Food and Beverage Management

fifth edition
Chapter 10
Making Strategic Decisions
© 2019 Cousins et al: Food and Beverage Management, 5th edition, Goodfellow Publishers
Chapter 10 covers:
 The origins of strategy
 Assessing current performance
 Assessing organisational capability
 Strategic analysis and planning
 The need for a balanced approach
 The basis of strategy
 Strategic direction and strategic means
 Evaluation criteria

© 2019 Cousins et al: Food and Beverage Management, 5th edition, Goodfellow Publishers
Origins of strategy
 Strategic decisions are:
 Major decisions that affect the direction to which an
organisation, or part of an organisation, is committed
for the next few years
 Decisions which involve a significant commitment of
resources
 Decisions which involve complex situations at
corporate, business unit and operational level which
may affect and be affected by many parts of the
organisation

© 2019 Cousins et al: Food and Beverage Management, 5th edition, Goodfellow Publishers
Terms used include:
 Vision
 Mission
 Policy
 Goals/aims
 Strategy
 Objectives
 Tactics

© 2019 Cousins et al: Food and Beverage Management, 5th edition, Goodfellow Publishers
The three levels of strategy

© 2019 Cousins et al: Food and Beverage Management, 5th edition, Goodfellow Publishers
Assessing current performance
 Same three levels used when assessing the
performance of the current operation:
1. Operational
 includes day-to-day sales and the way the product is provided and
promoted

2. Business
 the performance of the enterprise in terms of profitability,
competitiveness and other business measures

3. Corporate
 the strategic direction of the operation and how this is being achieved

© 2019 Cousins et al: Food and Beverage Management, 5th edition, Goodfellow Publishers
Assessing current performance
 Quantitative analysis

 Business environment analysis

 Qualitative evaluation

© 2019 Cousins et al: Food and Beverage Management, 5th edition, Goodfellow Publishers
Quantitative analysis

 Essential part of appraisal

 Considered over time

 Evaluation is more important than the data itself

© 2019 Cousins et al: Food and Beverage Management, 5th edition, Goodfellow Publishers
Quantitative analysis can:
 Identify trends and progress
 Enable comparisons with the competition and the
industry as a whole
 Reveal lost profit and growth potential
 Identify areas needing improvement
 Highlight and emphasise possible danger areas

© 2019 Cousins et al: Food and Beverage Management, 5th edition, Goodfellow Publishers
Ratio analysis
 Includes:
 Operational ratios
 Activity ratios
 Profitability ratios
 Liquidity ratio
 Gearing ratios
 Stock market ratios
The formulae and explanations of what the indi­vidual ratio can indicate, are detailed in
Appendix A Food and Beverage Management 5th edition, Cousins et. al. 2019

© 2019 Cousins et al: Food and Beverage Management, 5th edition, Goodfellow Publishers
Business environment appraisal

 Macro-environment
 PESTLE

 Industry micro-environment
 Porter’s Five forces

© 2019 Cousins et al: Food and Beverage Management, 5th edition, Goodfellow Publishers
The business macro-environment

P Political
E Economic
S Socio-cultural
T Technological
L Legal
E Ecological (environmental)

© 2019 Cousins et al: Food and Beverage Management, 5th edition, Goodfellow Publishers
 The business micro-environment

Porter’s Five Forces

Adapted from Porter 2004

© 2019 Cousins et al: Food and Beverage Management, 5th edition, Goodfellow Publishers
Qualitative evaluation
 Should be used as an additional tool to back up
issues identified in another area of analysis
 The evaluation of the quantitative analysis is more
important than figures themselves
 Qualitative evaluation supports:
 Making informed evaluation of the business
 Allowing for external comparison
 Ensuring the right questions are asked

© 2019 Cousins et al: Food and Beverage Management, 5th edition, Goodfellow Publishers
Analysis using the Food Service Cycle

© 2019 Cousins et al: Food and Beverage Management, 5th edition, Goodfellow Publishers
The Food Service Cycle
 Difficulties in one element of the cycle will cause
difficulties in the elements of the cycle that follow

 Difficulties experienced under one element of the

cycle will have their causes in preceding elements

© 2019 Cousins et al: Food and Beverage Management, 5th edition, Goodfellow Publishers
External comparison
 With other organisations generally
 With other similar organisations
 Against industry norms
 Through benchmarking

© 2019 Cousins et al: Food and Beverage Management, 5th edition, Goodfellow Publishers
Quantitative measures
 Can draw attention only to things that can be
easily measured
 Performance indicators measure behaviour, but
can also change behaviour to only satisfy the
indicator
 Some of the indicators are prone to being
manipulated to give the impression of higher
quality than is actually being achieved

© 2019 Cousins et al: Food and Beverage Management, 5th edition, Goodfellow Publishers
Assessing organisational capability
 Resource analysis
 How well do we do what we do?
 Existing capacity for change
 Identifying changes in resources
 Value chain analysis
 Examine all stages of the food service cycle

© 2019 Cousins et al: Food and Beverage Management, 5th edition, Goodfellow Publishers
Strategic analysis and planning
 Seeks to manage the interface between:
 The external environment

(opportunities and threats)

and
 The internal capabilities of the operation
(strengths and weaknesses)

© 2019 Cousins et al: Food and Beverage Management, 5th edition, Goodfellow Publishers
SWOT matrix

© 2019 Cousins et al: Food and Beverage Management, 5th edition, Goodfellow Publishers
Using the SWOT analysis
 Need for constant monitoring
 Assess for now and the future:
 What possible external changes might make a current
strength into a weakness, or vice versa?
 How can current strengths be used to explore future
opportunities?
 Are current resource capabilities able to meet future
demands?

