Background3
External Environment....4
Political Factors.4
Economic Factors..5
Social Factors....6
Technological Factors6
Internal Environment6
Critical Evaluation.7
Dutch Model Problem Solving 8
Goal-Setting Theory in the Retraining Program..11
Implementing the Retraining Program.12
Consultancy Role.13
Conclusion13
Reference List..15
Hai Di Lao Hot Pot Strategy
Background
Hai Di Lao Hot Pot is a chain of restaurants established in Cihina in 1994 and is now spread across China, South Korea, Singapore and the USA (Haidilao 2016). As the name suggests, its specialty is the Chinese Sichuan hot pot, a dish in which the ingredients are assembled together and are cooked in a hot pot at the table of the diner. The humble beginnings, the relatively young age of the company and its runaway success make it a perfect case study of business strategy and an understudy of goal setting and problem solving.
At the time of the establishment of the initial Haidilao restaurant in the Sichuan Province of China, there were already many traditional food restaurants in the country and competition was stiff. Zhang Yong, the founder of the restaurant chain, had to offer a unique proposition not only to survive but to excel in this kind of environment (China Daily 2013). The current number of Haidilao stores stands at 110 in 29 cities and with a workforce of over 18,500 in China alone. The founder, a very personable individual, settled on a strategic communication plan that emphasized care and concern for the customer. The choice of strategy was a winner as customer relations, especially in the restaurant business, is poor in China. To differentiate themselves, Haidilao chains offered superior service that included serviettes for cleaning eyeglasses for customers who wore spectacles since the glasses would get foggy from sitting next to the simmering hot pots. The management went a step further and offered free drinks and snacks to customers waiting for tables. However, the Haidilao Arcadia Restaurant opened in Los Angeles, America, is not doing as well as its Chinese counterparts. Of major concern, the customers have complained of inferior service that does not match the chain’s reputation. This paper will analyze the business strategy of the company and the attendant theoretical perspectives and empirical findings of studies of similar business concerns. In particular, the paper will explore the cause of the inferior service in the American branch of the restaurant chain. It will conduct a detailed critical evaluation of the business strategies and their alignment to the vision and mission of the company.
External Environment
The external environment of a business refers to the external stakeholders and reigning circumstances that offer opportunities for the progression of the business and pose threats to its growth (Banhegyi 2009). It includes the businesses that compete with the case concern in a limited market. Besides, the prevailing political, economic, social, and technological (PEST) conditions have a direct impact on the performance of the business. The firm must confront these PEST forces to take advantage of them or put in place measures to mitigate them where they (the PEST forces) are not conducive for the advancement of the business.
Political Factors
The ascent of the Communist Party to the helm of the Chinese government brought with it drastic political measures meant to accelerate the industrial development of the economy. The Communist Party drafted a policy of massive industrial development in the cities and agricultural production in the countryside. It instituted the hukou system to ensure that urban populations worked in the industries and the rural populations stuck in the villages tilling the land. The system worked successfully to the extent that China became the world’s leading manufacturer earning it the moniker “the world’s factory” to date (Ye, Levine and Liu 2011). However, in the late eighties, the government realized that the global market for their industrial products was getting saturated. There was need to develop the local market to encourage local consumption of the goods churning out of the factories. The diminishing raw materials also posed a threat to the sustainability of manufacturing as the mainstay of the economy. To remedy the situation, the government opened its market to the external world in gradual steps. It instituted policies that encouraged local borrowing to steer entrepreneurship as the driver of local economic growth of the hitherto disenfranchised middle class. However, foreign investment was still under tight control by the government. In 1992, Deng Xiaoping convinced his government that the market economy in the rest of the world was not in opposition to its socialist approach for the welfare of its people. The embracement of the free market took place in gradual steps that culminated in the accession of China to the WTO in 2001. Haidilao was born in 1994 in this political environment.
