Esprit Strategic Analysis Essay

In regard to a research of microenterprise in Macau, casino and gambling enterprise is the main source of income to the Macau economy. Over 80% of income is contributed in 2012. However, microenterprise is also taking an essential role to the healthy long-term development to the local economy. By doing so, a bundle of different strategies have to be conducted in each company in order to achieve the goal. Strategic Management is a way to identify competitive advantage and analyze the internal and external factors which influence one’s performance. It also helps in making a bundle of decisions for future direction and attaining sustainable development by formulating and implementing appropriate strategies. In this report, company background information, vision and mission, a series of strategy formulations and analysis are provided. Furthermore, applying various strategies in actions and implementation are attached in the following. INTRODUCTION Cafà © Tai Lei Loi Kei is one of the historical cafe in Macau and their exclusive hand-made pork chop bun is the icon while it will come up in mind of locals and tourists when thinking of Macau. It was established in 1968, with nearly 50 years of history located at the Taipa village. The initiate owner of the cafe was Ms. Kuok Loi Ho but the business is transmitted to her daughter Ms. Chan Ka I and other two family members. In the 1960’s, Taipa village is not well-developed as what people see today where there were lots of firecracker factories set up there. Ms. Kuok was originally operating this kind of business but it involves high risks and accidents were often occurred during that time. She later transformed her business in opening a cafe which was selling drinks only. At that period, there were many Portuguese working at the Municipal Council at Taipa next to the cafe. Ms. Kuok was taught by a Portuguese to make a pork chop bun with special Portuguese sauce and it becomes the reputable pork chop bun nowadays. Following the success of the business, more stores are rapidly opened in Macau and even Hong Kong. Besides of the flagship store at the Rua do Cunha, it can also be found in Venetian and one near Ruins of St. Paul. The food items are diversified for options which fish ball, squid, beef, and pork chop rice with onion sauce etc. are served as well. With good word-of-mouth and reputation and being recommended by many guidebooks, their main customers are tourists and it is said that the Tai Lei pork chop bun has to be tried when every tourists come to Macau. MISSION According to the owner of Cafà © Tai Lei Loi Kei said, their mission is â€Å"Whoever talks about pork chop bun, the first brand name come up with in their mind is Tai Lei Loi Kei.† Our group thinks that it is not strong enough in regard to be a good mission statement; therefore, we have further developed a more comprehensive mission statement below. â€Å"To be the leading role of pork chop bun market not only in Macau, but also expand the business to South-East Asian countries. As a top family style pork chop bun store, we are determined to reinforce our image by designing our own logo, slogan and brand of Cafe Tai Lei Loi Kei. With the insistence of fresh ingredients used and friendly sentimental service, we are committed to serve high value and quality products to all visitors and local residents at reasonable price. In order to meet the customers’ needs and demand in the rapid changing market, we will continue to develop new technology applying in food production and innovative products. Our dedicated team is also responsive to social community in hiring uneducated local employees as well as contribution in charity activities, in where providing growth opportunity and building a more familiar relationship to employees.† VISION â€Å"We are transforming the original operation pattern to microenterprise, with regional franchise operations not only limited to Macau but also to the South-East Asian market. We believe that an accelerated profit will be kept over the next few years. We will constantly design and launch new menu items in accordance to the local appetite in the market. Our goal is to make a remarkable profit for every branch of Cafà © Tai Lei Loi Kei and fulfill every customer’s expectation.