Vision and mission statements
Casper & Gambini’s has a lengthy vision statement. The firm’s vision statement is “Through our continuous development and determination to expand within different cultures and countries, we, at Casper & Gambini’s, will successfully spread our distinctive all-day restaurant-café concept worldwide” (David, Ali, & Al-Aali, 2011, p. 194). The vision statement has strengths because it states what the firm wants to become. The firm targets to expand to all regions in the world. It also inspires employees to be creative in developing new products. It is part of its strategy to penetrate different markets across the globe. The weakness of the vision statement is that it is a very lengthy statement. Its length creates complexity and may cause variations in interpretation by employees.
The mission statement was drafted properly and appears to have no weakness. Casper & Gambini’s mission statement is “Commitment to offer high quality wholesome food and beverages in an environment that is both stimulating and liberating with warmth and passion, delivering a genuine experience” (David et al., 2011, p. 194). The mission statement highlights what the firm intends to do. It states its distinctive competence, which is its high-quality wholesome food and beverages. Its self-concept is serving customers in an environment that is both stimulating and liberating. The mission statement is broad to cover its core business as well as derivatives.
The firm’s key strategic goal is to expand its business to major continents across the globe. The firm targets to enter new markets in Europe, Southeast Asia, North America, North Africa, and the GCC region (David et al., 2011). The firm considers franchising as an alternative to raising capital on its own. Another strategic goal includes retaining top performers and talented employees. The firm also seeks to continuously develop new products in old markets and new products that match the cultures found in new markets.
Porter’s Five Generic Strategies
Low-cost strategy (Type 1)
According to Michael Porter, the low-cost strategy is used when a firm offers products that are lowest-priced in the market (David et al., 2011). Casper & Gambini’s do not use the low-cost strategy because their prices are not considered the lowest in the market. The low-cost strategy also targets a wide range of customers, different from C&G’s strategy.
Best-value strategy (Type 2)
The best-value strategy involves selling products at a price that customers would consider the best price in the market (David et al., 2011). Casper & Gambini’s use their cost control measures in trying to ensure that they offer the best price for customers. C&G’s shares cost control information with franchisees, which may be a strategy to ensure that all franchised outlets offer the best value. It also includes evaluation by the Food & Beverage Director to ensure that franchised outlets offer high-quality products. The best-value focus strategy is reinforced by the firm setting up a central production and delivery unit. It values highly skilled employees to offer the best service.
Differentiation (Type 3)
Differentiation is used when a firm produces unique products and offers them to different market niches. The customers should be less sensitive to higher prices (David et al., 2011). Casper and Gambini’s targets sophisticated urban young and middle-aged consumers. The customers seek to socialize in restaurants offering non-alcoholic drinks. It targets professionals, who are willing to pay premium prices for stylish services. The firm’s derivatives also offer differentiated products for different groups of people. Its wholesome food and beverages are unique. Customers are willing to pay a higher price for products made from natural ingredients. Differentiation is also seen from its wide range of services, from office deliveries to all-day-long restaurant services.
Low-cost focus (Type 4)
A low-cost focus strategy is used when a firm targets a specific market niche with the lowest-priced products (David et al., 2011). There is no indication that leads to the conclusion that Casper & Gambini’s target a low-cost focus strategy.
Best-value focus (Type 5)
Focused differentiation is the strategy that accurately fits Casper & Gambini’s strategy. In focused differentiation, a firm targets niche markets with differentiated products and by offering the best value for customers (David et al., 2011). Casper & Gambini’s targets professionals in urban areas, within which they target smaller groups. Corporate catering services targets businesses that have special events and would like to have high-quality services. Specialty coffee-based drinks target sophisticated customers with a strong taste of different coffee ingredients. The firm also seeks to establish outlets in prominent sites, which is aligned with its strategy to target professionals in urban areas.
Strategies applied successfully
The firm cannot apply all five generic strategies. The firm’s main strategy is focused on differentiation. Differentiation and low-cost strategies are a difficult combination because of the extra cost involved in developing new products. It also involves the under-utilization of capacity because of targeting small niche markets. Casper & Gambini’s has applied the best-value focus strategy successfully. It has strengthened the brands of its derivatives, such as Silver, Italian, and From The Tree. Strengthening brands ensures that different groups of customers can be proudly associated with their products. One of the reasons for its successful use of differentiation is that the market is growing at a higher rate (David et al., 2011). The focused differentiation appears to be working because food sales in the catering services increased from $92,231 to $313,939, representing a 240.38 percent growth between 2008 and 2009. Beverage delivery increased from $34,045 to $56,992, representing a 67.4 percent growth in sales in the same period (David et al., 2011). It shows that focused differentiation is successful. Restaurant/ Café sales still hold 87.4 percent of gross sales. A better evaluation would require an assessment of different products separately. The financial result may be used to evaluate the outcome of a strategy. The multiple awards it has received are an indication of offering the best value and the success of its R&D.
