ABSTRACT
BIBLIOGRAPHY
VELOSO, JAY B. APRIL 2007. Competitive Advantage of Restaurants in
Baguio City. Benguet State University, La Trinidad Benguet.
Adviser: Jovita M. Sim, MSc
ABSTRACT
The study is conducted to know the characteristics and kinds of restaurants
operating in Baguio City. Identify problems and solutions encountered by these
restaurants, to determine their competitive advantage and the action plan identified to
increase productivity.
The study revealed that majority of the respondents belong to the economy class
restaurants, and most of them are giving full service to their customers.
The main reason of entrepreneurs engaging in restaurant business is for them to
create employment and for family income.
The forms of pricing method they usually used are value pricing for products that
are usually consumed, cost plus method and market share approach because most of their
competing restaurants have the same price for the same products.
At present, the study identified that most of these restaurants are still competitive
and profitable, how ever there are some who are risky and declining due to
mismanagement and lack of finance.
In identifying their competitors, most say that they consider the competitors
services, status, capabilities and objectives. These are there strategies to know their gap to
other restaurants in order for them to improve.
The study also revealed that the advantages of the respondents are more on
product differentiation, quality service and trained staff. Even though, some say that they
used unique strategy and lower the prices of the food for them to have customers and
sales as compared to their competitors.
In promoting their business majority of them advertising in ads, media, billboards,
flyers and sponsorships to any kind of party or occasions. Some respondents also do not
promote their business due to lack of budgetary finance.
The study have found out that majority of the respondents counteract competitive
advantage around price such as offering senior citizen discounts, holiday special price,
lesser price and discounts to regular customers. All these factors give them advantage to
be competitive and to have customers.
ii
TABLE OF CONTENTS
Page
Bibliography…………………………………………………………..
i
Abstract…………………………………………………………………
i
Table of Contents ……………………………………………………..
iii
INTRODUCTION……………………………………………………..
1
Rationale of the Study …………………………………………
1
Statement of the Problem ………………………………………
3
Objectives of the Study…………………………………………
3
Importance of the Study ……………………………………….
4
Scope and Delimitation ………………………………………...
4
REVIEW OF RELATED LITERATURE………………………………
5
Competitive Advantage ………………………………………..
5
Competitive Advantage using Market
Differentiators…………………………………………………..
5
Six Differentiators that Build Competitive
Advantage…………………………………………………...….
6
a. Core competencies…………………………………….
7
b. Reputation for superior products and
services……………………………….…………….…
7
c. Niche market…………………………………………...
7
d.
Unique
distribution channels or
delivery methods………………………..…………..…..
8
iii
e. Organizational efficiency………………………….……
8
f. Unique technology and innovative
products or service……………………………..……..….
8
Building Sustainable Competitive Advantage………………………
10
a. Organization and Managerial process……………………
10
b. Learning………………………………………………….
10
c. Reconfiguring and Transformation………………………..
10
d. Positions…………………………….……………………..
10
e. Paths……………………………………………………….
11
f. Technological opportunities……………………………….
11
METHODOLOGY…………………………………………………………..
12
Locale and time of the Study ………………………………..............
12
Respondents of the Study ………………………………….………..
12
Data Collection …………………………………………...................
12
Data to be Gathered ………………………………………………….
12
Data Analysis ……………………………………………..…………
12
RESULTS AND DISCUSSION………………………….…………………
13
Profile and Classification of the Respondents…………………………
13
a. Quality………………………………………………………
13
b. Items available inside the restaurant………………………...
13
Page
c. Status of restaurant business…………………………………
14
Mode of Services the Restaurant Offers………………………………… 16
Respondents Advantages to other Restaurants………………………….. 17
iv
a. Accessibility and availability to customers………………….
17
Ways Considered in Identifying Competitors………………….............
19
Status of Competitors………………………………………………….
20
Action Plan of Respondents after Identifying
Competitors………….……………………………….……..……….
20
Strategies Implemented by Respondents after
Identifying Competitors…………………………….……………….
21
Factors to Consider in Human Resource
Management…………………………………………………………..
23
Pricing Method Adopted by Respondents………………………………. 23
Purpose in Engaging Restaurant Business………………………………. 24
Technology Adoption………………………..………………………….. 25
Impact of Fast-Food Centers at SM City Baguio
to Outside Restaurant…………………………………………………… 26
a. Impact……………………………………….………………..
26
b. Solutions to counteract………………………………………
26
Business Promotion Strategies………………………………………….
27
a. Actions in promoting business restaurant…………………….
29
b. Reasons for not promoting…………………………………..
29
Competitive Advantage on Price………………………………………..
29
a. Price flexibility……………………………………………….
29
Page
b. Causes of price inflation……………………………………..
29
Special Qualities/Uniqueness of the
Restaurant by Respondents…………………………………………….… 30
Factors Considered to Stay in the Competition…………………………. 31
v
Aspect in Focusing Competitive Advantage…………………………….. 32
Factors Considered in Industry Specialization………………………….. 32
Factors that Affect the Performance of the Restaurants…………………. 33
SUMMARY, CONCLUSIONS AND RECOMMENDATION……………….
35
Summary……………………………………………………………… 35
Conclusions……………………………………………………………
37
Recommendations……………………………………………………..
38
LITERATURE CITED ……………………………………………………….
40
APPENDICES…………………………………………………………………
41
Letter to respondents …………………………………………………..
41
Survey questionnaire…………………………………………………..
42
vi
INTRODUCTION
Rationale of the Study
Opening a restaurant is a distinct challenge. It is a thrill that gives one the
opportunity for tremendous creative expression. Developing the menu, creating a new
dish, designing the décor, attending to your level of service or establishing an ambience,
these factors all contribute to exceeding the expectations of the customer. However, there
are numerous hurdles to overcome before the opening; the good news is that with careful
planning, including the writing of business plan, the chances of success may improve
(GO Software, 2003).
A restaurant shall be held to mean any establishment offering the public regular
and special meals or menu, cooked foods and short orders. Such public eating places also
serve coffee, beverages and any kinds of drinks (Petterutto, 1979).
A restaurant is also an establishment that serves prepared food and beverages to be
consumed on the premises. The term covers multiplicity of venues and diversity of styles
of cuisine. Sometimes it is a feature of larger complex, typically a hotel, where the dining
amenities are provided for the convenience of the residents, and of course, for the hotel to
maximize their potential revenue. Such restaurants are often also open to non-residents
(Kinnear, 1986).
In the past, cooked food service industries make-up the largest segment of world
economy; Enjoying a phenomenal growth coupled with a great demand for trained
employees and it takes advantage to the local entrepreneurs an alarm to engaged in this
kind of business enterprises (Go Software, 2003).
Competitive Advantage of Restaurants in Baguio City / Jay B. Veloso. 2007
2
It is easy to set employees each doing his or her own thing in effect. Such a
situation can foster competition rather than cooperation. If any situation calls for
teamwork, it is the fast-paced dining room, which requires working in harmony, goodwill
and trust. It is much easier and faster for two service people to serve a party of six than it
is for one. Normally a server cannot carry more than four plates, and it is necessary to
make it a short trip so that the two other plates will not get cold. Some restaurants operate
with servers working as a team so that at least customers will not get bored waiting for
the order. The team system has one major advantage; hot food is served hot, very quick
service is good accommodation (Machado, 1996).
Restaurants literature and educational programs uniformly urge service personnel
to promote and sell as part of the service job. The rational is that sales will increase, and
if the sales job is done correctly, customers will have a better dining experience. Another
factors for having sales increase demands a particular approach; “Will you have an after
dinner?” “Will you have cocktail?” “Will you have dessert?” people may feel assured and
sometimes say so, especially if the servers approach is very soft (Kotler,1999).
Competitive advantage is a company’s ability to perform in one or more ways that
competitors cannot match. One sustainable competitive advantage, those that deliver high
customer value satisfaction, which leads to high repeat purchases and therefore high
company profitability (Kotler, 1999).
Basically it also means by offering consumers lower prices than competitors for
similar products or by providing more benefits that justify higher prices. Thus, the
company must do a better job than the competitors of keeping cost and prices down, or
Competitive Advantage of Restaurants in Baguio City / Jay B. Veloso. 2007
3
of developing better products. The company must compare its prices and products to
those of competitors and look for possible improvements. To the extent that it can do
better than its competitors, it has achieved competitive advantage (Kotler, 1999).
