Hospitality Industry : Products and Process Innovation

In modern business world, profitability of a company greatly depends on an efficient marketing mix and smooth functioning. Despite of a remarkable success of the F&B industry the country has recently faced competitions from international markets. As stated by Mabry (2012), the concept of competitive advantage can be defined as the factors that enable a company to manufacture products and services at a comparatively lower price and in a more appealing manner for consumers. A business plan based on such conditions enable a organisation to emerge superior to its rival companies. Typically, the policy of competitive advantage include a array of factors like cost framework, brand royalty, diversification of products, channels of distribution and consumer service. In terms of a sustainable future and an advantage over competitors a firm significantly depends on a strong competitive advantage strategy. The Australian F&B industry divides the policy into two types, comparative and differential schemes. On the other hand a value chain analysis refers to extensive activities that a company undergoes to conceive a final product and sell the good to a consumer (Ni Mhurchu, et al. 2013).

It is the duty of business managers to study every production step immensely and bring in changes as and when required to lower total production cost and thereby increase profits. Australian leading companies like Fonterra and Lion Nathan distributes the manufacturing procedure into five broad categories each of which provides an opportunity for the firm to maximize capabilities and set up a proportional relationship to competitive advantage. The practice of competitive advantage mix promotes the idea of selling products at a cheap cost to achieve a higher revenue surplus.  Residents of Australia aim to maximise utility and cost value of a good. In relation to Weissman (2014), cheap costing substitutes offered by companies attract a wide range of consumers and also eventually meet stakeholder`s expectations.

Competition in food and beverage industry (Sydney)

The food and beverage industry in the hospitality sector of Australia is one of the most competitive areas. The competition nature of the F&B industry in Sydney refers to the dynamic external system in which the organization operates. The competition of the food and beverage industry increases as the number of sellers increases who offers similar kind of goods and services to customers. In Sydney, there are a number of fast food centres for the customers to choose from that enhances the competitiveness in the market. 

There are two types of competitive nature prevailing in the food and beverage industry of Sydney which are the direct competition and the indirect competition. In the direct competition the competitors offers and sells products and services that are of similar kind. The Parmalat and the Goodman Fielder operates in the direct competitive nature. Confronting to Hollensen (2015), in case of an indirect competitive environment, the competitors of the food and beverage industry in Sydney compete with one another even though they offer different products and services to the customers. The products provided by the competitors are close substitutes for each other which cause the competition as the companies try to retain more of the customers so as to prevent the customers from switching the brand.

In the food and beverage industry of Sydney, the companies intend to differentiate the products and services offered by them to increase the sales and revenue of the enterprise. According to Lammers & Ryll (2016), the food and beverage sectors retail food and beverage merchandise from the locations that are from the fixed point of sale. The organizations involve the use of specialized equipments such as freezers, refrigerators and other gadgets for the business. Moreover, the staffs of the organization are trained in order to achieve the objective of healthy and safe storage and sanitary conditions.

However, the food and beverage industry in Sydney has been facing increased competition and the price pressure in the business. There has been lower shelf price and increase in the price of the commodity experienced by the ingredient suppliers and the food makers in the industry. As per PhiIlipov (2015), the cost challenge is met by the food and beverage firms by achieving a critical mass via consolidation and higher economies of scale. The companies are able to build a stronger position in the competitive market by gaining the leverage. This further helps the company to deal with the high demand of the customers.

The food and beverage industry in Sydney serves the needs of the customers through industry specific solutions. The organizations operates in the overall supply chain that includes all the processes from development to delivery. Management of companies innovates and develops the IT system in order to meet the challenges in the competitive market of food and beverage industry in Sydney (Green et al., 2015). Majority of the organizations in the industry uses the ERP system to support the streamline planning, future forecasting and the accounting system to ensure better productivity of the business. Therefore, it can be stated that although the food and beverage industries in Sydney confronts a high competitive nature, it is able to deal with the competitive nature effectively.

Value Chain analysis and Competitive Advantage in Australian F&B companies

According to Soosay, Fearne& Dent (2012), the value chain analysis is a tool that is used by the bars and the up-markets in Australia in order to identify the primary and the other organizational activities that help to add values to the finished or the final products of the companies. The value chain analysis contributes to analyzing the actions of the organizations in order to minimize the cost of the products and maximize the product differentiation that is required to sustain in the competitive market. The value chain analysis includes all the internal activities involved in transforming the inputs into desirable outputs. The supply chain of the bars and the upmarket restaurants is an evolving shopping process. The provision of the products and services are regulated by the demand of the products from the customers. It has been mentioned that the chain operates efficiently and there is a proper balance in the ordering of the final product.

 As stated in Grunert, & Traill (2012), factors like product, place, promotion and price or the 4P theory plays a major role in the illustration of these concepts in the bars and upmarket restaurants operating in Australia. The products offered by the firm needs to be developed through strategic ideas such that the customers are able to understand how and when to spend the money. Therefore, the menu needs to be designed based on the customer wants and this can be effectively achieved through proper market research.

The price of the products set by the bars and the upmarket needs to be competitive and within the affordable range of the customers. As per Ho, Yang & Hung (2015), customers prefer good quality food within the nominal budget. Therefore, the companies need to develop products that are cost effective to reduce the price of the outputs. Choosing the correct place with a view of selling the products has to be decided correctly. The products need to be sold in the areas in larger amount where the number of the potential customers is high. A menu of the restaurants must be set based on the taste, preference, and culture of the clients in the particular place.