Casper & Gambini’s has a strong presence in the GCC region. However, it operates in an international environment, considering it operates in North Africa and the Middle East. It also targets to expand its business to other continents.
The General Environment
The strength of the Euro affects the firm’s operations because the firm imports materials from Europe using the Euro. A stronger Euro makes input costs to be higher, which affects the price of its products (David et al., 2011).
Another economic force is the rising incomes in the GCC region. On one hand, it may increase Casper & Gambini’s sales. On the other hand, it may result in the demand for increased wage rates.
Consumption patterns are another factor that may be considered under economic forces. There is an increasing demand for ethnic food in Lebanon.
The 2008 economic crisis has increased the demand for franchises (David et al., 2011). It may help the firm to expand more rapidly through franchising. The economic crisis has intensified rivalry. People are saving more cash for precautionary reasons.
Social and demographic forces
There is an emerging trend of young professionals who enjoy dining in restaurants. The consumption habit is also shifting from quick-service food sales to a more prolonged experience (David et al., 2011). Customers are spending more time in restaurants.
Political, legal, and governmental forces
One of the political forces that may affect Casper & Gambini’s business is the unstable political regimes in the GCC region (David et al., 2011).
One of the legal factors that directly affect demand is the law that prohibits alcoholic drinks in most GCC countries. The illegality of alcohol increases the demand for beverages and the popularity of restaurants offering non-alcoholic drinks. Franchising also involves legal issues.
There is a lack of statistical data in the region (David et al., 2011). The lack of statistical information may be partly because of governmental forces. Private firms that provide industry information, such as Bloomberg, usually rely on regulators. Regulators make it necessary to publish information for publicly traded companies. Government agencies should host databases for different sectors.
The environmental factors in the firm’s operations include waste management and noise pollution. Waste management is required by law. Firms that operate restaurants should have a waste disposal arrangement. They should also manage the level of noise going beyond the restaurants.
The Internet is one of the technological forces that affect how businesses operate. Marketing, customer feedback, and sales can be managed through the Internet. Financial management and performance measurement systems can be controlled through information technology.
The specific environment
The company’s customers are young and middle-aged professionals who like to dine in elegant areas. The customers also include those who like to eat natural wholesome foods and beverages. The customers are shifting from quick service to spending more hours in the restaurants.
The company suppliers
The firm has successfully implemented a backward integration strategy through Main Spring and The Roaster. They supply the firm and its franchisees. The raw materials are imported from Europe.
Professional expertise and labor
The firm employs based on knowledge and skills. In offering the best service, the firm’s main challenge is employee retention. Highly skilled top-level managers and middle-level managers are migrating to countries that offer higher wage rates (David et al., 2011).
Porter’s Five Forces
Rivalry among competing firms
The intensity of rivalry is high because there are a high number of firms selling similar products. The competitors are franchises from well-recognized global brands, which makes rivalry more intense (David et al., 2011).
Most products are similar. There is a lack of intellectual property rights when it comes to cuisines and recipes. Only the brand names may have patents. Firms can easily imitate their competitors. Lack of copyrights increases the similarity of products in the food and beverage industry.
In the industry, the GCC region has a 12 percent growth rate (David et al., 2011). The high growth rate reduces the intensity of rivalry because firms have a high demand to satisfy.
Restaurants use large spaces, which incur high fixed costs. There is a need to increase the number of customers, so as to spread fixed costs widely.
The use of the Internet for marketing may increase the intensity of rivalry because customers can easily compare prices and facilities.
Threat of new competitors
The global brands are also using franchising, which increases the threat of new entrants. The possibility of entrepreneurs operating without using known brands also increases the threat of new entrants.
Threat of substitute products
The food and beverage industry has a high threat of substitutes. Products from a different line of business can be used as substitutes, such as Kentucky chicken and synthetic juices. The firm has to rely on the growing trend to consume natural and low-calorie products.