Statement of the Problem
The study deal mainly on the different aspect of competition in order to determine
the competitive advantage of restaurants in Baguio City. More specifically, this study was
conducted to find answers to the following questions:
1. What are the characteristics and kinds of restaurants in Baguio City?
2. What are the current profile, status, and purpose o deciding to engage in
restaurant business?
3. Who are their potential competitors?
4. What are their advantages, competencies and capacities as compare to other
competitors?
5. What are their problems regarding the competition and their solutions?
6. What are their plans to improve their strategies, management and advertising?
Objectives of the Study
The study aimed to:
1. Know the characteristics and kinds of restaurants.
2. To identify problems and solution encountered by the restaurants.
3. To determine advantages of high competition in restaurants at Baguio City.
4. To identify action plan to increase productivity and standard.
Competitive Advantage of Restaurants in Baguio City / Jay B. Veloso. 2007
4
Importance of the Study
The study will be a tool for comprehensive reference and contributes information
or knowledge regarding the competitive advantage in selected restaurants in Baguio City.
The volume of restaurants in Baguio City now is high, thus results of this study
will be beneficial information in order for them to gain new ideas on how to compete and
take advantage to be ahead and help them encourage to continue operate their business
efficiently.
Finally, this study could be the opening line or material for aspiring entrepreneurs
and students to get involved in the said enterprises.
Scope and Delimitation
This study is limited only on the profile of the restaurants towards the competitive
advantage in their enterprises.
The respondents of the study were the managers, owners of the different
restaurants in Baguio City.
Competitive Advantage of Restaurants in Baguio City / Jay B. Veloso. 2007
REVIEW OF LITERATURE
Competitive Advantage
Competitive advantage is defined as to carry out processes; a company needs
resources such as manpower, materials, machines and information. These resources can
be owned leased or rented. Traditionally, company’s sought to own and control most of
these resources that entered their business (Kotler, 1999).
In any industry, businesses create a competitive advantage through price or the
market. A price or cost advantage is tied directly to production costs, efficiency, or
available technology. A competitive advantage in the market requires you to develop
market differentiation—the aspect of your business that sets you apart from the
competitors in your industry. Companies that build and sustain a distinct market
differentiator generally have unique attributes (Kauffman, 2006).
Competitive Advantage Using Market Differentiators
Kauffman (2006), said that each of these companies has grown by using some
kind of market differentiator, such as the following:
• Unique way to meet the needs of a niche market
• Brand recognition in the market
• Proprietary or trade secrets for operations
• Customized or proprietary software or technology
• Patents and trademarks
• Unique combination of products/services
Competitive Advantage of Restaurants in Baguio City / Jay B. Veloso. 2007
6
• Access to leading or scientific research
• Highly skilled and creative staff
• Reputation for quality and innovation
Companies with a price, or cost, advantage over competitors usually have internal
strengths that are difficult for other competitors to replicate, including:
• Investments in production and equipment
• Expertise in designing products/services efficiently
• Access to less expensive materials
• Operational processes replicated consistently
• Outsourcing partnerships
• Efficient distribution channels
• Effective hiring practices, low turnover, and highly skilled/knowledgeable staff
• Efficient production or operational systems
• Innovative equipment or technology
• Strategic alliances that support delivery to customers
Six Differentiators that Build a Competitive Advantage
Kauffman (2006), identified six differentiators that build competitive advantage.
A true competitive advantage is one that is difficult for other competitors to copy and one
that customers find valuable. Ultimately, your competitive advantage is why customers
choose to do business with your company over anyone else. If customers don’t value
your differentiator, then you don’t have a competitive advantage. Here are six ways your
company can differentiate itself from the rest:
Competitive Advantage of Restaurants in Baguio City / Jay B. Veloso. 2007
7
Core competencies. The core competencies can be used to develop an edge over
the competition by providing products or services that customers value over products or
services your competitors offer. Core competencies are the strengths that allow you to
meet the needs of your customers. Keep in mind: your core competencies may change
over time, depending on the demands of the marketplace and the dominant position you
want to have over competitors.
Reputation for superior products/services. Provide the best products or services in
the industry or market. Your focus on quality will give you a reputation for expertise in
specific areas. For example, Nordstrom focuses on offering customers the best possible
service, selection, quality, and value. Nordstrom sets the standard for department store
customer service and a guaranteed, money-back commitment to meet customers’
expectations.
Niche market. Offer products or services to meet the specific demands of the
target market(s). A niche market is a distinctive group of customers within a larger
market or a smaller segment of a product line. For example, Tom’s of Maine®, by
positioning its toothpaste as a natural product, created a new category in the toothpaste
market. Since no other toothpaste filled this need, the company was able to charge a
premium price that consumers who buy organic or all natural products will gladly pay.
Unique distribution channels or delivery methods. Use a selling method that is
unique to the industry or difficult for competitors to use effectively. Provide multiple
products or services to the same or similar markets through an effective distribution
channel.
Competitive Advantage of Restaurants in Baguio City / Jay B. Veloso. 2007
8
Organizational efficiency. Look for less expensive materials and more efficient
equipment. Streamline your processes and find ways to make products or deliver services
more efficiently. Outsource to efficient and highly skilled suppliers. Hire staff with
expertise that can improve operations and efficiency levels.
Unique technology and innovative products or services. Use unique, innovative,
and leading technology to market, sell, and serve target markets. Consider using the
Internet to offer products or services to local, regional, national, or global customers.
Invest in technology to manufacture products, manage operations, or track customer
information.
Strategy is integrated action in pursuit of competitive advantage. Successful
strategy requires an understanding of the unique value that will be the source of the
firm’s competitive advantage. Firms ultimately succeed because of their ability to carry
out specific activities or groups of activities better than their competitors. These activities
enable the firm to achieving and sustaining competitive advantage. This unique value
must be something that competitors cannot match (Keegan, 2002).
Differences
in
management
styles, organizational skills, and strategic perspectives
create advantages and dis advantages for firms competing in different types of industries,
as do differences in the intensity of domestic rivalry. Domestic rivalry keeps an industry
dynamic and creates continual pressure to improve and innovate. Local rivalry forces
firms to develop new products improve existing ones, lower costs and prices, develop
new technologies, and improve quality and service (Keegan, 2002).
Kotler (1999), says that competitive advantage is a vis-à-vis relevant competition,
which is more attractive to customers. The advantage can exist in any element of the
Competitive Advantage of Restaurants in Baguio City / Jay B. Veloso. 2007
9
company’s offer; the product, the service, price, advertising and point of sale promotion,
or the distribution of the product. One of the most powerful strategies for penetrating a
new national market is to offer a superior product at a lower price. The price advantage
will get immediate customer attention, and, for those who purchase the product, the
product superior quality will make an impression.
Most business operate in a competitive environment which is expanding into the
global arena, and in order to get that sale they must satisfy customer needs better than
their competitors. This is called building competitive advantage. You will also find
terminology-differential advantage, competitive edge or USP-unique selling proposition.
In other words what a need of breakthrough opportunities-opportunities that help develop
hard to copy marketing strategies that will be very profitable for a long time. To be
innovative, always bear in mind that the success will greatly depend on the value and
need satisfaction offered in the target market (Schwerdtfeger, 2001).
Porter (2004), stated that a firm possesses a Sustainable Competitive Advantage
(SCA) when it has value-creating processes and positions that cannot be duplicated or
imitated by other firms that lead to the production of above normal rents. An SCA is
different from a competitive advantage (CA) in that it provides a long-term advantage
that is not easily replicated. However, these above-normal rents can attract new entrants
who drive down economic rents. A CA is a position a firm attains that lead to above-
normal rents or a superior financial performance. The processes and positions that
engender such a position are not necessarily non-duplicable or inimitable.
Competitive Advantage of Restaurants in Baguio City / Jay B. Veloso. 2007
10
Building Sustainable Competitive Advantage
Porter (2004), said that there are basically six types of assets that help build an
SCA. These categories are exhaustive and include all of the company's SCAs:
Organization and managerial process. Coordination and integration: Coordination
among teams in organization is key to organizational success. Interdepartmental
coordination and resource sharing to reach a common goal is fundamental to creating
"value". Integrating resources is key to the success of firms. Firms that are able to
integrate resources see synergistic effects of resources coming together.
Learning. Organizational learning is a key to the success of a firm. It determines
how a firm collects, distributes, interprets and responds to market based information
collection and changes in the environment. These changes in the environment could be
customer based changes, technological developments, legal and government restrictions.
