From Tsui Wah’s 2013 annual report, it has just implemented the service of “Tsui Wah Delivery”. This movement reflects that it intends to provide more variety in addition to its main stream of business. However, what can Tsui Wah still undertake in future to make more diversification? In the following parts, a SWOT analysis is prepared by reference to the PESTEL model, Porter’s Five Forces Competition Framework and Resource-based View model. Based on the analysis, several recommendations are also suggested for Tsui Wah to incorporate more variety into its business.
Finally, a brief conclusion is drawn. SWOT Analysis 1. Opportunities 1. 1. Increasing Mainland Visitors Due to the introduction of “Individual Visit Scheme” in 2003, the number of Mainland visitors increases significantly year by year. According to a report released by Savills (Hong Kong) Limited on hospitality industry in Hong Kong, the number of Mainland visitors in 2012 soared by 543% compared with that in 2004. Visitors normally want to try some indigenous foods. Tsui Wah is just where they want to go because it is one of the restaurants representing Hong Kong’s traditional foods.
1. 2. Prevalent Trend of Dining Out Nowadays, working women is a prevalent phenomenon. A lot of families would choose dining out instead of cooking themselves. In a survey conducted by the Public Opinion Programme of The University of Hong Kong on Hong Kong people’s eating habits, it is revealed that on average an interviewee dines out 5. 1 times per week. This is really conducive to the catering industry as a whole. 2. Threats 2. 1. Tough Industrial Environment In the catering industry, there are a lot of substitutes such as Cafe de
Coral, Fairwood and Maxim’s MX. People can easily switch to any restaurant. With regards to rivalry, in spite of keen competition, competitors are competing on non-price dimensions. Each restaurant is slightly different from competitors. For Tsui Wah, it differentiates itself from others by offering foods at premium quality. Regarding barriers to potential entrants, there is no legal restriction to set up a restaurant. However, a certain extent of investment is required. Apart from that, potential investors can easily enter into catering industry.
For bargaining power of suppliers, a restaurant highly depends on the quality of materials supplied by suppliers because this directly affects the quality and safety of dishes that the restaurant provides. Besides, finding another quality supplier to replace the current one is so costly since relationship builds up by time. Apart from raw materials, what suppliers supply also affect significantly the operating cost as well as profitability of a restaurant such as renting a property. Therefore, the bargaining power of suppliers in catering industry is quite high.
Concerning bargaining power of customers, similarly their bargaining power is also high because the dishes provided by a specific restaurant is not so important to them and there are many alternative choices. Generally speaking, catering industry is not so attractive based on Porter’s Five Force of Competition Framework. 2. 2. Rising Operating Cost Rental has been increasing continuously for the past decade. According to Rate and Valuable Department, the rental for retail properties in 2013 was about 60% of 1999’s level.
This situation is further aggravated by the statutory minimum wages introduced in 2011. Moreover, since Tsui Wah’s suppliers are mainly from Mainland China, the continuous inflation of Renminbi signals the rising trend of its raw material costs. Due to the increase in rentals, staff costs and ingredient costs, Tsui Wah would be under serious pressure in respect of its operating costs in coming future. 3. Strengths 3. 1 Reputable Brand Name The reputable brand, “Tsui Wah”, has a long history and is the most prominent resource.
It is extremely valuable since it represents the level of quality of products or services provided. This is why Tsui Wah can charge its foods at premium prices while numerous people are still willing to pay. According Tsui Wah’s prospectus in 2012, the average amount per patronage is HK$74 which is about twice of normal Cha Chaan Teng. Even though its brand is valuable, the brand itself is not rare. Every restaurant can have its own brand. Certainly, their values would vary considerably. However, there may be radically impossible to have two perfectly identical brands in the world.
Thus, to some extent “Tsui Wah” is a unique brand. It is possible for a restaurant to imitate Tsui Wah’s brand. But, this must not be done within a short period of time because Tsui Wah had used over 40 years to develop its brand. Thus, it is costly to imitate a brand name. From the resource-based view, its brand is really an important resource as it can create sustained competitive advantage. 3. 2 Use of Central Kitchen The introduction of central kitchen does help a lot in various aspects. It enables the standardization on the quality foods among branches.
This is extremely crucial for chain restaurants because different standard on foods from different branches would affect unfavorably customers’ confidence toward the restaurant as a whole and accordingly the brand. It also helps reduce the size of kitchen in the branches due to fewer ingredients stored in the branches and accordingly reduce the rentals. 4. Weaknesses 4. 1 Limited Customer Segment As aforementioned, Tsui Wah charges foods at premium prices, which is about a double of normal restaurants, and targets middle class.
Hence, grassroots are normally excluded from Tsui Wah’s customer pool since they tend to choose restaurants which price foods at normal level. Besides, in economic downturn middle class may curtail consumption and Tsui Wah may suffer. It is better to diversify its business so that even in economic recession its profitability can still be maintained stably. Recommendations 1. Retailing Packaged Foods To better utilize the capacity of Tsui Wah’s central kitchen, it is suggested that it should manufacture packaged foods and sell them in its branches or supermarkets.
With the aid of its reputable brand, which has penetrated deeply into Hong Kong’s society, the packaged foods sold under the brand of “Tsui Wah” would be perceived as high quality and would be welcomed by Hong Kong citizens. This concept just likes what Ikea’s cafe is doing now. The dishes that we can buy from Ikea’s cafe can also be bought in packaged form such as a Swedish meatball called KOTTBULLAR. 2. Renting Shops in Shopping Malls Due to high rental for street-level shops, it is recommended that Tsui Wah moves to shopping malls where rental is a bit cheaper.
Although operating in street-level is the tradition of Cha Chaan Teng, moving into shopping malls would not affect a lot because Tsui Wah has already developed a strong prestige. No matter where its branches locate, people would still keep their preference. 3. Discounted Price for Delivery To cater the purchasing power of grassroots, it is advised that Tsui Wah should offer a slight discount for delivery orders. Through this tactics, it can include more grassroots into its customer pool. Meanwhile it can show that Tsui Wah is an enterprise which does care people in the society. Conclusion
Despite more Mainland visitors and popular trend of dining out, they cannot constitute a valuable opportunity for Tsui Wah to expand aggressively due to keen competition and rising operating costs. However, its reputable brand and central kitchen make it a restaurant standing out from others. Therefore, Tsui Wah should continue take a diversification strategy to sustain growth in future. It could enter into the food retailing market to sell packaged foods under the brand of “Tsui Wah”. Moreover, it could also switch to rent shops in shopping malls in order to tackle the increasing rental.