[Student ID number and intake number]
of the
POSTGRADUATE DIPLOMA IN BUSINESS ENTERPRISE
Southern Institute of Technology
2016
List of Tables 3
Section 1. Introduction 4
1.1 Purpose of the proposal 4
1.2 Research Aim 4
1.3 Research Questions and Objectives 4
1.4 Research hypothesis 5
1.5 Background and overview of business 5
Section 2. Literature Review 6
2.1 Introduction 6
2.2 Micro and Macro-Economic Indicators and Business Confidence 6
2.3 Recent Trends, Strategies and the Market Potential 7
2.4 Consumer Preferences 8
2.5 Conclusion 9
Section 3: Methodology 9
3.1 Introduction 9
3.2 Secondary Research Method – Literature Review 9
3.3 Case Study 10
3.3.1. Research Design 10
3.2.2. The Sample 11
3.2.3. The Process 11
3.5 Ethical and cultural considerations 11
3.6 Conclusion 12
Section 4: Timeline 1
Section 5: Budget and resources 2
Reference List 3
List of Tables
The purpose of this research is to explore the key customer satisfaction factors in the restaurant business in the environment of Invercargill, NZ. Contemporary business environment makes operations in any sector significantly more complex than twenty and even ten years ago, Technology, increasing competition and changing the social profile of individuals influence organizational strategies. Food retail sector is not an exception, as many external factors affect the format and trends, common today for the companies, operating in the restaurant sector. This research will be conducted as an exploratory study and the information gathered through literature review and case study analysis will demonstrate the central trends in the industry and the latest societal tendencies, shaping the key factors, which make consumers prefer an establishment and be satisfied with their dining-out experience. Considering the mixed approach to this study, the author believes that the combination of literature review and the observation of the real-time environment will provide the research with significant information for general conclusions, which are relevant for restaurant business environment in Invercargill. The researchers aim at building a comprehensive review of the customer trends small and medium business operation in the restaurant sector.
1.2 Research Aim
The research question for this study is "Feasibility study for a new restaurant in Invercargill, NZ?” Additionally, this research suggests that by recognizing and addressing specific customer satisfaction factors, new restaurants can effectively enter the market and be profitable. This study can make a significant constitution to the body of knowledge for entrepreneurs, who are willing to start their business in the sector (De Vaus, 2001). While a lot of studies were conducted to understand the customer trends in the dining-out sector in New Zealand specifically, the academic research lacks specific body contributions, which can offer a comprehensive analysis of the situation in Invercargill or other small towns, where the demographic and social dynamic is different from a large city. With that in mind, the current research aims at fulfilling this gap and offering analysis, which can be conceptualized to Invercargill and other small towns with similar demographic and societal profiles.
1.3 Research Questions and Objectives
As it was previously mentioned, the purpose of this study is to explore the critical customer satisfaction factors and further test the hypothesis that by understanding the key customer satisfaction factors, small and medium size companies can effectively compete on the market. To explore the current environment and establish the trends and factors, which drive contemporary consumer´s decisions and preferences in the restaurant sector in a small town in New Zealand. Considering the research aim, outlined in the previous section, the following research objectives can be outlined for this study:
What are the general micro- and macroeconomic factors, affecting a restaurant in Invercargill?
How do customers evaluate the quality of their dining-out experience?
What are the major societal and demographic trends in the Invercargill?
How can a new restaurant build a successful competitive strategy through recognizing and addressing customer satisfaction?
The above research questions can be translated into the following research objectives:
Examine the macro- and microenvironments in Invercargill, affecting businesses in restaurant sector;
Understand the most important criteria for the customers to assess the quality of product, service, and experience in a restaurant;
Explore the demographic factors and social trends and their effect on business models of restaurants;
Determine how new restaurants can become successful by exploring the customer satisfaction.
