A SWOT Analysis is a tool that identifies the strengths, weaknesses, opportunities and threats of an organization. This basic, straightforward model assesses what an organization can and cannot do as well as its potential opportunities and threats. The method of the SWOT analysis is to take the information from an environmental analysis and separate it into internal (strengths and weaknesses) and external issues (opportunities and threats). Once it is completed, SWOT analysis determines what may assist the firm in accomplishing its objectives, and what obstacles must be overcome or minimized to achieve the desired results.
Strengths * Brand Strategy and positioning. The Group’s branding strategy focuses on brand differentiation to cater a wide range of customers. The newest brand of the group, SUBU focuses on innovative healthy food for younger and more fashionable office workers, the LAN Club is the luxury brand that targets the upper-class dining segment of successful businesspeople aged over 45 years, and South Beauty, the Group’s flagship brand that targets upper-middle class segment of businesspeople aged from 30 to 45 years. No competitor in the Chinese restaurant market has such brand format.
Almost all of them operate their single brands without clear brand positioning so their brand image is quite inferior to the Group’s. * Consistent brand identities. The company has built consistent brand identities by launching some outdoor and print advertisement. The company also explore cooperation with certain international airlines, including Air France and KLM Royal Dutch airlines, to provide business travelers flying between China and Europe with South Beauty-branded Chinese dishes. * Innovation. The company is regarded as an innovative company, with 55 percent annual growth.
The South Beauty restaurant also introduced several innovations and improvements with regard to traditional Sichuan food, not only in terms of new raw materials, but also the process of preparing the dishes and the customer experience. The Group developed a range of innovations with regard to Sichuan cuisine but also added certain Cantonese cuisine and other flavors to its menu. One of the group’s biggest and most ambitious innovations is the combination of Chinese and Western cuisine that breaks with tradition and creates original new flavors.
It is the first Chinese restaurant to offer Chinese food in a western style, and the first to mix food presentation with artistic views. * Differentiation in cuisine. Some of the factors that make the Group’s cuisine different from others are the strict requirements placed on raw ingredients, the innovation on traditional cuisine, the exacting criteria placed on a dish’s nutritional value, and the strong emphasis on the visual appeal of each dish. * Location and Pricing. The Group’s restaurants are located in top-notch office buildings in key cities.
Meals are also expensively priced to cover costs, but because of the brand’s reputation and image, consumers are willing to pay the high prices. This combination of high-end location and high pricing were helpful in developing the upper-middle class brand image. * Interior decoration and ambience. Each South Beauty restaurant had a different decor, designed by well-known artists in the field. It is Zhang Lan’s belief that people should come to the restaurant not only for the food but also for the ambience. * IT applications. Advanced IT applications enhanced the image of the restaurant and improve efficiency.
For example, the Group built its own CRM system to record customer information and use that information to provide tailor-made services and make promotional communications. These IT applications give the Group an edge because they are quite innovative for the traditional Chinese catering industry as most restaurants remain committed to their old ways of operating their businesses. * People management. Zhang Lang was a firm believer that a dedicated workforce could overcome challenges pertaining to financial capital and market potential, so the Group strove to apply performance management techniques with regard to the management team.
It also worked with a consulting firm to design a new people management system to motivate the staff. The group also initiated a large-scale training program for the staff. * Synergies. The use of the company’s central management to achieve synergies has caused the South Beauty Group to develop functional management expertise at its head office with a view to coordinating the management of its restaurants, all of this helps brainstorm ways to differentiate the Group from its competitors to capture market share. * Expansion. South Beauty Group is not only looking to expand further in China ut is also looking for an international presence. * Right target group. Because of the booming economy in China, the business meals had more potential than the other segments because they could absorb higher prices. These business-people were not satisfied with simple eating and drinking- they required more in terms of the restaurant’s environment or ambiance. These businesspeople are the target consumers of the South Beauty Group.