Among the political changes that were in operation at the time of the conception of Haidilao was the relaxation of banking rules to allow more borrowing by locals to speed up investment (Chuang and Thomas 2010). Up to 2006, majority of the banks were state owned and foreign banks did not exist in China. The government could therefore control the areas of investment through control of borrowing by industry. Today, international banks operate in China although under less-than-normal conditions compared to other markets. There is therefore access to credit by entrepreneurs who wish to establish or to expand their businesses.
Economic Factors
The Chinese economy was gradually falling on the hands of the people or the market. The liberalization measures meant that Chinese masses could then transfer their savings (formerly a third of income) to investment (Bardhan 2013). There was, therefore, flow of money among the common people. This free flow of cash enabled the startups not only to survive but also to grow. In America, the dining culture is well-established as majority of the population is employed. It has little time to prepare food at home and prefers to dine in restaurants. Haidilao should be very successful with its reputation for exceptional service.
Social Factors
The Chinese are a very social people. Family ties are very strong the extended family is considered important in everyday life (Yu and Heselton 2016). Most Chinese activities are an opportunity to get together to catch up on family issues and friendship. Dining is equally an opportunity for the social units to get together for further bonding. A business idea that encouraged or maintained social bonding could not help but succeed. In America, dining is an individual exercise and eating from the same pot or dish is considered unhygienic.
Technological Factors
As mentioned earlier, China experienced rapid industrial growth with the advent of the Communist government under Chairman Mao. The country had extensive and modern transport and communication infrastructure in place by 1994 that grew even more rapidly from 2000 (Lu 2010). America has superior technology compared to China and Haidilao should be even more successful in this market.
Internal Environment
The internal business environment refers to the internal elements of a firm such as the employees, the management, capital, organizational culture and the general employee behavior (Saleem 2010). These elements are largely under the control of the business unlike the external factors that are not. The internal environment could be a source of a competitive advantage such as in the case of availability of sufficient capital. It could also be a disadvantage if it is not conducive to the development of the business. An example of a weakness is poor management. A successful business takes advantage of its strengths to advance its mission while it takes measures to minimize its weaknesses.
Zhang Fong, the founder of Haidilao Hot Pot was a personable individual with a compassion for people. He transferred his compassion to excellent customer service in his restaurants, winning the admiration and loyalty of anybody who visited the eateries. In effect, he distinguished his restaurants from the others in China by instituting exceptional customer care through persistent customer relations. He started the restaurant chain at the age of twenty-four when he could nolonger endure the meagre pay he was earning as a factory worker taking home 93.5 yuan a month. The difficulty in meeting his daily needs as an employee gave him the passion with which he embarked on his business. Furthermore, the employees of Haidilao were mostly drawn from factory workers who lived in congested dormitories and could not meet their needs adequately. The opportunity to earn more while working with people gave them the personal drive to work to their best. They are trained to focus on customers as each of them feels a part of Haidilao Hot Pot and that their individual input is appreciated.
At the beginning of Haidilao, the founder had little capital of 10,000 yuan only. Consequently, he could only manage to establish a small place in a dingy booth with only four tables. The business also did not have the brand advantage as it was starting afresh. It took hard work and dedication and focus for the company to establish a reputation as it is today.
Critical Evaluation
The vision of Haidilao Hot Pot is to become a first-class catering outfit with a first class brand. The mission is to create value in dining and maximize returns through dedicated and professional employees providing high quality, safe, delicious dishes and service. The strategy of Haidilao Hot Pot is to provide a traditional hot pot dish with excellent service and customer relations. Haidi Lao is a successful restaurant chain in its home country of China and other oriental markets such as South Korea and Singapore. Its debut in the United States of America has been met with mixed reactions because the service is below the expectations of many customers who have visited the Chinese store. The service does is not in tandem with the reputation. The organization needs to reverse this turn of events and raise the standard of service to the level of the mother store back home in China. This is the objective of the food store. The strategy is to retrain the service personnel and to re-educate them on the brand strategy, which is to offer excellent service to its clientele. The personnel should be made to understand that the differentiation of the chain lies in offering exceptional service to customers at all times and in every store.