1.4 Research hypothesis
The present research will be conducted utilizing the mixed research approach. First, the inductive method will be used to explore the key customer satisfaction factors in the restaurant sector. Secondly, the study will focus on testing the specific hypothesis:
“A new restaurant, based on a business model, which brings healthy food, social media -focused marketing, and technological know-how into restaurant sector, can be very successful in Invercargill”.
1.5 Background and overview of business
The study is centered around a niche business concept in the Inverness restaurant market. The research will focus on profitability and competitiveness of small contemporary food restaurants, offering lunch and dinner for its clients. Importantly, the average bill of the target restaurant for a three-course meal is NZ$ 30, targeting middle-class customer. By limiting the research to this profile of a business, the study will be able to offer a conceptualized view on the consumer preferences and demonstrate how companies can enhance their strategies by differentiation and offer relevant to the customer's solutions.
Section 2. Literature Review
2.1 Introduction
The literature review constitutes the inductive approach to this research, which aims at building on understanding and knowledge of the Invercargill and New Zealand restaurant market and enables the researchers deriving meanings from existing bodies of knowledge. The purpose of this literature review is to explore the trends and external factors, which shape the restaurant market strategies and define consumer preferences. The research will focus on the knowledge contributions over the period of 2000-2017, such as academic articles, books, and authorized research companies. With that in mind, the literature review will summarize the macroeconomic indicators in the country and the city of Invercargill specifically. Furthermore, it will consider the most recent societal and demographic trends in the city in restaurant market to further use the findings for parametric quantitative research (Gray, 2014). Finally, this literature review will examine the changes in consumer behavior and demand over the given period and drive conclusions about the key factors, determining consumer satisfaction in a contemporary environment. The section will provide the conclusion, outlining the major findings and observations, deriving from the secondary study.
2.2 Micro and Macro-Economic Indicators and Business Confidence
The macroeconomic environment is determined by a variety of different indicators, which affect both, upstream and downstream sides of a restaurant business. On the upstream, restaurants have to deal with suppliers, which are limited and segmented by the region, type of products and level of service, which they can provide to their business-to-business customers (Porter, 2008). On the downstream, restaurants are dealing with the price competition, trends and employment market, which underpins the strategies and potential profitability of the companies in this sector (Porter, 2008). The city of Invercargill is one of a typical example of the geographical area, which is affected by both, microeconomic factors in the local economy and macroeconomic factors, affecting the New Zealand’s economic health in general.
Blumsky and Kirton (2010) note that one of the major points of difference of Invercargill is the complex demographic situation as the statistics show that the population of the city is reducing at a rapid pace, due to migration and aging. With that, the national statistics predicts that the current population, which is estimated at about 51,000 people today will reduce by 6% by 2031 (Blumsky and Kirton, 2010; Stats NZ, 2013).
New Zealand Restaurant Association outlines the growth trend in the hospitality sector in general and restaurant segment specifically. According to the source, café and restaurant sales surge by over 10% in 2014, which is 4% above the industry average. The growth, however, comes with its challenges. Some of the major issues in the sector are presented by inflexible labor regulations and increasing wages, which significantly outpace the consumers’ expectation of restaurant price rise (RANZ, 2014). Aaker (2001) argues that the size and type of business models, which develop depend on the perceived potential for growth in the sector. Connor and Whiteford (2014) note that the growth in restaurant sector outperforms the hospitality industry in many categories, including the new business openings, which accounts for 2.4% growth and new jobs, which is estimated at 1.6% growth annually. Importantly, the restaurant sector has a specific characteristic, where the proportion of the younger employees between 15 and 24 years old is significantly higher than in any other industry in the country. This statistic applies also to the city of Invercargill, and, hence, brings forward the issue of aging population as a significant threat to the employment stability in the sector.
