Posted at 10.15.2018
This report aims to spell it out and evaluate features it will use the resource based view to examine them in more detail and examine the value of these to a company. After this, the report will evaluate Nandos resources and functions and will discuss ways in which these can build a foundation for competitive advantage. It'll then use an assortment of analytical frameworks relevant with Nandos to research in more detail the competitive advantage they may have over their competition. Finally it will then discuss how Nandos managers are able to develop and manage their capabilities.
This report depends around Nandos the restaurant chain. Nandos whose food, along with wacky promotional initiatives has captured the hearts of thousands of beloved customers. The origins of Nandos can be traced back again to South Africa where in fact the first restaurant opened in 1987, Robert Brozin and his friend Fernando Duarte popped into a Johannesburg restaurant called Chickenland. The chicken was the best they'd ever tasted, they thought, and promptly bought the joint. They renamed it Nando's, after Fernando, a Portuguese national (Guardian. co. uk). It's the distinctive chicken they serve, happy staff and customer service which offers a distinctive 'Nandos' dining experience which competitors could only desire to achieve. It has already established rapid expansion overseas seeing triumph in many of the 30 countries they operate, although it is not successful everywhere they 'laid their eggs'. To be able to comprehend the strategy as well capabilities the companies possess, it is essential to look at all the pieces of the Nandos puzzle, this report can do this by drawing on real life examples of how Nandos have utilised resources and capabilities, in addition will be using analytical frameworks to support findings and present further understanding.
The resource-based view of strategy proposes that both resources and capacities are crucial to success in business; Grant states it is the 'principle foundations for strategy, along with correct understanding and implementation of them, are a firm's key source of profitability'. (Grant 2009 p. NUM)
It is also important to distinguish between resources and the capabilities of a firm; resources are, 'The productive assets owned by the firm whereas functions are what the firm can do' (Grant 2009). One of the foremost resources of profitability is the competitive advantage in market. 'Establishing competitive advantage may be accomplished through the development and deployment of resources and capabilities, and is just about the main aim for strategy. '(Grant, R 2009 p. 124).
Furthermore, if the external environment change's frequently, a better foundation is constructed using internal resources and functions (Grant, R 2009). This strong assortment of resources and capacities can be used by a firm to exploit different markets where they could complement, instead of allowing the marketplace in which they operate along with customers to control how it functions and what it produces, further supporting the importance competitive advantage can have in market, as well as the necessity to have got this.
In appendix it identifies the financial statements of the firm from February 09 to February 10. Since beginning the company in 1987 they have see continued financial success especially through 1993 to 1997, there revenue had increased by over 700%. Carrying on into the 00s the firm has seen triumph in the united kingdom with the opening of over 200 stores by 2008(Guardian. co. uk). When looking at the total amount sheets of Nandos it shows them in a solid financial position, although the 30 million pound acquisition of GBK could been seen as an unnecessary risk by some, it'll allow Nandos to acquire more capabilities rather than needing to develop them independently.
Management within Nandos shows that they are constantly innovating and this can be seen as a cause of their success over recent years. The commitment shown for staff and management training has seen them place 33rd in the 100 best companies to help within the Guardian, a means where they have done this is developing training programme catered for each individual, meaning a relevance with their own job http://www. uniquesolutions. co. uk/nandos-success. Over working out period managers are retrained as well as new staff, it teaches them how to; work in a team, give constructive feedback, and finally developing up a culture within the person which encourages teamwork and effective communication. Having this set up it ultimately causes a boost in morale and also performance.
This effective culture of Nandos is exactly what distinguishes them from others, it could be seen emanating from their restaurants when you enter them, it almost seems as if you step into some other land or as Nandos call it ' The Nandos Experience', and is based around there 'five values: Courage, Integrity, Pride, Passion and Family'. (Nandos. Co. uk) Few over restaurants in the industry possess such a passion to fulfill as Nandos gives them this original caring nature which is usually only present in smaller firms, whereas Nandos a multinational company has were able to replicate this atlanta divorce attorneys single restaurant.
Another valuable resource within the last two decades has been there reputation, helped in no small part by their wacky promotional initiatives which have drawn the attention of many. Nandos the brand sometimes appears as thought provoking and contemporary worldwide. In addition they boast a superior unrivaled customer service, with the speed and quality that rivals could only dream of. Maintaining this high quality is hard and constantly under observation, Nandos conducts internal evaluations frequently through 'Mystery Shoppers' that determine performance in all areas of each restaurant, providing constructive feedback to managers to help them improve. There reputation however can only be achieved by tasting the food, this experience by the clients determines solely if they keep coming back or not, whether they tell people or not, meaning it is crucial for every and every customer to enjoy their own 'Nandos Experience'.
The launch of Nandos saw Brozin hire the perfect team to contribute effectively to the running of his restaurant. This base of business has been replicated in every of these stores as of yet to guarantee the greatest food and service to the client. What Brozin achieved was a family group within each Nandos restaurant comprising employees with knowledge in all areas of owning a restaurant as well as the passion and enthusiasm for great food. The way in which they communicated through the business was also informal and personal giving a closer knit feel to the business enterprise. This however will not come without problems, due to the organisation structure of Nandos it causes problems for promotion prospects because of the majority of employees being on the same level, which could cause motivational problems at work.