The bargaining power of suppliers
The firm has reduced the bargaining power of suppliers through its backward integration strategy, which consists of The Roaster and Main Spring (David et al., 2011). The firm has also reduced the bargaining power of suppliers by buying large. The same supplier supplies franchises.
The bargaining power of buyers
Corporate buyers may have high bargaining power because they purchase large amounts. Individuals visiting restaurants and cafés have low bargaining power.
Opportunities and threats from the general and specific environment
Rising incomes in the region may create an increase in demand, allowing facilities to operate near full capacity. Consumption patterns and emerging lifestyles favor the business. Highly sophisticated customers have a strong taste for differentiated products. High growth rates in the industry may reduce the intensity of rivalry and create a suitable environment for expansion. The economic crisis has increased the demand for franchises. The illegality of alcoholic drinks intensifies the demand for beverages. The backward integration strategy enables the firm to maintain high standards for its supplies. Brand loyalty can protect the firm against current competitors and new entrants.
The strength of the Euro may cause an increase in retail prices. Lack of statistical data limits the ability to anticipate market changes. The Internet could intensify rivalry, as customers are able to compare services and prices. Employee retention problems may cause the firm to increase its wage rates high above the industry average wage rate. It is easy to imitate products and practices. Switching costs are low for customers. The presence of a lot of substitutes is also a threat.
The outstanding organizational culture in the firm is innovation. The firm values new product development and continuous improvement. The firm’s main strategy is focused on differentiation, targeting sophisticated customers. The culture of innovation and continuous improvement enables the firm to stay on top in offering the best value. The firm has received several awards as an indication of its high standards and uniqueness of products. The firm liberates creativity, despite having standard procedures. The culture helps the organization to enter new markets with products that match different cultures and unique tastes in different countries.
Resources and capabilities
One of its resources is the team of top-level and middle-level managers. The firm hires qualified managers to head departments. It also hires experts to carry out innovation. Employees are also encouraged to be creative. However, new ideas have to be evaluated by the Food & Beverage Director, before they can be applied.
The firm has the ability to roast its own coffee beans and other beverages through The Roaster. It is a capability that helps it to maintain high standards in its differentiated focus strategy. Main Spring also supplies materials to franchised outlets. The firm’s ability to use backward integration is a unique capability that can allow it to target the best quality raw materials in the supplies market. The firm can also use it to standardize prices in the Arab region. However, franchising is not a unique capability because it is used by competitors.
The firm does well in offering unique products that can be known broadly as differentiated products. The wholesome natural foods and beverages are the firm’s outstanding feature. ‘From The Tree’ offers juices and other drinks made from a wide range of natural flavors. As a result, its core competency can be described as the ability to creatively use natural ingredients to offer a wide range of differentiated products for refreshment.
Weakness from organizational culture
The firm relies on employees to be innovative. The employee retention problem creates a weakness. Leaving employees may strengthen competitors. The focused differentiation strategy may result in products that have higher prices than common products or substitutes. It may prevent the firm from expanding rapidly because it targets small niche groups. However, targeting niche groups with unique products can offer higher profit margins. The firm has to target larger markets than niche markets to increase its revenues rapidly.
- Some competitors are well-known global brands from North America and Europe. They may find it easier to raise capital for expansion than Casper & Gambini’s.
- The firm offers consultative support to franchises, reducing the weaknesses that are related to smooth and efficient operations.
|Strengths ||Weaknesses |
|Opportunities ||Threats |
The liquidity ratios show that the firm did not have adequate liquid assets to cover its current liabilities in 2008. It was considered insolvent (David et al., 2011). In 2009, there was a great improvement in financial liquidity. A well-performing firm should maintain a current ratio that is almost equal to 1.0.
The leverage ratios show that the firm used a high-level of leverage. The debt-to-total assets ratio shows a leverage ratio of 97% in 2009. The debt exceeds assets in 2008. The leverage ratios show that the firm is in a bad financial position. The main reason for its continued operation is that the firm’s times interest earned ratio indicates the ability to cover interest expense. ROA and ROE are also high enough to give creditors confidence in the firm’s investment.
The inventory turnover ratio shows that inventory is managed efficiently. The proper management of inventory could come from the nature of the business, dealing in perishable goods. The fixed asset turnover gives a positive signal of efficient utilization of assets.
The profitability ratios indicate that the firm can become more profitable when it reduces operating expenses. The gross profit margin is very high while the operating profit margin is very low.
