Environmental
As there is a rise in environmental protection concern, this implies threat on Café de Coral. The enormous dumping of disposable items by fast-food restaurants is driving Hong Kong's landfills to saturation point, a green group has warned. It is urged that operators of fast- food restaurants should replace disposable items with reusable ones. In the trend, Café de Coral may need to put effort to reduce dumping like setting up dining utensils area as the green group suggests, which may increase the cost.
Social/ Cultural
The cultural environment provides opportunities to Café de Coral. Seasonal products and festive recommendations are introduced. As winter is coming, Winter Solstice Poon Choi is currently offered so to attract traditional Chinese families as well as tourists.
Technological
As modern technology is evolving quickly, Café de Coral takes an opportunity to boose its business. When octopus card was introduced, Helen Li, head of logistics and IT for Café de Coral saw the chance for better cash management. Smart card technology offers far more than speeding payment and enhancing customer loyalty.
Micro environment - Porter’ s 5 forces:
Competitors
Competition is keen with more than 1,000 establishments in Hong Kong. The fast food industry in Hong Kong is dominated by Chinese fast food outlets which make up 80% of the total market. The major existing rivals of Café de Coral include Chinese fast food restaurants - Fairwood and Maxim's, while McDonald's and KFC are the major Western fast food restaurants. Café de Coral is considered to be the largest Chinese fast food restaurant with 129 outlets in 2006, followed by Fairwood (74 outlets) and then Maxims (70 outlets). Café de Coral has to be always prepared to meet the challenge by competitors.
Barrier to entry
As said as the above, the existing fast food competition is keen, it is difficult for new entrants to enter the market. As the standard of restaurant environment and services has been raised so much due to competition, the cost of entry will be very high.
Buyers & Suppliers
As there are a large number of customers in the market, so the influence of individual is small. As Café de Coral is well-established company with high goodwill and reliable, its bargaining power is high towards buyers and suppliers. In contrast, the bargaining power of buyer and suppliers is lower.
Substitutes
There is wide variety of food substitutes in the market, like buffet, sushi, dessert, pizza, etc. Customer may go for different substitutes. Therefore, Café de Coral may need to widen the variety of dishes to meet customers’ taste.
Internal Environment (Strengths and Weaknesses) Analysis Internal Environment
Structure
The internal management structure of Café de Coral is not known by public. However, through observing the efficient operation of the food stores without any bad news arises so far, it is viewed that the structure is incoherent and it is the strength of company. The good performance of management is recognized as it got the award of "Overall Regional Best Managed Medium Cap Company 2004" by Asia Money.
Strategy
Its objective is clear as to maximize market share via providing quality service to customers. Non-profit oriented strategy is properly implemented by keep improving their products, restaurant ambience and service quality in lineage with their performance pledge: "A Hundred Points of Excellence".
Segments
Since the segment Café de Coral chosen is business people and students. A weakness exists in which the price setting cannot be too high which exceeds their affordability. The profitability may therefore limited. However, Café de Coral has been trying to get extra money by providing luxurious food that seldom exist in fast food stores.
CONSUMER BEHAVIOUR
Marketing scholars have developed a “stages model” of the buying decision process.
Problem recognition → Information search → Evaluation of alternatives → Purchase decision→ Postpurchase behavior
The above model is used as a template for understanding how the Group’s customers go about buying its products.
Problem recognition
The buying process starts when the buyer recognizes a need. The need can be triggered by internal stimuli – hunger.
Information search
Customers will search information of company providing catering service, such as quality of service, price, service cover areas, restaurant environment, etc. This can be done through access companies’ web site, forum, telephone requires, mostly by word of mouth
Evaluation of alternatives
The collected information will then be evaluated. Customers’ general considerations includes price, quality of service and food, restaurant environment, etc. Some others specific consideration likes type of food, geographical location of stores, etc, would also be taken into account for particular customers’ need.
Purchase decision
Customers who choose Café de Coral, generally is looking for convenient service with affordable price. Since individual favor towards food is unique to each person, Café de Coral provides wide varieties of dishes which includes both western and Chinese. "Hong Kong consumers are actively seeking out healthier food options as they become more health conscious," Lawrence Matthews, director of Genesis Group that owns Dozo!. Café de Coral has seen this trend, so it does provide specially designed healthy dishes. Nevertheless, some customer may choose the restaurant just base on their belief.
Post Purchase Behavior
Finally, if consumers enjoy a good day in Café de Coral, then they are likely to go there again and recommend it to people around them.
MARKET SEGMENTS
POSITIONING
A company uses different methods of positioning (4Ps). Here, product positioning, promotions positioning, price positioning and distribution positioning of the Group, particularly in its household brand - Café de Coral, will be discussed.
PRODUCT
Product can be divided into five product levels, i.e. (i) core product, (ii) basic product, (iii) expected product, (iv) augmented product and (v) potential product.
- Core benefit is the use-benefit, problem-solving service that the consumer is really buying. The customer of the Group, a food restaurant, is buying “hunger satisfaction”
- At the second level, the Group has turned the core benefit into a basic product, that is food catering.