The nature of competitive advantage is formed by way of a capability or resource which have two conditions; there relevancy and there scarcity 'The benefits from these resources and features depend not simply on the ability to determine a competitive advantage, but also how long that advantage can be sustained' (Grant, R 2009 p 136). Also it is dependent on how resilient the business's features are; as well as if a rival company can replicate specific capabilities. Also provided can be an comprehensive view of Nandos resources and capacities and how they donate to an edge and also their sustainability (Figure 1). This report will now analyse what a core and dynamic capability is, including certain relevant examples related to Nandos. After this, I will go onto discuss comprehensive the bond between these and exactly how they might be able to present Nandos with effective advantage over their competition, following on out of this, I will then use certain frameworks to analyse and determine whether they are sustainable or not.
Grant deems that capacities can be explained as either 'core' or 'distinctive', the dissimilarities between the two are; 'core are the primary fundamental capabilities an organization must possess to compete in the chosen market, whereas distinctive are ones which separate the company from your competition, giving them a competitive advantage'. (Grant 2009 p ) I will now look further into Nandos features with regards to them in kinds of core an distinctive.
In order for Nandos or any business for example, to stay in a position that is both profitable and sustainable is a very hard thing to do. The understanding of their features is imperative, as though they don't really understand them they could find themselves on the way to failure. Development of features can take quite a while; this has become clear in the restaurant industry being one of the largest & most competitive industries. Large amounts of time and money are invested yearly into new eating habits and trends within their markets to ensure they stay one step ahead. One way of acquiring features through a reduced timeframe is acquiring a company which already posses a valuable group of capabilities, this however does carry risks to start with it is a large financial risk when acquiring a company as it is an extremely expensive process to complete, and also when incorporating acquired features with a businesses already established could cause problems.
Nandos have shown over the last 10 years that they are doing something right in the restaurant industry by opening up over 200 stores in the united kingdom alone, and high operating profit (SEE FIG). Also they have presented this success in the form of the acquisition of Gourmet Burger Kitchen, gaining new capacities in a fresh portion of the restaurant market. As stated by Clapham House (GBK), "Recent years have been challenging and there are difficult times remaining ahead. Nandos has comprehensive experience in this sector and can therefore help the business overcome its difficulties and grow into a far more successful organisation. " (Thisislondon. co. uk, 2010) The success of Nandos has been down to their thrive to develop a very important base of core and distinctive competences in addition with their mergers with partners at the start of operations to minimise risks. Also the way they have recently come out on top in a already highly populated market, providing the buyer with an new eating experience.
An organisation with regularly successful financial performance are often distinguished by their managerial values they posses, and define the way in which the firm performs (Grant 2009). Through this report they have described how strong staff relationships and organisational capacity of Nandos has proved a very important resource and a key part to their success over time on the market. A lot of Nandos resources they have are reliant on other resources to be remembered as a substantial resource to the firm. When looking at Nandos last five many years of trading they have observed a significant upsurge in revenue and profit (APPENDIX), meaning a financial resource for Nandos to utilise, having this resource has a huge impact about how Nandos operates and also significantly increases capacities of Nandos, which includes been proven how over the last few months as Nandos have successfully negotiated the acquisition of Gourmet Burger Kitchen. Additionally large financial capital resource, Nandos are able to deploy other resources such as R&D customer trends and diet plan every 6 months allowing them to adapt their development of features to keep up with the industry. With revenues during the last couple of years being (FIGURE AMOUNT) it permits them to invest vast amounts of money developing new ideas for menus and updating the 'Nandos Experience' to keep customers interested, one powerful proven fact that has been used is the loyalty card scheme which has been a huge success in drawing in customers and also to keep them returning to eat time after time.
Gaining and maintaining a competitive advantage contains creating and applying a strategy that utilises the inimitability of any organisations selection of resources and functions (Grant 2009). That is a key area that is linked to the effectiveness of M&As and will become important for Nandos soon, as if they fail to put together an effective strategy through obtaining GBK, they may find themselves failing woefully to gain direction in their market, that could in turn lead to incurring loss of revenue. Although GBK only opened in 2001 it is rolling out capabilities that others aspire to have, with their focus on the 'burger' it complements Nandos who focus their business around 'chicken'. They developed 45+ restaurants from 2001-2008, nonetheless they did not react to the recession over the last few years and adjust to the changing trends in the market, which lead to in 2008 to create a 39% lack of revenue. Nandos jumped at the opportunity to buy out GBK for 30m in Sept '10, having spotted the potential in their similar business ethoses. As Nandos have only seen rapid expansion over the last 5 years, they are just now realising their potential and adjusting their market strategy accordingly to gain a larger market share and be more competitive. Together with the acquisition of GBK they may have had the opportunity to utlise the Unique Selling Point and resources that they provide of a robust brand, percentage of the restaurant market and over 50 restaurants worldwide. With acquiring such an innovative business it offers Nandos advantage over their market with such unique capabilities and resources already present in both companies. Synergy How much market will probably be worth?