Overall analysis of the firm’s competitive position
The firm’s competitive strategy is to use focused differentiation. The best-value focus is strengthened by the firm’s ability to continuously add new products to its menu. The firm moved from an original menu of salads and sandwiches to a wide range of products under different brands. For example, ‘From The Tree’ targets customers who want juices made from natural products. There are different blends of juices, creating different products, which ensure that all customers within the niche markets have something unique to match their taste. The firm invests in R&D to ensure that products are developed to match different cultures in new markets and changing customer demands.
In the hotel & restaurant industry, there are usually smaller brands that operate separately. They intensify rivalry. The isolated brands may target price-sensitive customers, leading to lower prices. The capital requirements are not restrictive. New entrants can use smaller spaces and offer a narrow product line. Casper & Gambini’s products are highly differentiated, which reduces the possibility of buyers shifting to other restaurants. The Internet allows customers to compare prices and services. According to David et al. (2011), buyers have a high bargaining power when they are informed about other offers in the industry. Brand loyalty can shield against new entrants (David et al., 2011). Casper & Gambini’s is a quality brand shielded by its differentiated products. Its differentiated products may also reduce the threat of competition from well-known brands.
The firm also uses backward integration to ensure that it maintains high-quality ingredients through ‘The Roaster’ and ‘Main Spring’. The Roaster provides high-quality beverages and Main Spring supplies to franchised outlets. Backward integration was chosen to maintain the standards of inputs used as ingredients. Beverages are supplied from Lebanon. The roaster is the main supplier of beverages. The consolidation of purchases has reduced the influence of suppliers. It ensures that franchisees are supplied through the same supplier. It is also unlikely that material suppliers could enter the restaurant business, which reduces their bargaining power further. Casper & Gambini’s can protect its business from high raw material costs.
Using opportunities and strengths to overcome threats and weaknesses
The firm cannot influence political stability but has to select countries that show signs of political stability. For example, it can choose countries that elect leaders democratically and those that have royalties parallel to elected leaders. The firm can assess the level of loyalty to the royalty regimes. The firm can also assess the level of expenditure on defense (David et al., 2011). However, a stronger army is not a reason for internal stability.
The exchange rate may fluctuate, affecting the stability of prices. Casper & Gambini has to use means that ensure the maintenance of stable prices. Customers dislike seeing prices changing within short periods. Keeping large inventories would have been a solution. However, the firm uses perishable goods that cannot be stored for a long period. Alternatively, it can have an inventory of beverages because they can be stored for a long period. It reduces the portion of products that are affected by fluctuations in the exchange rate. Another method is to hold a considerable amount of its working capital in Euros, instead of the local currency. The firm can use its profits to increase the firm’s liquidity. It can also use hedging derivatives against exchange rate fluctuations, which incurs a cost.
Rising income levels may result in the firm paying more for an equal size of the current workforce. The firm has to ensure that the increase in profitability exceeds the increase in wage rates. Rising income may also increase demand, which may result in increased utilization of capacity. The firm can use the resulting efficiency to reduce costs and expand its customer base.
The GCC casual dining and quick service food market have an annual growth rate of 12 percent and it is expected to grow at the same rate for the next five years (David et al., 2011). A high growth rate is good for expansion. It also shows that most facilities will be operating near full capacity, increasing efficiency, and productivity.
Casper & Gambini’s offer all-day long services to customers, who may want to spend a longer time in the restaurants. The industry is also supported by the tourism industry. Tourists increase the number of customers, creating seasons of high sales and low sales. The emerging trend of healthy, low-calorie, and organic foods and beverages may support the firm’s expansion and growth in sales (David et al., 2011). The emerging lifestyle of spending nights in lively places may also increase the number of customers. Casper & Gambini’s should anticipate the change by seeking more spacious restaurants and training more part-time employees.
Inability to retain employees in critical positions may affect offering the best-value in customer service. It may also increase costs by continuously training new employees. The use of part-time workers and university students may compromise the quality of service. In addition to the reward system, the firm should consider offering wage rates that are above the industry average to retain more employees.
The firm should continue using focused differentiation to support the long-term strategy. The firm’s long-term strategy is to enter new markets and have global operations. The differentiation strategy is effective in entering new markets. A cost leadership strategy is not the best option because homemade meals are substitutes that have lower costs. The firm should continue targeting niche markets with its differentiated products. The firm has high fixed costs in the form of rental expenses. The firm sets up outlets in prominent areas, targeting sophisticated customers. Salaries and wages also account for a big portion of operating expenses. Differentiated products allow the firm to charge higher prices. As can be seen in the financial analysis (Figure 2), the gross profit margin is very high.
