Strategy Analysis Tsuru Case study

Group B12 Group member:
HIRPARA SHREY
LIM JIA XIN
OGUNRINDE OLADIPO
WANG QIU JING

External analysis
1.1 PESTLE Analysis: The two most important factors to be considered is the economic and social factors. The recovery of the UK economy and the increasing employment rate has increased the average consumer spending on eating out. The eating out market in UK increased at approximately 2% in 2014 and quick-service restaurants experienced a growth rate of 3.7% (EY Report). The London property market has also increased by 29% in 2014 which may affect restaurants’ profitability. As for the social factor, increasing consumer awareness on healthy lifestyles has influenced restaurants to include healthier choices in their menu. This trend provides a good opportunity for both existing players and new entrants to attract new market segmentations. The political and legal, technology and environmental factors are explained in detail in Appendix 1.
1.2 Porter’s five forces: As shown in Appendix 2, there is intense competition among dominant market players such as Wasabi and Itsu which have numerous franchises and experience high brand values and customer loyalty. They benefit from economies of scale and have the resources to retaliate aggressively through pricing promotion. However, the barriers to entry is moderate since the initial capital outlay are relatively low. The market competitiveness increases buyers power. Customers are price conscious since these offerings are quite undifferentiated and customers experience no switching costs. The threat of substitutes is relatively high as there are many alternatives such as ready-made meals and other global fast-food operators. However, it is a good opportunity for existing players who can differentiate their offerings and also efficiently communicate their brand values to customers. Suppliers’ power is relatively low as there are many undifferentiated suppliers and these dominant market players have high purchasing power due to high volume of basic ingredients. In conclusion, this industry still very attractive and has ample opportunities for both existing players and new entrants.
2.0 Internal Analysis: Porter’s value chain analysis (Appendix 3) is used to identify Tsuru’s resources and capabilities and help understand its activities. As for supportive activities, its in-store traditional Japanese decoration styles with wooden furniture creates a relax eat-in environment. This helps create a better dining experience as compared to Wasabi and Itsu. Tsuru’s friendly employees and experienced chefs are also important resources to deliver high quality offerings and services. Tsuru also prides itself on its fresh and sustainable ingredients, prime location in the heart of the Central Business District(CBD), as well as imported Japanese noodle machine. As for primary activities, Tsuru has built a sustainable strategic relationship with suppliers who provides high quality materials such as free range chicken, sustainable line caught fish and recyclable boxes. These resources create values for customers who are increasingly concern with a healthy lifestyle and environmental responsibility. As for operations, Tsuru has two stores located in London’s CBD which provides take-away and eat-in service. It offers traditional Japanese food such as handmade ultra fresh sushi, curry, bento and ramen. Its patrimonial recipes are Tsuru’s main resources to gain competitive advantage. Tsuru also offers stylish burgers and salads to adapt to local customers’ eating habits, which differentiate itself from competitors. In terms of outbound logistics, Tsuru’s hot offerings such as curry and ramen are freshly made. Tsuru also implemented a loyalty card as part of its marketing and sales to improve customer loyalty and uses outdoor information boards to promote its offerings. For example, it states clearly on its information boards that its “ramen” are homemade noodles using authentic and 100% natural ingredients. Lastly, Tsuru provides friendly service but the speed is less competitive as customers have to wait for the hot food to be prepared which can be resolved with its new online ordering platform.
3.0 Competitive advantages: This chapter focuses on Tsuru’s competitive advantage via differentiation. Review websites such as Yelp and TripAdvisor (Appendix 9) are referred to gather an insight of what Tsuru’s customers value which is explained in detail in Appendix 6. In general, customers particularly value the excellent katsu curry, sushi platter and speedy service as well as the Japanese styled dining experience. Also, based on food testing among a panel of judges, Tsuru’s sushi platter won the first place followed by Wasabi and Itsu (Financial Times, 2014). Appendix 7 shows the resources and capabilities that are exploited to create the values mentioned. However, two of its resources and capabilities need improving. The inclusion of sit down service does not optimize lunch opportunity. It creates discomfort for some customers that are eating-in as those in line to purchase food tend to stand in the way of those eating-in. Besides, as Tsuru is located close to offices, it tends to lack customers after office hours which cuts into its profits. Nonetheless, Tsuru has successfully created a high willingness to pay(WTP) in terms of its ability to offer an eat-in experience and good quality of food. Based on a survey of quick-service restaurants, customers were willing to pay $2.47 more when service was fastest, $1.56 more when ambience was highest and $1.53 when product quality was highest (Perutkova, 2010). Despite being an American survey, it gives an approximate understanding of customers’ behavior in the UK. As Tsuru is able to satisfy all 3 of the values mentioned, it can be concluded that it has a high WTP compared to its competitors who tend to sacrifice ambience. Besides, Tsuru’s customers have a higher WTP due to Tsuru’s sustainable sourcing policy. Only 2 out of 100 Tsuru customers were not willing to pay 20 pence more for a chicken dish made with poultry raised in high welfare standard (Morris, 2011). However, Tsuru’s prices are quite similar to those of its competitors despite its high WTP. This could be due to its efforts to drive market share away from its competitors as it is a relatively new and small chain. Tsuru’s competitive advantage are from multiple sources which creates causal ambiguity. It is insufficient for competitors to merely imitate its ambience, it will need to include other factors such as prices, quality of food and service. Also, as Tsuru’s recipes are inherited, it is difficult to replicate. However, some of its resources and capabilities are easily imitated such as its architecture. As for now, the competitive advantage is still sustainable but it is unsure in the long term.
4.0 Strategy: In terms of market objectives, Tsuru needs to focus on increasing brand awareness and customer loyalty in the short term and being a market leader within CBD areas in the long term. For financial objectives, Tsuru aims to achieve 4% annual increase in its profitability which is achievable as the growth rate of UK’s quick-service restaurant industry is at 3.7%, To do so, there are 3 strategies that Tsuru needs to implement. Firstly, Tsuru needs to focus on its competitive strategy that includes changes to its offerings, process and services. Tsuru could broaden its offerings scope vertically and horizontally to satisfy its customers’ demands. Tsuru also needs to improve its speed of ordering process. As for its services, Tsuru should adopt human resources strategy such as introducing “training and development” and “reward system” amongst its employees to improve customers service and reduce staff turnover rate. Besides, Tsuru should also implement an effective marketing strategy to improve brand awareness. Lastly, a proper financial strategy provides a firm with the appropriate financial structure and funds to achieve its overall objectives.
5.0 Action Plan: To achieve its competitive strategy, Tsuru needs to diversify its menu in order to satisfy a wider range of customers and to provide more choices for existing ones. As it is relatively quiet during dinner time, Tsuru can open up for breakfast instead and offer Japanese style breakfast. This may attract businessmen and professionals who are going to work. This means that chefs need to create new recipes and working hours of employees need to change to accommodate the earlier opening hours. However, it may be challenging to maintain the quality of such a wide range of products and it is unsure how customers will react to Japanese style breakfast as most Japanese restaurants open only during lunch and dinner. Secondly, Tsuru’s speed of ordering process can be improved. This can be done by improving its in-store online ordering platform or app in which customers can order before hand and choose to collect it at a specific time. Tsuru has a running app but customers are unable to download it. This means that Tsuru needs to transition to an information management system which includes online database that allows employees to access customers’ information and orders. However, employees may lack expertise and experience to manouver the online database as well as an increase in budget to maintain the online platforms. With such major changes, Tsuru needs to conduct training and development for its employees to educate them about the changes as well as to encourage them to increase promotion of Tsuru’s new implementation to the customers. To increase brand awareness and brand equity, Tsuru can create an Instagram account to increase exposure. Lastly Tsuru needs to fund these changes by taking out bank loans in the short term. In the long term, it can consider cooperating with venture capitalist. It is recommended that Tsuru should first implement a wider menu and also focus on promoting its brand. The rest of the strategies can be implemented later on as a complement to its new diversified menu.