Firms have to develop robust market sensing and spanning capabilities to effectively
collect information. Once they collect info they have embed this knowledge in the
products they produce.
Reconfiguring and transformation. The environment for firms is constantly
changing and constant reconfiguring and transformation is the key to form SCA. A
double loop learning and transformation is the best way to produce innovative products.
Innovative capacity of a firm determines how it reacts and learns from market
information.
Positions. Market positions are the assets of a company. Most of them are
technological assets, financial assets, reputation assets and structural assets. The structure
Competitive Advantage of Restaurants in Baguio City / Jay B. Veloso. 2007
11
of a company can determine how it performs. The hierarchy of a company can influence
its culture, procedure and routines.
Paths. Path dependencies: At the birth of a company usually accompanied with
certain orientations. The progenitor brings certain orientations and attributes that stay
with the company for a long time. The path the company takes then determines the
development of its competencies.
Technological opportunities. Technology development at a time can determine
how a firm can exploit opportunities to form SCA. Very often, we see the advent of
several technological factors converging into a capability that forms a SCA. An example
would be the rise of companies such as Genentech at the turn of the previous century with
the advent of gene mapping, significant developments in target selection and databases of
previous studies and gene pools.
Competitive Advantage of Restaurants in Baguio City / Jay B. Veloso. 2007
METHODOLOGY
Locale and Time of the Study
The research study was conducted during the period of October 2006 to
December 2006 in Baguio City where most restaurants are found.
Respondents of the Study
The respondents of the study were the managers, owners and supervisors of the
restaurants. The restaurants were classified according to their kinds and characteristics. A
sample of 35 establishments was chosen at random.
Data Collection
A structured survey questionnaire was used as a tool in gathering data. This was
given personally to the respondents by the researcher. Actual interview was done to
satisfy and validate some necessary questions. Personal observation was also done and
key informants were interviewed for additional information regarding the topic.
Data Gathered
The data gathered focuses on the profile of restaurant towards competitive
advantage. This includes the current status of the restaurants such as different strategies,
marketing strategies, problems on their operation, identified solutions and their planned
actions. Other data gathered were the pricing strategies, impact of SM City to outside
restaurants and factors in identifying competitors.
Competitive Advantage of Restaurants in Baguio City / Jay B. Veloso. 2007
RESULTS AND DISCUSSION
Profile and Classification of the Respondents
Table 1 presents the classification and profile of the respondents. This was
represented according to kinds of restaurants, their qualities and requirements, items
available inside or outside their business and their special services. Result show (28.57%)
of the respondents said that they are family restaurants followed by 20% which are fast-
food and only 2.86% for Japanese restaurants which is the lowest among the 35
respondents. The rest comprises to Ethnic restaurant (11.43%), 8.57% for Chinese
restaurant, while 5.71% for Fine dining, Café /bakery and Mongolian restaurant.
Quality. As shown in table 1, the respondents were asked to check the basic
requirements in operating or opening a restaurant business. Majority of them posses those
necessities and items as needed in the operation such as technologies, utilities, sanitation
and a lot more. Although some requirements are not necessary for their operation, this
was still the guide for approval of Department of Trade and Industry and business
licensing from the government unit.
Items available inside the restaurant. The table also shows the different
technologies or machines found with in and alone the premises of the restaurant. This
implies that they are completing the basic requirements in operating a restaurant. As
found in the Rules and regulations to govern the Business operation of all restaurants in
the Philippines under the Department of Tourism. This also serves as a guide in
identifying the class or levels of restaurants.
Competitive Advantage of Restaurants in Baguio City / Jay B. Veloso. 2007
14
Status of restaurant business. The table shows most (74.29%) of the respondents
are now risky while (68.57%) profitable, meaning, they have a wiser and good
operation.54.29% claimed that they are still competitive and 42.86% are now declining.
The result indicates that most of the respondents are operating with the same level
of environment but still the customers are looking for their own preference of food or
services. In addition, some restaurants lack proper management due to improper job
placement of staffs.
Table 1. Profile of the restaurants
CHARACTERISTICS
FREQUENCY
PERCENTAGE
Kind of Restaurant
Fast-food
7 20.00
Chinese
restaurant
3
8.57
Public
house
restaurant 0
0.00
Family restaurant
10
28.57
Café
and
Bakery
restaurant
2
5.71
Ethnic
restaurant
4 11.43
Fine
dining
2
5.71
Japanese
restaurant
1
2.86
Mongolian
restaurant
2
5.71
Italian
restaurant
4 11.43
TOTAL
35
99.99
Competitive Advantage of Restaurants in Baguio City / Jay B. Veloso. 2007
15
Table 1. Continued…
CHARACTERISTICS PERCENTAGE FREQUENCY
Services Offered/Utilities available
Parking
availability
12
34.29
Clean
comfort
rooms
22
62.86
Lounge/lobby
14
40.00
Furnishing
and
lighting 21
60.00
Entertainment/sound
system
18
51.43
Carpeting
15
42.86
Pantry/cold
storage
20
57.14
Back
sink
35
100.0
Quality
service
staff
30
85.71
Foreign
exchange
counter
8
22.86
Security
personnel
25
71.43
Adequate
location
19
54.29
Strict
maintenance
33
94.29
Good
air
conditioning
18
51.43
Reception
area
8
22.86
Elevator
3
8.57
Telephone
35
100.0
Menu
book
35
100.0
Linen/table
cloth
17
48.57
Crockery/glass
wares
26
74.29
Competitive Advantage of Restaurants in Baguio City / Jay B. Veloso. 2007
16
Table 1. Continued…
CHARACTERISTICS PERCENTAGE FREQUENCY
Cuisine 14
40.00
Separate
bar
16
45.71
Housekeeping
13
37.14
Good
atmosphere
25
71.43
Emergency
power
33
94.29
Fire
fighting
facilities
28
80.00
Status of Restaurant Business
Risky
26
74.29
Profitable
24
68.57
Competitive
19
54.29
Declining
15
42.86
*Multiple response
Mode of Services the Restaurant Offers
As shown in table 2, the restaurant offers different aspect of customer service,
91.43% are offering delivery service upon order of the food with the restriction of
waiting because it will still be cooked. 82.86 % offers full service, and 25.71% for self
service. As observed from the research, most self-service restaurants are fast-food
centers.
Competitive Advantage of Restaurants in Baguio City / Jay B. Veloso. 2007
17
Table 2. Mode of services the restaurant offers
CHARACTERISTICS PERCENTAGE FREQUENCY
Mode of Services
Self
service
9
25.71
Delivery
service
32
91.43
Full
service
29
82.86
*Multiple response
Respondents Advantages from Other Restaurants
Table further shows that 88.57% of the respondents have unique strategy as their
advantage to other restaurants, followed by the efficient trained staff (85.71%) f the
trained staff, for quality service 77.14%, and product differentiation (68.57%). Among
the other advantages, these four are the topmost reason for being ahead in the
competition. Some of other reasons are fast service, low price and established research
analysis.
In other aspect, the three reasons as the lowest also give emphasis on effective
operation, even though majority of the respondents do not use this as their basis for
success. It still helps develop more customers’ attention.
Accessibility and availability to target customers. In this table, it shows that the
respondent’s rate good ambiance and spacious dining 77.14% because it is where
customers are usually relax. (71.43) is given to romantic and intimidating. Most
customers in this area are partners, couples, lovers. They enjoy most if the environment is
conjoint to their situation, and followed by 34.29% for spacious parking area. The
Competitive Advantage of Restaurants in Baguio City / Jay B. Veloso. 2007
18
customer is also looking for availability of parking area; this is the most problem of other
respondents because some customers roll back if parking area is not available. This
problem has something to effect in the sales.
Table 3. Respondents’ advantages from other restaurants
PARTICULARS
FREQUENCY PERCENTAGE
Advantages to other competitors
Product
differentiation 24
68.57
Low
prices
of
food
9
25.71
Established
research
analysis
8
22.86
Unique
strategy 31
88.57
Trained
staff
30
85.71
Quality
service 27
77.14
Fast
service
15
42.86
Accessibility and Availability to Target Customers
Good ambience and spacious
dining
27
77.14
Romantic
and
intimidating
25
71.43
Spacious
parking
area
12
34.29
*Multiple response
Competitive Advantage of Restaurants in Baguio City / Jay B. Veloso. 2007
19
Ways Considered in Identifying Competitors
Table 4 shows the things considered in identifying competitors. This was obtained
by knowing the competitor’s objective plan, their strategies, competitor’s capability,
present status, services offered, and prices of food commodities. Basically some of the
respondents admit that they are personally observing and assigning staffs to determine
competitors operation. Out of the 35 respondents, 91.43% identified for competitor’s
capabilities were usually considered in identifying other restaurants. This was followed
by competitors present status (85.71%), services offered (82.86%), prices of food
commodities (71.43%), objective plan (62.86%) and identifying strategies (60%).
