The business environment of Radix Fried Chicken
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Published: Mon, 08 May 2017
The objectives of doing report is to study and understand the whole business environment better, to apply our knowledge of management of strategy in a real business environment by analysing the general environment and using the appropriate strategies in a business situation. Besides that, this report is also done with the motive of guiding RFC in the management of their business.
1.3 Scope of Report
This report covers the background of the organisation, situation analysis, strategic options for the organisation, key selection criteria and recommendations for the organisation.
1.4 Limitations of Report
This report may not be entirely credible and may not be very detailed. This is due to the fact that we have difficulty obtaining information and details on Radix Fried Chicken as the information we gather online is limited and our interviewee, who is the supervisor of Mydin MITC’s RFC branch, could not answer most of our questions with eloquence and could not provide us with the details we wanted. Furthermore, certain parts of our report are written based on our observations, knowledge, understanding and analysis.
2.0 Background of Organization
Radix Fried Chicken (RFC) was established by Tuan Haji Ismail on the 26th of May 2008. The first RFC branch, which was opened in Lagenda Heights, Sungai Petani, Kedah, started its operations on 1st June 2008. The opening of RFC is 100 percent owned by Islamic Bumiputeras.
RFC is one of the subsidiary companies under HPA industries Sdn Bhd and is a fast-food based concept restaurant based on the Islam Syari’ah law. All requirement aspects of the Syari’ah ensure RFC’s quality from its storage of raw materials, its halal quality and cleanliness.
The management and operations aspect of RFC practices the ethical principal of Islamic workers such as Muslim culture and discipline; and also the practice of praying before the beginning of each working day.
In the current situation, the market and demand for fast-food is high. It is found that the fast-food concept market in this country is monopolized by the non-Islam community and 90 percent of their brands originated from overseas. Upon the realization and responsibility how important halal food choices are, RFC is established to give halal food choices to Islam people, especially Islam people in Malaysia. With the opening of their first restaurant in Sungai Petani, RFC is determined to open 400 more restaurants in the whole of Malaysia.
3.0 Situation Analysis
3.1 General Environment Analysis
General environment is the factors and conditions composed of dimensions in the broader society that influence an industry and the firms within it. These dimensions are grouped into seven environmental segments, which are demographic, economic, political/ legal, sociocultural, technological, global and physical environment.
Demographics or demographic data are the characteristics of human in a population. Demographic trends describe the changes in demographics in a population over time. Both distributions and trends of values within a demographic variable are of interest. The target market of Radix Fried Chicken is fast food lovers and their target customers are mainly Muslims but also at other races.
Economic forces refer to the nature and direction of the economy in which business operates. Economic factors have a tremendous impact on business firms. The impact of growth or decline in gross national product and increases or decreases in interest rates, inflation, and the value of the dollar are considered as prime examples of significant impact on business operations. Malaysia is currently experiencing economic growth and expansion at a slow rate. Even though the current economic situation does not affect the fast-food much, Radix Fried Chicken experienced a slight improvement in business. This may be because Radix Fried Chicken’s products are cheaper compare to its competitors.
Political-legal forces include the outcomes of elections, legislation, and court judgments, as well as the decisions rendered by various commissions and agencies. The political sector of the environment presents actual and potential restriction on the way an organization operates. Radix Fried Chicken (RFC) is a Muslim based restaurant with a halal status. Therefore, RFC must abide the rules and regulations set by JAKIM (Jabatan Kemajuan Islam Malaysia) or the Halal Industry Development Corporation.
Social forces include traditions, values, societal trends, consumer psychology, and a society’s expectations of business. The following are some of the key concerns in the social environment: ecology (e.g., global warming, pollution); demographics (e.g., population growth rates, aging work force in industrialized countries, high educational requirements); quality of life (e.g., education, safety, health care, standard of living); and noneconomic activities (e.g., charities). Malaysia is currently experiencing a decline in the national birth rate as well as a general reduction in the size of a typical family. With this change in family structure, consumers are spending more on themselves and dining out more frequently. Furthermore, the younger generation in today’s Malaysian society has a strong liking for fast-food. These sociocultural changes in Malaysia contribute to RFC’s business.