The primary objective of advertisement and promotion is to reach out to more customers by making them aware of the products and the services offered by the organizations (Cadez & Guilding, 2012). Effective promotion can lead to increase in the sales and revenue of the bars and upmarket restaurant in Australia. Firms like Lion, Dick Smith Ltd and De Bortoli emphasize the implementation of well organized promotional techniques to attract customers. Large corporations enjoy a broad range of competitive advantage over their rivals. Also, it with high skilled management and a enlargement of restaurant chains Attica and Bills effectively add value to their brands. The success of a beverage company depends heavily on a theory of VC analysis. Being among the leading exporters of wines, Australian companies are significantly influenced by the international market. A fluency of communication between several high turnover companies enables domestic firms to increase managerial efficiency and learn about new production techniques.

According to Hatch & Howland (2015), it is the people of the nation who benefit the most from the extensive competition within brands. On the other hand mediocre companies like Mars and Bindaree Beef focus more on the process of outbound logistics. Delivering of goods, pricing and after sales service are of great importance to them. While, Nelson Wines, Treasury Estates, Casella and several other high yielding beverage companies harness the theory of Economic Moat. Furthermore, in recent years the wine industry has presented a significant rise with an export of 263ml of high quality wine mainly to UK (Piankova, 2014).

Menu Engineering

Australian F&B brands discreetly analyse the popularity of their offered products and arrange them accordingly for a better profit generation. The strategy of menu engineering is practised by companies with a simple goal to maximise annual turnover. A well organised arrangement of food and beverage items can escalate a restaurant`s profits by 10%-15% on a daily basis. According to Theng Loo (2012), it is the duty of a brands management to study the customer demands and execute changes when requires. Typically the process of menu-engineering is divided into four segments of costing, categorizing, designing and testing. Australian restaurants primarily focus on the preliminary step of product costing to attract customers. In adherence to Linassi, Alberton & Marinho (2016), it can be seen most of the F&B companies do not carry the costing of their menu effectively. Categorizing of items on the menu and an attracting design are equally important to conduct a well-developed menu construction. Finally, company supervisors test the customer’s response to the newly implemented menu.

With the help of popularity information of the several offered products, managers subdivide the menu into four different segments of horse (highly popular with small profits), star (high revenue from increased popularity), dog (less popular resulting low yield) and puzzle (large earnings from shallow popularity). Also, upmarket restaurants and bars in Australia feed on the people’s psychology and an efficient management system to build up an active menu order. F&B industry giants emphasize the need for carrying out the process of menu-engineering by a single person who is always in contact with the visitors and energetically take part in company decisions. A successful designing and exercising of this strategy enhances cost minimisation and thereby affects profit ratio. According to Reale & Flint (2016), in addition to an immense study of customer behaviours and their different buying patterns, supervisors often seek the help of restaurant specialists and menu advisors when it comes to designing and promoting of the menu card.

The removing of currency signs as a prefix to product process in one of the advancement that provoked better earnings. Often restaurants invoke the need for a better promotion by introducing combo plans and highlighting items that need to be sold most in the menu. Moreover, the presentation element also plays a vital role in affecting a consumer`s decision. As opined by Smith & Pititto (2014), increased visual, alignment of prices and a diversification of designing patterns are some of the important factors that influence visitors. Menu card as such of Fonterra and Accolade Wines act as examples to other food and beverage companies and also have proved a noticeable increment of 60% profit margin. In addition, the concepts of “Happy Hours” and “House Specials” have sufficiently gained a better reaction of the Australian people (Guy, 2016). Further, an inclusion of product description creates an increased hunger and desire. The prosperity of a company greatly depends on a restaurants or bars ability to understand the feedbacks of their targeted customers and undergo changes as and when required. According to Lang & Heasman (2015), flexibility in production pricing and adaptability to the environment greatly affects profitability of a firm.  Analysing the current situation of the Australian market, organisations need to work in a more efficient way to a secure a more sustainable future and to gain a better competitive advantage.

Conclusion

The food and beverage industry form a major part of the Australian market concerning investments. Since the development and introduction of new policies and strategies by the government and companies, the nation's F&B industry has proved to offer tempting long-term returns with a comparatively less amount of risk than other industry segments. Along with stability, companies in this industry are highly creative in nature. A constant evolution of products, pricing and marketing strategies provide brands with a sense of competitive advantage. Furthermore, the study of value chain structure and its implication by restaurants and bars provides a better growth opportunity for business firms. Australia being a developed country and highly adaptive in nature faces an immense competition at the international as well as domestic levels. The restaurants deal in the same line of product and often in order to attract more customers focus on developing best quality substitute goods. From the above report, it can be inferred that for a sustainable future organizations need to continuously keep an eye for undertaking new developments in the functioning. Business giants in addition to fulfilling revenue requirements also put a spotlight on attending to societal welfare. Being among the top ten exporters of wine, the government of the country takes deep interest in providing beverage companies with a number of facilities to gain better knowledge about the taste and preferences of the world. Analyzing the Australian F&B industry and intensely studying its determinants it can be concluded that with an effective managerial efficiency and a practice of menu-engineering brands aim to accomplish the target of becoming the world’s one of the most dominating and influential sectors.

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