Company Background

Caf de Coral Group is the largest publicly listed Chinese Fast Food
restaurant in the world with over 330 outlets in the Asia Pacific region. It was
established in 1968 and currently operates more than 100 self-service fast
food restaurants in the territory. It has now over 34 years of proven
experience in the food service and catering industry.

In addition, it now currently caters to an average of over 300,000

customers a day, making the chain the undisputed market leader in the field.
The Caf de Coral Group is the development and management of quick
service restaurant chains. Locally, in the Hong Kong headquarters, Caf de
Coral is the market leader of the fast food sector for over three decades.

Location

Restaurant locations of the Group are found in mixed use district,

business core, shopping centres, industrial areas, and private and public
housing estates. Restaurants of an average 300 square meters are designed
with a modern and warm ambience aiming to maximize customer flow.

Product

The famous signature products of the Group include Baked Pork Chop
with Rice, Hot Pot, Chicken in Glutinous Rice, and Tea with Milk, and are
among other products that it offers. They want to be better than the best and
thus, never stop evaluating its signature products to make improvements, so
that its customers will always get the best without even having to ask for it.
Aside from the well established menu, Caf de Coral also explores into the
realm of the newest taste. It even introduced luxurious dishes that used to be
served only in the most prestigious hotels and high-end dining restaurants,
such as our Winter Melon Soup. In turn, consumers always get the best food
with the best value for their money.

In addition, menus are changed seasonally. Typically, dishes that are

able to hold their temperature longer, such as hotpot and clay pot rice are
served in winter months in addition to those items that are served all year
round. Most seasonal specialties are presented in specially designed utensils
to enhance their appeals and thus their perceived value to consumers.

In order to ensure and enhance its competitiveness, it continuously

reviews, updates and improves the products it offers to consumers. It
constantly seeks to introduce new food products to its range to increase its
variety, keep the interest of its customers and thus, build up their loyalty.

Quality Control

Caf de Coral Group insists so much on the quality of the food it offers,
thus, setting the strictest standard for every step of the process, from
merchandising, cooking, to storage. The company also hires an independent
team to examine and evaluate the quality of food at each branch. In order to
involve its customers, the company continuous to conduct surveys regularly in
order to understand their needs in terms of food and services.

Focus

In terms of focus, the company has clear objectives, with high operating
efficiency, with clear understanding of the company objectives, and
streamlined procedures to reduce the operating cost and to increase its
productivity. As a result, the companys profitability increases and both the
company and its staffs grow at a fast pace.

Value

In terms of value, the company provides reasonable prices to its products,

and offers quality products and services to consumers. Stringent material
quality checking and production process all comply with the high standard of
quality requirements. Service must be affectionate and meticulous, thus,
customers must come first.

Analysis of Strategic Capability

One of the tools that would allow the company to analyse its strategic
capability is by knowing its marketing environment, which includes all the
actors and forces that influence an organizations ability to effectively transact
or negotiate business with its target market. It includes both the micro and
macro environments, where microenvironment pertains to forces close to the
organization and affects its ability to serve its customers, while the macro
environment pertains to the larger societal forces, which affects the
organizations microenvironment. An organizations microenvironment
includes its internal environment with its top management, its suppliers that
provide the needed resources of the company, its marketing intermediaries,
which assist the company to promote, sell, and distribute its products to
consumers, its customers, its competitors, and its publics, who pertains to any
group that perceives to have an interest in achieving the organizations
objectives and goals. On the other hand, the macro environment of any
organization includes external factors, such as the economy, demographics,
culture, politics, natural environment, and technology (Kotler and Armstrong
1999).

External Environment Analysis

PEST Analysis

The PEST Analysis establishes a good analysis of the external effects on a

company by breaking them into essential and obvious sorts.

Political restrictions in the policies set by the Hong Kong government in

making negotiations; distinct superiority over its legal system; standard
pricing laws or regulations set by the Hong Kong government
Economic financial crises; economic growth of the city; issues on demand
and supply and distribution; economic situation experienced by individual
consumers that may affect the affordability of the products
Sociological conflict with consumers that are major stockholders of the
company; unemployment; Dynamic changes in communication, marketing
and management; can be attributed to the changes happening in Hong Kong,
such as retaining a distinct superiority over human resources, languages,
having an impressive array of human resources that include not only mainland
Chinese who have been educated and trained in the West, but also a standing
force of lawyers, accountants and other professionals hailed from every corner
of the world; use of the English language, which has long been integrated into
its socioeconomic fabric; competition and rivalry
Technological Complex: impacts of e-commerce to the company;
development and improvement of its website, utilization and maximization of
the Internet
Being one of the busiest cities in the world, its complexity grows to cope
with the changes outside its domain. Part of the environments complexity is
the use of the Internet or World Wide Web, which is continuously reinventing
the whole customer process, from information to after-sales care. The use of
the Internet in Hong Kong made negotiations faster, developed new high-tech
tools, enhanced Research and Development, hastened operation and
production, and contributed to the improvement of analysis and decision-
making processes in companies (Heller 2006).