Table 4. Ways considered in identifying competitors
PARTICULARS
FREQUENCY PERCENTAGE
Ways Considered in Identifying
Competitors
Competitors
objective
plan
22
62.86
Strategies
21
60.00
Competitors
capability 32
91.43
Competitors
present
status
30
85.71
Services
offered
29
82.86
Prices
of
food
commodities
25
71.43
*Multiple response
Competitive Advantage of Restaurants in Baguio City / Jay B. Veloso. 2007
20
Status of Competitors
Table 5 shows the result of knowing the status of the competitors after identifying
the competitors. In this area, it was considered that majority of the restaurants were also
offering the same food variety (97.14%), followed by (91.14%) affected by geographical
changes. Some other status of competitors that will create bankruptcy is financial stability
(62.86%). Likewise large marketing and advertising was declared 54.26% while longer
histories of operation (51.43%).
Table 5. Status of competitors
PARTICULARS
FREQUENCY PERCENTAGE
Financial
stability
22
62.86
Large
marketing
and
advertising
19
54.26
Longer
histories
of
operation
18
51.43
Same
food
services
34
97.14
Also affected by geographical
changes 32
91.43
Offer
lower
prices
8
22.86
*Multiple response
Action Plan of the Respondents
after Identifying Competitors
Table 6 shows the action plan after the respondents have identified the profiles of
their competitors. Most (79.29%) from the respondents said that they need to focus on the
planning of future commodity prices, closely followed by awareness on food safety
Competitive Advantage of Restaurants in Baguio City / Jay B. Veloso. 2007
21
(71.43%). This implies that majority of the restaurant owners are very strict on sanitation.
More than half of the respondents (57.14%) also revealed in anticipation of company
cost, which means cost cutting should be applied in all kinds of expenditures. On the
other hand, 40% replied that making projections on environmental changes and generate
marketing conditions. However, 48.57% said that responding immediately on customers
demand will also help in building up good rapport to the customers.
Table 6. Action plan of the respondents after identifying competitors
PARTICULARS
FREQUENCY PERCENTAGE
Generate
marketing
conditions 14
40.00
Planning
of
future
commodity
prices
26
74.29
Awareness
of
food
safety
25
71.43
Anticipation
of
company
cost
20
57.14
Making projections on environmental
changes
14
40.00
Responding immediately on
customer
demand
17
48.57
*Multiple response
Strategies Implemented by Respondents
after Identifying Competitors
Table 7 present the strategies implemented by the respondents after identifying
competitor’s advantages. Majority (82.86%) of the respondents said that human resource
efficiency and capacity is the most effective strategy in order to stay in the competition or
Competitive Advantage of Restaurants in Baguio City / Jay B. Veloso. 2007
22
even ahead. This is more effective to influence proper duties and responsibilities of every
staff that has a task.
According to Keegan (2002), firms ultimately succeed because of their ability to
carry out specific activities better than their competitor’s do, this enable the firm to create
unique value for their customers.
On the other hand, 74.29% said that technology adoption is a wiser strategy in
order to have quality products or food and be able to meet the standard of customers.
65.71% replied that appropriate organizational chart will develop proper order or detailed
working. However, 62.86% said that they need to improve their management while
54.29% need to access on reliable information system.
The table emphasized that majority of the respondents have a greater plans in
implementing their own strategy.
Table 7. Strategies implemented by respondents after identifying competitors
PARTICULARS
FREQUENCY PERCENTAGE
Appropriate
organizational
chart
23
65.71
Technology
adoption
26
74.29
Human
resource
affectivity
29
82.86
Information
system
access
19
54.29
Improved
management 22
62.86
*Multiple response
Competitive Advantage of Restaurants in Baguio City / Jay B. Veloso. 2007
23
Factors to Consider in Human
Resource Management
Table 8 represents the emphasis on human resource management. 74.29% from
the respondents claimed that there should be strict and proper training on all stations.
2.86% on update tracking of performance followed by 45.71% immediate relay of needed
information. However some respondents include 42.86% on proper job placement.
Table 8. Factors to consider in human resource management
PARTICULARS
FREQUENCY PERCENTAGE
Proper
training
on
all
stations
26
74.29
Immediate relay of needed information
16
45.71
Update
tracking
of
performance
22
62.86
Proper
job
placement
15
42.86
*Multiple response
Pricing Method Adopted by Respondents
One of the most powerful strategies for penetrating a new national market is to
offer a superior product at a lower price. The price advantage will get immediate
customer attention, and for those who purchase the product, the superior quality will
make an impression (Kotler, 1999).
Table 9 presents the different pricing method. In this method of pricing, majority
of the respondents uses 2 or more pricing strategies to avail the exact price for their
products. 85.57% usually use cost-based method. This method was taken from cost plus
method, return on investment pricing, and experience curve pricing. This was followed
Competitive Advantage of Restaurants in Baguio City / Jay B. Veloso. 2007
24
by integrative pricing (68.57%), under this method; marginal approach is commonly used
as to competitive bidding approach and multi-stage pricing. However, 62.86% claimed
that they are using demand based, in this method it covers value pricing which demands
on the value of the product, prestige pricing wherein it was denote from ranking the
products, odd-even pricing, price lining and leader pricing.
Furthermore, 48.57% replied that competition based is one-way method to have
common price of products. This method was based on market share prices, price
leadership and customary pricing.
Table 9. Pricing method adopted by respondents
METHOD
FREQUENCY PERCENTAGE
Demand
based
22
62.86
Cost
based
31
88.57
Competition
based
17
48.57
Integrative
based
24
68.57
*Multiple response
Purpose in Engaging Restaurant Business
Table 10 shows the purpose of the respondents in engaging restaurant business.
All of the respondents said for family income and source of livelihood, followed by
82.86% to create employment, and 57.14% as application of educational skills. Among
other reasons are less priority of the respondents; 28.57% to join the competition, 5.71%
is just for past time.
Competitive Advantage of Restaurants in Baguio City / Jay B. Veloso. 2007
25
Table 10. Purpose in engaging restaurant business
PURPOSE
FREQUENCY PERCENTAGE
For
past
time
2
5.71
Application
of
educational
skills
20
57.14
Family
income 35
100.0
To
create
employment
29
82.86
To
compete
10
28.57
*Multiple response
Technology Adoption
Table 11 shows that among the 35 respondents, 80% said that adapting or
upgrading new technologies is necessary to their business, while 20% revealed that they
are already contented with their old machines because buying another set of technologies
will cost them so much.
Technology is expected to contribute to greater effectiveness in generating
revenues, whether achieving same location revenue growth, increasing customers count
as well as increasing size of average sales. It also plays a vital role in differentiating the
service and product offering (Kotler, 1999).
Competitive Advantage of Restaurants in Baguio City / Jay B. Veloso. 2007
26
Table 11. Technology adoption
PARTICULARS
FREQUENCY PERCENTAGE
Adopt
technology
28
80.00
Do not adopt technology
7
20.00
TOTAL 35
100.0
Impact of Fast-Food Centers and Solutions to
Counteract Impact at SM City Baguio to
Outside Restaurants
Impact. Table 11 shows that fast-food centers In SM City Baguio greatly affect
the operation of restaurants outside SM. More than half (54.29%) said that they lost their
regular customers and their income had reduced, while 48.57% reveals that they have
already minimal customers.
Solutions to counteract impact. The table shows that after being affected with the
opening of SM City Baguio, the restaurants have implemented solutions or action for
continuous operation; 71.43% said that they need to have cost cutting or control to avoid
expenditures that are unnecessary, 68.57% from the respondents claimed that they need
to expand their advertisements like advertising in adz, media, brochures, billboards etc,
62.86% replied that they would improve the quality of their products and services,
54.28% also said that they need to orient more their staff to improve their customer
service approach and 42.86% revealed that they reduced price of food served.
