Cost and market orientation

Examples of cost orientation are identified particularly in the welfare sector such as catering in prisons,
for patients in hospitals and often for ‘in-house’ employee restaurants, while market orientation
examples are found in the hotels, restaurants, popular and fast-food sectors.

A market oriented business displays the following characteristics:

● A high percentage of fixed costs, for example rent, rates, management salaries, depreciation of
buildings and equipment. This high percentage of fixed costs remains fixed regardless of any changes in
the volume of sales. A hotel restaurant is an example of an operation with high fixed costs that have to
be covered before profit can be made.

● A greater reliance on increases in revenue rather than decreases in costs to contribute to the profit
levels of the establishment. The implication here is that in seeking to increase the business ’ s
profitability, more emphasis must be given to increasing sales (e.g. by increasing the average spend of
the customers or by increasing the number of customers) rather than by reducing costs. For this reason
the close monitoring of all sales in a market oriented business becomes of prime importance.

● An unstable market demand for the product, thereby requiring a greater emphasis on all forms of
selling and merchandising of the product to eliminate shortfalls in sales and the need to manage the
capacity of the business more closely.

● More likely to have a more flexible pricing policy in order to attract customers at off-peak times.

A cost oriented business displays the following characteristics:

● A lower percentage of fixed costs, but a higher percentage of variable costs such as food and beverage
costs. The percentage of variable costs in cost oriented establishments varies with changes in the
volume of the business’s sales. Employee restaurants are often found with a lower percentage of fixed
costs. This places less emphasis on achieving high sales volumes.

● A greater reliance on decreases in costs rather than increases in sales to contribute to the budgeted
profit levels of the establishment. Thus in seeking to increase the performance level (budgeted revenue
and profit) of a cost oriented business more emphasis would be given to reducing the overall costs of
the operation in such areas as purchasing, portion sizes and labour levels.

● A relatively stable market demand for the product. In comparison to market oriented businesses, cost
oriented operations enjoy a reasonably stable demand for their products. This makes planning and
operating more predictable and controllable.

● More likely to have a more traditional fixed-pricing policy.

There are those areas of the hospitality industry that cannot be precisely defined as either cost or
market oriented in that they display characteristics of both orientations at different times during their
business. In the main, however, most hospitality establishments fall into one of these two categories
and this has important implications for the catering and financial policies of the business,
Food and beverage management is mainly concerned with planning, leading, organizing and controlling
the activities of the department . These are the basic roles of managers in an organization. First, they are
involved in the planning process – setting objectives, making decisions about which direction the
organization should take, that is, formulating policies. Second, managers decide how these objectives
should be achieved and by whom. This involves analysing tasks and assigning them to individuals or
groups. Third, managers are involved in staff motivation in such a way as to move the organization
through them in the direction formulated at the planning stage, to achieve the stated objectives. Fourth,
managers have a controlling function including the comparison of actual performance to that forecast at
the initial planning stage and taking any necessary steps to correct any deviation from agreed objectives.
The controlling may be done by observation, by analysis of accounting records and reports or by analysis
of recorded statistical data.

These four management functions – planning, organizing, motivating and controlling – can be translated
into the functions of the food and beverage manager. In a food and beverage department, the planning
process involves the setting of several basic policies: a financial policy dealing with envisaged
profitability or cost constraints of the establishment; a marketing policy defining the market to be
catered for; and a catering policy defining the main objectives of operating the food and beverage
facilities and the methods by which such objectives are to be achieved. Such policies would be decided
at a senior level of management. The tasks needed to achieve these objectives would then be assigned
to individuals who should receive job descriptions detailing the purpose of their tasks, the
responsibilities of the individuals, who they are responsible to, etc. Here food and beverage managers
work in conjunction with the personnel department in producing job descriptions and appointing on-the
job trainers to help train new staff.

