Survival Strategies of Fairwood

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Survival Strategies of Fairwood

• Ivy Wen 02732095g
• Emily Cheung 02711628g
• Iris Fan 02412954g
• Karen Chow 02408848g
• Joyce Tsoi 02716280g

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Outline

• Company Background
• SWOT Analysis
• Analysis on Fairwoods Survival Strategies
• Cost-saving Strategies
• Strategic Opportunity Matrix
• Product Penetration
• Product Development
• Market Development
• Diversification
• Conclusion
• Specialty Restaurants
• Cost-saving Strategies
• Other Strategies
• Recommendations
• sub-point

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Company Background

• Listed company
• Net asset 209 M
• Total number of employees in Hong Kong around
  2300
• Principal activity fast food restaurants in HK
  PRC under the name of Fairwood Fast Food
• 69 fast food outlets in Hong Kong
• 4 outlets in Shenzhen in 2001, and 2-3 in
  Guangdong by the end of 2002 - Plan to tap major
  cities in northern China.
• School lunch box business

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Company Background

• 14 specialty restaurants include
• Buddies Café
• Little Tokyo Restaurant
• Cat Street Restaurant
• Maritime Cafe
• Café Porto
• Oasis

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Company Background

• First fast food restaurant established in 1972 in
  Tsuen Wan
• Chairman Lo Fong Seong- founder of Café de Coral
• The second restaurant was opened in Sham Shui Po
  in 1977
• Fairwood Fast Food Limited established in 1981
• IPO in the Stock Exchange of Hong Kong in 1991
• 8 restaurants ----- 52 restaurants
• serving over 100,000 customers daily
• 90s expanded its business to China

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Company Background

• Turnover (in 000,000)

Source Fairwood Annual Report 2000/2001/2002
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Company Background

• Profit / Loss (in 000,00)

Source Fairwood Annual Report 2000/2001/2002
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SWOT Analysis

• identify the internal strengths and weaknesses
  and external opportunities and threats.
• (source Lam, Hair. McDaniel, Marketing, p. 36)
• Internal
• Strengths what the company does well
• Weaknesses what things the company does not do
  well
• External
• Opportunities conditions in the external
  environment that favor strengths
• Threats conditions in the external environment
  that do not relate to existing strengths or favor
  areas of current weaknesses.

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SWOT Analysis

• Strengths
• Long history well-known
• 30 years of history
• Well known fast food chain
• Economic of scale
• 69 fast food outlets in HK
• Bulk purchase, good bargaining power with
  suppliers

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SWOT Analysis

• Weaknesses
• not create an outstanding food menu to give
  customer a deep impression
• Copycat , always copy the food recipe either from
  café de carol or Maxims
• Insufficient food quality control
• news a customer found a razor blade in rice when
  eating

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SWOT Analysis
Weaknesses

• hygiene of eating environment
• Suffering from financial deficit (Financial
  comparison chart)

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Financial Comparison
SWOT Analysis
Source Annual reports of Café de Coral and
Fairwood
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SWOT Analysis

• Opportunities
• Increased Not cooking young couples
• - no time to cook after overtime work
• Economic downturn
• - Lower income earned
• - Shift from traditional Cantonese
  restaurants to fast food restaurants
• Decreased rent and cheaper labour force
• Food preference of younger and teenager

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SWOT analysis

• Threats
• Keen competition in catering industry
• Cut-throat price war
• Decreased profit margin
• Major competitor Maxims Café de Carol
• Maxims offers 30 off after 830pm
• Café de Carol offers special food package at
  super low price
• New competition
• Increased competitors, e.g. McDonald, KFC,
  7-eleven
• Potential customers will shift to
• those shops

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Analysis on Fairwoods Survival Strategies

• Cost-saving strategies
• Restructuring and Re-engineering
• Relocated part of its back office operations
  including Account, Human Resources, IT and
  Purchasing departments to PRC
• Outsourced logistics function to reduce
  operational cost
• Closed eight non-performing fast food outlets to
  prevent further erosion to profit margins
• Company downsizing 700 staff were laid off
• (source SingTao Daily dated 2002-07-24)
• Inventory Control
• Liaised with outlets, suppliers and logistics
  service providers to drive down inventory level
• Reduced the inventory holding cost and improved
  the quality of the stored perishable products

