The purpose of this study is to investigate the extent to which the strategies employed by Nandos in the recent recession have been effective. For the topic to be extensively researched, the research proposal has been split in to the following objectives.
* Identifying the customer base of Nandos.
* Investigating if and how the recession affected Nandos. * Analysing strategies used by Nandos in the recession.
An investigation of Nandos’ performance since and during the recession will need to be undertaken. This would need to be compared to its performance prior to the recession in order to investigate the effect of the recession on Nandos. Firstly, the proposal will first carry out an in depth literature review to investigate relevant theories and information related to the research objectives outlined above. Building on the findings of the literature review, the research design and strategies will be formed to investigate each of the above objectives. During the course of this study, ethical and practical issues in relation to the research altogether will also be considered. Nandos founded in 1987 is a casual dining restaurant with a Portuguese theme. It originated from South Africa and is now operating in 30 countries on 5 continents. It specializes in chicken dishes with different souses such as lemon and herb, medium, hot or extra hot Peri-Peri.
In some countries, they also offer other flavor options like mango and lime, lemon and herb, or Mediterranean (Nandos 2009, p.4) The restaurant began in 1987 when Robert Brozin and Fernando Duarte bought a restaurant called “Chickenland” in Rosettenville, Southern Johannesburg. They renamed the restaurant Nandos after Duarte. The restaurant incorporated influences from former Portuguese colonists from Mozambique, many of whom had settled on the south-eastern side of Johannesburg, after their homeland’s independence in 1975. (Nandos 2009, p.4) Nandos is famous for its flame-grilled Peri-Peri chicken which is served either in quarters, halves and wholes.
It also serves burgers, pitas, salads, wings and wraps. In some countries, Nandos sells chicken livers, Espetada and the Cataplana. (Nandos 2009, p.2) Nandos also manufactures a range of sauces which are sold in Nandos restaurants and in supermarkets. These include Peri-Peri sauces, marinades, cooking sauces and a Peri-Peri Essence. (Nandos 2009, p.2) In 1992 Nandos entered the United Kingdom’s restaurant industry with its first restaurant in Ealing, London and now is operating with its several branches around UK. In 2009 Nandos UK was awarded Three Stars in the Best Companies Annual Accreditation Awards becoming the only entrant in the large companies’ category to achieve the three star rating. (Harmer, 2010)
According to Edwards (2010) customer base of an organisation includes all the customers that organisation servers. One of the most important ways to establish a successful business is to build a solid base of customers who stick with the business through thick and thin. A solid customer base becomes the foundation on which a business grows. Business Cycle
Business Cycle is defined as a cycle of series of different phases of contraction and expansion of real GDP. A complete business cycle consists of five different phases and every country has to go through each phase in order to achieve its peak. A complete business cycle from peak to peak is shown in the graph below. (Arnold 2008, p.151)
. (Arnold 2008, p.151)
Phases of The Business Cycle
There are five different phases of a business cycle which include the peak, contraction, though, recovery and expansion. (Arnold 2008, p.151) A complete business cycle is measured from peak to peak. Peak – at the peak of the business cycle real GDP is temporary high. (Arnold 2008, p.151) Contraction – this phase represents the decline in the real GDP. This phase is known as the recession phase. (Arnold 2008, p.151) Trough – this phase represents the low point in the real GDP just before the starts to increase back again. (Arnold 2008, p.151) Recovery – this phase represents the phase when the GDP is rising back towards the initial peak.
Recovery phase begins from trough and extends up till the initial peak. (Arnold 2008, p.151) Expansion – the expansion phase refers to the increase in real GDP beyond the recovery point. In this stage the GDP increases the initial peak. (Arnold 2008, p.151) No country can stay in the peak phase for long time even the developed countries. The best any country can do is that they can go straight from contraction phase to expansion phase and skip the trough and recovery phases.
According to Wiegand (2009) recession occurs when a country’s gross domestic product (GDP) – the value of all the reported goods and services produced by a country – goes down for two or more consecutive quarters – which means for six months or more. (p.18) The above mentioned definition was considered very simple and standard so on November 26, 2001, the National Bureau of Economic Research gave a different than standard definition of recession. According to the NBER, “recession is a significant decline in activity spread across the economy, lasting more than a few months, visible in industrial production, employment, real income and wholesale retail trade.” (Wiegand, 2009) Ordinary recession symptoms are quite depressing. People buy less stuff because they feel less confident about making in the future. Factories make less stuff because people are buying less. It can be harder to get credit. Unemployment rises and stock market falls.