† STRATEGY FORMULATION i.External Factor Evaluation Matrix (EFE) Cafà © Tai Lei Loi Kei – Key External Factors OpportunitiesWeightRatingWeighted Score Increase number of tourists coming to Macau0.1530.45 Better economy in South East Asia and Mainland China0.1030.30 Increase in Macau people’s purchasing power0.1030.30 Promotion coupons attached in Macau’s official tourist map may help increase awareness0.0520.10 Cooperation with the youth correctional institution may help finding manpower0.0530.15 Threats Customers are easy to change another brand to consume pork chop bun0.1020.20 Increasing number of competitors in the town selling similar product0.1510.15 Increasing amount of rent in Macau may lead Tai Lei suffer0.0520.10 Local people refuse to work in small-middle enterprises0.0520.10 Negative comments from online reviews and locals0.0520.10 Negative news in Taipa’s flagship store in December 2011 (required to close by IACM)0.0530.15 People seek for healthier food and beverage nowadays0.1020.20 TOTAL1.002.30 Cafà © Tai Lei Loi Kei has a total weighted score of 2.30 revealing that the company is below average in its performance to implement strategies that capitalize on external opportunities and avoid threats. ii.Internal Factor Evaluation Matrix (IFE) Cafà © Tai Lei Loi Kei – Key Internal Factors Strengths WeightRatingWeighted Score Old history and reputable brand name0.1040.40 Use central manufactory to produce pork chop to ensure same quality and acquired ISO recognition0.0530.15 Earning profit every year0.1540.60 Attractiveness to investors from South East Asia and Mainland China0.1540.60 Strong marketing team to develop new promotional programs and expansion strategies0.1030.30 Weaknesses Low educational level of all level of the employee0.0520.10 Lack of manpower0.1010.10 High selling price compares to similar products in the market0.1520.30 Limited amount of branches in Macau Peninsula0.0530.15 Most products are in high calories 0.1020.20 TOTAL1.002.90 Cafà © Tai Lei Loi Kei has a total weighted score of 2.90 indicating that the company is above average in its effort to implement strategies that utilize on internal strengths and minimize weaknesses. iii.Competitive Profile Matrix (CPM) Two core competitors are identified in accordance to geographic location, product, quality and price. Cafà © E.S.KIMO is the first Taiwanese coffee shop in Macau (MGTO, 2012), with the immersion of local favors. It also provide famous pork chop bun with a very nice unit price of MOP 13. It has many branches across the town as well as mainland China. In the Taipa branch which just located opposite to Cafà © Tai Lei Loi Kei, it placed an easy-up banner (see picture 1) outside of the store showing that â€Å"Macau’s famous pork chop bun only sells MOP 13† (see picture 2). Another competitor is â€Å"Taipa’s famous pork chop bun† (named Taipa pork chop bun below) located in Rua do Cunha, which also selling pork chop bun with unit price of MOP 23 and Kopi Luwak (a kind of high quality coffee). Cafà © Tai Lei Loi KeiCafà © E.S.KIMOTaipa Pork Chop Bun Critical Success FactorsWeightRatingScoreRatingScoreRatingScore Advertising0.1020.2030.3010.10 Food Quality0.1530.4530.4520.30 Dietary Consideration0.1020.2030.3020.20 Service Quality0.1030.3030.3020.20 Price Competitiveness0.1020.2040.4020.20 Management0.0330.0930.0920.06 Financial Position0.0530.1530.1520.10 Customer Loyalty0.0520.1040.2010.05 Reputation0.0540.2040.2020.10 Global Expansion0.1520.3030.4510.15 Market Share0.0530.1540.2020.10 Accessibility0.0330.0940.1210.03 Atmosphere of Restaurant0.0420.0840.1620.08 Total1.002.513.321.67 According to the result of CPM, it shows that Cafà © Tai Lei Loi Kei has a total weighted score of 2.51 which is just above average. Comparing to the other two core competitors, the company is situated in the middle; while Cafà © E.S.KIMO is performing the best among them. iv.Strategic Position & Action Evaluation Matrix (SPACE) According to the result of the SPACE Matrix, it showed that the strategic position of Cafà © Tai Lei Loi Kei is aggressive (1, 1.11). The environment is stable, have the strong competitiveness and financial background. The appropriate strategies are backward, forward, horizontal integration, market penetration, market development, product development and diversification. v.SWOT Matrix Strength 1.Old history and reputable brand name 2.Use central manufactory to produce pork chop to ensure same quality and acquired ISO recognition 3.Earning profit every year 4.Attractiveness to investors from South East Asia and Mainland China 5.Strong marketing team to develop new promotional programs and expansion strategiesWeakness 1.Low educational level of all level of the employee 2.Lack of manpower 3.High selling price compares to similar products in the market 4.Limited amount of branches in Macau Peninsula 5.Most products are in high calories