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Analysis on Fairwoods Survival Strategies

• STRATEGIC OPPORTUNITY MATRIX
• (source Lamb, Hair, McDaniel, Marketing, P40)

New Product
Present Product
Present Market
New Market
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Analysis on Fairwoods Survival Strategies

• STRATEGIC OPPORTUNITY MATRIX
• (source Lamb, Hair, McDaniel, Marketing, P40)
• Market Penetration - A marketing strategy that
  tries to increase market share among existing
  customers.
• TV and Printed Advertisements

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Analysis on Fairwoods Survival Strategies

• Couponing
• Distribution of Coupons through printed
  advertisements, such as HKD5 cash coupon and
  special offer for breakfast and tea.
• Free Drinks
• Patronage at dinner time will be offered a
  free drink
• Students are offered a free drink during
  lunch time

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Analysis on Fairwoods Survival Strategies

• Cut-throat Price Strategy
• Breakfast HKD10
• Lunch HKD17
• Tea Set HKD10
• Dinner Set HKD20
• Dinner after 800pm HKD18
• (source Apple Daily Oct, 2002)
• Value-added services to retain customer royalty
• Refurbished existing restaurants such as
  Lounge Dining Design to provide a comfortable and
  warm place for dining
• 1st Phrase 2002 20 outlets in prime areas
  and
• 2nd Phrase 2003-200451 outlets
• Internet surfing
• Plasma TV and Music programme
• Encourage existing customers to consume more

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Analysis on Fairwoods Survival Strategies

• Product Development- Marketing strategy that
  entails the creation of marketable new products
  process of converting applications for new
  technologies into marketable products.
• (source Lamb, Hair, McDaniel, Makreting, P41)
• Keep always changing on variety and choices of
  food
• Introduction of traditional Cantonese Restaurant
  recipe into fast food restaurant
• Mix of Chinese, Western and South East Asian
  cuisine the variety of food to match different
  tastes of customers and give fresh feeling to
  customers
• Seasonal Special
• Attract potential customers to patronize Fairwood

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Analysis on Fairwoods Survival Strategies

• Market Development - Attracting new customers to
  existing products
• (source Lamb, Hair, McDaniel, Makreting,
  P41)
• Open 6-8 outlets in prime areas this year.
• - attract potential customers to new
  locations
• Delivery Services
• - begin delivery services in Lam Tin and Tuen
  Mun

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Analysis On Fairwoods Survival Strategies

• Market Development - attracting new customers to
  existing products Source Lamb, Hair,
  McDaniel, Marketing, Edition 6, P.41
• 
  
• Open 6-8 outlets in prime areas this year.
• - Attract potential customers to new locations
• Delivery Services
• - Begin delivery services in Lam Tin and
  Tuen Mun

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Analysis On Fairwoods Survival Strategies

• Diversification a strategy of increasing sales
  by introducing new products into new market
  Source Lamb, Hair, McDaniel, Marketing, Edition
  6, P.41
• Operation of Specialty Restaurants
• - Different specialty restaurants with
  distinctive brandnames to enter the mid-range
  restaurant market
• - 11 specialty restaurants in 2001
• - 3 specialty restaurants were opened this
  year

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Analysis On Fairwoods Survival Strategies

• Café Porto - Mediterranean restaurant at Kwai
  Fong.

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Analysis On Fairwoods Survival Strategies

• Café Oasis - Hotel Café-like restaurant at
  Central Wanchai.