2.3 Recent Trends, Strategies and the Market Potential
The research touched upon the demographic and microeconomic issues in the region and it is important to understand the relationships between the demographic and economic factors and business confidence. It is evident that the increase or reduction in the population and the outflow of “brains” from the city results in a negative effect on the educational and health systems and the economic potential of the location. Business confidence, in its turn, highly depends on the ability of the governmental sector to sustain the infrastructure growth, building on population growth and local market potential. Southland region in the country is highly concerned with the demographic trends and the government adopted a structural approach to handling the situation, announced in the Southland Regional Development Plan (SRDP) 2015-2025. Given the trends in the Invercargill community, the community engagement strategies are central to reverse the situation in the city (Bowen, Newenham-Kahindi, and Herremans, 2010). The local authorities employ several facilitating and motivational strategies for community, involving local entrepreneurs in brainstorming sessions, providing benefits and tax reductions for businesses that create new jobs, conducting the workshops and training with local travel agencies, restaurants, youth council and other stakeholders, which affect and are involved in the economic activities in the city (Blumsky and Kirton, 2010). Per SRDP (2015), the key objectives include (1) population growth, (2) diversification of economy, and (3) enablers. That said local authorities expect to increase the total population by 10,000 in 2025, focus on three emerging industries, being tourism, aquaculture and international students, and strengthen capacity for innovation, primary sector and the ease of doing business. This strategy outlines the great potential for the restaurant business and builds on investors´ confidence in the region. This trend is specific to the city, but it does not limit the scope of the analysis of the external influences, underpinning the direction of the restaurant sector development. It worth mentioning that the general trends in the country affect the profile of the businesses in the sector and should serve as a reference for the new start-up in the area.
The major trends in the restaurant and hospitality sector in the country include the following (Connor and Whiteford, 2014):
Expected rapid growth of employment in the sector in the coming years;
Alcohol licensing laws will continue to challenge the industry as the regulations on legal drinking age, opening hours and other aspects affect the operations of the restaurant;
Healthy trends will continue prevailing in the sector, building on opportunities in organic and healthy menus for existing and new establishments.
Additionally, the establishment of the new business in the restaurant sector should consider the potential transition into the super city regulatory frameworks. That said, such transition in the scope of Invercargill can build on additional immediate costs for the organizations during the transition stage and shortly after the implementation of the system in the region (Smith et al., 2014).
2.4 Consumer Preferences
The external environment is determined by many factors, the success of the new company, however, is highly reliant on its ability to understand and address consumer needs and desires. Building on transactional knowledge in the market is essential to ensure that a start-up accurately assesses its go-to-market plan and builds on the general strategy, adequate to the region and aligned with the external environment (Hitt, Ireland, and Huskisson, 2007). Invercargill´s role in the regional development and profile is unique to the country. While other centers represent the economic contribution, Invercargill´s role is social cohesion and lifestyle. Economic activity is "leaving" the city, changing the consumer trends, as people prefer digital solutions to the bricks-and-mortar operations. That said more and more consumers in the region adopt commerce solutions, delivery service and rely on the businesses, which are not necessarily located in the city itself (SRDP, 2015). For Restaurant sector, it means that companies should look for effective solutions in marketing and operations, involving new technology, social media, and mobile applications. For New Zealand, Facebook and LinkedIn are the most popular social media vehicles with 76% and 29% of the population preference (Miller et al., 2014). The table below demonstrates the number of fans per industry on the Facebook and outlines the importance of social media for the new restaurant:
* Source: http://www.gefree.org.nz/assets/pdf/OANZMarket-Report2016FINALlow.pdf
Another important consumer trend in the region is the increasing health awareness and preference for organic food options. This trends significantly influences the business models and focus on the business (Miller et al., 2014). Important insight can be gained into the population habits in this area by sales growth statistics in specific categories:
The above statistics demonstrates the size of a domestic market and clearly outlines the potential for healthy and organic food market in a dining-out sector (Organics, 2016).
