Hotel Professionals

Strategic planning in the service industry


In order for a restaurant to be successful, the management must have a well-defined goal and follow a well-thought out business plan . Strategic planning is an integral part of every business and must be drawn up at least annually and more frequently if necessary

Business plans involve outlining an orderly process for determining the direction and management of the business. They must be compiled with the most efficient allocation of skills and resources available while considering the future of the business.

The following principles are important on which to base the plan:

  • There are a limited number of strategies
  • Business is condition-rather than ambition-driven
  • Identify strategy centers within the firm

A strategy center is a business area with an external market place for goods and services which can determine objectives and their fulfillment. Most business gurus argue that this applies only to large corporations ; in reality it applies to all businesses

Once the desired market segment has been established, objectives and strategies can be formulated. In order to develop achievable objectives and realistic strategies, the following must be analyzed thoroughly:

  • Competitors
  • Pricing of the market segment
  • Quality and style of the product
  • How quickly can the business be diversified or liquidated

Planning is databased

Most small business owners fail to pay due attention to collecting accurate data pertaining to their enterprise. Usually mental notes are made and may or may not be used when required. Useful data should always be collected and filed for future use.

A variety of agencies and organizations collect important data which can be accessed; Statscan, professional business associations, banks, and chambers of commerce accumulate and make available such data.

Data should be examined and filtered to fit the business before classification and filing

Some of the criteria for examination are:

  • Are macroeconomic changes likely to affect the objectives of the business
  • Competition
  • History of the business
  • Industry trends
  • Profitability of the product
  • Identification of major concerns

If an enterprise has generated a 10 per cent revenue increase for annually over at least eight years, after inflation has been has been discounted.

Planning for a 10 per cent increase appears reasonable, providing economic conditions remain favourable. Business is not random. There are fundamental reasons for planning. Business patterns of competition and performance are predictable short of major catastrophes.

The basis of the examination is rooted in the life cycle of every industry, and which are:

  • Embryonic stage
  • Growth
  • Maturity
  • Aging

On occasion a mature industry may revert to a growth pattern pending on macroeconomic conditions. A few years ago, fine dining operations were in the   aging category. Today, with economic growth in full progress, high-end restaurants are prospering. A mature industry can change pending overall economic growth and general change in the composition of the population.

The competitiveness of a business means the ability to remain competitive in the future.

This depends on:

  • Production
  • Marketing
  • Distribution service
  • Technological superiority
  • Management ability

Competitive positions can be strong, favourable, acceptable, or weak. A business in any one of these positions can decide to continue as usual, expand, or turn it around, if cash flow permits.

Management must be aware that no business can expand forever. With larger size, inefficiencies creep in, and in fact in certain industries the size of the business is inversely related to quality. The food service industry is one of them. Large operations are slow to adapt to market changes and tend to be formula oriented.

There are only a limited number of strategies

A strategy consists of co-ordinated actions directing limited resources, which can be, achieved either by increasing quality while holding prices, or lowering prices without jeopardizing quality.

Another strategy is to increase quality and price in an attempt to cater to a smaller, more discriminating market segment.

As can be seen, there are only a limited number of choices a business can make. Some businesses decide to emphasize marketing, or production, or distribution or profits. All require substantial capital outlay at the beginning.

Business is condition driven rather than ambition driven.

Planning must be based on internal or external conditions. While many operators are ambitious, external factors may hamper the best managerial intentions. Strategy is ultimately a subjective function but must be carefully balanced to be successful. Taking too many risks may ruin a company, while a no-risk policy reduces rewards unnecessarily. Successful businesses remain focused and refrain from pursuing several strategies at the same time

It is best to define a strategy, plan accordingly, monitor developments constantly, and change direction as market conditions change.

Change in the business world is constant and all successful companies follow market conditions in an attempt to implement required corrections.

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