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Analysis On Fairwoods Survival Strategies

• Used different segmentation, positioning and
  market mix to
• serve the needs of different target segments

Product
Price
Target customers Intended positioning
Promotion
Place
Source Kotler Armstong, Principles of
Marketing, Eighth Edition, P.49
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Analysis On Fairwoods Survival Strategies

• Oasis as illustration

• Market Segmentation The process of dividing
  a market
• into meaningful, relatively similar, and
  identifiable
• segments or groups
• - Demographic segmentation Office ladies,
  white
• collars and shoppers at Central
  Wanchai
• Psychographic segmentation People looking for a
  
• relaxed and comfortable environment to dine

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Analysis On Fairwoods Survival Strategies

• Position the place a product, brand or
  group of products
• occupies in consumes minds relative to
  competing offerings
• - Place to provide refreshing and leisured
  environment to dine
• - Café with variety of choices 
• Marketing Mix
• Product
• - New brandname
• - Food With plenty of choices. Tastes and
  presentation are different from traditional
  fast food
• - Shop Layout / Atmosphere Spacious relaxed
• environment

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Analysis On Fairwood Survival Strategies
Price - Average price 37, 50 higher than
Fairwood Place - Located at commercial
areas Central Wanchai to reach target
segments Promotion - Locational promotion,
shop managers distribute coupons to
neighborhood stores and offices to built up
customer relationship
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Conclusion

• Specialty Restaurants
•  
• Profitable - tailored marketing efforts to
  match with the
• consumption pattern of each target
  segment.
• Source www.yahoo.com, Ming Pao 8/8/2002,
  B09
• Enjoy niche competitive advantage and
  diverse earning
• Continues to explore market opportunities
  to open more
• specialty restaurants.
• Only accounts for 20 of the total
  business portfolio.
• Further improve performance on its core
  business - fast food

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Conclusion

• Cost-saving Strategies
• Able to reduce operation cost
• Cannot attain cost comparative advantage
• Good cost control of competitor. E.g. Café
  de Coral has already
• set up food processing plant in HK PRC
• Other Strategies
• Special offers discount coupons lowered
  gross profit
• Introduction of new dishes is short-term
  strategy
• Not sustainable - competitors can easily
  imitate
• and follow

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Recommendations

• Further the strategy on cost-saving
• Create an electronic interface to integrate
  restaurant outlets with head office
• more timely and powerful customers information
  can be collected for data analysis and strategic
  planning save manpower and administrative
  expenses at head office
• Diversification strategy
• Establish food processing plant to diversify the
  business

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Recommendations

• Strengthen the brand name and image
• to change consumers perceptions and increase
  brand loyalty
• Through
• Customer-oriented strategy
• Launch brand building advertising program
• Create simple and expressive slogan
• Re-build the website
• Consistency on overall image

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Recommendations

• Products
• Improve and control food quality
• Provide more hygienic environment
• Create top of the mind cuisine
• Introduce nutritious and healthy menu to fast
  food outlets for attracting health-conscious
  customers
• e.g. tasty low-calories meals, wheat bread
  sandwich, salad, fresh fruit juices, etc
• Use recyclable containers for takeaway foods

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Recommendations

• Service
• Set up service standards
• Provide more training to front line employees
• Provide valued-added services to customers
• Establish a customer service hotline
• to answer customers inquiries
• to provide additional channels to collect
  customers comments or complaints

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Recommendations

• Service (cont)
• Provide lunch boxes and tea sets delivery
  services in commercial areas
• Provide Online ordering service
• A brand has high awareness, perceived quality and
  brand loyalty among customers can provide the
  company with competitive advantage and offer the
  company with some defense against price
  competition.

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Thank You !
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Bibliography 

•  
• 1.Fairwood Annual Report 1998/1999/2000/2001/2002
• 2.Café de Coral Annual Report 1998/1999/2000/2001/
  2002
• 3.Lamb, Hair, McDaniel, Marketing, P36, P40, P41,
  P49, P214, P233, P693
• 4.Kotler Armstrong, Principles of Marketing,
  8th Edition, P49
• 5.www.fairwood.com.hk
• 6.www.cafedecoral.com
• 7.www.info.gov.hk/censtatd/eng/hkstaff/fas/commerc
  e/restaurant/restaurant_index.html
• 8.www.info.gov.hk/censtatd/eng/hkstat/hkinf/popula
  tion/pop6_index.html
• 9www.bi36.yahoo.com/company/review/52.html
• 10.Ming Pao 8th August 2002
• 11.Sing Tao Daily 24th July 2002