Competitive Advantage of Restaurants in Baguio City / Jay B. Veloso. 2007
27
According to Machado (1996), gaining advantage is a company’s liability to
define because it has something to do improve their quality. Looking for solutions can
foster competition rather than cooperation.
Table 12. Impact of fast-food centers to other restaurants outside SM City Baguio
PARTICULARS
FREQUENCY PERCENTAGE
Impact of Fast-Food Centers
in SM City Baguio
Less
customers 17
48.57
Less
income
19
54.29
Loss
of
regular
customer
19
54.29
The restaurant needs more
improvement
16
45.71
Solutions to Counteract Impact
Improving
goods
and
services 22
62.86
Lower
prices
of
products
15
42.86
Delegating staff to improve
qualities 19
54.28
Cost
control
25
71.43
Anticipate
customers
needs
18
51.43
*Multiple response
Business Promotion Strategies
Table 13 presents the impression of respondents towards business promotion,
97.14% declared that they are always promoting, and it is one major form of their
Competitive Advantage of Restaurants in Baguio City / Jay B. Veloso. 2007
28
competencies and expenses, while 2.86% said that they lack funds for promotion because
they are on the stage of declining.
Machado (1996), further said that business promotion is also called marketing
communication. Various activities are undertaken to communicate its products benefit to
persuade the target customers to buy them. In order to differentiate promotion – be
innovative in communication with customers and ensure your advertising is unique and
different from competitors.
Table 13. Business promotion strategies of respondents
PARTICULARS
FREQUENCY PERCENTAGE
Promote Business?
Yes
34
97.14
No
1
2.86
TOTAL 35
100.0
Strategies in Promoting
Business Restaurants
Advertising (adz, media, bill-
Boards,
coupons)
32
91.43
Sponsorship
17
48.17
Reasons of not promoting
Business
Lack
of
budget
1
2.86
Not
necessary
1
2.86
Competitive Advantage of Restaurants in Baguio City / Jay B. Veloso. 2007
29
Actions in promoting business restaurants. The table shows strategies taken to
promote their restaurants. Majority (91.43%) said that they are advertising in adz, media,
billboards and flyers. 48.17% also said that they are sponsoring any kinds of parties like
wedding, birthdays, children’s day or any other kind of occasion.
Reasons for not promoting business. Table show that 2.86% are the reasons for
not promoting their restaurant because they lack budget, and it is not necessary.
Competitive Advantage on Price
Price flexibility. Table 13 presents the competitive advantage of restaurants on
price. Among the respondents who experience this kind of situation, 100% declared that
they are offering senior citizen discounts only if the customers present a valid I.D,
31.43% said that they are giving discounts to their regular customers, some (22.86)
replied that they are giving discounts every time there is a holiday like Christmas season
while 20% said that they have always lesser price as compared to other restaurants, and
45.71% declared that they are increasing their prices due to increase of materials used.
Causes of price inflation. Table presents the causes of price inflation. All of the
respondents said that salary increase is the major cause of increasing the prices of their
product, followed by 65.71% increase in materials needed and as the second topmost
cause. Furthermore, 60% declared that rentals and utilities expense is also one factor.
Competitive Advantage of Restaurants in Baguio City / Jay B. Veloso. 2007
30
Table 14. Competitive advantage on price
PARTICULARS
FREQUENCY PERCENTAGE
Offering
senior
citizen
discounts
35
100.0
Seasonal
price
discounts
8
22.86
Discounts
to
regular
customers 11
31.43
Price
flexibility 16
45.71
Lesser
price
7
20.00
Causes of Price Inflation
Salary
increase 35
100.0
Land and construction cost
9
25.71
Rentals
and
utilities
expense
21
60.00
*Multiple response
Special Qualities /Uniqueness
of the Restaurants by Respondents
Table 15 presents the qualities or unique specialties of the respondents. 80% as
the topmost was declared because of fast and clean service. Majority of the respondents
said that cleanliness in their premises is a big factor to have regular customers. 71.43%
said that their unique qualities was satisfaction of the customers from food, service etc.
However, 31.43% declared that they have their own specialty food as one reason for
having regular customers.
Competitive Advantage of Restaurants in Baguio City / Jay B. Veloso. 2007
31
Table 15. Special qualities/uniqueness of the restaurants by respondents
CHARACTERISTICS FREQUENCY PERCENTAGE
Focus
on
one
specialty 11
31.43
Fast
and
clean
service
28
80.00
Satisfying
service
25
71.43
*Multiple response
Factors Considered to Stay in
the Competition
As presented in Table 16, result shows the factors considered by restaurants
management in-order to stay in the competition. All of the respondents said that they are
avoiding bad image because it will destroy their reputation, 71.14% said that proper
assessment of complaint will yield them to stay in the competition because the customers
were secured to any kind of misunderstandings. Some (54.29%) said that strict and
disciplined management creates a well-mannered staff, and 45.71% said that consistent
quality of product and service should be maintained.
Table 16. Factors considered to stay in the competition
CHARACTERISTICS FREQUENCY PERCENTAGE
Strict
and
disciplined
management
19
54.29
Avoiding
bad
image
35
100.0
Proper
assessment
of
complaint
25
71.14
Consistent
quality
16
45.71
*Multiple response
Competitive Advantage of Restaurants in Baguio City / Jay B. Veloso. 2007
32
Aspect in Focusing Competitive
Advantage
Table 17 presents the different aspect of the respondents in focusing their
competitive advantage. Among the respondents who have high risk of competition,
62.86% reveal that they are concentrating in industry specialization compared to 37.14%
who said that they focus on unique product or service; in aspect they declared some
thoughts that it is still the better way as part of competition to determine customer’s
preference. However, 25.71% also said that geographical location is an advantage
because it is easy accessible and compatible to any kind of customers.
Table 17. Aspect in focusing competitive advantage
CHARACTERISTICS FREQUENCY PERCENTAGE
Unique
product
or
service
13
37.14
Geographical
location
9
25.71
Industry
specialization 22
62.86
*Multiple response
Factors Considered in Industry
Specialization as Form of Competition
Table 18 presents the factors that restaurant owners/respondents considered as
form of industry specialization. Majority (91.43%) revealed that they are focusing on
customer’s preference. The respondents focused on customer’s preference because they
are aiming to have regular customers. Most (80.00%) declared that they are observing
who the potential customers are, this has something to affect the level and kind of their
restaurant. On the other hand, 28.57 said that they are trying to identify the different
Competitive Advantage of Restaurants in Baguio City / Jay B. Veloso. 2007
33
knowledge, ethnic, culture of customers as a basis in determining the approach to be
employed.
This emphasized that majority of the respondents are looking forward to improve
their industry and specializing in different factors will help them determine the proper
approach, strategy in caring and winning customers.
Table 18. Factors considered in industry specialization as form of competition
FACTORS
FREQUENCY PERCENTAGE
Factors of Industry Specialization
Observing who are the
potential
customers
28
80.00
Customers
preference
32
91.43
Customers
education
10
28.57
*Multiple response
Factors that Affect the Performance of the Restaurants
Table 19 shows the possibilities affecting the performance of their business.
Among the 35 respondents, all declared that it is because of traffic patterns or volume of
competitors, followed by 82.86% marketing conditions where majority of their
competitors are very aggressive in marketing studies and implementations. On the other
hand, 57.14% said that they are being affected by political conditions, and 34.29% said
that they cannot manage to get new technologies necessary to their business.
Competitive Advantage of Restaurants in Baguio City / Jay B. Veloso. 2007
34
Table 19. Factors that affect the performance of the restaurant
FACTORS
FREQUENCY PERCENTAGE
Technology
problems
12
34.29
Traffic patterns or volume
of
competitors
35
100.0
Political
condition
20
57.14
Marketing
conditions
29
82.86
*Multiple response
Competitive Advantage of Restaurants in Baguio City / Jay B. Veloso. 2007
SUMMARY, CONCLUSIONS AND RECOMMENDATIONS
Summary
The study was conducted to identify the competitive advantages of restaurants in
Baguio City. It aims to determine the characteristics and kinds of the different restaurants
operating in the city, to identify their problems regarding the competition and the action
plans or solutions.
A total of 35 respondents were chosen within the city with different aspect of
operations. Structured questionnaire was used as a tool in gathering data. The
supervisors, managers and owners were the respondents of the study. A personal
interview is done to some respondents who preferred an actual interview and personal
observations around the premises and key informants were also interviewed for
additional information regarding the topic. The data gathered were examined and
analyzed using descriptive method like frequency and percentage.