Opportunities 1.Increase number of tourists coming to Macau 2.Better economy in South East Asia and Mainland China 3.Increase in Macau people’s purchasing power 4.Promotion coupons attached in Macau’s official tourist map may help increase awareness 5.Cooperation with the youth correctional institution may help finding manpowerS1, S4, S5, O2 – Expand the business to South East Asia and Mainland China S1, O1, O2, O3 – Put more efforts on the advertisement and promotion in existing market – Threat 1.Customers are easy to change another brand to consume pork chop bun 2.Increasing number of competitors in the town selling similar product 3.Increasing amount of rent in Macau may lead Tai Lei suffer 4.Local people refuse to work in small-middle enterprises 5.Negative comments from online reviews and locals 6.Negative news in Taipa’s flagship store in December 2011 (required to close by IACM) 7.People seek for healthier food and beverage nowadays-W3, T3 – Acquire supplier company to lower the cost W5, T7 – Develop healthier product to capture the market share of the â€Å"healthy followers† i.Acquire supplier company According to the W3 and T3, it shows that Cafà © Tai Lei Loi Kei is suffering the very high rent in Macau, especially the shop located in the Taipa old town which costs them almost MOP 150,000 per month. Furthermore, Tai Lei has set the selling price in a high level comparing with other similar products in the market in order to balance their financial statement. However, it does not help with the cost issue. We suggest that backward integration strategy would be suitable for them. Cafà © Tai Lei Loi Kei has already taken care of their distribution; therefore, they can acquire some of the supplier companies such as the company which provides bread and pork chop. With the implementation of this strategy, they can have better control in the cost of their business and they might lower the price to attract more customers. ii.Develop healthier product Nowadays, people concern their health more than before. The trend of the current environment is tent to buy healthy and green products and company always promotes well-being. However, the products of Cafà © Tai Lei Loi Kei are high calories and fats and it’s not what the current market looks for. According to the W5 and T7, it indicated the need to develop healthier food. For example, Tai Lei can invest a new product which claims at healthiness, such as using organic vegetables, low fat milk, vegetable oil, etc. iii.Expand the business to South East Asia and Mainland China According to the strength 1, 4, 5 and opportunity 2 and the concept of the market development, it discloses that Cafà © Tai Lei Loi Kei have a strong power to expand their business out of Macau. They are successful and have a long history of their business and have already accumulated a well reputation. In addition, they are famous to the South East Asia and Mainland China. It’s attractiveness to the investors from those countries to invest a new business in there. Moreover, the economy of South East Asia and Mainland China are doing well nowadays, it’s one of the motivators that Tai Lei should expand their business to the two markets. iv.Put more efforts on the advertisement and promotion in existing market In strength 1 and opportunity 1, 2, 3, we suggest Tai Lei can create a new strategy with application of market penetration. Tai Lei owns two branches in Hong Kong and three in Macau. Hong Kong and Macau are popular tourism cities in the world, especially Macau; the number of tourists coming to Macau is increasing rapidly. Moreover, according to the opportunity 2, there is better economy in South East Asia and Mainland China, and the main tourists of Hong Kong and Macau are come from those countries. Advertisement and promotion can help to introduce Tai Lei to those tourists before the company enters to these two new markets. For example, using celebrities to promote the brand and product or distribute coupons via different channels. If Tai Lei put more efforts to do the advertisement and promotion in Hong Kong and Macau, it can attract more consumers and increase the market share. vi.Quantitative Strategic Planning Matrix (QSPM) A QSPM for Cafà © de Tai Lei Loi Kei Acquire supplier companyPut more efforts on the advertisement and promotion in exiting marketExpand the business to South East Asia and Mainland ChinaDevelop healthier product External FactorWeightASTASASTASASTASASTAS Opportunities 1.Increase number of tourists coming to Macau0.1510.1540.6020.3030.45 2.Better economy in Southeast Asia and Mainland