- At the third level, the Group prepares an expected product, a set of attributes and conditions buyers normally expect when they purchase this product. The customers come into the restaurant expect clean environment, quick services and reliable dishes. Because most restaurants can meet this minimum expectation, the consumers will settle for whichever restaurant is most convenient or cheapest.
- At the fourth level, the Group prepares an augmented product that exceeds customer expectation. For example, in Café de Coral, besides their established menu, it introduced luxurious dishes that used to be served only in high-end hotels and dining restaurants, such as Shark's Fin Soup, King Size Scallop and Campedore Soup. It attracts customers who desire more luxury food and they are able to afford as the price is cheaper than that in the hotel.
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At the fifth level stands the potential product, which encompasses all the possible offering in the future. The Group has search for new ways to satisfy customers. For instance, with rapid growth in internet communications, it offers business possibilities of engaging internet offering. “It is not uncommon for a customer to want to order food at one branch location and pick it up later at another. With instant Internet communications, we can easily accommodate this," explained Helen Li, Director, Professional Logistics, Café de Coral Group.
The Group positions their product in the market place by providing reliable services and products. The staffs are all well-trained and the personnel of the customer service staff is nice. The coverage of the restaurants is wide. It is the largest Chinese restaurant group. The Group promotes its image through different channels not just through advertisements in the media, but also through renovation of stores. HK$41 million are invested to renovate 20 Café de Coral shops under 4th Generation post-modern design concept. The ‘up-market’ restaurant environment set new standards for dining experience for the industry.
PROMOTIONS
Communication platforms include advertising, sales promotion, public relations, personal selling and direct marketing.
Café de Coral adopts several communication platforms to promote its services. The strength and weaknesses of the platforms will be discussed below.
Advertising
Following a very successful “See You at Café de Coral” series of TV commercials in 2005, another advertising campaign with the theme of “A Beautiful Day” was launched in February, 2006. It projected the energetic, happy, positive and youthful mood of the brand. Famous artist Alex Fong is featured in their advertisements through press, television, POAD, posters and web, etc, to ensure it can reach a wide range of audience. Messages delivered by popular artist can attract higher attention and enhance higher brand awareness. However, the high cost of using a celebrity need to be assessed.
Sales Promotion
Café de Coral introduces membership scheme Club 100 to build royalty and guard against competitor entries to the market. By paying $10 annual fee with registered Octopus Card, member will be given cash coupon of Café de Coral. It is companied with advertising on the website and in the outlet. However, the cost and staff or management time involved are considerable.
Public relations
Café de Coral has participated in community activities. For example, in 2005, it attended the ceremony to pledge its support for setting the air-conditioning room temperatures at 25.5℃ in Environmental Protection Festival and Environmental Awareness Campaign Activities. This kind of activities is valuable for enhancing brand recognition and increase corporate goodwill.
Personal Selling
Café de Coral put a great effort on regular training programs to its frontline staff to refine their individual skills and to improve their co-operation skills as a team. "Mystery shoppers" program is conducted to reveal the real service quality and employee's attitude. This makes Café de Coral won many awards in terms of quality service, such as "The Hong Kong Q-Mark for Excellence in Quality" by The Hong Kong Q-Mark Council Federation of Hong Kong Industries. Although heavy manpower is needed, healthy image is promoted to the customers.
Direct Marketing
There is not much direct marketing used by Café de Coral. It has order forms of special dishes for customers to download on its website but the forms have to be printed out and faxed. It may not be user-friendly enough.
Overall, Café de Coral is increasing using promotions to keep up with their expansions and to fight off increasing competitions as the people are demanding higher quality of food and services. One essential thing is that the promotions are non-price oriented, but often quality oriented. This further enhance brand-building and stands out from the competitors.
PRICING
A company set the price base on its objective. Many factors have to be considered in setting pricing policy. Analysis of the pricing policy of Cafe de Coral is as follows:
Objectives of pricing policy
Its pricing objective is to maximize its market share, while at the same time, try to maximize its profit and maintain the quality.
Strategies for adapting the price
Like many companies, Café de Coral does not set a single price, but a pricing structure that reflects variations in many factors, especially market-segment requirement. It adjusts its basic price to accommodate differences in classes of customers, as in the following cases:
Customer-segment pricing: It charges a lower price or give discount to full-time students.
Time pricing: Prices of dishes are varied by season, day, or hour. It charges less to “early bird” customers. Breakfast and tea sets are in price much lower than lunch and dinner.
Café de Coral did initiate price-cut in the past. However, it was concluded that price cutting was merely a short-term solution bearing brand damaging risks. Thus, it takes steps to establish its brand equity, product and service competence and strong financial resources to address long-term issues.
The price adapting strategy is effective. Taking its last campaign in evaluation, the judges reports of HKMA/TVB award for Marketing Excellence 2002 reviews that cost savings was successfully passed to customer without hurting profitability. It attained “double-digit” profitability and 11% net profit growth in the year 01/02, in a falling price circumstance. It has achieved its objective of expanding Café de Coral’s market share by 1%.
Its holding company, is planning to raise prices by 3% on its menu for next year to offset a surge in food and rental costs. The effectiveness of this plan can be evaluated in the future.