A recession when gets out of control turns into a depression resulting in the country’s GDP drops by more than 10%.(Wiegand, 2009) Real life examples of great depression that happened in USA and Finland are: * From 1929 – 1933, the GDP of the United States decreased by 27%. * Form 1937 – 1938, the GDP of United states decreased by 18%. * In 1990s, after the Soviet Union fell apart the GDP of Finland dropped by 11%. The above given examples when compared by the global recession of 2001 in which the GDP decreased by 0.6% give the idea of the critical situation of 1930s. (Wiegand, 2009)
Impact of Recession
According to King (1997) the recession had two different but related impacts: * The realization that competitive nation require competitive government stimulated experiments to reform government structure and systems. * The failure of many of these experiments to deliver short – term benefits has led many to distrust the traditional processes and rhetoric of governments. While recession exposed both businesses and governments to new global forces, nosiness responded more flexibly than government. (p.269)
Causes of Recession
The reasons which cause the GDP to decrease and hence result in recession are classified into two types which are:
External Causes of Recession
External causes include misusing of those same factors which are used by the government in tackling the recession. Recession is generally caused by the excessive application and misusing of different governmental economic policies like fiscal or monitory policies. On rare occasions, there can be other types of external shocks such as oil embargo of 1973 – 74, but usually the cause of recession that does the real damage is the fiscal or monetary policies. The most prominent example of external cause of recession is the severe monetary control sometimes referred to as “cold turkey monetarism”. (Klien 2002, p.133)
Internal Causes of Recession
Internal causes of recession are probably more important than that of external causes of recession. These are the excesses, imbalances and distortion that develop within the structure of the economy itself as the expansion unfolds and cause consumers to cut back on their buying and business executives to cut back on production and employment. For example: an excessive build – up of inventory, an imbalance in price – cost movements that brings on a profit squeeze and excessive demands for credit that drive the rates beyond variable level. (Klien 2002, p.133)
Strategies used by Governments to combat Recession
The methods used by the federal government to try to pull the economy out of recession are discussed below:
Setting Fiscal Policies
According to Wiegand (2009) fiscal policies are basically the guidelines the government follows to collect and spend the tax money. Governments in order to tackle recession it can take the following steps: * Cut Taxes – so people and businesses keep more cash for spending on goods and services. * Increase Spending – on government projects to boost employment. * Widen “safety net” programs – such as unemployment insurance. Adjusting Monetary Policies
According to Wiegand (2009) governments can regulate economy by manipulating the supply of money. Governments can use the following measures to control the recession in the economy:
* Lower the amount banks have to keep in reserves.
* Lower the interest rates on loans.
* Buy treasury bonds and loans that private entities made.
Strategies used by Businesses to combat Recession
According to Vickers (2006) Businesses in order to recession proof its business in case of economic slowdown should follow the strategies give below: * Diversify its business.
* Offer extraordinary customer service.
* Intensify its marketing activities.
* Adopt latest technology.
* Stay focused towards long term goals and objectives.
* Look for new ways to be innovative.
Recession and Chicken/ Burger Bar Market
The worldwide recession has affected most markets and the chicken/burger bar market is no exception. Mintel (2010c) shows the chicken and burger bar market was worth £4.014m. However, in 2008, roughly when the recession came to the fore, this was down to £3.781m and was estimated to fall further yet.
Recession and Nando’s
A study conducted in December 2010 based on the opinion of 1,966 people aged 16+, suggests 7% of people falling in the category visit Nandos. Furthermore, for the age group 15-24, this figure rises to 19% (Mintel, 2010a). This would seem to suggest that Nandos appeals more to a younger age group. However, one must take into consideration that the sample of 1,966 may not be a sufficient representation of the UK population. Nandos are inclined to target a young age group; an idea backed up by the “Spirit of Nando’s” radio campaign aimed at 18-35 year olds (Mintel, 2010b). This point is further backed up by Nandos’ popularity amongst celebrities (Sawyer, 2010). In addition, Mintel (2010a) also suggests that, largely, visitors to Nandos are inclined to be from the C1 and Urban Prosperity socio-economic groups. Although there was some archival data on the customer base of Nandos, it is not sufficient for the purposes of this research.
Building on the data found during the literature review, this study will look more closely in to the customer base of Nandos. Due to lower consumer spending influenced by the recession, Nandos in the UK made a loss of £23m in only 36 weeks leading up to February 2009. However, directors of Nandos also citied rising ingredient costs as factor (Paskin, 2010). The loss of £23m over 36 weeks during the recession would seem to suggest that the recession has negatively affected Nandos. The Mintel (2008 and 2010c) reports showed that there was no significant change in Nandos’ market share in the period when recession was in progress. The research design will allow for the reasons behind this loss to be analysed in detail. Nandos’ financial reports will be required to look comprehensively at their financial performance and the driving forces behind any major changes.