China0.1010.1030.3040.4020.20 3.Increase in Macau people’s purchasing power0.1020.2030.3010.1040.40 4.Promotion coupons attached in Macau’s official tourist map may help increase awareness0.0530.1540.2000.0030.15 5.Cooperation with the youth correctional institution may help finding manpower0.05-　-　-　-　-　-　-　-　 Threat 1.Customers are easy to change another brand to consume pork chop bun0.1020.2040.4010.1030.30 2.Increasing number of competitors in the town selling similar product0.1520.3040.6010.1530.45 3.Increasing amount of rent in Macau may lead Tai Lei suffer0.05-　–　-　–　-　-　 4.Local people refuse to work in small-middle enterprises0.05-　-　-　—　–　 5.Negative comments from online reviews and locals0.0510.0540.2030.1520.10 6.Negative news in Taipa’s flagship store in December 2011 (required to close by IACM)0.0510.0540.2020.1030.15 7.People seek for healthier food and beverage nowadays0.1010.1020.2030.3040.40 Sub Total1.00　1.30　3.00　1.60　2.60 Internal FactorWeightASTASASTASASTASASTAS Strengths 1.Old history and reputable brand name0.1010.1040.4030.3020.20 2.Use central manufactory to produce pork chop to ensure same quality and acquired ISO recognition0.05-　　–　–　-　-　-　 3.Earning profit every year0.1510.1530.4540.6020.30 4.Attractiveness to investors from South East Asia and Mainland China0.1510.1530.4540.6020.30 5.Strong marketing team to develop new promotional programs and expansion strategies0.1010.1040.4030.3020.20 Weakness 1.Low educational level of all level of the employee0.05-　-　-　-　-　-　-　-　 2.Lack of manpower0.10–　-　—　-　- 3.High selling price compares to similar products in the market0.1540.6020.3010.1530.45 4.Limited amount of branches in Macau Peninsula0.0510.0540.2030.1520.10 5.Most products are in high calories 0.1010.1030.3020.2040.40 Subtotal1.00　1.252.50　2.301.95 Sub Total Attractiveness Score　　2.555.50　3.904.55 As the table of QSPM for Cafà © de Tai Lei Loi Kei show that the left two columns are extracted verbatim from the EFEM and IFEM of Cafe Tai Lei Loi Kei and also note that four alternative strategies – 1) Acquire supplier company 2) Develop healthier product 3) Expand the business to South East Asia and Mainland China 4) Put more efforts on the advertisement and promotion in exiting market – were from the company’s SWOT Matrix. Moreover, the Attractiveness Score (AS) from1 to 4 is used to reveal each strategy’s attractiveness given the respective external or internal factor, where 4 is the best and 1 is the least attractive. Work row by row in developing the QSPM and decide which strategy is the best for the external or internal factor. After conducted the QSPM, the strategy of â€Å"Put more efforts on the advertisement and promotion in exiting market† was highly recommended based on the result of the sum total of the Attractiveness Score from QSPM and it acquired the highest score of 5.50. The second recommendation strategy is â€Å"Develop healthier product† and the third one is â€Å"Expand the business to South East Asia and Mainland China† due the priority of the Attractiveness Score, which is 4.55 and 3.90. QSPM can be important information for a firm to make decision of strategies. The strategy of the Attractiveness Score below 3 in the QSPM is not taken into the consideration. The reason of chosen â€Å"Put more efforts on the advertisement and promotion in exiting market† as the highly recommend strategy, the Attractiveness Score of this strategy in the sector of external factor, there are two  opportunities are rated as 4 and two rated as 3 reflecting that the strategy was attractive enough to fulfill those opportunities and one of the opportunities is not related; those opportunities are related to the market trends – the chance for increasing sales because the tourists, especially the South East Asian and Mainland China tourists, are flooding to Macau tourism market and the booming economy increase the spending ability of local people as well. In addition, two threats about the competitors become more and more because of the opportunities that they can gain the market share of pork chop bun, besides; two threats related to lots of negative comments, news are appeared on the internet, newspaper and magazine. Therefore, a strategy of â€Å"Put more efforts on the advertisement and promotion in exiting market† got the highest score on Attractiveness Score because it can against this situation by create more promotional advertisements and distributed by mass media in order to capture the largest amount of pork chop bun market share, by the way; this strategy can break the negative comments and news as well. The remaining