2.5 Conclusion
The literature review, conducted for this research, focuses on answering the research questions. The analysis is structured in three major elements, micro and macroeconomic factors, recent trends in the sector and the changing consumer preferences. Microenvironment outlines significant challenges for the region, caused by the outflow of the population and reducing business confidence. At the same time, macro environment, defined as the country illustrates the positive trend in hospitality and restaurant sector. Considering the Regional Development program, centered around building on the competitiveness of Invercargill as a city, the environment is attractive for a new restaurant with differentiated client proposition. Following this observation, it was identified that customers look for the following elements in a successful restaurant proposition (1) healthy and organic food options, (2) social media present and (3) tech-savvy solutions. A start-up, which can focus its business model on these values can become a successful and profitable enterprise. Additionally, it is important to develop strong risk management strategy which will include the business focus on community projects and involvement, profitability analysis after the first year of operations, where the company loses the incentives for the new business and the costs, associated with the potential decision to develop the sure city in Southland.
Section 3: Methodology
3.1 Introduction
The purpose of this research is to explore the viability and feasibility of opening a new restaurant in Invercargill, considering the current micro and macro environment and consumer expectations. The research requires extensive analysis of the current situation and insight into the specific market and its demographic, economic and societal characteristics. Considering the objectives of the research, it is essential that the study can explore the existing literature and derive own conclusions and observations. Furthermore, these findings and observations contribute to the construction of the primary hypothesis, which is expected to be tested using primary research methods. Considering the scope of the study, the research will adopt a mixed research methodology, utilizing the following approaches and methods:
An inductive research and literature review method;
Deductive research with case study analysis involving questionnaire.
The detailed approach and rationale for each of the approaches are discussed separately in the following sections.
3.2 Secondary Research Method – Literature Review
The first research method, employed in this study is a literature review. The researcher will focus on the academic articles, books and other knowledge contributions, official reports from the local authorities and recognized research agencies, such as New Zealand Restaurant Association and the Ministry of Business and Innovation. The time scope of the research is limited to the period of 2000-2017, as this time range outlines the latest wave of development of the city in political, economic and cultural terms. By choosing this time frame, the researchers expects to be able to gather data, which is relevant to the body of knowledge based on three criteria (Gray, 2014):
Up-to-date economic and social indicators;
Accurate forecasting for the short and medium term future trends and public policies;
Relevant transactional historical data, which allows comparison and parametric approach to data collection (De Vaus, 2001).
This method applies inductive reasoning, which makes a broad generalization from specific observations during the process of the literature review. This method is appropriate for the first part of the research, aiming at examining the situation and analyze the external environment of a new restaurant from economic, societal and demographic standpoints. While this method is extremely effective and useful for the given research, it lacks specificity, which can only be obtained through numeric data and, thus, quantitative research methodology. To fulfill this gap, the research will use the data, collected by secondary research method to build on a specific hypothesis, previously outlined in this research (Richards, 2014).
3.3 Case Study
The second research method, which will be used in this study is the primary research and data collection through case study method. That said this part of the research will employ inductive reasoning, aimed at testing the specific assumption, expressed in the form of a hypothesis. This approach allows proving or disproving the conclusions, driven from the primary research and observations while using terroristic approach. The advantage of this method is that it allows explaining specific relationships between the outcome and the variable.
3.3.1. Research Design
The research will be conducted as the case study of 17 specific restaurants, operating in Invercargill. The researchers will build a framework, aimed at evaluating the relationships between the success and profitability of the restaurants and the three dependent variables. The study will be conducted by observation of the restaurants in operations and sending out the questionnaire to the General Managers of all the establishments. The purpose of the questionnaire is to establish the relationships and degree of influence of dependent variables on the profitability of the business. The questionnaire will consist of 12 closed-ended questions.
Importantly, the choice of this specific research design over other quantitative research designs, such as natural experiment and laboratory experiment is grounded on the assumption that the best outcome is seen from the observation of the businesses in their natural environment, but under the circumstances, where these establishments can be exposed to and compared based on their use of the three dependent variables (De Vaus, 2001).