The motivation of the staff of the food and beverage department is an important function of food and
beverage managers. This may be undertaken in several ways – for example, by helping individuals who
are undertaking common tasks to form into groups so that a ‘ team spirit ’ may develop, by encouraging
staff–management committee meetings, or at a more basic level to see that full training is given so that
job anxieties are reduced for employees from the beginning. Finally, there is the element of control in
the food and beverage department. This involves the checking of actual performance against
expectations or forecasts, and in the case of any wide deviations, to locate the problem area and rectify
it, and to take whatever steps are possible to prevent the problem occurring again. The functions of
food and beverage managers in coordinating the food and beverage department are therefore
numerous, and it is important that they should use all the tools of management available to them.

An organization chart shows the position of the food and beverage department within the context of
the total establishment. An organization chart presents graphically the basic groupings and relationships
of positions, and a general picture of the formal organization structure. It shows the chain of command
and span of control.

A job description is an organised list of duties and responsibilities assigned to a specific position.

Responsibilities of the food and beverages department

2. The purchasing, receiving, storing, issuing and preparation of food and beverages within the
establishment for final provision and service to the customer.

3. The formulation of an efficient control system within the food and beverage department with the
purpose of:

● Monitoring food and beverage prices and achieving competitive rates while still ensuring quality
standards.

● Pricing restaurant and special function menus to achieve desired profit margins.

● Compiling on a daily, weekly and monthly basis, all relevant food and beverage information on costs
and sales that may be used by management for forecasting, planning, budgeting, etc.

● Reconciling actual and forecast costs and sales, and initiating corrective action if discrepancies occur,
and finding out and eliminating the causes, for example bad portion control, incorrect pricing, etc.

● Training, directing, motivating and monitoring of all food and beverage department staff.

● Cooperating with other departments to become a significant contributor to the organisation ’ s short-
and long-term profitability.

● Obtaining in a regular, structured and systematic way, feedback from customers, so that their
comments, complaints and compliments may be taken into account to improve the overall standard of
service.

CONSTRAINTS OF THE FOOD AND BEVERAGE DEPARTMENT

The food and beverage businesses are influenced by internal and external factors in their everyday
operations. It is organisations that study both the macro and micro environment that survive the
industry.

Macro environment

This is the external environment of the organization the factors are largely unpredictable and
uncontrollable. They originate outside the organization and for this reason internal action can rarely
solve the problem adequately, although pro-active management may help to reduce their impact.

Political Environment: These relate to government rules and regulations that guide investment and
operations in the food and beverage industry.

 Government legislation, for example, fi re regulations, smoking regulations, health and safety
legislation, EU regulations.

● Changes in the fiscal structure of the country, for example, regulations affecting business expense
allowances.
● Specifi c government taxes, for example, VAT, 2% tax on all epayments in Zim

● Government policy on training and employment, economic development, regional development, etc
eg indigenization strategy in Zim

• Health & Hygiene that concern aspects of food poisoning, food preparation conditions, storage
conditions, hygiene of cooks and servers, etc. Medical test and certification for all food handlers in Zim

Economic Environment:

This aspect certainly influences the success of business. The economic conditions of a region influence
the customers’ buying power and also the cost of running the operation.

• Rate of inflation and rising costs of raw materials, labour, fuel, insurance, etc.

• Distribution of economic wealth that determine target markets.

• Actions that stimulate growth and employment like subsidized apprentice programmes or farmer
subsidies.

• Disposable income in the hands of the public to eat out.

• Regional development.

• Sales instability including the peaks and troughs of business.

• Expansion or retraction of credit facilities by banks to make it easy or difficult to raise funds for
business.

• Interest rates on borrowed capital.

Social Environment:

This has a great impact on how the F&B operation runs in order to find acceptability and patronage of
the target market.

• Changes in demographics e.g. emerging women workforce or a moneyed middle-class.

• Ethics in doing business. People want to have the comfort that they are not being cheated.

• The decision-maker at home. It is found that children influence a lot of buying decisions

resulting in advertisements aimed at them.

• Convenience shopping like home delivery, take-away foods, fast foods,

• Growth in ethnic minorities demanding varied and special foods.

• Food habits of target markets.

