bsca presentation

Business Strategy

for Competitive Advantage-

U51035 Students: Porter’s generic Strategies – Cost

leadershipGroup 1(Team B)

Presentation FlowIdentify

Cost Leadership

Strategies being used

by CDC

Cost-leadership strategy

How to implement

Measure with the benchmark

Which one doing better

Identify Cost Leadership

Source: Café de Coral Corporate Motto & Mission

Cost-leadership strategiesInput cost

• Labour cost• Raw

materials

Economies of scale

• Scale/Size• Sales volume

Experience

• Labour productivity

• Learning curve& History

Product/ProcessDesign

• Simplifying menu• Streaming the

frontline operation flow

Strategies being used

by CDC

Input cost

Input cost

Labour cost

Raw materials

Input cost--Labour cost

Strategy being used by CDC

• Implement Automation in Production Process and workplace

How to implement

•A. Tai Po Food Processing Center•→The automated machinery makes operation more efficient •→Less manpower needed•B. Outlets •→Vending machine at some outlets•→allow diners to make orders and•→pay for them electronically•→Cut down on cashiers

Effect •Reduce increasing rate of Labor Cost•2012/2013 Café de Coral ↑0.7%, Fairwood ↑1.1%


○

CDC: average 25%2009~2013

Input cost-- Raw materials


• Global Purchasing mix

How to implement

•Raw materials procurement from all over the world •Selects lower cost of raw materials around the world•E.g. Canadian Grain-fed Beef and Australian fish fillet

Effect

•Reducing the raw material cost influenced by RMB appreciation •Global purchasing has been employed since 2012. •RMB↑2.45% (1/2012~1/2013),the raw material cost ↓0.5%•And the cost of food ingredients has decreased since then, from 33.9%

down to 33.4%.

Measure with the benchmark○

Input cost--Which one doing better

○ Benchmarking on input cost in 2012/13

○ Ranking:○ They are similar ~70%

Input cost

Labour cost

Other Inputcost

Economies of scale

Economies of scale

Scale/ Size

Sales volume

Economies of scale--Scale/ Size


• Expansion strategy

How to implement

•A. Opening more stores.•→Located at commercial, industrial and residential districts•→Where there were strong demand for quick service restaurants.•→Open 15 stores in 2010-2012•B. To establish new central food processing plants •→To support 300-350 stores in Hong Kong. •→Having a central kitchen = less space would be needed in retail stores•→More space can be spared for serving customers to maximize revenue.

Effect

• ↑ Negotiate discounts• Better cost control• ↑Competitive advantage

Source: Café de Coral Annual report 2010/2011


2013-2014 Café de Coral Fairwood Tsui Wah

Size 153 103 27

Café de Coral Fairwood Tsui Wah

Support no.of stores

300~350 180 60

Benchmarking on Size in terms of no. of stores in2013-2014

Benchmarking on central kitchen (Support no. of stores)

Economies of scale--Sales volume

Strategy being used by

CDC

• Prudent approach on price increment

How to implement

• Low price strategy • Value meals• Some of our initiatives over the year have led • to money-saving efficiencies that we plan to pass back

to customers• in the form of a new range of value meals: low-cost

standards that will underpin our higher-value offerings.

Effect

• ↑ Customers volume• Small profit but rapid turnover

Source: Café de Coral Interim report 2011

Source: Café de Coral CEO's Report 2013/2014

Measure with the benchmarkBenchmarking on average spending per customer in2013

Economies of scale-- Which one doing better

Experience

Experience

Learning

curve& History

LabourProductivit

y

Experience—Labour Productivity


•Mentorship and Knowledge transfer

How to implement

• Has established the "Café de Coral Management Academy"(2000)• Regular training activities for employees• Put team spirit into practice• Review the service attitudes and performance of staff through an objective

"mystery shoppers" program.

Effect

• To strengthen labour skills, enhance labour productivity• Helps enhance the quality of service• Reduce mistakes

Source: CDC CEO’s Report

ExperienceFoundation

First food processing

plant

50th restaurant

Café de Coral

Management

Academy

Building Central food-

processing plant

Over 140 restaurants & 300,000 customer

daily

1968

Year

1979

1988

Now2008

2000

UnitCost

Cumulative volume of production

X

Y

Experience curve

Experience—Experience curve& History

BenchmarkBrand Foundation

Cafe de Coral 1968

Maxim’s 1972

Fairwood 1972

Tsui Wah 1977

Early entrants into a market will have experience late entrants do not yet haveIt is important to gain and hold market share


Experience—Which one doing better

○

Product/Process Design

Simplifying menu

Streaming the frontline operation flow


Product/Process Design-- Simplifying menu


How to implement

Since 2013, Café de Coral sets number signs next to the menu

Effect

Make the menu clearTo convince the customers to order and staffs to take order

How to implement

Source form Café de Carol Annual Report 2011

Product/Process Design-- Streaming the frontline operation flow


How to implement •Establish an independent zone for packing deliver

Effect•Make the process more efficient •save time cost→ shorten the queuing time•More flexible

Source form Café de Carol Annual Report 2011

Product/Process Design-- Which one doing better

Ranking:CDC is doing better than others

Simplifying menu

Independent zone for packing deliver

Cafe de Coral

Y Y

Fairwood N N

Maxim’ mx N N

Overall performance of CDC

CDC

Input cost Similar to competitors

Economies of scale

1st

Experience 1st


Doing better

ROA 2013-14

CDC 12.72%

Fairwood 12.12%

Tsui Wah 10.77%

ROA---An indicator of how profitable a company is relative to its total assets. ROA gives an idea as to how efficient management is at using its assets to generate earnings.

References

Café de Coral. (n.d.). Café de Coral Home page. Retrieved from Café de Coral Web site: http://www.cafedecoralfastfood.com/companyinfo3.php?lang=b5

South China Research Limited. (n.d.). South China Research Limited- Golden age of Hong Kong fast food chains. Retrieved from South China Research Limited Web site: http://www.sctrade.com/data/sctoday/20130731104308Eng-Golden%20Age%20of%20Hong%20Kong%20Fast%20Food%20Chains%20-%20130731.pdf

Standard Chartered. (2013, April 27). Equity research: Fast-food to fine dining. Retrieved from China: Travel& Leisure- Emerging Companies: https://research.standardchartered.com/configuration/ROW%20Documents/Fast-

致富證券有限公司 . (n.d.). 致富證券有限公司 -本地快餐店及茶餐廳分析 . Retrieved from 致富證券有限公司 : http://www.chiefgroup.com.hk/_upload/pdf1_20140320075750_%E5%B0%88%E9%A1%8C%E5%A0%B1%E5%91%8A-%20%E6%9C%AC%E5%9C%B0%E5%BF%AB%E9%A4%90%E5%BA%97%E5%8F%8A%E8%8C%B6%E9%A4%90%E5%BB%B3%E5%88%86%E6%9E%90.pdf