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Business

Strategy
for
Competitive
AdvantageU51035
Porters
generic
Strategies Cost
leadership
Group 1
(Team B)

Students:

Presentation Flow
Identify
Cost
Leadership
Strategies
being used
by CDC

How to implement

Measure with
the benchmark

Which one doing better

Costleadershi
p strategy

Identify Cost Leadership

Source: Caf de Coral Corporate Motto & Mission

Cost-leadership strategies
Input
cost

Labour cost
Raw
materials

Econom
ies of
scale

Scale/Size
Sales volume

Experi
ence

Labour
productivity
Learning
curve&
History

Strategies
being used
by CDC

Product/ Simplifying menu


Process Streaming the
frontline
Design operation flow

Input cost
Labour
cost

Input cost

Raw
materials

Input cost--Labour cost


Implement Automation in Production Process and workplace
Strategy being
used by CDC

How to
implement

Effect

A. Tai Po Food Processing Center


The automated machinery makes operation more efficient
Less manpower needed
B. Outlets
Vending machine at some outlets
allow diners to make orders and
pay for them electronically
Cut down on cashiers

Reduce increasing rate of Labor Cost


2012/2013 Caf de Coral 0.7%, Fairwood 1.1%

Measure with the benchmark


CDC:
average
25%
2009~2013

Input cost-- Raw materials


Global Purchasing mix
Strategy being
used by CDC

How to
implement

Effect

Raw materials procurement from all over the world


Selects lower cost of raw materials around the world
E.g. Canadian Grain-fed Beef and Australian fish fillet

Reducing the raw material cost influenced by RMB appreciation


Global purchasing has been employed since 2012.
RMB2.45% (1/2012~1/2013),the raw material cost 0.5%
And the cost of food ingredients has decreased since then, from 33.9%
down to 33.4%.

Measure with the benchmark

Input cost--Which one doing better


Labour
cost

Input cost

Other
Input
cost

Benchmarking on input cost in


2012/13
Ranking:
They are similar ~70%

Economies of scale
Scale/
Size
Economies of
scale

Sales
volume

Economies of scale--Scale/ Size


Expansion strategy
Strategy being
used by CDC

Source: Caf de Coral Annual report 2010/2011

How to
implement

Effect

A. Opening more stores.


Located at commercial, industrial and residential districts
Where there were strong demand for quick service restaurants.
Open 15 stores in 2010-2012
B. To establish new central food processing plants
To support 300-350 stores in Hong Kong.
Having a central kitchen = less space would be needed in retail stores
More space can be spared for serving customers to maximize revenue.

Negotiate discounts
Better cost control
Competitive advantage

Measure with the benchmark


Benchmarking on Size in terms of no. of stores in20132014
TsuiWah
Caf de Coral
Fairwood
2013-2014
Size

153

103

27

Benchmarking on central kitchen (Support no. of stores)

Caf de Coral

Fairwood

TsuiWah

Supportno.of
stores

300~350

180

60

Economies of scale--Sales volume


Prudent approach on price increment
Strategy
being used by
CDC

How to
implement

Effect

Source: Caf de Coral Interim report 2011

Low price strategy


Value meals
Some of our initiatives over the year have led
to money-saving efficiencies that we plan to pass back
to customers
in the form of a new range of value meals: low-cost
standards that will underpin our higher-value offerings.
Customers volume
Small profit but rapid turnover

Source: Caf de Coral CEO's Report 2013/2014

Measure with the benchmark


Benchmarking on average spending per customer
in2013

Economies of scale-- Which one doing better

Experience
Labour
Productivit
y
Experience
Learnin
g
curve&
History

ExperienceLabour Productivity
Mentorship and Knowledge transfer

Strategy being
used by CDC
Source: CDC CEOs Report

How to
implement

Has established the "Caf de Coral Management Academy"(2000)


Regular training activities for employees
Put team spirit into practice
Review the service attitudes and performance of staff through an objective
"mystery shoppers" program.

To strengthen labour skills, enhance labour productivity


Helps enhance the quality of service
Reduce mistakes
Effect

ExperienceExperience curve&
History

Experience

Foundatio
n

First food
processing
plant

50th
restaurant

Caf de
Coral
Managem
ent
Academy

196
8

197
9

198
8

200
0

Y
Unit
Cost

Experience
curve

Building
Central
foodprocessing
plant

200
8

Over 140
restaurants
& 300,000
customer
daily

Now

Yea
r

Cumulative volume of
production

Brand

Measure with the


benchmark Foundation

Benchmark
Maxims

1968

Fairwood

1972

TsuiWah

1977

CafedeCoral

1972

Early entrants into a market will have experience late entrants do


not yet have
It is important to gain and hold market share

ExperienceWhich one doing better

Product/Process Design
Simplifying

menu

Streamin
g the
frontline
operation
flow

Product/
Process
Design

Product/Process Design-- Simplifying menu


How to implement

Strategy being
used by CDC
Source form Caf de Carol Annual Report 2011

How to implement

Effect

Since 2013, Caf de Coral sets


number signs next to the menu
Make the menu clear
To convince the customers to order
and staffs to take order

Product/Process Design-- Streaming the


frontline operation flow

Source form Caf de Carol Annual Report 2011

Product/Process Design-Which one doing better


Simplifyi
ng menu

Independe
nt zone for
packing
deliver

Cafede
Coral

Fairwood

Maximmx

Ranking:
CDC is doing better than
others

Overall performance of CDC


CDC
Input cost

Similar to
competitors

Economies of
scale

1st

Experience

1st

Product/Proc
ess
Design

Doingbetter

ROA2013-14
CDC

12.72%

Fairwood

12.12%

TsuiWah

10.77%

ROA---An indicator of how profitable a


company is relative to its total assets.
ROA gives an idea as to how efficient
management is at using its assets to
generate earnings.

References
Caf de Coral. (n.d.). Caf de Coral Home page. Retrieved from Caf de Coral Web site:
http://www.cafedecoralfastfood.com/companyinfo3.php?lang=b5
South China Research Limited. (n.d.). South China Research Limited- Golden age of Hong Kong fast food
chains. Retrieved from South China Research Limited Web site:
http://www.sctrade.com/data/sctoday/20130731104308Eng-Golden%20Age%20of%20Hong
%20Kong%20Fast%20Food%20Chains%20-%20130731.pdf
Standard Chartered. (2013, April 27). Equity research: Fast-food to fine dining. Retrieved from China:
Travel& Leisure- Emerging Companies:
https://research.standardchartered.com/configuration/ROW%20Documents/Fast . (n.d.). - . Retrieved from
: http://www.chiefgroup.com.hk/_upload/pdf1_20140320075750_%E5%B0%88%E9%A1%8C
%E5%A0%B1%E5%91%8A-%20%E6%9C%AC%E5%9C%B0%E5%BF%AB
%E9%A4%90%E5%BA%97%E5%8F%8A%E8%8C%B6%E9%A4%90%E5%BB
%B3%E5%88%86%E6%9E%90.pdf