Background (Darden Restaurant)
It is the world’s largest company-owned and operated full-service restaurant company that served over 423 million meals in the fiscal year 2012. The organization operates in more than 1990 restaurants in the United States and Canada. 1961 of these restaurants are located in the United States, which is the home country for the restaurant with the main brands being Olive Garden (786 restaurants), Red Lobster (677 restaurants) and LongHom Steakhouse (386 restaurants). Others include the Capital Grille, Bahama Breeze, Seasons, eight Eddie and the Seafood Grille.
The corporation’s first restaurant, Red Lobster seafood restaurant, was opened in 1968 in Florida. The Red Lobster restaurants have, since then, grown to a total of 704 restaurants both in the United States and Canada. By the year 1970, the company was making total sales of $3.5 million with six restaurants that grew to a total of $7998.7 million with 1994 restaurants by the end of the fiscal year 2012.
Applebee and Yum Brands
Among the main competitors of the Red Lobster restaurants include the Applebee and the Yum Brands Inc. In 2007, Applebee (a large chain of restaurants in the US) ventured the Chinese restaurant market following the success of other US firms in the same industry in the US market including the Yum Brands and the McDonalds. The restaurant adopted a contemporary design and look that was intended to attract younger populations.
Beyond this, the design was complemented with unique service models that were specifically meant for China with the company positioning itself in such a way to be perceived as a provider of fast and friendly services (Lamb, 2012). To the surprise of the organization, brand recognition, and experience in the Chinese market was not that easy and it can easily get lost. The organization experienced tough times venturing into the market. The days when a firm could easily gain popularity in China simply because it is a large multinational corporation based in the US are long overdue. To date, the Applebee restaurants have struggled to venture into the Chinese market.
Unlike the Applebee restaurants, the Yum Brands Inc. (that had penetrated the Chinese market earlier on) is doing considerably well. The US-based corporations are identified as the largest casual dining company in China with more than 3800 Pizza Hut and KFC outlets in the country. In spite of doing well for a considerable large period, the organizations recently raised the menu prices by at least 2% with a warning of a likely squeeze to the profit margin.
The organization is said to be struggling with startling labor and food inflation in China. The level of competition in the overall food industry in China grows every day with increased health awareness and concerns (Liu, 2015). The food chains and entrepreneurs in the industry that are doing considerably well are those who can convince their customers of the health wellness of their commodities.
Target Customers
Going by the types of target consumers for the restaurant in the United States and Canada, the demographic target would include all genders all ages. This includes all groups of people, including families, business men/ women and couples amongst other upper and middle-class categories (Smith, 2012). The average income of individuals that the restaurant targets are $40000 with most of them living in the metropolitan statistical area.
The location of the restaurant must, therefore, be in one of the metropolitan regions in China. The fact that these individuals are middle-income earners affect menu choices in the sense that the restaurant’s management should set prices that have a good profit margin but affordable (Li, 2011). Besides, the majority of the target potential customers is educated and well knowledgeable and, therefore, their health concerned must be addressed when drafting the menu. In other words, Red Lobster seems to target both the lower and the upper middle class. Its commodities must, therefore, be tailored towards satisfaction for the needs of this category of individuals.
The Red Lobster restaurants, going by the behavioral target, look forward to loyal customers who are not easily persuaded by other competitors in the same industry. The reputation of the restaurants, plays a major role in ensuring customer loyalty. Even so, this is a weak factor for consideration having in mind that the Chinese market is not easy to penetrate and have the brand recognized irrespective of the international reputation.
Developing and maintaining customer loyalty requires that the restaurant develops such a menu that is well consistent with the needs and requirements of the Chinese locals (Li, 2011). Besides, the restaurant must ensure that the components of its menu do not contain a wide margin of the variance in the sense that the meal components of the menu today should not largely differ from the components of the same menu tomorrow.