Most of the restaurants in Baguio City belong to the economy class, and most of
them are offering full service.
The main reasons of the respondents to engage in restaurant business are for
family income and as a source of livelihood, to create employment, and application of
educational skills.
All the respondents believed that they have unique strategy as an advantage to
other restaurants. Most of these strategies are differentiation focus and cost management,
well trained staff, technological assets, financial assets and structural assets, low prices of
products and quality service.
Competitive Advantage of Restaurants in Baguio City / Jay B. Veloso. 2007
36
Although some respondents focus on customers satisfaction as an advantage. In
this aspect some restaurants offer extra services like, good ambience and spacious dining,
romantic and intimidating environment, spacious parking area and presence of bar lounge
with acoustic bands. Out of the strategies identified, unique product, industry
specialization, and geographical location that competitors cannot replicate
Most of the respondents are doing actions to identify their competitors specially
their competencies. In identifying, they focus on the strategies, status, plans and
capacities of their competitors.
For the general problems encountered by the respondents, most say the traffic
patterns or volume of competing restaurants, technology problems, marketing and
political condition. Other problems identified were minor because immediate solutions
were acted to avoid its emphasis on the operation.
Some of the restaurants operating outside the premises of SM City Baguio
declared that they are very much affected. Majority of the problem they encounter are
loss of regular customers, their sales decreased and some restaurants are declining.
However, they immediately implement solutions for continues operation; improving their
goods and services, proper management of pricing, asses their staff to improve their
qualities, also cost control and generate their advertising aspect. However, some
respondents also said that it is an opportunity for them to expand their business because
they open branches at SM City Baguio.
For business promotion strategies, majority of the respondents said that they are
advertising in adz, media, billboards, distribute coupons or flyers, sponsorship and mouth
Competitive Advantage of Restaurants in Baguio City / Jay B. Veloso. 2007
37
dispersal. In this aspect, majority of the respondents claimed that it is costly and time
consuming, however, it helps a lot to gain customers.
Majority of the respondents have their own orientation in pricing their products as
to demand based, cost based, competition based and integrative based. In some areas,
price is one of their major competitive advantages to other restaurants because they said
that customers are now looking for cheaper prices. To stay in the competition regarding
prices of commodities, they offer discounts to the senior citizens, to their regular
customers and also discounts during holidays. However, some of their complaints
regarding price inflations are increase in labor costs, government demand for salary
increase, cost of rentals, increase in government taxes and business permits.
For them to improve their marketing sector or competitive advantage. They need
to sustain or gain a lot of ideas so that they will be ahead or even competitive. They have
implemented a lot of factors such as strict and disciplined management, maintaining good
reputation, consistent quality, proper assessment of complaints, technology innovation,
cost control, proper order of supplies and resources, acceleration of advertising and
proper evaluation of the human resource management.
Conclusions
Based on the findings of the study, the following conclusions were made:
1. The respondents have different trade names or kinds but majority of them are
offering the same products although some have unique features in preparation
and few of them are focusing on one product.
Competitive Advantage of Restaurants in Baguio City / Jay B. Veloso. 2007
38
2. There are hundreds or more restaurants in Baguio City now that are
competing. As observed majority of them are in good operation due to
constant and very updated management. However, the competition is very
strict and some restaurant businesses are now declining. Most of their reasons
to engage in this kind of business are for family income and to create
employment.
3. The restaurant operators are competing with each other to be ahead and to
have sales. Monitoring their competitors is one factor to create an advantage.
4. Competitive advantages of the respondents are almost similar, but they are
still trying to differentiate in order to develop their competencies and
capacities.
5. Majority of their problems are technology assets, volumes of competitors,
marketing and political condition.
6. They plan to establish more strategies, cost cutting, and proper delegation of
the human resource management.
Recommendations
1. Although it was known that restaurants in Baguio City have an organization.
They need to cooperate in all the rules and regulations of their organization to
avoid conflicts and mis understandings.
2. Change their attitude of come what may because now a days, if there is no
action no possible result.
Competitive Advantage of Restaurants in Baguio City / Jay B. Veloso. 2007
39
3. Respondents should be aware of cleanliness or sanitation in their premises so
that the customers feel secured and be satisfied.
4. Continue research product development, or develop unique food products to
be differentiated from other restaurants.
5. It is further recommended that respondents need to be strict and disciplined
their staff to avoid complaints from the customer. In this case, you are
maintaining good reputation.
6. Marketing activities should be always updated in areas where it was done and
expansion is very much recommended.
7. It is recommended that further study in operations of restaurants should be
made with regards to knowing the requirements and be informed on the
government laws.
8. For those individual who want to venture into restaurant production, you must
first develop a strategic and concise plan, observed the different restaurants
and of course gain knowledge on how to have advantage.
9. Often, the only element of business that management can truly control, is its
technology. And as technology continues to change and improve, it is positive
for managers to embrace the currents trends that have proven ROI and provide
operational efficiency.
10. It is also recommended that do not start a price war if you decide to build
competitive advantage around price.
.
Competitive Advantage of Restaurants in Baguio City / Jay B. Veloso. 2007
LITERATURE CITED
ANONYMOUS, 1998. Promotional Strategy: Marketing Communication in Practice
Koekemoer, Juta Inc. Retrieved December 12, 2006 from
http://www.google.com.ph.
GO SOFTWARE. 2003. Speed A Competitive Advantage in Restaurant Services. An
ROI Co. Retrieved December 15, 2006 from http://www.google.com.ph.
KAUFMANN, E.M. 2006. Fast Tract Growth Venue. Setting Direction: Competitive
Advantage. Retrieved January 10, 2007 from http:www.yahoo.com.ph.
KEEGAN S.W. 2002.Global Marketing Management. 7th ed. Pearson Education
Inc.Upper Saddle River, New Jersey. Pp.149-152.
KINNEAR T.C et al. 1986. Principles of Marketing. 2nd ed. Bernhandth Scott, Foresman
and Company.
KOTLER P. 1999. Marketing Management. Prentice Hall Alexandra Road, Singapore.
Pp. 67-71.
MACHADO R. 1996. Marketing for a Small Business. Part of the Small Business
Management Series. Juta Inc. Retrieved November 27, 2006 from
http://www.google.com.ph.
PETTERUTO R. 1979. How to Open and Operate a Restaurant. Delmars Publishers,
Albany New York. Pp. 114-116.
PORTER, M. 2004. Sustainable Competitive Advantage. Retrieved January 08, 2007
from http://en.wikipedia.org/wiki/.
SCHWERDTFEGER, L. 2001. Marketing Back to Basics. Institute of Marketing
Management. Bi-monthly column. Retrieved November 20, 2006 from
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Competitive Advantage of Restaurants in Baguio City / Jay B. Veloso. 2007
41
APPENDICES
Appendix A
Letter to Respondents
College of Agriculture
DEPARTMENT OF AGRICULTURAL ECONOMICS
AND AGRIBUSINESS MANAGEMENT
Benguet State University
La Trinidad, Benguet
December 2006
Sir/Madam:
I am a graduating Agribusiness student of Benguet State University and in partial
fulfillment of the requirements for the degree; I am presently conducting an
undergraduate research study entitled “COMPETITIVE ADVANTAGE OF
RESTAURANTS IN BAGUIO CITY”.
In this regard, may I request a portion of your time to answer the attached
questionnaire to complete the research undertaking as a requirement for graduation. Rest
assured that the data will be used for academic purposes only and will be treated with
strict confidentiality.
Thank you very much and God bless.
Very respectfully yours,
(Sgd.) JAY B. VELOSO
Student researcher
Noted by:
(Sgd.) JOVITA M. SIM
Competitive Advantage of Restaurants in Baguio City / Jay B. Veloso. 2007
42
Appendix B
Survey Questionnaire
Direction:
Please respond to each item in the questionnaire by putting a check mark or
providing the information asked on the appropriate space provided for.