• Religious restrictions like no beef for Indians or no pork for Muslims.

• Concern for healthy eating bringing in the use of organic foods and diet foods.
Technological Environment:

Technology is changing the way people work and has revolutionized work practices. The Food service
industry has a fair share in this revolution that has benefited both workers and customers.

• Mechanisation of work methods has greatly influencedfood preparation. For example, the food
processor has shortened time in the arduous traditional ways of making

and mixing things. The microwave ovens and convection ovens have speeded preparation times.

• Information technology has influenced how information is processed. e-Order pads, for instance, have
connected information to the kitchens, accountants and control departments simultaneously.
Restaurant micros are linked to mainframes churning out analytical data for decisionmaking.

• Food technology has helped develop organic vegetables, increased their shelf life, introduced frozen
foods and brought in meat and dairy alternatives.

Media:

The media includes the press, travel writers, gourmet writers, television and radio, etc. The image of an
F&B operation is so fragile and important to the success of the business. One wrong news item can have
irreparable damage. Food and beverage is so personal to the public because it has a direct impact on
their health. The media can make or break an establishment because more powerful that the news item
is the word of mouth that travels fast around the town.

Food and beverage outlets should aim to build a positive relationship with media houses to allow
positive consumer perceptions. This can be achieved through

• Participation in environmental issues such as cleaning the beaches or planting trees.

• Set leadership in good community conduct by having ethical ways of doing business.

• Provide employment to the local community. The employees become ambassadors to the public.

• Adopting correct practices and procedures in the preparation of food.

• Concern for hygiene and sanitation and following local laws on the subject.

• Having a system of receiving guest comments and acting upon them.

Micro Environment

This is also known as the operational environment as it has immediate influence on daily work. This is a
reality that all food and beverage operations have to deal with daily.

Customers:

They are the reason for doing business. The customer is king and unless the establishment responds to
the changing wants and habits of the customers, it is doomed for failure. Some of the concerns of
customers are:
• The satisfaction of their needs and wants.

• The amount they are willing to pay.

• Life style and habits.

• Their health and safety.

• Doing business ethically.

• Getting value for money.

• Getting recognition and participation in the dining experience

Employees:

Employees are the ones who fulfil the objectives of the organisation and create the customer
experience. The food service industry has the following concerns and commitments:

• Availability of skilled workers.

• Fulfilling the requirements of unions and labour laws.

• Training of staff especially casual workers who are coming into this industry in large numbers.

• Motivation of staff to give the customer the perfect guest experience.

• Managing employee grievances.

• Providing career advancement.

• Loss of employees to competition.

• Availability of multi-lingual staff to serve varied ethnic customers.

Suppliers:

They are a critical component of the business as they deliver the raw materials of the right quality,
quantity, and price in the right time, on a consistent basis to the establishment thereby helping it in
doing business. Some concerns in this area include:

• Availability of reliable suppliers, especially those who adhere to hygiene and safety concerns. ISO
certified

• Availability of raw materials round the year.

• Cost of imports of items not available locally.

• Unanticipated changes in cost.

The food and beverage industry requires little capital investment hence there are few barriers to entry.
This results in the presence of many players offering the similar product in the industry. Food and
beverage establishments must aim to differentiate their product andcome up with strong marketing
strategies to survive in the industry. Service excellence remains a strong selling point for businesses with
special attention to the meal experience.

Service Agencies:

The local government agencies of the federal and local government play an important role in any food
and beverage operations. They give permission to operate the business.

Some of their influences are:

• Providing the license to do the business, Liqour Licensing board , City of Harare

• Giving the license to operate a bar.

• Municipal authorities who provide power, fuel and water connections, building permits, sewage

disposal and garbage removal services.

• Internal revenue that governs sales tax and income tax.

• Fire Department that control the fire prevention measures.

• Local police that approve parking, traffic flows and unethical behaviour. They also register

company vehicles.

• Local authority that governs hours of operation.

• Health department that ensure proper health and hygiene standards in food preparation.