one about the shortage of man power in Macau cannot solve by the firm themselves due to the government policy. On the other hand, in the internal factor, two strengths are rated as 4 and two strengths are rated as 3 to show that Cafe Tai Lei Loi Kei has the ancient and reputation brand name, the ISO recognition and the new hire marketing team so it is attractive enough to get the attention of investors all over the world, besides they had good financial report on earn profit per year. Thus, â€Å"Put more efforts on the advertisement and promotion in existing market† can be chosen as a tool to attract more investors so as to expand the pork chop bun market by the promotional advertisement about the ancient and reputation brand name and cooperate with the new hire marketing team, the expanding no longer focus on Macao but Southeast Asia. And one strength does not have any relationship of this strategy. Moreover, one of the weaknesses is rated as 2 and one is rated as 4 related to higher price and do not have enough branches in Macau, so the promotional poster or promote in the travel guide book to emphasis the ancient brand name with â€Å"where to buy† instruction that can be a good solution to against the weaknesses which already excited in Tai Lei, furthermore; one of the weaknesses is rated as 3 for the less of healthier food, thus first at all, Tai Lei prove some health product then use â€Å"Put  more efforts on the advertisement and promotion in existing market† to do more promotion of the related product. And the other weaknesses are no impacted on this strategy. STRATEGY IMPLEMENTATION i.Acquire supplier company Acquisition is one of the backward integration methods. Cafà © Tai Lei Loi Kei could acquire suppliers such as the pork chop and bread suppliers, etc. This benefits Tai Lei because it eliminates the profit which normal suppliers get from Tai Lei, causing reduction of cost. Upon the acquisition, Cafà © Tai Lei Loi Kei may have to keep all the original staff of the suppliers. However, the organizational culture of the two firms may be different so it becomes difficult for Tai Lei to persuade all staff to have full commitment to the Cafà ©. Remuneration package have to been discussed again in order to retain all experienced staff. ii.Develop healthier product Inventing and creating new flavor products will be a way for Cafà © Tai Lei Loi Kei to survive in the keen competition. Customers are always looking for new products and innovations, especially some healthy food. After the launch of new products, it takes Tai Lei a long period of time to test the market response and to see whether the customers accept the new products or not. Cafà © Tai Lei Loi Kei will definitely bear the risk that the new products do not help them to expand the product line and obtain good response from customers. iii.Expand the business to South East Asia and Mainland China It costs Cafà © Tai Lei Loi Kei a lot to expand a new market, such as some South East Asian countries. They have to spend a lot on marketing campaigns and promotion methods. Tai Lei has to tolerate the heavy marketing expenses and at the same time, bear the risk that the customers from new market do not accept this kind of new products. The marketing strategies with high cost will affect Cafà © Tai Lei Loi Kei’s profit. iv.Put more efforts on the advertisement and promotion in existing market By applying the same concept with the expansion of new market in South East Asian countries, Cafà © Tai Lei Loi Kei has to spend a lot to emphasis more on the marketing effort within the existing markets, Macau and Hong Kong. It will be beneficial for them to focus more on the existing market since it is easier to retain customers rather than attracting new customers. However, the high marketing cost decreases Tai Lei’s revenue at the same time. CONCLUSION Cafà © Tai Lei Loi Kei is a local brand with long history, selling its superior pork chop bun to delight customers with most efforts. According to the interview result and data, we created a brand new vision and mission for Tai Lei. Those interview result includes its internal strengths and weaknesses, external opportunities and threats and many other factors which may affect the future development and performance of Tai Lei. A number of matrixes have been conducted to better analysis the current situation of Tai Lei. After all the matrixes analysis, four strategies have been developed. We suggest Cafà © Tai Lei Loi Kei to adopt these four strategies, in order to further develop and expand its own business and have a more prosperous future.