Competition Analysis: Porters 5 Forces Model of Competition

The model of pure competition suggests that risk-adjusted rates of return

should be stable across firms and industries. Nevertheless, a number of
economic studies have asserted that different industries can sustain varied
levels of profitability, through knowledge of the structure of the industry. With
this, Porters 5-Forces Model is useful for understanding the context of the
industry, in which the firm operates (Porters Five Forces 2007).

Rivalry This is caused by several factors, such as the presence of a larger

number of firms that compete for the same consumers and resources; low
switching costs for a consumer can switch from one product to another; a
diversity of rivals with different histories, cultures, and philosophies; and
industry shakeout (Porters Five Forces 2007)

Fairwood is the competitor of Caf de Coral in the fast food industry. On

promotion, Fairwood has sought to be innovative in both the development and
presentation of its fast food products. It was the first fast food chain in Hong
Kong to introduce traditional clay pot rice and rice burger. It was also the first
to bundle its products to provide customers with set-dinner and set-lunch.

Threat of Substitutes - Substitute products refer to products in other industries

(Porters Five Forces 2007). The threat to Caf de Coral is the price of the
materials being used in order to render service to consumers, which includes
the supplies for the food items and other materials used in the stores.
Buyer Power This refers to the impact that customers have on a producing
industry (Porters Five Forces 2007). In Hong Kong, buyer power is strong,
such that this could provide the stores rivals with a strong and efficient
business.
Supplier Power The power of suppliers of Caf de Coral is also strong, as it
also contributes to the decline of the business of the company. Due to the
increase of prices in the market, prices of raw materials also increases, thus,
give additional costs for the company.
Barriers or Threat to Entry Some consumers in the city are already aware of
food safety and nutrition. The challenge or barrier to the store is the
promotion of more interesting and nutritious food to consumers.

Internal Environment Analysis

The internal environment of the company must also be evaluated to

be able to grasp and understand its potential for developing teamwork,
coordination, and employee development. In terms of its products, Caf de
Coral marks a right cup for a cup of tea or coffee. Only the best tea leaves can
make it to a consumers cup of tea at the Caf de Coral. It blends its tea
leaves according the seasons best. This is being done by using the most
advanced tea brewing machines that make the infusion stronger and more
even. The Caf also makes sure that the tea is at the right temperature. The
brewing process is also standardized and has been tested and fine-tuned for
so many times before obtaining the perfect tea base, which is the strongest
aroma and taste of tea leaves with the best texture and color. To top it all,
Caf de Coral only uses evaporated milk of the highest quality to make the
tea smooth.

In addition, as the worlds largest Chinese quick service restaurant

group, it maintains a publicly recognized leadership position in the mass
market, quick service restaurant chain business, with vertical and horizontal
diversification towards the food services, food processing and distribution,
catering and hospitality sectors in the world arena. The Groups value chain is
a model that helps to analyze specific activities through which the firms can
create value and competitive advantage. In terms of inbound logistics or
inventory control, Caf de Coral was very clear in what it needed the new BMS
to do. The restaurant group wanted to streamline business processes, improve
productivity, promote effective strategic planning and generate savings in
manpower and administrative expenses. Most important of all, it needed new
ways to continue to enhance customer satisfaction today and into the future.
In terms of operations, the company tests and value creating activities that
transform the inputs into the final product. Seito was selected after evaluating
a number of POS system providers. Seito was deploying the solution to over
150 branches within 3 months. Apart from the strong project implementation
team, one of the Seitos strengths is to provide professional, effective and
responsive service support. 24-hour hot line and on-site supports are
committed. In terms of outbound logistics, the company is required to get the
finished product to the consumers. In this part of the operations, lunch
delivery service is provided to both primary and secondary students. It is one
of the major school lunch providers in the marketplace. All schools and
parents are appreciative of this service, for its nutritional value, environmental
friendly packaging, and value for money.

In terms of its marketing and sales including advertising and

promotion, Achieving A Hundred Points of Excellence has been its
commitment to its customers and now a household catch phrase. As part of
the companys on going campaign to strengthen the Caf de Coral Brand,
proactive advertising campaigns are launched on a continual basis. Through
the campaign, the brand image has been further enhanced by positioning
Caf de Coral as a place not just for best taste and value meals but also a
popular meeting place for all walks of life. Moreover, in terms of Research &
Development and design, the company introduces the revolutionary 4th
Generation post-modern design concept to elevate its interior architecture
and design image and to revolutionize their facilities, ambience, service, and
image, all in one go. The company also gives importance to its HR
management and training, as Caf de Coral provides training for employees
on all levels regularly, to refine their individual skills and to improve their co-
operation skills as a team. "Mystery shoppers" program is conducted to reveal
the real service quality and employee's attitude. This auto-amelioration is
surely one vital step in elevating the standard of service. For service,
customers come from all ages and all walks of life ranging from students,
nearby residents and young executives.