Technological forces influence organizations in several ways. A technological innovation can have a sudden and dramatic effect on the environment of a firm. Technological developments can significantly alter the demand for an organization or industry’s products or services. Technological change can decimate existing businesses and even entire industries, since its shifts demand from one product to another. Moreover, changes in technology can affect a firm’s operations as well its products and services. Many organizations are increasing their usage in technology in their operations. Radix Fried Chicken has chosen to use Posiflex at the cash register which enables the staff to control the money in a safer way. Besides that, Radix Fried Chicken also uses Robotcoup to make their coleslaw.
The global dimension of the environment refers to factors in a country that affect an organization. Although the basic management functions of planning, organizing, staffing, leading, and controlling are the same whether a company operates domestically or internationally, managers encounter difficulties and risks on an international scale. Whether it be unfamiliarity with language or customs or a problem within the country itself (think mad cow disease), managers encounter global risks that they probably wouldn’t have encountered if they had stayed on their own shores. Many organizations in the world are heading towards globalization. Radix Fried Chicken is following this trend and is planning to expand their business by opening branches of RFC in China, Indonesia, Saudi Arabia and other middle-eastern countries. In order to make their globalization efforts work, they have to ensure that their products are in tip-top condition and improve their inventory management by making sure that their supplies are always consistent.
7) Physical Environment
The physical environment refers to the external surrounding and conditions in which something exists. It can be described as the energy consumption, practices used to develop energy sources and also minimizing a firm’s environmental footprint. It is also related to the trends oriented to sustaining the world’s physical environment and the influence of ecological, social, and economic systems. In their attempt to be socially responsible and eco-friendly, Radix Fried Chicken uses organic chicken for their fried chicken. Organic chickens are healthy and are safe for the consumption of consumers as these chickens are not given any antibiotic growth promoters and are fed with feed which is free from genetically modified feedstuffs.
3.2 Industry Conditions ( Porter’s Five Forces Analysis)
The industry conditions also known as Porter’s five forces analysis is a framework for the industry analysis and business strategy development formed by Michael E. Porter. This framework explains the five forces that determine the competitive intensity and attractiveness of a market.
1) Threats of new entrance
RFC is facing competition, as it is a new entrant in the market, it was opened in 1998.
It threatens the market share of already existing fast food companies who are its main competitors. RFC needs to come up with methods to differentiate their product in order to survive in the market
2) Bargaining Power of Suppliers
RFC gets most of its input products, stocks and supplies (herbs) from HPA products that are manufactured in the HPA factories. Switching costs could prove to be high should RFC consider, due to the effectiveness of the suppliers.
3) Bargaining Power of Customers
RFC has provides cheaper priced food as compared to others, which may act as an advantage for them.
4) Threat of Substitute Products
RFC’s direct competitor is KFC as they tend to sell the almost similiar food and beverages.
5) Intensity of Rivalry
KFC which is RFC’s main competitor has an advantage over RFC as it is well established, and also is a global enterprise. RFC on the other hand is new and still has a long way to go. A strategy that could work their way is their much targeted ‘Halal’ branding which has a huge potential for success. For RFC to prosper, it has to focus on creating a strong brand so that it can be able to compete with the already existing fast food chains such as MacDonald’s and KFC.
A stakeholder is a person, group or organization that has direct or indirect stake in an organization. Stakeholders are a group of very important people to an organization because they can be affected or may be affected by an organization’s actions, decisions, objectives, and policies. In this case, Radix Fried Chicken’s key stakeholders are their customers, employees and suppliers.
1) Customers/ consumers
RFC’s main customers are mostly Muslims, especially Malaysian Muslims. However, they also serve customers who are non-Muslims who are of different religion, races and ethnic groups as Malaysia is a multi-cultural country with diverse cultures. Therefore, all the foods in their menu are based on the halal standards. Customers or consumers are one of RFC’s stakeholders because RFC is responsible for their customers’ health, time, money and also their relationship with them (customers).
All of RFC’s employees are Muslims because they only employ Muslim workers. Due to this, their work practices, culture and regulations are based on the Islam Syari’ah law. RFC is responsible for their employees’ safety and rights.
RFC suppliers are HPA. They obtained their herbs from HPA in Kedah and Chicken from Perlis. RFC is at stake with their suppliers because they have to ensure that they pay their suppliers on time.
3.4 SWOT Analysis
SWOT analysis is a method of strategic planning used to evaluate the strengths, weaknesses, opportunities, and threats involved in a project or in a business venture. SWOT analysis also involves specifying the mission and vision of the business venture. It can also be a tool for auditing an organization and its environment. SWOT analysis is generally used by businesses or organizations to identify the key internal and external factors that are important to achieve objective in the particular company.