Dutch Model Problem Solving
In resolving the problem of poor service in the US store, the management can employ the “Dutch Model” approach. First, it needs to define the real problem. The problem is presenting itself as poor service; customers have reported disappointment with the level of service as below that in the Chinese stores they visited. For first-time visitors, they did not experience the exceptional service the Chinese stores are famous of for offering. Analysis reveals that the personnel have basic service training but do not understand that service is the differentiating factor between Haidilao and other restaurants. Furthermore, the waiters have little understanding of good service expectations of American diners.
The main goal of this problem solving approach is to instil into the servers that exceptional service is the differentiating aspect of the Haidilao experience. Towards this, the management should retrain all its Arcadia personnel within the next six months. Individual servers should be retrained in four weeks out of which two should be spent understanding the value of service to the chain. The other two weeks should be spent understanding the American customer’s expectations with regard to a good dining experience. Key performance indicators include the number of customer complaints on individual servers, the waiting time and the clutter on the dining tables. The objectives should be to reduce customer complaints by 75% within the next six months, to reduce the average waiting time from the current one hour to 15 minutes in the same period and to minimize the clutter by 75% in the same time.
The resolution of the service problem is restricted by several factors. First is the financial aspect. The policy of the company is that each store should be self-sufficient in managing its activities. A special request shall be made to the head office to consider financing this important need if need be. The second problem is that most of the servers do not understand English, a factor that repels many American customers and restricts communication between the customers and the personnel. Each server will be compelled to pass the test of English exam by the end of the six-month period.
The first option in retraining the servers is to fly them to China in batches to attach them to existing stores for a two-week period each to learn and experience the Haidilao service tradition. They would then return to America to learn American dining customs by attachment to American restaurants for another two weeks. Upon return, the servers who cannot speak English fluently would have to enroll for intensive classes and take the TOEFL within six months. Another option is to close the Arcadia restaurant for six weeks to enable all the personnel to undertake the retraining in China and the US at the same time. In this case, those who are not fluent in English would then enroll in language classes and take the TOEFL within the six-month period. The last option is to fly in experienced servers from Haidilao stores in China to retrain those in Arcadia and to engage other experienced American waiters to instruct Arcadia personnel on American dining practice.
The three options should each be analyzed using the Six Thinking Hats method of de Bono. This method explores the true implications of all the options. The first option would require two servers to fly to China every two weeks to train all the 24 employed in Arcadia. Each would also require another two weeks internship in an American restaurant upon return. The total duration of absence for each server would be four weeks. The White Hat view is that the waiting time for customers in Arcadia would increase with the reduction of waiters in this period. The restaurant cannot afford this implication, as it would worsen an-already bad situation. While this is the Black Hat opinion, it is supported by the White Hat view in consideration of data from similar cases. The option of closing down the store for six weeks is out of question, as it would signal a failure in the American market’s mind. The reopening would be met with pessimism and the store would take longer to pick up to the current level. Flying in experienced servers from China and engaging Americans would be cheaper financially but would take a longer period to achieve the same results. Specifically, the experience the Arcadia waiter will gain from a Haidilao restaurant in China and in an American restaurant in the US within two weeks would require six weeks of dedicated training in Arcadia. The crowding of the store by personnel due to presence of trainers will worsen the complaint of crowding and is likely to turn away more customers. The best option therefore, is to fly the waiters to China in batches and attach them to American restaurants upon return. The improvement on this option, however, is to fly in four replacements from Chinese stores the moment the first batch of two fly out. The sequence of training must remain as the Chinese experience in Haidilao stores before getting experience in American restaurants. Another benefit from this approach is that the China Haidilao expatriate fly-in replacements will gain invaluable experience serving American customers while in Arcadia. They should be compelled to impart their new knowledge to their colleagues back home upon return to China to enable them to serve American and Western diners better. This option will benefit both the Chinese stores at home and the Arcadia store.