© 2019 Cousins et al: Food and Beverage Management, 5th edition, Goodfellow Publishers
 Need for a balanced approach
 Decision making must take account of four
perspectives:
 Developmental – organisational capacity, knowledge and
innovation
 Operational – efficiency
 External – stakeholder and customer satisfaction
 Financial – performance and financial management

Balanced Scorecard Institute

© 2019 Cousins et al: Food and Beverage Management, 5th edition, Goodfellow Publishers
 Balanced Scorecard

Organisations need to know:

how the Internal Drivers are contributing to the Results

Source: Developed from Johnston et al. 2012

© 2019 Cousins et al: Food and Beverage Management, 5th edition, Goodfellow Publishers
Examples of performance indicators

© 2019 Cousins et al: Food and Beverage Management, 5th edition, Goodfellow Publishers
Strategy is a means to an end

“Would you tell me please which way I ought to go from

here?” she asked.

“That depends a good deal on where you want to get to,”

said the cat.

Lewis Carroll, Alice’s Adventures in Wonderland (1865)

© 2019 Cousins et al: Food and Beverage Management, 5th edition, Goodfellow Publishers
Strategy is a means to an end

Where do you Where are you Which way

want to get to? starting from? ought you to go?

Objective Current position Strategy

© 2019 Cousins et al: Food and Beverage Management, 5th edition, Goodfellow Publishers
Basis of strategy
1. Cost leadership
2. Differentiation
3. Focus
3a. based on cost
3b. based on differentiation

Michael Porter (2004a)

© 2019 Cousins et al: Food and Beverage Management, 5th edition, Goodfellow Publishers
 Porter’s matrix
Competitive advantage

Low cost Differentiation

Broad
Target 1 2
Cost Differentiation
leadership
Competitive
scope
3A 3B
Cost focus Differentiation
Narrow focus
Target

Adapted from Porter 2004

© 2019 Cousins et al: Food and Beverage Management, 5th edition, Goodfellow Publishers
 Strategy Clock
Eight
possible
strategic
routes

Adapted from Johnson et al. 2008 and 2017

© 2019 Cousins et al: Food and Beverage Management, 5th edition, Goodfellow Publishers
Strategic direction
 Various approaches can assist, including:
 Growth Share (BCG) Matrix

 Life cycle analysis

 Ansoff’s growth matrix

© 2019 Cousins et al: Food and Beverage Management, 5th edition, Goodfellow Publishers
Product Portfolio Matrix

Boston Consulting Group

© 2019 Cousins et al: Food and Beverage Management, 5th edition, Goodfellow Publishers
Life cycle analysis
 Stages
 Introduction – Growth – Maturity - Decline

 Market position
 Dominant – Strong – Favourable – Tenable – Weak

 Variants
 Fad life cycle
 Extended life cycle

© 2019 Cousins et al: Food and Beverage Management, 5th edition, Goodfellow Publishers
Life cycle analysis

© 2019 Cousins et al: Food and Beverage Management, 5th edition, Goodfellow Publishers
 Ansoff’s growth matrix

Adapted from Ansoff 1988

© 2019 Cousins et al: Food and Beverage Management, 5th edition, Goodfellow Publishers
Strategic means and assessing options
 Strategic means
 Internal development
 Mergers and acquisitions
 Joint development

 Evaluation criteria for options

 Suitability
 Feasibility
 Acceptability

© 2019 Cousins et al: Food and Beverage Management, 5th edition, Goodfellow Publishers
Strategy and organisations
 If approaches to strategic management were only
undertaken in a wholly scientific way, decisions would
only be rational and objective
 But organisations are complex, and decisions about
strategy are largely dependant on the predominant
organisational characteristics
 This help to indicate why similar food service businesses,
facing similar business environments, might make quite
different strategic decisions

© 2019 Cousins et al: Food and Beverage Management, 5th edition, Goodfellow Publishers
Reality of strategic management
 Organic not linear
 Affected by organisation and culture
 Complex and judgmental
 Continuous process
 Combines a variety of approaches and techniques
 A management job
 Needs to be flexible to cope with uncertainty

© 2019 Cousins et al: Food and Beverage Management, 5th edition, Goodfellow Publishers
© 2019 Cousins et al: Food and Beverage Management, 5th edition, Goodfellow Publishers