DISTRIBUTION
Since Café de Coral (the manufacturer) provides the catering services directly to the customer through the food stores, there are not any middleman. The only distribution channel is through food stores.
There are some pros and cons of the marketing strategies:
Pros
Since Café de Coral provides the services directly to the public, it can easily and more quickly know the customers’ needs. It conducts surveys regularly to understand what customers need in terms of food and services. It can coordinate the operation more quickly in order to fulfill the needs
Since there are no other middlemen in the distribution with its own outlets, Café de Coral has good quality control on its sales team and food. Café de Coral itself sets the standard for every step, from merchandizing, cooking to storage. An independent team is hired to examine and evaluate the quality of food at each branch.
Cons
Having their own outlets means higher cost, which include rent and wages. For instance, the Group may raise prices on its menu for the second consecutive year to offset a surge in food and rental costs. The rental cost eventually passed to the customers. The reaction towards the rise in price from the customer has to be awarded of.
CONCLUSION
In analysis of the Group, in particular its household brand Café de Coral, the marketing strategy it used is good. It effectively make use of all 4Ps of marketing to enhance the value of its products and services together with modest price reduction in the face of cut-throat competition which focus mostly on price. Short term sales gains are balanced with long term marketing needs.
RECOMMENDATION
As the competitors of Café de Coral has been launching different campaign in recent years to fight for market share, Café de Coral has to plan innovative strategies in order to protect its market share. Apart from keep on improving quality of services and products, some specific recommendations are as follows:
Improvement in direct marketing
As e-shopping is becoming popular, Café de Coral may provide online services by which customers can make order through the internet. It will be leading the industry as not much fast food chain is providing this kind of service so far.
Be more active in charitable and environmental issues
At present, Café de Coral is not dominant in charitable activities compared with its rival-Mcdonald’s. Being more active in charitable activities in fact can improve its image and telling people it concerns about community. As fast food stores are continuing dumping huge amount of wastes, Café de Coral may take a step to be the leader of environmental conscious store, e.g. by providing reusable utensils only.
LIMITATION
The case study is carried out through desk research. There is lack of information on internal operation and management of the case company. Some interpretations may merely based on personal observation of performance in the stores. Conclusion of findings may not be all-rounded and up-to-date.
References
Kotler, P., Ang, S.H., Leong, S.M. and Tan, C.T. (2006), “Marketing Manageent: An Asian Perspective”, Forth Edition Prentice Hall, Singapore.
(All the following websites were accessed on 11 December 2006)
Café de Coral Holdings Limited homepage [Online] Available at:
Fairwood homepage [Online] Available at:
Maxims homepage [Online] Available at:
Grace Lam, The Standard, “Cafe de Coral may raise prices by 3pc” July 13, 2005
[Online] Available at:
Green Sense survey on disposable items by fast-food restaurants 2006
[Online] Available at: http://www.greensense.org.hk/fastfood/PressRelease_20061030.doc
Environmental Protection Festival and Environmental Awareness Campaign Activities
[Online] Available at:
Jan Chan 2006, ‘A huge appetite for growth’, Classified Post, 4 March, [Online] Available at: http://www.classifiedpost.com/jsarticle.php?lcid=HK.EN&arttype=CHINA&artsection=NEWSCENTRE&artid=3000013320
Judges Report of HKMA/TVB Award for Marketing Excellence in 2002 by HKMA
[Online] Available at:
Cannix Yau “Three-phased smoking ban to start next year” China’s Business Newspaper, January 19, 2006 [Online] Available at:
Tim Metcalfe, Classified Post, “A change to the menu” 3rd March, 2006
[Online] Available at:
Microsoft Customer Service “Café de Coral Improves Customer Experience with Business Management System on .NET Architecture” February 1, 2002
[Online] Available at: http://www.microsoft.com/hk/sia/search2.aspx?CaseID=91
Grace Lam The Standard “Cafe de Coral may raise prices by 3pc” July 13, 2005
Judges Report of HKMA/TVB Award for Marketing Excellence in 2002 by HKMA
Jan Chan 2006, ‘A huge appetite for growth’, Classified Post, 4 March
Judges Report of HKMA/TVB Award for Marketing Excellence in 2002 by HKMA
Jan Chan 2006, ‘A huge appetite for growth’, Classified Post, 4 March
Cannix Yau “Three-phased smoking ban to start next year” China’s Business Newspaper, January 19, 2006
Green Sense survey on disposable items by fast-food restaurants 2006
Tom Leander CFO Asia “The Future Of Money” October 2001 [online] http://www.cfoasia.com/archives/200110-01.htm
Fairwood homepage [online] http://www.fairwood.com.hk/jspwww/main.jsp
Maxims homepage [online] http://www.maxims.com.hk/html/fastfood/
Tim Metcalfe, Classified Post, “A change to the menu” 3rd March, 2006
Microsoft Customer Service “Café de Coral Improves Customer Experience with Business Management System on .NET Architecture” February 1, 2002
Judges Report of HKMA/TVB Award for Marketing Excellence in 2002 by HKMA
Grace Lam, The Standard “Cafe de Coral may raise prices by 3pc” July 13, 2005