Having identified the resources and capabilities of Nandos, I am going to now analyse these applying certain theoretical frameworks to ascertain whether or not they have contributed to a competitive advantage. I will be using SWOT analysis, Ratio Analysis amongst others to gain an improved insight into Nandos and the market they operate in, which can only help me anaylse how strategically capable Nandos is. I will also be using up up to now company reports which I have acquired from companies' house to help analyse Nandos performance.
Acquires funds, accounts and payroll are completed; administrative tasks are completed for every activity.
Human resource Management (HRM)
HRM area supervises all support participants in every activities, such as trucks and drivers for inbound logistics to supervision of restaurant workers.
This part of Nandos is accountable for making the business more streamlined an effective through new developments in technology, such as development of and warehouse methods, or developing new promotional materials.
Purchase of materials needed to complete primary activities, including trucks, warehouse space and advertising space or time.
Nandos Primary Activities
Raw Materials received and stored.
Raw material distribution to manufacturing.
Research and Development in the field to research needs of customers
Quality products developed by transforming raw materials into finished products.
*Implementation of R&D Resources.
Distribution of foodstuffs and other products from manufacturing areas to restaurants via regional distribution centres.
The marketing department develops the brand of Nandos.
*Advertising, Marketing resources are employed.
Sales of food to the client, also providing them with an experience that keeps them coming back. 'The Nandos experience'.
The value chain shown above identifies some key activities throughout Nandos. Earlier in this report it outlined a lot of Nandos capabilities and resources, it is clear to see the relationship that exists between resources and capacities and how in fact these have an effect about how strategically capable Nandos is. This relationship means that different departments of Nandos are able to support one another in a well formed and inter linked way which makes it harder for rivals to imitate, for instance 'inbound logisitics' can fail if deliveries aren't met on time or materials aren't of the right standard, while 'outbound logistics' would not have the ability to produce such high quality food designed about the consumers needs minus the help of 'operations' and the R&D department within the experience, also 'marketing and sales' supports the service that supplies the customer such a superior quality of service, as Nandos are available the food as well as the knowledge in the restaurant to the buyer. All these activities are interlinked closely with one another, so if one area fails to deliver then the whole chain can be broken, which can have drastic effects on the profit percentage of Nandos.
One problem that may be seen with this little bit of analysis is that it's based solely around the internal workings of a business, which consequently means no consideration of threats, opportunities or anything for example within the external environment around them; this can be seen as highly dangerous in a market such as Nandos, having this such problem may lead to what helpful states as strategic drift, Handy states this is a 'gradual change occurring without having to be noticed until it is too late to do something upon' (Handy 1982). However due to the evidence stated throughout this report of Nandos completing acquisitions and constantly adapting to match their market through their strong group of resources and functions it is clear this might not exactly be a cause for concern. Nevertheless, as I feel only using the value chain would be insufficient to analyse Nandos thoroughly I've chosen to employ a SWOT analysis, that used in conjunction with a value chain builds the perfect picture of how Nandos are performing strategically and takes into account the external environment to help identify threats and opportunities.
Strong budget despite challenging downturn in market.
Well developed brand.
Increasing market share and consumer awareness.
Customer service and employee satisfaction one of the highest in their market.
No organic and natural and vegetarian options.
Extensive employee turnover costs Nandos.
Testing for other recipes and other meat products failed materialize, leading to inability to contend with competitors who own these.
Ability to obtain similar companies to GBK.
New means of cooking allows different flavours to be tested, attracting different consumers.
Expansion into new countries to expand portfolio.
Diversification into delivery service.
Increasing competition from rivals, pricing wars and product innovation.
Weak economy people aren't spending as much eating out.
Rising raw material costs threaten profit margins.
I have completed this SWOT analysis as a means of evaluating Nandos strategic capability. To start with, Nandos strengths are incredibly sturdy because they are still performing exceptionally well and have increased their gross profit margin from Feb 09 at 22% to 24% in Feb 10 APPENDIX, showing just how strongly put together Nandos is and exactly how sustainable the business enterprise is throughout such a turbulent amount of time in the economy, also that they have increased their gross profit in the time by 17m
There are however, certain threats from other external environment which Porters Value Chain failed to pick up on that I've were able to indentify. Because of the thriving financial position Nandos is it is regularly buying new restaurants, countries and recently acquired GBK for 30 Million. For Nandos these investments are extremely expensive and will continue steadily to become even way more through the next few years, it is imperative that they keep aware of threats from the ever changing environment to ensure they are not drifting uncontrollably from their market and competitors through poor decisions, which eventually ends up costing themselves vast levels of money they are unable to recoup.
Throughout this report I have been able to establish how Nandos are managing their capabilities, through an efficient break down of resources and capabilities, has helped with the analysis of Nandos.
Relationship between resources functions and competitive advantage
Industry key factors success factors
Capacity for communication and collaboration