External Forces There Are A Number Of Essay

Length: 6 pages Sources: 4 Subject: Business Type: Essay Paper: #15494508 Related Topics: Intellectual Property, Use Of Force, Hospitality Management, Internal Environment
Excerpt from Essay :

External Forces

There are a number of forces that will impact the strategy of Hot Wings. The legal and regulatory environment governs a number of different aspects of the business, from licensing to human resources policies to food handling and other aspects of the business. There are regulations at the federal, state, municipal and possibly county levels. Food handling and alcohol are the most important elements within the regulatory environment as violations of these regulations can result in shut down, legal action or the closing off of revenue streams. Proper training must be given to all staff with respect to the different food and alcohol regulations in order to keep the business running.

The economic environment is of critical importance because the number of times people eat or drink outside of the home is dictated in large part by their disposable income. In good economic times, people go out more often and this allows restaurants and bars to proliferate. Success of the business is going to depend in part on the state of the economy (Food Product Design, 2010). In the short-run it is only the local economy that matters but in the long-run, if Hot Wings is to become nationally franchised, the country's economy will need to improve significantly in order to create a more favorable operating environment. What this means at the entrepreneurial level is that the business must be designed to withstand economic shocks and the downturns in business that come with those shocks.

The technological environment can be important for restaurants as well. The most important areas of innovation at present are with respect to inventory control -- computerized order taking and inventory management systems. Such systems can lower the food waste and allow the restaurant to maintain inventories at minimal levels. It is important for Hot Wings to pay attention to advances in this field in particular in order to free up working capital and improve profitability. Inventory control is a particularly popular form of cost control during difficult economic times, but its positive impacts can be felt at any point (Chathoth, Tse & Olsen, 2006).

The social environment is very important to the business, for two reasons. The first is that bars are under pressure from societal changes that discourage drinking in public, or drinking and driving. Most Hot Wings locations will probably be away from public transit, including the flagship location, so societal pressures that have the potential to reduce drinking in our establishment will inevitably hurt revenues unless strategies are identified to work around this. The other way in which the social environment is important is that Hot Wings needs to be more appealing to customers than its competitors, so management must always be attuned to the latest trends in food and drink option -- for example including on our menu the latest ethnic-influenced food options and microbrewed beers to broaden our appeal.

The competitive environment is one of the most important elements of the external environment for Hot Wings. The casual dining segment is intensely competitive, with dozens of chains and innumerable independent restaurants all competing for the same business. While the market is huge, there is no room for weak competitors. It is important for the long-term success of the Hot Wings concept for the restaurant to be aware of changes in the competitive environment and respond to those changes. For example, the economic downturn has adversely affected the casual dining segment, leading firms to price reductions (Horovitz, 2008). We need to understand what our competitors are doing and why in order to formulate effective responses.




Complex environment; food handling and alcohol service regulations are particularly risky; trend towards increased complexity


Significant impact on demand; business must be able to withstand economic shocks; economy currently challenging but improving slowly


Inventory control is critical to cost control; trend towards constant innovation, just-in-time controls, strong supply chain relations


Keeping up with trends; risks of social mores on...


The firm's strategy is critical and has been outlined in an earlier section of this report. Beyond strategy, the structures and systems that Hot Wings utilizes are essential to success, especially when the company gets to the franchising stage. There are two primary source of value for a franchise -- the brand and the systems. For Hot Wings, the ability to replicate the experience of the flagship restaurant at all of the other restaurants is critical to success. The structure of the organization must ensure sufficient controls in terms of policy and training so that the experience does not vary from restaurant to restaurant. In particular, centralized training of management is critical, as it centralized menu planning and purchasing.

One of the critical resources to the short- and long-term success of Hot Wings is access to capital. Without sufficient money to launch and sustain the business, success is virtually impossible and shortage of capital is a common reason for business failure. The current climate for capital access is moderate to poor but there are signs that it is on the rebound as banks are beginning to lend more (Tice, 2011). It is critical, however, that Hot Wings line up before launch sufficient equity capital and have deals in place with banks for credit facilities to help the business survive downturns or to help the business expand.

Hot Wings will also succeed on the basis of its corporate culture. While the organization wants to project a fun image to consumers, there is little doubt that the culture must emphasize professionalism, excellent execution of strategy, learning and the ability to adapt to change. In a highly competitive environment, even small changes can have a significant impact on the business, so management needs the culture and training to adapt to change easily, to keep the company ahead of its competitors as external conditions vary.

Hot Wings also needs to cultivate strong leadership. The current leadership team has a combination of vision and experience, but this must be translated at all levels. In particular, once the company enters the franchising phase, it will be important that leadership is able influence the branches so that the results delivered are both consistent and excellent. To that end, Hot Wings will institute a leadership training program as part of its management education, allowing leadership to exist in all areas of the company, not just at head office.

Another internal key to success with be the protection of the firm's intellectual property. This includes the brand, the imagery and the recipes. There will undoubtedly be countless imitators of the concept once our success is apparent. The key to maintaining one's intellectual property rights is to defend that property. Rigorous defense of intellectual property is essential to maintaining what is special about Hot Wings (Hamilton, 2010).

In terms of operational execution, supply chain management is essential. Hot Wings will supply its restaurants from a number of different suppliers. Maintaining the balance between cost and quality will be essential. To that end, Hot Wings needs to develop strong relationships with its suppliers, to ensure that deliveries are received on time and to spec. In addition to computerized inventory and ordering systems, Hot Wings will focus on just-in-time inventory in order to reduce warehousing costs, especially of cold or frozen items. Hot Wings will also have back-up suppliers available in case of stock outs or other problems with the existing suppliers. Over time, the suppliers will ideally be dependent on Hot Wings business for their profitability, as this will give Hot Wings more bargaining power to drive costs down further.

Issues and Opportunities

Although the casual dining/bar industry is highly competitive, there is tremendous opportunity in the segment. Many existing firms are struggling with stale concepts and dated stores. Many firms lack strong corporate cultures and back-office systems to drive down costs. In this respect, Hot Wings can outperform many players in the industry, which would give it the opportunity to enter the market. Once the initial flagship store is established, there is literally room to grow across the entire country and even internationally. Thus, geographic expansion is possible for the foreseeable future.

It is important, however, to remember that such expansion will not be possible if Hot Wings is no better than anybody else. In addition to controlling costs with inventory control systems and supply chain management, Hot Wings must instill a strong corporate culture that emphasizes both fun and professionalism. An effective management training program is essential to ensure that this occurs and can be disseminated throughout the entire organization.

Over time, Hot Wings must be able to scale up these competencies that it develops to chain format. The company's success also depends…

Sources Used in Documents:

Works Cited:

Chathoth, P.; Tse, E. & Olsen, M. (2005). Turnaround strategy: A study of restaurant firms. International Journal of Hospitality Management. Vol. 25 (4) 602-622.

Food Product Design. (2010). Economy key to casual, fine dining recovery. Food Product Design. Retrieved March 28, 2011 http://www.foodproductdesign.com/news/2010/11/economy-key-to-casual-fine-dining-recovery.aspx

Hamilton, R. (2010). Defending against threats to intellectual property. In Defense of Data. Retrieved March 28, 2011 from http://www.entrepreneur.com/2011/01/-all-through-the-recession.php

Horovitz, B. (2008). Casual dining chains hunger for change. USA Today. Retrieved March 28, 2011 from http://www.usatoday.com/money/industries/food/2008-10-13-casual-dining-restaurants_N.htm

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