SWOT Analysis

SWOT analysis can provide a framework for identifying and analyzing

strengths, weaknesses, opportunities, and threat. This can also provide an
impetus to analyze a situation and develop suitable strategies and tactics, a
basis for assessing core capabilities and competences. Moreover, this can
provide the evidence for, and cultural key to change and a stimulus to
participation in a group experience.

STRENGTHS

WEAKNESSES

1. Wide knowledge of industry

2. 30 years of experience in managing diversified customer base

3. Competent top management and rank & file for operation and
maintenance

4. Existing wide range of customer base

5. Strong financial performance

6. Strong competitive advantage

7. Dedicated and professional employees

8. Wide range of products and branches

9. Stable pricing for products

10. Diversified campaigns for launching products

1. Change of preferences of Hong Kong consumers, of becoming aware of

food safety and nutrition

2. Considerably late exploitation of the Internet.

3. Lack of promotion of new and interesting food

4. High operational costs

5. Customer losses

OPPORTUNITIES

THREATS

1. Expansion of target market

2. Healthy market environment

3. Diversification

4. New product launches

5. Use of the Internet

1. Economic restructuring

2. Intensified competition
3. Government regulation

4. Competitive marketplace

5. Volatile market condition

6. Additional supplementary tax charge

With Caf de Coral Groups proven business model, it can use the
expanding scale of the business to further strengthen the central kitchen
operating system and the bargaining positions with the companys suppliers.
All these will generate substantial cost efficiency that can pass on to its
customers and ultimately, enhance the sales volume of the business. The
Group also persisted to maintain a stable pricing level for the products. This is
because the company believes that their customers are demanding good
products with the right prices instead of inferior products with low prices. With
the companys 30 years of experience in managing a diversified customer
base, it has cumulated years of experience in optimizing the price/value
equation. It also launched over 20 new menu products, for instance Pumpkin
& Chicken Burger Breakfast Set, Shanghai Vegetable Rice, Twin Baked Dishes
and Lobster Soup & Sizzling Plate Dinner Set, all with satisfactory sales results
achieved. We continue to stay tune with our advertising and promotional
activities for generating the customer visits to our shops. In order to better
serve the needs of our diverse customer segment, we introduced a Two-
pronged Product Launching campaign with the intention of increasing
repeated customer patronage on our core products and quick service
restaurant developed attracting new customers with innovative premium
products.

For customer service levels, to service the customer locally is the best
service levels for OEM party. That is why they are thinking to reach the
customers in the market side to do the Build-To-Order or one step further, the
Configure-To-Order. The customers service level can be satisfied through the
Value Chain. For channels of supply and distribution, to produce and in
customer service level, it can be highly satisfied through the local assembling
and supports. Build-To-Order or Configure-To-Order is the best service support
from the global logistics management. In channels of supply and distribution,
to produce and distribute products locally. For inventory, it t is the very
important factor to determine the profit levels in the notebook industry. If you
have less inventory levels, you can have profits in running the global logistics
operation. These are the key issues to manage the demand and supply. For
transportation, because of deregulation in the procurement in local branch
offices, they do not need to concern about the transportation problem too
much. Instead they should find out the best transportation decision to reduce
the total inventory cost and reduce the total transportation cost. For
information management, it can be adjusted through different organization
structure and different company culture. The whole information linkage from
suppliers to customers is determining the different information management.
Information flow planning is very important to help the efficient global
logistics operation.
 Furthermore, as the companys core competence, it recently launches
the Club 100 = VIP, which benefits the customer by enjoying non-stop
marvelous rewards provided by the Bonus Point Program, and with which
provides new product information and activities update via e-mail. The launch
of Club 100 membership program for our valued customers is another
innovative and powerful marketing tool of customer loyalty and relationship
management. All these measures not only set new standards in leading the
rest of the pack in the industry, but they also result in same store sales
growth and margin improvement.

Atmosphere as another major reason for the popularity of fast food.

Except for the higher end, more expensive restaurants, the traditional
restaurants were not overly concerned about friendly customer service or
cleanliness. While the quality of service at traditional places varies greatly
depending on the personality of the waiter, the students said that the cashiers
at the fast food places are always smiling and polite. The Group has 7,200
employees as at March, 2001. We believe in rewarding employees by allowing
them to share in the growth of the all internal training activities a n d
improved the front-end quality of services. This will also guarantee the
smooth and effective implementation of management plans in business
process re-engineering. Believe the Group can use the expanding scale of our
core business to further strengthen the central kitchen operating system and
the bargaining positions with our suppliers. All these will generate substantial
cost efficiency which can pass on to our customers and ultimately, enhance
the sales volume of our core business.

References

Heller, R 2006, Management Issues, viewed 4 June 2008,

<http://www.management-issues.com/2006/5/25/opinion/complex-
management.asp>.

Kotler, P and Armstrong, G 1999, Principles of Marketing, 8th ed., Prentice

Hall.

Porters Five Forces 2007, QuickMBA, viewed 4 June 2008,

<http://www.quickmba.com/strategy/porter.shtml>.