Basically, the internal factors mean that the strength and weaknesses in the internal management to the organization. For example, the firms must identify their strengths and weaknesses in resources, capabilities and core competencies so that they can able to identify whether their organization have core competencies in areas required to achieve a competitive advantages. Alternatively, they could decide to outsource their weak function or activity in order to improve customer’s value towards the firm’s products or services. Inversely, external factors are the opportunities and threats presented by the external environment to the organization. An opportunity is a condition in the general environment that if exploited effectively can help an organization achieve strategic competitiveness in the market. However, a threat is a condition in the general environment that may hinder organization efforts to achieve strategic competitiveness which may cause trouble for the business.
The SWOT analysis of RFC is summarized as follows:
Their foods are unique and different compare to other fast-food restaurants as natural herbs and spices are used as ingredients in their food. For example, their Radix Cola and fried chicken are made from herbs.
Good customer service. RFC has excellent customer service as the staffs are polite and will patiently listen to their customers’ demands. They are also efficient in the serving of their food as food is served to customers within a short period of time upon ordering.
Has a good reputation for the excellent quality control in their food.
Good balance of budget. RFC managed to balance their budget well in order to achieve their low-cost strategy where they try to minimize their costs and price their food at a relatively lower price compare to their competitors.
Weak brand presence and image. Many people do not know about the existence of RFC.
Insufficient used of technologies. RFC does not use much technology in their production or service.
Financial constraints.RFC does not have much financial resources.
Does not have many outlets. Besides that, the locations of RFC outlets are not situated at strategic locations.
Skills of employees. The employees are not equipped with insufficient skills as most of them are SPM leavers.
Inefficient inventory management. RFC often experienced a shortage in stocks and supplies which cause them losses at times.
The halal or Muslim market. RFC is the one and only Muslim -based restaurant in Malaysia and this gives them an advantage over other fast-food restaurants as Malaysia is a Muslim country.
Globalization. RFC is planning to expand their business overseas to countries such as China, Indonesia, Arab and other Middle-eastern countries.
Stiff competition. RFC has to compete with other fast-food restaurants with a strong customer base such as McDonald’s, Kentucky Fried Chicken and Pizza Hut.
3.5 Summary of Situation Analysis
The Situation Analysis is divided into four topics, which are the General Environment, Industry Conditions, Stakeholders and the SWOT Analysis.
There are seven general environments for the Radix Fried Chicken; Demographic, Economic, Political/Legal, Sociocultural, Technological, Global and Physical Environment. This topic focuses on the environment that Radix Fried Chicken (RFC) is in. In demographic forces, it describes the target market of RFC which is mostly Muslims. For economic forces, RFC is operating in an economy where the growth rate is slow. As for the political or legal, RFC must abide the rules and regulations set by JAKIM. In sociocultural forces, more people are dining out and the preference for fast-food is high among young people. As for the technological forces, RFC uses posiflex at the cash register so the money is more secure. Other than that, RFC uses a robotcoup for making coleslaw. The global forces mention that RFC is planning on opening a branch in Indonesia, Saudi Arabia, China and Middle Eastern countries. As for physical environment, RFC uses organic chicken in their fried chicken.
In the Industry Conditions, the Michael Porter’s Five Force Analysis is used. The first force in the framework is the threats of new entrant. As we all know that RFC is a new fast food restaurant. So it faces competition from other restaurants that are more established like KFC or McDonalds. Next is the bargaining power of the suppliers. RFC gets most of its products from their parent company which is HPA. So switching cost would be really high for RFC to consider due to the effectiveness of the supplier. In bargaining power of customers, RFC offers cheaper prices than their competitors, which is an advantage for customers. Next is the threat of substitute products, which is a disadvantage for RFC because they sell the same products as their competitors who provide many substitute products in the market. The last force in the five forces framework is the intensity of rivalry between RFC and other fast food restaurants. RFC main competitor, KFC has an advantage on them because they are globally known and winning over their loyal customers is a difficult task.
RFC has three key stakeholders, which are; customers, employees and suppliers. RFC’s customers are generally Malaysians but they more focus on Muslims because their main objective is to provide halal food. As for the employees, all of them are Muslims. So, the culture and all the practices and regulations are based on Islam’s Syariah Law. RFC’s main supplier is HPA, where they obtain all their raw materials from.
