisfaction.
Another basic activity that leads HRC to successfully manage its people is compensation. HRC takes all of its effort to make employees feel like they are part of the company because they are sources of new idea for HRC to develop. Compensation and benefit are alive through all levels of positions at HRC. The company motivates employees in many different ways in order to prove that it does not only care about profit but also employees’ satisfaction. To begin with, HRC always concentrate on payment policies for employees. Outstanding pay and benefit and payment equality for both part-time and full-time employees are remarkable characteristics in HRC’s direct financial compensation. What’s more, outside volunteer workers is encouraged to foster a bond between the workers and their community (Heizer & Render, 2010, p. 445).
Additionally, HRC has also provided nonfinancial compensation policies for employees by job environment that is considered as a key element in a total rewards system. The most noticeable point in working environment in HRC is flexible time. HR General Manager Ken Hoffman has made effectively a flexible schedule for all employees (Heizer &Render, 2010, p. 647). It does not only allow employees to spend more time on taking care of their family and community but also expand their opportunities. For instance, part-time employees such as students get probably continuing and higher education. Hence, employees are always generally happy and grateful as a consequence of employees’ satisfaction, low turnover and higher productivity. The second is unique culture which has contributed enormously to achieve high employee commitment. In fact, the HRC culture brings a fun, healthy, nurturing environment for employees and allows for acceptance of substantial diversity and individuality (Heizer & Render, 2010, p. 445). Moreover, HRC has given feedbacks for their employees through “ranking” system based on their seniority (Heizer & Render, 2010, p. 647). Therefore, the staffs would feel their importance to HRC and HRC’s respect to them thus reducing turnover and increasing productivity.
In term of location decision, because target customers of HRC’s customers are tourists, HRC has elected multi-domestic strategy which operating decisions are decentralized to each country to enhance local responsiveness (Heizer & Render, 2010, p79). Currently, HRC has expanded globally in destination cities in Europe, Latin America and Asia by franchising which is a popular way to expand delivery to multiple sites without the level of investment capital that would be needed for rapid expansion of company owned and managed sites (Lovelock & Wirtz, 2004, p. 194). It is an appealing strategy for HRC’s growth-oriented strategy because franchising is highly motivated to ensure customer orientation and high-quality service operation. Franchising helps HRC achieve a larger scale with a more recognizable brand name, offer franchisees fewer supports but long-term contracts. Moreover, franchising is an effective way to reduce cost, avoid political risk and cultural differences and connect local knowledge. However, perhaps, HRC has to face with some challenges such as losing control of delivery system or break-down contract with franchisees because franchisees gain experience and believe that they could operate the business without HRC’s support.
Moreover, location decision also depends on many important external factors such as political, economic, social-cultural, technological, legal and environmental factors. For example, site location tends to focus on city center in destination cities because they are place attracting a plenty of tourists with dense population, dynamic economy, numerous sport, festival events, hotel and entertainment, convenient transportation (Heizer & Render, 2010, p. 369, 370).
To sum up, it is admitted that HRC is one of the most famous brand name in the world. In recent years, based on successful strategies, it has obtained a wide range of achievements such as high customer satisfaction, low turnover, and unique culture. Nevertheless, it possibly faces with few risks such as break-down contract with franchisees, difficulties in expressing product warranties and predicting actual customer needs.
QUESTION 2: OPERATION MANAGEMENT CHALLENGES AND OPPORTUNITIES FOR HARD ROCK CAFÉ IN HANOI
With global expansion strategy, it is inevitable for Hard Rock Café to plan to appear in “gateway city” Hanoi next years. In order to build business plan in Hanoi, HRC identifies necessarily opportunities and challenges in operation management in Hanoi. Hence, HRC need to begin with analyzing external factors influencing significantly on its operation. PEST analysis which focuses on four key aspects of external environment: political, economic, social and technological is considered as the best method (Harrison, 2009, p. 14).
To begin with, it is acknowledged that Vietnam is developing in political stability under control only party, Vietnam communist party. Moreover, Government always encourages foreign investment in domestic market.
As for economic factor, according to General Statistic Office, Vietnam has experienced step by step economic recovery period with remarkable achievements. Economic situation in nine months of 2010 shows a rather stable and positive growth. Economic growth rate was presented in GDP in nine months of 2010 increasing by 6.52% as compared to nine months in 2009.
To regard with service sector, the total retailed sales of consumer goods and services in first nine months of 2010 increased by 25.4% against in the same period last year. The most impressive sector was found by tourism rising by 37.4%. International visitors in first nine months of 2010 rose by 34.2%.
