Introduction
The purpose of this documents it to provide a summary of an extensive analysis of the external environment that underpins the operations of companies in restaurant and Horeca sector in Australia and Canberra specifically. The analysis aims at outlining the opportunities and challenges of the uncontrollable environment of the organization, willing to enter the market with Italian Gourmet Pizza restaurant Marimonte in Canberra.
The analysis will look at the industry trends, competition, strengths and weaknesses, opportunities and threats for the potential business model as well as PESTEL framework, highlighting the major influencing factors from political, social, economic, technological, environmental and legal perspectives.
Industry Overview
Restaurant sector in Australia has been growing dramatically over the past decade, fueled by the changing social preferences and the emerging middle class in the country. Canberra is one of the major metropolises in the country, affected by the phenomena and representing over 35% of the total growth in Horeca sector. The forecast for the coming five years is to expand further by 6.2%, totaling to USD 13.1 billion (Ibis World, 2016).
While the changing lifestyle of individuals and continuous search for the solutions, which allow time saving and convenience, more and more people turn to eating out experience and expect the sector to respond to the emerging needs of the population. At the same time, the competition in the sector is growing, demanding companies to innovate and build more creative business strategies to remain competitive in the market. That said, some of the most recent trends include healthy fast food and “green products” proposition, well received by the clients.
Additionally, the technological advancement and digitalisation underpin and shape the direction of the retail industries in Canberra in general. The restaurant sector is not an exception. That said, there are a clear need and the opportunity in adopting innovative customer-side and supply side technology to enable mobile purchases and ensure cost-efficiency (Sadler, 2003).
External Environment Analysis
Based on the Dimmi Australian Dining Index 2014, the restaurant sector in the country was heavily affected by the global financial crisis and the uncertainty of the population with regards to the economic situation in the country. In spite of the reduction in overall spendings for restaurants and delivery in the country, Canberra market continued to grow at a steady pace.
PESTEL
Political factors have the strong influence on the activities of the companies in the sector. The past decade indicates stable and assuring political situation in the country, building on investor confidence and attracting foreign capital in the country. The level of consumer protection is one of the major concerns for the restaurants as it sets a number of regulatory requirements and informal regulations, relevant to the industry. In terms of tax regulations, the government practices lean taxation structure, aimed at helping small and medium size businesses establish themselves on the market and contribute towards the development of the local employment.
Economic overview of Canberra, published by Invest Canberra in the beginning of 2016 demonstrates the potential of the region for investors. The city is outperforming the national GD growth through most of the past decade,averaging a 3% over the past five years. With the GDP per capita of AUD 85,000, the city’s index is AUD 20,000 higher than the national average. This, coupled with the strong population growth, accounting today for 800,000 including the surrounding areas and predicted to pass the million limit by 2050, 37% of the population are between 18 and 40 years old. This outlines the good labor structure and domestic consumer market especially, given the increased search of eating out experience among the population of the country.
Social factors outline the changing family patterns with the growing number of families in emerging middle class. The latest trends include growing digitalization of retail industry and increased demand for delivery and take away service among the population, practicing eating out. More and more families have both parents working, attracting the higher percentage of Canberra population to a restaurant for quick lunch and dinner. With the high level of education in Canberra, where 21% of the population have Bachelor degree, it is expected that population will continue growing interest in healthy fast-food options and will develop time-saving as the major criteria in the choice of eating out (IC, 2016).
Technological development has the strong influence on the industry as the use of smartphones has grown dramatically among all social classes and ages. Mobil applications and digital shopping are at its peak and people are looking for innovation and digitalization from all their partners. With the development of the technology in catering services and integrate solutions for upstream supply for the restaurants, the companies have great access to cost-control mechanism and automation of the purchasing and operations department. Additionally, the mobile and smartphone trends outline the future of the industry in terms of purchasing decisions and potential of online sales and delivery to support the revenues coming from traditional physical establishments for eating out.
Environmental regulations are getting more rigid across the world, attracting the attention of not only local and national government to the footprint of the businesses in Canberra but also placing pressure from active environmental groups on the international level. Australia Business and Environmental Law determines high standards of food safety regulations, applicable equally to all the businesses in the sector. The government allows a standartized and unified approach to license, facilitating the operations of the companies. Environmental legislation is mostly is driven by the recommendations and facilitate projects from the government to raise the awareness and interest of restaurants in pursuing "green practices". Major regulations come from packaging regulations and the Environment Protection and Biodiversity Conservation (EPBC) Act (Business Australia Government, 2016).
The legal environment is underpinned by the transparency of the competition law, fostering the growth of domestic businesses and open market policies in Horeca sector. Consumer regulation is based upon the Australian Consumer Law, proving regulations on unfair contract terms, product safety, and consumer rights guarantee as well as penalties and lay-by agreements. The regulations are standardized for all types of governance structure in the sector, simplifying the market entry strategy and operations of the companies with foreign capital. Employment regulations are guided by national Employment Law, allowing the certain flexibility in working hours and employment agreements based on the position and profile of the candidates (Australia Government, 2016).