The SWOT Analysis identifies RFC’s strength and weaknesses, threats and opportunities. For strength, RFC is different from its competitors because their products are herbs-based. For example is their fried chicken and Radix Cola. They also offer high quality products and good services at a cheaper price compare to their competitors. As for the weaknesses, we have identified that RFC does not have a strong brand name because many did not know about their existence. Apart from that, RFC lacks in technology, financial resources, and employee’s skills and has a poor inventory management. As RFC is a halal fast-food restaurant, they have an opportunity to break into the Muslim market and expand their business to Islamic countries like Saudi Arabia and Middle-eastern countries. Lastly, operating in an industry with strong competitors that are globally recognized like KFC, McDonalds and Pizza Hut is a threat to RFC.
4.0 Strategic Options
Strategic options are creative alternative action-oriented responses to the external situation that an organization faces. Strategic options take advantage of facts and actors, trends, opportunities and threat of the outside world. Strategic options can be identified after an institutional assessment, keeping in mind the aspirations (basic question) of an organization.
The strategic options for RFC are:
Product differentiation; provide a variety of choices in menu.
Although RFC is not as popular as KFC, RFC can set a target or aim to achieve higher ranks when it comes to chicken restaurant chains, convenience restaurants and variety food provider. For example, Zigzag Wedges, Radix Sweet Bun, Herb Burger, Sambal Burger, Rice delight, Radix Nugget, Rosties, and Tortillas are some of their menu. Besides that, RFC also have their own beverage choices, such as Radix cola, Radix herb slimming tea, and Radix herb coffee. RFC can develop or add some more menus to differentiate themselves with other competitors. For example, they can offer customer menu choices which are made from seafood such as fried shrimp, fried squid, and squid burger, so that seafood lovers can have their meals there.
Improve on the marketing strategies.
When the customers witness advertisements of new products and promotions offered by RFC, they might show interest towards the new product advertised. This helps RFC to attract more their fast food lovers to buy more o their products. Yet, the marketing strategy should be genuine and the quality of the product must meet their customer expectations.
Improve on the multimedia usage
RFC should establish a new website or reinforce their current website by making it more attractive and user-friendly. The website should be easily accessible so that visitors can view the webpage and get more information about the RFC, the food they offer, latest updates and promotions.
Maximize the advantage of being the local halal fast food company
RFC should maximize the advantage of being the first HALAL hub in Malaysia as the majority of its citizens’ are Muslim.
Open 24-hours franchises with drive- thru
RFC need to build many franchises that open 24-hours because it is more convenient for their customers. RFC also need to add a drive- thru service because, if the customer is in a rush and do not have time to dine in, they can use the drive thru service which is very convenient. By doing so, RFC will eventually earn more customer loyalty as it gives customers the impression of being a good service provider.
Key Selection Criteria
For the past decade, RFC has a significant improvement as an outcome of the successful execution of a number of key initiatives which include a strategy of continuing restaurant expansion and the implementation of effective RFC branding and marketing program to improve the competitive advantage and build up the marketing position of being the halal fast food company in Malaysia. There are some key selection criteria that may affect the strategies for the organization.
The cost of applying of strategic planning is high and it may incur extra expenses for the organization at the beginning of stage. The extra cost is needed if RFC plans to expand its business in its strategic plan. If the location that RFC expands its business at is not suitable, then the cost of venturing in the place may not be worth the effort. Strategic planning is a type of long-term planning. Therefore, RFC should carefully plan a detailed accounting budget plan to control their cash flows.
The overall underlying principle of the strategy should be fit into the goal of organization. The strategy must deal with the main strategic issues by the RFC’s strategic position. All the strategic plans should be suitable for the consumers of Malaysia and foreign countries; international markets and even government. Economies of scale should be examined in order to execute the suitable strategic plans.
The resources that are needed in the implementation of strategy have to be available, which can be developed or achieved. Important resources such as people, time and information should be available for the implementation of strategy. In globalization, the feasibility of resources will affect the strategic planning in the specific market. Therefore, the feasibility of the resources is very crucial in strategic planning.
The performance of outcomes such as return and risk must meet the expectation of the stakeholders including mainly shareholders, employees and customers.