The implementation of the retraining program should begin within one month of approval to enable the preparation of travel documents for the initial participants on both sides. The management should make arrangements for the supervision of the trainees at all levels to ensure that they learn within the period of training. Furthermore, it should prepare a monitoring and evaluation program for the exercise to track the achievement of the goals.
Goal-Setting Theory in the Retraining Program
The setting of the goals should be in tandem with the findings of the goal-setting theory by Locke and Latham. First, the duration of the goals is shorter than normal. The servers will work harder to learn the most within the two-week practical internship periods and the six-month deadline to pass the TOEFL. They should be subjected to continuous and final assessment examinations during each attachment, which they must pass to continue working with Haidilao. The assessment is a way of providing feedback to enable the servers to track their progress. Training away from their place of employment communicates the importance of the exercise and will instil commitment to the goal of the program among the servers. The practical approach and interaction and observation of skilled workers doing the work and attitude they are learning should inform the trainees of their ability to do the same with equal efficacy. Besides, the training schedule is prepared by the management and the workers will strive harder to meet the goals. Individual trainees will set individual goals during the training. These goals will be goals to meet within short durations to enable them meet the overall goals of the training. Upon return to the Arcadia Haidilao, the goals of the chain should be communicated to the workers to win their cooperation to achieve the group goals.
Implementing the Retraining Program
The retraining program introduces a change in the Haidilao Arcadia organization as it introduces a different way of doing things. The change process must be planned from its introduction to the end including the monitoring of the progress and the final goals. The Kurt Lewin method of change management can be applied in managing the retraining program.
First, the need for the improvement of the customer service level (the change) needs to be communicated to the workers. Showing the high level of customer complaints and reports of dissatisfaction with regard to the poor service will give credence to the conclusion of management that a change is necessary. A comparison of the data with that of other stores in China should emphasize the urgent need for a change. The servers must be informed that a failure to change will lead to the eventual closure of the Arcadia store and that would mean loss of employment for them. Taking the servers away for retraining in efficient restaurants removes them from their comfort zone of Arcadia and it should help them embrace the need to change more easily. This first stage is what Kurt Lewin calls the “unfreeze” stage.
The next step is to implement the change. In the Arcadia case, it involves supervising the retrained workers to ensure them that they practice the new approach to customer service they were taught in their internship. Rewards and punishment should be used to enforce compliance with the new service standards.
Last, the management needs to help the servers to internalize the new service levels as visualized by the organization. The servers must display an internalization of the new attitude, feelings and beliefs of the exceptional service level expected of them. This level requires that the workers should practice the new behavior without supervision. They should not only make it habitual but a reflex action to act in the new manner. Positive reinforcement can be used to achieve this stage initially. Later, severe punishment must be used to communicate that a return to the old system is unacceptable. This last stage of change management is called the “refreeze” stage.
Consultancy Role
The writer of this paper played the role of a consultant in identifying the cause of the unsatisfactory service. To discover the true cause, the writer analyzed the customer feedback data, conducted a discreet survey among the customers and observed the service in practice for a period of one month. Interviews with the servers revealed a high level of ignorance about the typical American dining experience. Furthermore, the servers were ignorant of the vision of Haidilao and its differentiation as an exceptional service restaurant. The writer recommended the retraining as a solution to the deficiency.
Conclusion
The strategy of superior customer service and creation of a brand has worked for Haidilao. Customers who visit their eateries remember the distinctive service even if nothing else. The large number of complaints about inferior service in the US Arcadia Haidilao Arcadia restaurant required urgent attention. The Dutch Model of problem solving helped define the problem as ignorance of the servers about the distinguished service level of Haidilao restaurants and the American expectations of service. The Six Thinking Hats method analyzed the various options and resolved to send the servers for retraining in Haidilao restaurants in China and American restaurants in the US. Management of the change process using the Kurt Lewin method should ensure that the change process is successful and produces the desired results. Change management is important because workers normally resist change in any organization.
Reference List
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