However, Vietnam also has confronted with the alarming problem in relation to inflation and interest rate. This results in increasing in material price. What’s more, average CPI for first nine months of 2010 increased by 8.64% compared to the same period of 2009 according to GSO.
In addition to high inflation and interest rate, it is becoming increasingly that high competition in Hanoi cafe market will be enormous challenge to HRC. Many companies will be negatively affected by increasing competitive pressures. At the present, HRC has two main competitors: My Way and Highlands.
At the moment, My Way is regarded as the highest-class and most luxury brand with five shops located in the most convenient and beautiful streets in Hanoi city. It is undeniable that the most attractive features in May Way are the European modern interior decoration, brilliant water-drop light system and diversity of facilities designed by the top Vietnamese architects. Furthermore, it provides various good quality foodstuff and soft drinks and collection of 100 kinds of beers from 60 nations in over the world. Secondly, Highlands Coffee is a stylish brand that always brings delicate coffee experience to customers. Highlands Coffee is the combination between modern and classic Eastern and Western style. Customers have undergone the feeling of a part of dynamic life and Vietnamese unique cultural-traditional value through café culture, service culture and product developing culture.
In term of social factor, the first point in social structure is the change in population rate which was estimated being 86.97 million in 2010. However, in actual fact, majority of high and medium income people concentrate on big cities such as Hanoi, Ho Chi Minh, and more. Furthermore, the researchers said that 77% people at the age of 15 participate in workforce in April 2010.
The second highlight point was represented by education. Vietnamese people tend to get higher education more than ever. Total number of students passing for entrance exams of all three phases in the school year 2010-2011was 1,589,000, rose by 7.2% against the last school year. This implies that enterprises would recruit better skilled employees in the future.
Moreover, the standard of living of employees has been improved because of higher salary from a minimum level of 650,000 dongs to 730,000 dong per month. Consumers also tend to realize a greater degree of brand awareness. Additionally, there is a remarkable change in people life style especially young people. For example, young people and teenagers nowadays tend to going to the café in free time or prefer uniqueness to common thing. Another point is an increase in the trend of part-time jobs in student life.
The final factor, technology has played an important role in this sector because extensive coverage of Internet has generated establishment of many Wi-Fi café shops in recent years. Moreover, recruitment by Internet has become popular way to employ a plenty of candidates.
In the light of PEST analysis, it is obvious that HRC would have a wide range of operations management opportunities and challenges for its expansion into Hanoi. Initially, Hanoi external environment brings a lot of opportunities to HRC. To begin with product design, compared to local competitors such as My Way and Highlands Coffee, HRC would create “differentiated experience” to customers. Furthermore, the change in young people’s music preference would help HRC to make a new wave appealing many customers. Finally, HRC also bring to customers a unique local menu with various Vietnamese and American cuisines.
As for human resource, there is no doubt that Vietnamese social-cultural background is the most attractive feature for HRC to implement its human resource strategy. Firstly, dense population with rich labor force would create large the pool of applicants and diversity of employees in term of age, geography and social status. Moreover, trend of higher education has created opportunities for HRC to recruit a plenty of better skilled employees. In addition, popularity of Internet recruitment would make contribution to reduce human resource cost and enlarge candidates.
In term of location, political stability will create many flavor conditions for HRC to implement franchising strategy in Hanoi city. Apparently, Hanoi city is one of the famous tourist destinations thus quantity of international and regional tourists has increased dramatically annually especially in festival and sport events. In particular, Hanoi center is ideal place for HRC to build a new coffee shop. There are many reasons for this. Firstly, Hanoi young people often gather in the centre in holidays and festivals. Secondly, good transportation system would take into account HRC’s future growth. Moreover, employment and educational opportunities are the main attraction of Hanoi centre.
On the other hand, HRC is under the threats from many different things. To regard with product design, high inflation and interest rate cause negative impact on wage and materials such as coffee, agricultural products thus leading to increase in production cost. It also makes difficulty for HRC to create competitive price compared to My Way and Highlands Coffee.
In term of human resource, high competition has caused many difficulties for recruitment and employee commitment and increase turnover. New employment law such as increase in basic salary also impacts HRC’s compensation policies.
Finally, HRC should put effort into its location analysis because it would confront with some challenges. High density of restaurants and nightclubs and high price in real estate market put enormous strain on HRC’s location decision. What’s more, traffic jams is always Hanoi city’s serious problem thus impact negatively customer’s mind. Eventually, competitors’ distribution network is a significant element influencing directly to location decision. Because HRC is start-up business in the future, the most convenient places in Hanoi belong to Highlands, My Way and more.
All things considered, I believe vigorously that HRC would become successful coffee shop in Hanoi City. By multi-domestic strategy, Hard Rock Café is considered as a cultural bridge between worldwide cultures.
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