I. Profile
Name of Restaurant (Trade name) Optional:
____________________________________
Years of operation: ______________________
Address: ___________________________________________________
Name: _______________________________________
Position in the Business: __________________________
Kind of restaurant business (pls. check)
( ) Fast-food
( ) Chinese restaurant
( ) Public house restaurant
( ) Family restaurant
( ) Café and Bakery restaurant
( ) Ethnic restaurant
( ) All around restaurant
( ) Others, pls. specify ___________________________
Pls. check if the following items are available:
( ) What size ___higher than 25 seating capacity
( ) Adequate location
___25 seating capacity
( ) Strict maintenance
___lower than 25
( ) Good air-conditioning
( ) Parking availability
( ) Reception area
( ) Clean comfort rooms
( ) Elevator
( ) Lounge/lobby
( ) Telephone
( ) Furnishing and lighting
( ) Menu book
( ) Entertainment/sound system
( ) Linen/table cloth
( ) Carpeting
( ) Crockery/glass wares
( ) Kitchen ___pantry/cold storage
( ) Cuisine
___Back sink
( ) Bar
( ) Quality service staff
( ) Housekeeping
( ) Foreign exchange counter
( ) Good atmosphere
( ) Security
( ) Emergency power
( ) Special facilities and services
( ) Fire fighting facilities
___ Private dining room with audio-visual facilities
___ Smoking lounge
___ French service and flambi cooking
___ Car paging system
___ Customer paging system thru public address or pageboy
Competitive Advantage of Restaurants in Baguio City / Jay B. Veloso. 2007
43
___ Telephone jacks to bring telephone to customers
___ Separate bar lounge
___ Separate wine list and wine steward
___ Special food or beverage display
___ Toilet facilities
___ Others, pls. specify ___________________________________
II. Competitive Advantage
1. What mode of services your restaurants offer?
( ) Self service
( ) Full service
2. What are the pricing method you use in the different kinds of food and services
offered?
Demand based
Cost
based
( ) Value pricing
( ) Cost plus method
( ) Prestige pricing
( ) ROI pricing
( ) Odd-even pricing
( ) Experience curve pricing
( ) Price lining
( ) Leader pricing
Competition based
Integrative
based
( ) Price leadership
( ) Marginal approach pricing
( ) Customary pricing
( ) Multi stage approach pricing
( ) Market share pricing
( ) Competitive bidding pricing
3. What is your purpose in engaging in restaurant production?
( ) Just for past time
( ) Recreation of hobby or application of educational acquired
( ) For family income
( ) To create employment
( ) To join the competition among other restaurant
( ) Others, pls. specify ___________________________
4. How much capital you have invested at the start of the operation?
___________________________________________________________
5. At present, what is the status of your restaurant?
( ) Risky
( ) Profitable
( ) Competitive
( ) Declining
6. Do you adapt in the fast upgrade of technology?
( ) Yes
( ) No
Competitive Advantage of Restaurants in Baguio City / Jay B. Veloso. 2007
44
If yes, what are the machines?
( ) Point of sale computers
( ) Credit Card verification machine
( ) Back office computers
( ) Video surveillance equipment
( ) Inventory bar coding tracking
( ) Speakers monitoring equipment
( ) Sound system
( ) Advance equipments used in any stations
( ) Others, pls. specify __________________________________
If no, Why?
( ) No available funds for advance technologies
( ) Some machines not suitable for the operation
( ) Others, pls. specify ___________________________________
7. What are your advantages as compared to other restaurants?
( ) Product differentiation
( ) Lower the prices of food
( ) Already established research analysis towards the company
( ) Unique strategy
( ) Trained staff
( ) Quality service
( ) Others, pls. specify _________________________________
8. How do you implement product differentiation in your company?
( ) Changing ingredients of the food
( ) Changing packaging style to improve brand equity
( ) Additional benefits to the food ordered (side dish, toppings)
( ) Others, pls. specify ___________________________
9. In identifying your competitors, what are the important things you consider?
( ) Competitors objective and plan
( ) Strategies
( ) Competitors capability
( ) Competitors present status
( ) Services offered by other competitors
( ) Others, pls. specify ___________________________________
10. What is the status of your competitors?
( ) Established restaurants with branches and greater financial resources
( ) Large marketing and advertising budgets
( ) Longer histories of operation
( ) Offering the same variety of foods
Competitive Advantage of Restaurants in Baguio City / Jay B. Veloso. 2007
45
( ) Affected by changes in consumer tastes and by national, local economic
conditions, and demographic trends.
( ) Others, pls. specify ____________________________________
11. After knowing all the profiles of your competitors what was the plan identified to
go ahead of them?
( ) Generate marketing conditions, competition and pricing
( ) Forward-looking statements including future capital expenditures, business
strategies, strengths, goals and expansion.
( ) Planning of future commodity prices and complete availability of food
products
( ) Awareness of consumers perception on food safety
( ) Assessment of materials and employees.
( ) Proper anticipation of company cost
( ) Ability to make projection on changes in the environment
( ) Ability to respond on customers demand
( ) Others, pls. specify ____________________________________
12. In implementing your strategy, what are they that you have identified?
( ) Appropriate organizational structure
( ) Technology adoption
( ) Human resource affectivity
( ) Information system access
( ) Management style
( ) Others, pls. specify _____________________________________
13. How do you control strategic problems in case strategies are indistinguishable?
( ) Encourage efficient operations that are consistent with the plan while allowing
the flexibility to adapt changing conditions.
( ) Develop performance indicators, information system and specific mechanism
to monitor progress.
( ) Budgetary assistance to control financial expenditures
( ) Others, pls. specify ____________________________________
14. In actual cases, what is the impact of fast food centers at SM city to your
restaurants? (Optional to Non-SM operators)
( ) Less customers
( ) Less income
( ) Loss of regular customers
( ) The business found itself for more improvements
( ) Pls. specify some other aspect being affected __________________________
15. How did you come up to settle these problems? (Optional to Non-SM operators)
( ) Improving goods and services to the customers (extra benefits)
( ) Lower prices of products
( ) Delegating staff to improve qualities
Competitive Advantage of Restaurants in Baguio City / Jay B. Veloso. 2007
46
( ) Cost control
( ) Develop more social impact or anticipate what customer’s wants and needs
( ) Advertisements
( ) Others, pls. specify ___________________________________________
16. How do you give emphasis on human resource management?
( ) Proper training on all stations
( ) Immediately relays information if innovation or improvement arise.
( ) Others, pls. specify _________________________________________
17. Do you promote your business?
( ) Yes
( ) No
If yes, how?
( ) Advertising in ads, media type, house publication
( ) Publicity or sales promotion (show stands, coupons, billboards)
( ) Personal selling (house to house)
( ) Sponsorship
( ) Others, pls. specify ________________________________________
If no, why?
( ) Lack of budgetary finance
( ) Others, pls. specify _______________________________________
18. Do you counteract competitive advantage around price?
( ) Yes
( ) No
If yes, how?
( ) Offering senior citizen discounts
( ) Seasonal or special price (Christmas, special holidays)
( ) Discounts to regular customers
( ) Price flexibility
( ) Lesser price
( ) Others, pls. specify _____________________________________
If no, why? Pls. specify
_________________________________________________________________
19. What are some of the causes to price inflation in all restaurants?
( ) Increase in restaurant labor costs
( ) Government demand for salary increase of employees
( ) Land and construction costs
( ) Rentals
( ) Others, pls. specify _____________________________________________
Competitive Advantage of Restaurants in Baguio City / Jay B. Veloso. 2007
47
20. How do you make the business easily accessible and available to target
customers?
( ) Good ambience and spacious dining
( ) Romantic and intimate atmosphere
( ) Language proficiency of staff
( ) Availability of parking area
( ) Others, pls. specify ______________________________________________
21. Do you think your restaurant have unique or special qualities?
( ) Yes
( ) No
If yes, what are they?
( ) Focus on one specialty food/unique food/ethnic food
( ) Design of the building coincides with the products and services
( ) Fast and clean service
( ) Satisfying service
( ) Others, pls. specify _________________________________________
22. What are some of the factors you have implemented that made you stay in the
competition?
( ) Strict and disciplined management
( ) Avoiding bad image and reputation
( ) Proper assessment of complaints
( ) Others, pls. specify _____________________________________________
23. In general, what aspect do you focus competitive advantage?
( ) Unique product or service
( ) Geographical location
( ) Industry specialization
24. If you include industry specialization as form of your competition, what are the
factors you considered to attain advantage?
( ) Who are the potential customers
( ) What are their preferences (what are the products they usually consume)
( ) What are their educations, ethnic/culture do they share
( ) Others, pls. specify __________________________________________
25. Finally what are the factors that affect the performance of your restaurants?
( ) Technology problems
( ) Traffic patterns or volume of competitors
( ) Political condition
( ) Marketing conditions
( ) Others, pls. specify ______________________________________
THANK YOU VERY MUCH AND GOD BLESS!!!!!!!!!!