Competitor Analysis
The competitive environment of Canberra is typical for the profile of a city in the country. With a large number of competitors, the market is characterized by is the maturity of the life cycle. The industry's contribution to the national economy over the coming 1 years is expected to grow at an average rate of 3.3%, where Canberra statistics will follow the national average (Ibis World, 2016). With the total number of establishments expected to expand by 2.9% annually, the market is very saturated with no dominant players, shaping the direction of the sector. At the same time, the strong demand for quality food and dining out have attracted new players and shaped the direction of the sector, where the market share of fast-food restaurants gives its space to either more traditional organic dining out establishments or to sector of healthy and organic fast-food brands, entering the market at a rapid pace. The restaurants compete strongly for prime locations and, given the maturity of the market, location plays the paramount role in the success of the business.
When it comes to the pizza market specifically it is possible to argue that the industry has changed in a way that traditional pizza continues being popular,while the gourmet and healthier options are gaining more popularity. Consumers are ready to pay the premium price for healthier pizza, giving the positive outlook for the sector and predicting the revenue growth of 0.9% over the 2016-2017. With the diversification of this consumer demand, the companies continue looking for innovation in building unique customer experience (Ibis World,2015).
Some of the major competitors in the pizza market in Australia include Domino's Pizza, Pizza Hut, Crust Gourmet Pizza Bar and Eagle Boys and small local market players.Forbes (2015), however, outline that the price competition in the market is growing due to healthy trend and consumer preferences, shifting away from fast-food. With that in mind, the competitive profile of the market is more complex, bringing other restaurants, such as the establishments of Rockpool Group, which are not focused on pizza in direct competition with the pizza products (Forbes, 2015).
Customer Analysis
As it, as previously mentioned in the analysis of the socio-democratic profile of the region, the consumer trends in the restaurant and pizza market specifically indicate the transformation of demand and growing concern of regular consumers with the healthy and "green" products. Employment profile and family situation demonstrate the stronger focus on time management and increasing interest in dining out and diversification of the daily menu determines the positive direction of the sector growth.
Another important trend in the market is the technological advancement, attracting online sales, take away and delivery services. According to Deloitte (2015), 76% of the consumers use the smartphone and this number is expected to grow to 79% in 2017. The use of smartphones is not limited to the phone functions and the users increasingly use smartphones to take photos, make online purchases, communicating through social media and hailing a ride (Deloitte, 2015).
SWOT Analysis
Political
The above analysis outlines the focus on developing strong competitive proposition of the new market entrants, based on the composed customer experience and the extension of the brand to environmental practices,healthy food and "green" product market. With the maturity of the pizza market in the country, the segment is underpinned by reduction in profit margins due to price competition among pizza chains (Aaker, 2001). At the same time, the positive forecast for the pizza restaurant and food industry, in general, allows arguing that the combination of opportunities and strengths of Marimonte brand will allow the company develop a business model and entering the market with the sustainable competitive proposition.
References
Sadler Ph (2003). Strategic Management. 2nd Edition. London: Kogan Page Limited
Aaker, A. D. (2001). Developing Business Strategies. 6th Edition. New York: John Willey & Sons. Print.
Mullerat R. and Brennan D. (2011). Corporate Social Responsibility. The Corporate Governance of the 21st Century. Alphen Aan den Rijn:Walters Kluwer. Print.
Ibis World (2016). Restaurant Market Research Report (2016). Ibis World. Retrieved 1 August 2016, http://www.ibisworld.com.au/industry/pizza-restaurants-and-takeaway.html
Ibis World (2015). Pizza Restaurant and Takeaway in Australia: Market Research Report (2016). Ibis World. Retrieved 1 August 2016, http://www.ibisworld.com.au/industry/default.aspx?indid=2010
Dimmi (2014). Industry Analysis and Trends Report. Dimmi Australian Dining Index [Online]. Retrieved 1 August 2016, http://i0.dacdn.net/The_Dimmi_Australian_Dining_Index%202014-v3-online.pdf
IC (2016). Economic Overview. Invest Canberra [Online]. Retrieved 1 August 2016, http://www.investcanberra.com/media/6814/131210_economic_overview.pdf
Australia Government (2016). Australian Business and Environmental Laws. Business Australia Government [Online] Retrieved 1 August 2016, https://www.business.gov.au/info/run/environmental-management
Gagliardi, N. (2015). Competition Heats Up Among Pizza Restaurants For A Slow-Growing Pie. Forbes [Online]. Retrieved 1 August 2016, http://www.forbes.com/sites/nancygagliardi/2015/09/08/the-pizza-race-in-fast-casual-heats-up/#1dccd8f69cc9