The products must be accepted by the stakeholders such as customers. If the products could not attract the customers, RFC might incur losses. If the lifestyle of consumers inclines towards a health-conscious lifestyle, RFC will have to produce products which have high nutritional value. However, high nutritional foods might not taste good, and this might lower the customers’ demand for their products.
RFC will take more time to expand its business internationally. The strategic planning to expand the business oversea is time consuming. RFC needs to spend more time on their strategic planning to prevent the plan from failing.
1) Increase usage of technology
Radix Fred Chicken should equipped their outlets with better and more advanced technology. For instance, they could invest in a Continuous Fryer which is used in popular fast-food restaurant such as KFC and McDonald’s to fry hamburger patties, chicken nuggets, and steaks. By equipping their outlets with more advanced technology, RFC will be able to compete and be on par with other popular fast-food restaurants. Besides that, these technologies will help RFC to increase in productivity and efficiency, which will later result in more profits. However, the implementation of these technologies will be costly as they are expensive. They will also be dangerous and may cause losses or wastage if employees misuse or do not have sufficient skills to operate them.
2) Create brand awareness through promotional methods
Radix Fried Chicken should create brand awareness by using promotional strategies such as advertising, personal selling and internet marketing. Advertising can be done via television, radio and billboards, and also printed ads like magazines and newspapers. RFC can also distribute flyers and pamphlets which is another cheaper alternative of advertising. Advertising can reach a broad audience and through it, more people will know about RFC existence. RFC can implement personal selling by giving out free samples of RFC’s food for the public to taste. This method will not only cause consumers to be interested but makes them potential customers if they have a liking towards the food that they have tasted. In addition to free samples, RFC can consider giving out vouchers and coupons as this will encourage people to purchase foods from RFC. Creating brand awareness via promotional methods may increase RFC expenses and add to their financial burden. However, it will reap benefits for RFC in the long run once RFC has form a strong customer base.
3) Employee development
RFC should develop their employees so that their employees will be more skillful and knowledgeable. They can do so by organizing staff development programs like seminars and training camps where there will be mentors to guide the employees. They can also enroll their employees for enrichment courses such language classes, computer skills classes and service related courses. Employee development will not only benefit the employees but also benefit RFC for skillful and capable workers will increase productivity in the workplace, which will later result in more profits earned. However, this method may waste money and time, and not be effective if the employees are not interested in improving and developing themselves.
4) Improve inventory management
RFC should constantly keep track of their stock and supplies so that they can take immediate action and replenish their inventory when their supplies are nearing a shortage. RFC should also keep track of the orders they have on average in a day so that they can estimate the amount of raw materials they need to purchase. They may do so by investing in Restaurant Point of Sales software that runs on computers, and helps in assisting businesses to track transactions in real time. Besides that, they should also constantly communicate and have a good relationship with their suppliers so that their supplies will arrive on time. By improving their inventory management system, RFC will no longer experience shortages in their stock, leading to better customer service and increased profits. The only limitation of this is that there is no room for mistakes. Employees must be extremely careful when recording stocks in the inventory for any mistake in the records cause RFC losses.
5) Partnerships or alliances
RFC should consider establishing partnerships with well-established fast-food companies or other food and beverage companies. By establishing such relationships, RFC will be able to decrease their financial burden and may have a better opportunity to heighten their brand image or presence and also expand their business with the help of the companies they partner with. Besides that, RFC will be able to pick up more skills and knowledge related to the industry as their will be a sharing of information and knowledge among companies. However, this may also be a setback to RFC as their partner companies may know RFC secrets and imitate their specialties.
Radix Fried Chicken (RFC) is a Muslim based fast-food restaurant under HPA. It focuses on providing safe and halal foods for Muslims and non-Muslims alike. Based on our investigations, we found that RFC is experiencing difficulties competing in the fast-food market. They lack of brand presence and are far behind in terms of technology and development compare to renowned fast-food companies such as KFC, McDonald’s, and Pizza Hut. This may be due to the fact that RFC has financial constraints and budget balancing problems, which explains why they did not use advanced technology nor use any promotional tools to create brand awareness for their company. However, RFC still has potential in the fast-food industry as they are the only Islam- based fast food restaurant, in Malaysia, and are looking into breaking into Muslim markets in Muslim countries.
In conclusion, RFC will be able to overcome their challenges in competing in the fast-food industry once they know their weaknesses and threats; and take the appropriate actions to deal with them, and build a strong brand name and customer base for themselves.
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