The effect of the recession on Nandos may well have been reduced due to the brand name being perceived honest and sincere (Opoku et al, 2007). Nandos has continued to expand through the economic downturn, planning ’20 – plus’ openings and David Niven vowing to open up to 200 more within 5 years (Wootton, 2010). Another strategy explored by Nandos was the move towards being eco-friendly, underlined by unveiling the first branded UK restaurant to use its own waste cooking oil as a solitary power source (Wootton, 2009). Another tactic employed by Nandos was to make a commitment to offer healthier options in their menu (Eversham, 2008).
Nandos strategy of not taking note of recession and expanding will need to be further looked in to. Their initiative towards their staff and providing healthy options will also be investigated and the effectiveness of it analysed through the research methodology. Also, Nandos made a vow to make no redundancies in the recession which seems to be to keep up staff morale. And, as Moore (2010) suggests, HR methods are a major contributor to business profitability and this is a factor which is gaining more and more weight. This strategy seems to have paid some dividends with the award of three stars in the Best Companies Accreditation Scheme 2010 (Harmer, 2010).
Research methodology in research methods refers to the study of specific techniques, tools or procedures applied to achieve research objectives. Research methodology includes types of data, types of study, sources of data, research tools etc. used in order to conduct the research. (Dillman, 2000)
Purpose of Research
The research is being conducted to answer the following research questions:
* What is the customer base of Nando’s?
* If and how the recession affected Nando’s?
* What are the strategies used by Nando’s in the recession? In order to answer the research question above the methodology used to carry out the research includes the following:
Nature of Study
In order to answer the research questions this study will require both exploratory and explanatory strategies at different points. Exploratory strategy is required as there is not enough information available about the research topic in hand as this type of research on Nandos has never been conducted before and is done for the first time. So in order to fulfil the research objectives information about Nandos is needed to be explored to investigate the effect of recession on Nandos and different strategies used by Nandos to tackle recession. (Dawson, 2002) Explanatory strategy is required as the relationship of the research findings must be established and explained in the research. (Dawson, 2002)
By considering the research objectives and the literature review of the research project a clear structure of the most suitable research methodology for the research is developed. Through each layer of Saunder et al. (2007) research onion model the most appropriate research methods, approaches and strategies are adopted for conducting the research in order to answer the research question. The different layers in Saunders et al. (2007) research onion model are shown in the figure below; all the layers will be individually discussed to explain the reason behind selecting a particular element for this specific research.
Saunders et.al (2007) “Research Onion”
As shown in the figure above the first layer of Saunders et al. (2007) research onion is the research philosophy. Considering the research objectives interpretive approach is selected as the relation between Nando’s and its customer’s is needed to be determined in order to answer the research question. Positivism approach is also considered as the research also required qualitative and statistical data in order to improve the research findings.
As shown in the figure above the second layer of Saunders et al. (2007) research onion is the research approach. The research design will mainly be deductive as the use of existing literature and information on Nando’s will be required to form a hypothesis which will be extensively investigated through primary research methods. However, due to an apparent lack of specific existing research on some of the topics, an inductive approach will also be taken to help in answering the research objectives.
As shown in the figure above the third layer of Saunders et al. (2007) research onion is the research strategies. The research strategies employed in order to collect data for the research included the Survey, interview and Archival research. Data collected specifically for this research which is primary data will be collected through survey and interview while secondary which includes already published data will be collected through archival research. (Bates, 2005) A survey will be conducted; a questionnaire is designed in which direct formal questions will be asked from the customers of Nando’s.
The questionnaires will be distributed among the customers of Nando’s according to the principles of random sampling as according to Saunders et al. (2007) a suitable sample from the whole population can produce the results representing the whole population. The research strategy also includes intercept interviewing in which an individual personal interview of the branch manager will be conducted which will also include direct formal questions.
As shown in the figure above the fourth layer of Saunders et al. (2007) research onion is the research choice. The research choice for this research is ‘Mixed – Method’ as the research design will aim to collect and analyse both qualitative and quantitative information. This will allow for triangulation and, as Saunders et al. (2009) suggest, triangulation helps improve the credibility of findings, making them more valid.
As shown in the figure above the fifth layer of Saunders et al. (2007) research onion is the Time Horizon. Time horizon chosen for this research is ‘Cross – Sectional’ as all the data required to answer the research question will be collected just once and the whole research will take a month to complete. A Gantt chart is given in the appendices outlining the timetable of key activities for the project. The total research work is divided into 10 different tasks where some of the activities overlap as some of their components are inter linked.
The research design will mainly be deductive as the use of existing literature and information on Nandos will be required to form a hypothesis which will be extensively investigated through primary research methods. However, due to an apparent lack of specific existing research on some of the topics, an inductive approach will also be taken to help in answering the research objectives. Furthermore, this study will require both exploratory and explanatory strategies at different points. The research design will aim to collect and analyse both qualitative and quantitative information. This will allow for triangulation and, as Saunders et al. (2009) suggest, triangulation helps improve the credibility of findings, making them more valid.