Appendix

Appendix 1: PESTLE Analysis

Appendix 2: Porter’s five forces (Quick-Service Restaurant Industry)

Appendix 3: Porter’s Value Chin for Trusu

Infrastructure | Funding mainly from retained earningsRelaxed contemporary spaceNatural wooden tables and chairs | Human Resources Management | Hiring friendly employees Experienced and skilled chefs | Technology Development | Corporate with “Hungryhouse” app to speed up its service Develop its own online order app called “Served” | Procurement | Fresh and sustainable ingredients, CBD leasehold space and equipment needed to cook and delivers offeringsEg: Imported Japanese noodle machines, recyclable packaging | Inbound Logistics | Purchase raw material such as free range chicken and fresh fish from high quality and sustainable suppliers Soft drinks are supplied exclusively by Coca-ColaSpecial drinks such as Japanese tea and wine are imported | Operations | Offer ultra fresh sushi and rolls Japanese curry, bento, stylish burgers and ramen Provide take-away and eat-in service | Outbound Logistics | Curry, ramen and burger cooked from back kitchenSushi rolls, Salad and drinks display for self-service |

Appendix 4: Strengths and Weakness

Appendix 5: Resources and Capabilities

Appendix 6: Customers value

Appendix 7: The resources and capabilities that are exploited to create values

Resources and Capabilities
Resources and Capabilities
What customers value
What customers value

Appendix 8: Competitive Advantages:

Appendix 9: Customer Feedback from Yelp

Appendix 10: Restaurant pictures

References:

1. Bazalgette, P. (2014) The Taste Test: Takeaway Sushi, Available at http://www.ft.com/cms/s/2/336bcd06-12c2-11e4-93a5-00144feabdc0.html#axzz3u1Svf67s (Accessed: 10th Dec 2015).

2. EY (2014) Restaurant and Casual Dinning Insight Report, UK: The Caterer

3. Morris, S (2011) Sushi Can be Ethical, Available at: http://www.lovefood.com/…/o…/11246/you-can-eat-ethical-sushi (Accessed: 9th December 2010).

4. Perutkova, J (2010) 'Consumers' Willingness to Pay and to Patronize According to Major Restaurant Attributes', The University of Central Florida Undergraduate Research Journal, 4(2), pp. 6.

5. Tripadvisors (2015) http://www.tripadvisor.co.uk/Restaurant_Review-g186338-d1218307-Reviews-Tsuru-London_England.html (Accessed: 10th Dec 2015).

6. Yelp (2015) http://www.yelp.com/biz/tsuru-basking-ridge (Accessed: 10th Dec 2015).

7. Yueh, L. (2013) The rise of global middle class, Available at http://www.bbc.co.uk/news/business-22956470 (Accessed: 19th June 2013).