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Restaurant business is one of the most flourishing industries in the United States. The industry is characterized by significant development, subsequent decline and recovery. The industry boasts of nearly one-third of all employees in retail trade with annual sales standing at approximately $222 billion. Griddle cafe for breakfast and brunch is located at 7916 West Sunset Boulevard, Los Angeles in the West Hollywood neighborhood (The Griddle Cafe, 2012). The cafe is open from Monday through Saturday and Sundays closing at 4pm daily.
This cafe rated 4-stars is committed to dynamic growth and service excellence built upon Los Angeles' heritage of traditional hospitality (Yelp Inc., 2012). In addition, the cafe strives to consistently meet and surpass guests, employees and others stakeholders expectations. The restaurant has been extremely successful throughout the years due to strong focus on specific market segments. The company utilizes successful strategies, which have aided in their financial success and stability when other competitors have failed or taken a loss.
Goals and Values
The Griddle cafe and restaurant has created a mission statement that encompasses the company's goals and principles. The mission statement serves as the starting point for the company's overall business strategy. It incorporates three vital attributes of the company; who we are, how we behave, and how we succeed.
The cafe's main purpose is to provide the finest food and beverages for lunch and brunch to their guests. The company believes their employees are their most vital assets; the quality of the employees is paramount for the company in achievement of objectives. The cafe agrees that it takes a unified and cooperative employee effort to satisfy the guests' needs and achieve success in the highly competitive industry.
The company's values uphold that employees and guests should be treated fairly, ethically, and respectfully; the value rule being doing unto others what we expect them to do unto us. This is the underlying foundation for the Griddle cafe's organizational culture. The company's objective is to gain fair and reasonable profits in order to protect the investments of all stakeholders and to ensure this; the company focuses on long-term strategies, which ensures profitable growth.
Porter's Five Forces Analysis
The five forces that impact competitiveness are new entrants into the market, close substitutes, bargaining power of buyers and sellers, and the rivalry among existing competitors (Porter, 1980). These factors negatively or positively affect an industry depending on the measures the players within that industry take to reduce their occurrences or alleviate their impacts.
Threat of New Entrants: Low
Since the hotel industry is profitable, yielding high returns, new firms have been attracted to try their luck in this highly competitive market. Though the entry of new firms into the industry has been very low, their impacts have been felt by major players such as the Griddle Cafe. The entry of new firms dilutes the market leading to reduced profitability for all firms in the industry (Coyne & Subramaniam, 1996).
The companies in this specific industry offer customers highly differentiated products. The luxury hotel industry has high brand loyalty among their customers. This can be justified by the premium price customers are willing to pay for food and beverages as well as accommodation. The existence of strong brand loyalty is difficult for new entrants to break unless they offer a superior service, which is quite costly.
It is difficult for new entrants to gain access to the capital requirements needed to develop and build a luxury hotel. It costs over $200 million to build a new luxury hotel excluding the cost of employees and marketing. The industry's incumbents have established relationships and experience, which enables them to achieve significant cost savings. In addition to brand loyalty and costs the new entrants must also contend with the probability of retaliation from the established hotels.
Rivalry among Existing Competitors: High
For most industries, the intensity of competitive rivalry among competitors is the major determinant of the competitiveness of the industry (Porter, Competitive Strategy, 1980). The rivalry among competitors in the hotel industry is fierce with each restaurant trying to outdo the other and maintain a greater market share and competitive edge.
The luxury hospitality industry is fairly concentrated. There are more than 10 key competitors of the Griddle Cafe and restaurant. The hotel companies include Le Parc Suite Hotel, Sunset Tower Hotel, Petit Ermitage, and Ramada Plaza Hotel & Suites among others. The level of diversity among these hotels is medium to low because the majority of them provide similar types of high quality service. The high cost of building, furnishing and servicing the hotels in the industry create high fixed costs and high exit barriers. In addition to monetary costs the companies also have strong relationships and bonds with employees, investors and guests, which are difficult both financially and emotionally to divest.
As a result of the economic downturn in the last few years the hotel industry has experienced slow and even stagnant growth. Several hotels held back development projects and terminated employees' contracts to avoid a financial loss. Currently, there has been a steadily increasing demand for luxury hotels in the lodging industry. The Griddle Cafe and Restaurant has begun to witness the increase in consumer demand. Besides, the rivalry has led to intensive marketing campaigns by the restaurant to ensure increased clientele following the harsh economic downturns currently witnessed.
Bargaining Power of Buyers: Medium
Customers are able to put firms under pressure; a factor that is directly related to the customer's sensitivity to price changes. This bargaining power is further increased due to available substitutes in the market. However, this is controllable by impressing customers by having unique marketing strategies whenever clients spend in the hotels. Additionally, the restaurants can offer incentives to the potential customers to reduce their bargaining power.
The consumers in the luxury hotel industry purchase a low volume in relation to the industry's total capacity. The level of differentiation that the companies offer is high. This makes it difficult for consumers to compare luxury services with standard restaurant services. Consumers who required services at hotels, such as the Griddle Cafe are willing to pay the higher premium because they value the service. When the quality of the service is high the buyer usually has low pricing power. There is very little threat of backward integration from the consumer due to the high costs of startup in the luxury hotel industry.
Bargaining Power of Suppliers: Medium
Supplies are the other individuals who may pile pressure to the firm since they provide the firms with raw materials, components, labor, and other services (Porter, The Five Competitive Forces that Shape Strategy, 2008). The suppliers may refuse to work with the firm by charging high prices for unique resources; leading to increased operation costs for the firm. While this is not a substantial threat in the hotel industry it can have impact especially in the area of labor. With an aging population, there are fewer people to fill service industry jobs and hotels which can attract excellent staff have a greater chance of providing excellent and exceptional experiences to their clientele.
The number of suppliers to the hotel industry is extremely high. The availability of substitutes is generally high, except when supplies are developed exclusively for hotels and most hotels can easily switch between suppliers. The Griddle Cafe uses custom made products from Wal-Mart and is reliant on specific supplies from the firm. This locks other hotel companies into using certain suppliers and creates switching costs. Supplier power is slightly reduced by their reliance on the hotel industry, especially in the case of food suppliers.
Substitute Goods: Low
In the hotel industry, hotels are usually located next to each other offering the same pricing but with varying levels of service and amenities. The existence of products outside of…[continue]
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