Statutory Minimum Wage in Hong Kong

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Step 5: Other factors affect forces in step 4

Other factors affect the attractiveness in step 4 is that Cafe de Coral has a strong position in this market. Although there are lots of fast food restaurant in this industry, Cafe de Coral is the market leader of the fast food sector for over three decades, it has higher market share so that the company has an average of 300,000 customers everyday which means the company is a successful brand in Hong Kong and the company has it own signature products “Baked Pork Chop with Rice”, “Hot Pot”, “Chicken in Glutinous Rice” and “Tea with Milk” to attract customers so that it makes the threat of substitutes is low and receive 5 marks. Besides, the company has 34 years of experience in food and catering industry which made them the biggest and most successful brand in Hong Kong. Furthermore, the company has over 150 outlets in Hong Kong, all 18 districts have at least one outlet. Therefore, this factor make the threat of new entrant is low and receive 5 marks.

Q2. Summary of the scores

To sum up the five- force analysis, as the competition of fast food industry is intensive and hence it is unattractive to Cafe de Coral. The mark of rivalry among competition is 4. Besides, both of the bargaining power of suppliers and buyers are high, so they are unattractive to the firm. The marks of power of supplier and buyer both are 2 because of the high turnover rate and health issue. Finally, the marks of both threat of substitutes and threat of new entrant is 5 because of high market share and delicious signature products. The total score is 18/35.

Q3. Conclusion

Competitive environment is unattractive because even though the entry barriers are high and entry is unlikely but rivalry among competitors is intensive, competition from complements is strong, finally, suppliers and buyers have high bargaining power. Therefore, fast food industry in Hong Kong is unattractive to Cafe de Coral.

Part C

Target customers

The core product of Cafe de Coral is convenience. The restaurant sells affordable diversified cuisines which include Chinese, Western and even Southern Asia. Moreover, locations of the restaurant are spread out in the urban area, mostly in shopping malls and near houses.

The segmentation can be based on demographic and psychographic. Cafe de Coral operates business from morning to evening. The price of meal is then adjusted based on the time. Breakfast and tea time are much cheaper, and dinner are slightly expensive but still it offers some promotion for specific sets of meal and affordable price for other meals compared to similar fast food restaurant or Cha Chaag Teng. The price range is around $45 dollars. Its targeted customers are price-sensitive, since their background may come from low to middle level income family.

Besides price-sensitivity, age is other consideration for its products. The reason of diversity of foods is due to its customers with different age. The restaurant targets teenagers, adults and the elderly. Teenagers are inclined to Western food, but the elderly prefers to Chinses cuisine. It explains why the restaurant to provide both cuisine and fusion cuisine. Also, Cafe de Coral made some local adaption in products. They came up with an innovative idea that they offered convenient hot pot to fit in local culture.

From psychographic perspective, customers take advantages of its high level of convenience since customers are those from low to middle income family, their occupations are mostly workers with intense working hours. Also, Hong Kong is infamous for its hustle and bustle lifestyles, people value time as money that they rush every seconds to earn money. Especially for those workers who only have around an hour for launch. They considered time delivery of food is more important than the quality food. It is an opportunity for the rise of fast food restaurant. From the order taking to food delivering to customers are less than 5 minutes normally. This business model captures the preference of customers who want to finish their meal within limited time.

Apart from targeting workers, Restaurants in numerous location suggest the convenience benefits local residents as well. Since some are located in the vicinity of estates, those residents can easily go down to enjoy their meals inside or takeaway.

Satisfying hunger is a basis need for human beings, however, with a lot of substitutes in the market, some customers seek out one that can fulfill their time-based requirements, as well as affordable meals. Cafe de Coral then offer a solution to them. Not only it is convenient that the food delivery involves quick services like counter selling and self-served food taking, but also provides food with affordable price and various choices.

Main competitor’s analysis

We could doing an internal analysis (strength and weaknesses) before comparing with main competitor, Fairwood. Hence, there are several of Café de Coral’s performance could be summarized first.

First, Café de Coral is operated by its “group”, the largest publicly listed Chinese Fast Food restaurant group in the world. Its outlets and network system could be one of the main power in order to run Café de Coral smoothly, such as the low cost production and promotion strategy. Second, Café de Coral enforcing the innovation acquisition on their new foods, so that could achieve a more diverse earning base via the market exposure, the Chinese soup-cum-specialty-dish restaurant chain is one of the example. Third, the HRM functions are also utilized very well via “Executive Share Option Scheme” and some incentive program. These unique management methods are extremely fit with its organization so that can provide high quality services. Besides, the unique selling point also developed very well, especially when people can set customer mind strongly apart from other quick service restaurants.

However, there are some weaknesses in operation. Café de Coral are using so many “popular” location for the customer, such as plaza and commercial area, so that consuming huge of rental fees. It would affect the operational method when the profitability is lacking. Besides, the return on asset is another problems. More than that, it is highly dependent with the suppliers, like the supplied food or semi-finished foods. Hence, the bargaining power is low, and the stable supply is another potential problem.

In fact, its competitor, Fairwood is one of the aggressive competitor.