The interests of the target customers also form a key factor that is likely to influence the menu choices for the restaurant in its subsidiary in China. The restaurant targets individuals that love different food tastes. Individuals whose menu provisions from their hobby are more likely to visit and revisit the restaurant more often than individuals with no interest with the provisions of the menu (Li, 2011). The Red Lobster restaurant must, therefore, conduct a comprehensive research to ensure that the components of the menu and the menu choices are well consistent with the ‘hobby meals’ and the interests of the majority who will eventually form their potential customers. The interest of the target does not have to be necessary based on the menu components but can also be based on the level of services provided, the design of the restaurant, brand, and market positioning.
Going to the provisions of the Red Lobster restaurants in the US and Canadian market, there are plenty of benefits that customers would wish to associate with hence forming part of their potential and target customers. The restaurants provide the East Coast and private feel. Customers who target such a feel form part of their target and potential customers. Consequently, this impacts on the pricing of the menu choices because the price quoted on the menu is an aggregate of all the services provided plus the cost of the specific meal.
Considerations before entering the Chinese Market
RecruitmentThe China’s people problem is one of the main research problems that has been over-researched by economists since it is hard to understand how a country with a population of more than 1 billion citizens can suffer from lack of enough human resources. The shortage of skilled human resource is continuously raising the cost of doing business in China as the costs of recruiting and retaining hike by a considerable margin (Lamb, 2012). This is one of the major problems that is likely to face the Red Lobster restaurants in its attempts to venture into the restaurant industry in China.
Environment
Recently, there have been growing concerns over food waste in China and its impacts on the natural resources, environment, and food resources. It is, therefore, likely that the failure to provide clear food waste management processes may place the position in a restaurant where it is likely to be sanctioned (Liu, 2015). The environment, therefore, raises considerable concerns that should be tabled before venturing into the Chinese market. The restaurant should look forward to developing a clear strategy on how food waste and other wastes as a result of the restaurant’s operations are going to be managed.
Law and Policies
The Chinese law, as well as the American law, should as well form part of the major restaurant’s concern before it ventures into the Chinese market for business. The American law provides the guidelines on the process that should be followed when an American firm intends to establish a business in another country while the Chinese law provides the process that should be followed by foreign investors in establishing businesses in China, including all taxes, duties and payments.
As such, the law forms a critical part of the whole business establishment process. Besides, government policies put in place in the form of acts and other legislative provisions must as well be adhered to for they are perceived and treated as part of the law.
Measuring Success
One of the main ways that the Red Lobster restaurant can use to measure success is the business profitability. Profitability is the extent to which the business makes money. It is the amount of money left after the business has paid the operating activities and debts. If the amount of money left is considerably large, the restaurant can consider itself successful, and the reverse is also true.
A growing consumer base is an additional factor that can be used by the restaurant established in China to measure success. Even if a business makes considerable profits with low consumer base, it is likely that the success will be limited. This measure is, therefore, of equal importance.
Adding up to the measures is customer satisfaction. Such satisfaction poses as a clear indicator to the organization that it understands the needs and requirements of the customer. As such, it is more likely than not for the organization to retain the customers and attract more. This is important as far as growth and expansion of the business are concerned (Belkhamza & Wafa, 2012). Besides, the organization places itself in a better position to avoid the negations of its promotion as a result of unsatisfied customers.
Employee satisfaction would pose as another success indicator for the Red Lobster restaurant business. It insinuates that the business is successful in developing a work environment that is conducive enough for the satisfaction of its employees. Other than the employees, the satisfaction of the owners also indicates business success while the reverse is true. In fact, the most important measure of business success is whether or not the owner of the business is satisfied. If they are not satisfied, the business can be said to be unsuccessful.
References
Belkhamza, Z., & Wafa, S. A. (2012). Measuring organization' information systems success: New technologies' and practices. Hershey, PA: Business Science Reference.
Lamb, C. W. (2012). Marketing. Toronto: Nelson Education.
Li, J. (2011). China's America: The Chinese view the United States, 1900-2000. Albany: State University of New York Press.
Liu, H. (2015). From Canton Restaurant to Panda Express: A history' of Chinese' food in the United States.
Smith, A. F. (2012). Fast food and junk food: What we love to eat. Santa Barbara, Calif: Greenwood.