Phase 1: Archival Research
Firstly, mainly existing information on Nandos will be examined in order to investigate whether Nandos had indeed been affected by the recession. This part of the study will be deductive and exploratory. As regards to establishing the customer base of Nandos, credible databases such as Mintel will provide useful information which will help in the formation of the questionnaire and also aid in the sampling imperative information on variables such as demographics and age groups. Furthermore, reports on Mintel such as the ones examined in the literature review, can help in identifying the affect the recession had on visitors. There are reports available which discuss and analyse who visits Nandos, and other such outlets which were briefly explored in the literature review.
Some of these reports, which have the same variables, were composed before and after the recession respectively and the differences will be closely examined to determine patterns. Archival research will provide key information in both quantitative and qualitative form which will help develop primary research methods and ultimately answering the objectives. The financial reports will provide quantitative information. The figures before, during and after the recession will be analysed through determining the changes in profitability, for example, to establish if and to what extent the recession affected Nandos.
Newspaper articles and the reports on databases such as Mintel will provide qualitative information. However, one must keep in mind that some of the data collected may be out dated and hence possibly not be relevant and bring in to question the validity of findings. The quantitative findings of this phase will be analysed by the use of graphs and other such tools to show trends and patterns. (Researcher’s Contribution)
Phase 2: Questionnaire
Following the analysis of data collected through the archival research, the next step will involve questionnaire conducted with Nandos’ customers. A questionnaire was chosen as a data collection tool as it can be carried out, in theory in any case, over a large sample in a reasonable amount of time, hence allowing generalisability (Saunders et al., 2009). This method will not only aim to establish Nandos’ customer base but also how, if at all, the recession has affected their attitudes towards Nandos. The questionnaire will be quantitative focused but will also provide opportunity to collect qualitative data. In constructing the questionnaire, the analysis of the existing information on the customer base of Nandos found through phase 1 will be vital. The questions will be formed dependant on the type of customer base Nandos has; i.e. age group or socio-economic group. The population for this data collection method will be Nando’s customers.
As mentioned before, Nandos has over 200 outlets in the UK. Ideally, every Nandos customer that visits every outlet would be part of the sample. However, this is not feasible and getting a sample that will allow generalisability is vital (Saunders et al., 2009). Since there is not a database of specific Nandos customers, the sampling in that regard will have to be probable in the form of random sampling. The customer assistants will be told to offer every customer the chance to fill out the voluntary questionnaire. However, elements of non-probable sampling will also be present as the Nandos outlet that will be targeted for the questionnaire cannot be selected dependant on key variables identified through phase 1 such as outlets with high number of visitors and location among others due to lack of resources.
The outlet that will be selected will aim to be the most accurate representation on Nandos. The questionnaire will aim to cover the three types of variables, suggested by Dillman (2000), which are behaviour, opinion and attributes. The idea of offering an incentive to fill out the questionnaire may also be explored, however, this could lead to customer not answering honestly in order to get the incentive and hence hurting the validity of findings. The questionnaire prepared for the research is attached as an appendix.
Phase 3: Interview with Manager
The next step of the research will be to conduct a series of interview with a commercial manager within Nandos. An intercept interview of an individual was chosen. As discussed in the literature review, Nandos made a commitment to staff to make no redundancies and, in basic terms, to stand by them. As with the questionnaire, the sampling for the interviews will have elements of both probable and non-probable elements. From the store included in the sample for the questionnaire commercial manager will be asked to participate in the voluntary interview. They will be told the purpose of the study and the fact that the study is required for educational purposes.
To reduce the chance of bias within the interview, the interviewee will be offered anonymity (refer to 4.0 for further discussion on ethical issues). The interview will be structured as this will help answer pre prepared questions and will be preferred by the interviewee as it will be quick (Saunders et al., 2009). Some key themes for this interview will partly be derived from the results of the questionnaire. Interview questions can be found in the appendix. This method will provide qualitative data, by using open-ended questions, which will be further analysed. (QSR International, 2010).
Practical and Ethical Issues
In every stage of this research, there will be practical and ethical issues to bear in mind, as is the case with most research studies (Saunders et al., 2009). The major practical issues relating to data collection are access and response rate. The sample for the questionnaire will look to select outlet that have a high volume of customers to increase the chances of a high response rate. As regards to data collection, all participants will be informed that participation is voluntary and all data collected will be used in compliance with the Data Protection Act 1998.
Saunders et al. (2009) state that budget and time constraints prevent surveying a whole population and the sampling will look to overcome these constraints by selecting a sample which balances budget and time while giving a credible response. Another ethical issue was in relation to the interview with the mangers of Nandos’ outlet. Participants will be required to fill out a brief consent form, outlining the voluntary participation and ensuring anonymity where necessary. A brief consent form is given in the appendices.