3.2.2. The Sample
As it was previously mentioned, the sample for this study will consist of 17 restaurants, operating in Invercargill area the criteria for the selection of the sample is the following:
The restaurant is operating in the market for over 2 years;
The restaurant is successful, meaning that it is consistently profitable;
The restaurant is in the category of dining-out and does not include fast-food and bars;
The sample represents the diversity of the business models in the city, including contemporary, ethical food, family, romantic and other types of establishments.
The sample is estimated based on the total population of 234 restaurants in the category (SRDP, 2015). It is important to highlight, however, that there is no official categorization of the restaurants in the city and the segmentation of the same is the subjective element of this study.
3.2.3. The Process
The hypothesis, which will be tested by the chosen research method is the following:
“A new restaurant, based on a business model, which brings healthy food, social media -focused marketing, and technological know-how into restaurant sector, can be very successful in Invercargill".
The dependent variable in this situation is the viability of a new restaurant in Invercargill. The dependent variables include the following:
Healthy food proposition;
Social media marketing strategy;
Technological know-how of the business.
The researchers will classify the restaurants and choose the 20 restaurants that best represent the sample. The restaurants will be contacted for the study and the consent of the management will be received. It is expected that out of 20, only 17 restaurants will see the benefit of participating in the research. The questionnaire will further be prepared by the researchers.
The mathematical analysis, involved in this his quantitative research method, will be based on correlation and hypothesis testing, conducted from the data collected through the questionnaire. The outcome will be shared with all the participants.
3.5 Ethical and cultural considerations
The current research will apply two research method for qualitative and quantitative study. Qualitative research will be conducted through literature review. As this research method does not involve data collection from participants, the major ethical concerns revolve around potential harm to the body of knowledge and the issue of return for consent (Gray, 2014). The author will take all the necessary measures to correctly and accurately interpret the data and reference it to avoid plagiarism.
Quantitative research imposes different ethical considerations, related to the participants of the study. Some of the major issues include (1) protection of participants, (2) anonymity of the research, (3) benefit of the research to the participants. Considering the above, the researcher will ensure that the participants are aware of all the aspects of the research and the use of the outcome. Moreover, the benefits of the research will be presented to the participants and the researcher will ensure that all of them receive a copy of the final document for their own use. Additionally, the author will take necessary measures to protect the privacy of the participants and ensure the anonymity of the information. This includes the assurance that all the participants are free to leave the research at any point in time and make their independent decisions without fear of negative consequences(Gregory, 2003).
3.6 Conclusion
This section presented the research methodology and the overall approach to the study. The research will be conducted using the mixed research approach, where the literature review and case study methods will be applied to the inductive and deductive approaches respectively. This combination of methods is believed to be the most suitable methodology for the study as it will allow gathering relevant transactional and historical data as well as building on the new framework, based on the actual situation in the market. Taking into consideration that the study can and will be used in both, academic and business field, this approach is the relevant and accurate choice for the situation.
Secondary and primary research methods build on several ethical considerations. Academic research implies concerns about references and the use of previously written knowledge contributions for the benefit of a new study. Primary research method, on the other hand, is mostly concerned with the ethical relationships with the participants of the study. All the major ethical considerations are addressed in this research and the study will be conducted following the rules of the academic research in general.
Section 4: Timeline
The timeline for this project is limited to 8 weeks, within which the author will conduct the primary and secondary research and presents the findings and conclusions in a form of a written dissertation.
The work is divided into three stages, which outline the preparation, execution and finalization stages. It is evident that the execution stage, which includes the research and analysis of the findings will take most of the time and, thus, some of the tasks will be done in parallel to be able to adhere to the timeline.
Section 5: Budget and resources
The research will be conducted by the author himself and the chosen methods will not generate the significant cost. It is expected that the secondary research will not involve any additional cost rather than the cost of time spent for the study. The costs associated with the primary study include the following elements:
Transportation costs to explore and pitch potential participants;
The cost of questionnaire development in one of the specialized platforms, such as Survey Monkey.
It is expected the study can be conducted with the minimum use of resources, such as access to the internet and university databases. Considering the above, the total research budget will not exceed USD$ 15.
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