* Leader in the niche market of high-end Chinese dinner: South Beauty’s share was more than 7% Weaknesses * Ranking in the high-end Chinese dinner segment. Among the top 100 restaurant companies in China in 2007, 10 were in this segment, with the leader being Shanghai Jingiang (ranked 4) and Beijing Shunfeng (Ranked 18). South Beauty’s ranking was 72. * Poor diversity on types of cuisine. The high-ranked competitors focused on various Chinese cuisines, but South Beauty only focused on Sichuan cuisine, so it could not compete with these restaurants in terms of cuisine. * Fake Restaurants and inability to protect its brand.
The most crucial issue for South Beauty was that of restaurants claiming to be South Beauty franchisees. In 2005, there were at least 16 “fake” restaurants in cities South Beauty has not penetrated. The imposters used the same Chinese name as South Beauty with one or two additional Chinese characters to attract innocent customers and provided them with poor service and atmosphere. The unhappy customers however, complained to the “real” South Beauty. This hurts the brand image and reputation of the Group. * Authenticity of Sichuan food.
In cities with higher incomes (where South Beauty’s target customers are mainly located), consumers had more choices of restaurants and made selections based on word of mouth. 63 percent of consumers obtained restaurant information from word-of-mouth publicity, so while a restaurant review web site state that South Beauty promoted “Refined or Improved Sichuan Food”, in other places, such as Chengdu, the birth place of Sichuan food, customers were of the opinion that the Sichuan food offered by South Beauty was not as spicy as the original cuisine.
Other did not view South Beauty as a genuine Sichuan food restaurant. If consumers were looking for authentic Sichuan food, after hearing these opinions on the street, they were more likely to pick another restaurant. * Inability to do things in a standardized way to cut down costs and improve efficiency. The management team did not halt their efforts to improve the Group’s operational efficiency through standardization, which was also the foundation for scaling up. * Minimal market share in the Chinese Restaurant Market.
The market share in South Beauty in the total industry was less than 0. 1 percent. Opportunities * Expansion. The Group is seeking to expand its operations from the existing 20 restaurants in China to a total of 100 worldwide (35 in China and 65 in the international market) over the next three years. * Standardization. The standardization of the process of preparing the dishes is a big opportunity to increase efficiency and quality. * Entry into new businesses. The Group wants to diversify into business of partially cooked frozen foods for retail outlets and airline catering. The Group’s market share in the Chinese dinner category was an estimated 2 percent in 2006. There is great to room to increase this market share. * Ability to invest heavily in various elements, interior decorating being one of them. No competitor is able to invest so heavily. * Cuisine diversity. South Beauty only offers Sichuan cuisine. While a typical Chinese restaurant offers one or two cuisines, expanding into more than 2 different cuisines could give the Group a source of differentiation. * Becoming an international brand.
According to Zhang Lan “ (…) Now is the time to expand. We have met success in China, and now we wish to build an international brand, which will have a presence in New York, Paris, London, Milan, Geneva, Tokyo and other important international cities of the world. ” it is projected that the Group will have 30 restaurants in short term and 100 outlets in the next three years, of which 35 restaurants would be located in China and 65 in the international market in cooperation with strategic partners in Tokyo, New York, and other cities.
Threats * Some competitors of South Beauty have been able to overcome the obstacle of production and prepare Chinese dishes in a standardized way faster than South Beauty, so they are able to cut down costs and realize bigger profits. * Belief among certain consumers that the Sichuan food that South Beauty serves is not authentic because this can cause consumers to search for more “authentic” options in competitors. * “Fake” South Beauty restaurants.
They make the brand look bad and downsize the brand’s reputation and positioning. * With such large ideas for expansion, if the capital needed is not raised, this could pose a threat not only for future expansion but also for future growth in China. * Operational efficiency that needs to improve: the management team did not halt their efforts to improve the Group’s operational efficiency through standardization, which was also the foundation for scaling up. Each South Beauty restaurant carried 380 items on the main menu.
Raw materials depended on local suppliers, and the quality of each dish relied on the experience of the chef. Although there was a team with three main chefs at the head office to develop new dishes and control the quality, the process of standardization is still in its beginning phase. If standardization is not achieved soon, the Group may lose some of its market share to competitors that do achieve it soon because they will be able to cut down costs that will translate into cheaper prices.
Courtney from Study Moose