In terms of cost, a best-value focus strategy will not cost the firm an additional cost because it is a continuation of the firm’s current strategy. However, the firm may need to strengthen the strategy by finding means to retain more employees involved in product development and service improvement.
The evaluation process will look at the sales growth rate of different products. Products with low sales and low sales growth should be discontinued. The evaluation will be carried out on a quarterly basis.
The firm can improve employee retention by ensuring that its wage rates are above the industry average wage rate. Increasing the wages and salaries by 20 percent will require the firm to spend an additional $472,579.40 to cover the three categories (David et al., 2011). It is higher than the net profit. It shows that it is not viable to increase the salaries of the entire workforce by 20 percent. A better alternative is to target the top and middle-level managers, who create a retention problem. They also hold critical areas necessary to implement the focused differentiation strategy. Increasing management salaries by 20 percent will incur an additional cost of $62,660.60. It is feasible and aligned with the long-term strategy. It can be implemented in the next financial year.
In response to the use of part-time workers and university students, the firm should increase training expenses from $4,382 to $8,764, which is a 100-percent increase in costs (David et al., 2011). It will be used to ensure that every new worker is trained on the relevant services and there is a follow-up evaluation.
The strategy can be measured by the retention rate of managers. The firm can specifically target the retention of top performers. The performance of the training strategy can be measured using customer reviews. The main aim of the training plan is to improve the quality of customer service for employees who are employed for a short period. The evaluation will be carried out semi-annually.
The firm should be reluctant to set up outlets in countries that show signs of political instability. The length of time that a country has been governed democratically may be used to determine a country’s political climate. There is no accurate measure of stability. Egypt and Libya were once known as having political stability. Long-standing democracies may be a good indicator. Insurance companies do not insure against the war. The firm can set at least 10 years of political stability as a standard for entering new markets. Most countries in the Gulf region will be labeled as high-risk countries under the new standard. The firm is highly leveraged and needs to be protected from loss of property associated with country risk.
The firm should increase its working capital to protect against fluctuations in the exchange rate. The firm can generate part of the money from its net income. In 2009, the cost of sales was $2,544,328, which shows that the firm cannot afford to hold a large inventory (David et al., 2011). The main advantage is that operating expenses are not affected by the exchange rate. Most of the materials are perishable, which limits the possibility of holding a high-level of inventory. Dohring (2008) explains that one of the natural hedging methods is to balance foreign currency expenditure with foreign currency income. Wang (2009) suggests balancing foreign currency needs using foreign currency assets and liabilities on the balance sheet. Wang (2009) suggests the use of exchange-rate derivatives to hedge against fluctuations in the exchange rate, such as futures.
Dohring (2008) discusses that exchange derivatives may sometimes result in a loss when legal costs are taken into account. Dohring (2008) explains that the firm should demand to be paid in the currency that suits its needs. For example, Casper & Gambini’s should encourage tourists from Europe to make payment using the Euro. The firm can offer discounts to encourage payment in Euros. The firm can hold Euro-denominated securities that can be resold in a short period. The firm needs $508,865.60 to cover three-month supplies (David et al., 2011). Alternatively, the firm can hold Euros in cash because securities add other risks. They are also less liquid and three months is a short period. The firm has to find a balance between holding cash and depositing the money in a financial institution that offers a favorable interest rate. When the Euro strengthens by 10 percent, the firm may need an additional amount in local currencies, which may be worth about $12,721.64 in the three-month period (10% of 508,865.60). Holding Euros adequate to cover a three-month period is a better alternative when the expected change in the exchange rate is high.
The plan can be implemented in the next financial year. The performance of the plan to hold Euros in cash will be measured against the other alternatives. Managers should consistently predict and select the option that increases earnings and reduces costs. The evaluation will be done semi-annually.
David, F., Ali, A., & Al-Aali, A. (2011). Strategic management: Concepts and cases (Arab World Editions). New York, NY: Pearson Education.
Dohring, B. (2008). Hedging and invoicing strategies to reduce exchange rate exposure: a Euro-area perspective. Web.
Wang, P. (2009). The economics of foreign exchange and global finance (2nd ed.). Berlin: Springer-Verlag.