Competitive Advantage of Restaurants in Baguio City / Jay B. Veloso. 2007
VELOSO, JAY B. APRIL 2007. Competitive Advantage of Restaurants in
Baguio City. Benguet State University, La Trinidad Benguet.
Adviser: Jovita M. Sim, MSc
ABSTRACT
The study is conducted to know the characteristics and kinds of restaurants
operating in Baguio City. Identify problems and solutions encountered by these
restaurants, to determine their competitive advantage and the action plan identified to
increase productivity.
The study revealed that majority of the respondents belong to the economy class
restaurants, and most of them are giving full service to their customers.
The main reason of entrepreneurs engaging in restaurant business is for them to
create employment and for family income.
The forms of pricing method they usually used are value pricing for products that
are usually consumed, cost plus method and market share approach because most of their
competing restaurants have the same price for the same products.
At present, the study identified that most of these restaurants are still competitive
and profitable, how ever there are some who are risky and declining due to
mismanagement and lack of finance.
In identifying their competitors, most say that they consider the competitors
services, status, capabilities and objectives. These are there strategies to know their gap to
other restaurants in order for them to improve.
The study also revealed that the advantages of the respondents are more on
product differentiation, quality service and trained staff. Even though, some say that they
used unique strategy and lower the prices of the food for them to have customers and
sales as compared to their competitors.
In promoting their business majority of them advertising in ads, media, billboards,
flyers and sponsorships to any kind of party or occasions. Some respondents also do not
promote their business due to lack of budgetary finance.
The study have found out that majority of the respondents counteract competitive
advantage around price such as offering senior citizen discounts, holiday special price,
lesser price and discounts to regular customers. All these factors give them advantage to
be competitive and to have customers.
ii
TABLE OF CONTENTS
Page
Bibliography…………………………………………………………..
i
Abstract…………………………………………………………………
i
Table of Contents ……………………………………………………..
iii
INTRODUCTION……………………………………………………..
1
Rationale of the Study …………………………………………
1
Statement of the Problem ………………………………………
3
Objectives of the Study…………………………………………
3
Importance of the Study ……………………………………….
4
Scope and Delimitation ………………………………………...
4
REVIEW OF RELATED LITERATURE………………………………
5
Competitive Advantage ………………………………………..
5
Competitive Advantage using Market
Differentiators…………………………………………………..
5
Six Differentiators that Build Competitive
Advantage…………………………………………………...….
6
a. Core competencies…………………………………….
7
b. Reputation for superior products and
services……………………………….…………….…
7
c. Niche market…………………………………………...
7
d.
Unique
distribution channels or
delivery methods………………………..…………..…..
8
iii
e. Organizational efficiency………………………….……
8
f. Unique technology and innovative
products or service……………………………..……..….
8
Building Sustainable Competitive Advantage………………………
10
a. Organization and Managerial process……………………
10
b. Learning………………………………………………….
10
c. Reconfiguring and Transformation………………………..
10
d. Positions…………………………….……………………..
10
e. Paths……………………………………………………….
11
f. Technological opportunities……………………………….
11
METHODOLOGY…………………………………………………………..
12
Locale and time of the Study ………………………………..............
12
Respondents of the Study ………………………………….………..
12
Data Collection …………………………………………...................
12
Data to be Gathered ………………………………………………….
12
Data Analysis ……………………………………………..…………
12
RESULTS AND DISCUSSION………………………….…………………
13
Profile and Classification of the Respondents…………………………
13
a. Quality………………………………………………………
13
b. Items available inside the restaurant………………………...
13
Page
c. Status of restaurant business…………………………………
14
Mode of Services the Restaurant Offers………………………………… 16
Respondents Advantages to other Restaurants………………………….. 17
iv
a. Accessibility and availability to customers………………….
17
Ways Considered in Identifying Competitors………………….............
19
Status of Competitors………………………………………………….
20
Action Plan of Respondents after Identifying
Competitors………….……………………………….……..……….
20
Strategies Implemented by Respondents after
Identifying Competitors…………………………….……………….
21
Factors to Consider in Human Resource
Management…………………………………………………………..
23
Pricing Method Adopted by Respondents………………………………. 23
Purpose in Engaging Restaurant Business………………………………. 24
Technology Adoption………………………..………………………….. 25
Impact of Fast-Food Centers at SM City Baguio
to Outside Restaurant…………………………………………………… 26
a. Impact……………………………………….………………..
26
b. Solutions to counteract………………………………………
26
Business Promotion Strategies………………………………………….
27
a. Actions in promoting business restaurant…………………….
29
b. Reasons for not promoting…………………………………..
29
Competitive Advantage on Price………………………………………..
29
a. Price flexibility……………………………………………….
29
Page
b. Causes of price inflation……………………………………..
29
Special Qualities/Uniqueness of the
Restaurant by Respondents…………………………………………….… 30
Factors Considered to Stay in the Competition…………………………. 31
v
Aspect in Focusing Competitive Advantage…………………………….. 32
Factors Considered in Industry Specialization………………………….. 32
Factors that Affect the Performance of the Restaurants…………………. 33
SUMMARY, CONCLUSIONS AND RECOMMENDATION……………….
35
Summary……………………………………………………………… 35
Conclusions……………………………………………………………
37
Recommendations……………………………………………………..
38
LITERATURE CITED ……………………………………………………….
40
APPENDICES…………………………………………………………………
41
Letter to respondents …………………………………………………..
41
Survey questionnaire…………………………………………………..
42
vi
INTRODUCTION
Rationale of the Study
Opening a restaurant is a distinct challenge. It is a thrill that gives one the
opportunity for tremendous creative expression. Developing the menu, creating a new
dish, designing the décor, attending to your level of service or establishing an ambience,
these factors all contribute to exceeding the expectations of the customer. However, there
are numerous hurdles to overcome before the opening; the good news is that with careful
planning, including the writing of business plan, the chances of success may improve
(GO Software, 2003).
A restaurant shall be held to mean any establishment offering the public regular
and special meals or menu, cooked foods and short orders. Such public eating places also
serve coffee, beverages and any kinds of drinks (Petterutto, 1979).
A restaurant is also an establishment that serves prepared food and beverages to be
consumed on the premises. The term covers multiplicity of venues and diversity of styles
of cuisine. Sometimes it is a feature of larger complex, typically a hotel, where the dining
amenities are provided for the convenience of the residents, and of course, for the hotel to
maximize their potential revenue. Such restaurants are often also open to non-residents
(Kinnear, 1986).
In the past, cooked food service industries make-up the largest segment of world
economy; Enjoying a phenomenal growth coupled with a great demand for trained
employees and it takes advantage to the local entrepreneurs an alarm to engaged in this
kind of business enterprises (Go Software, 2003).
Competitive Advantage of Restaurants in Baguio City / Jay B. Veloso. 2007
2
It is easy to set employees each doing his or her own thing in effect. Such a
situation can foster competition rather than cooperation. If any situation calls for
teamwork, it is the fast-paced dining room, which requires working in harmony, goodwill
and trust. It is much easier and faster for two service people to serve a party of six than it
is for one. Normally a server cannot carry more than four plates, and it is necessary to
make it a short trip so that the two other plates will not get cold. Some restaurants operate
with servers working as a team so that at least customers will not get bored waiting for
the order. The team system has one major advantage; hot food is served hot, very quick
service is good accommodation (Machado, 1996).
Restaurants literature and educational programs uniformly urge service personnel
to promote and sell as part of the service job. The rational is that sales will increase, and
if the sales job is done correctly, customers will have a better dining experience. Another
factors for having sales increase demands a particular approach; “Will you have an after
dinner?” “Will you have cocktail?” “Will you have dessert?” people may feel assured and
sometimes say so, especially if the servers approach is very soft (Kotler,1999).
Competitive advantage is a company’s ability to perform in one or more ways that
competitors cannot match. One sustainable competitive advantage, those that deliver high
customer value satisfaction, which leads to high repeat purchases and therefore high
company profitability (Kotler, 1999).
Basically it also means by offering consumers lower prices than competitors for
similar products or by providing more benefits that justify higher prices. Thus, the
company must do a better job than the competitors of keeping cost and prices down, or
Competitive Advantage of Restaurants in Baguio City / Jay B. Veloso. 2007
3
of developing better products. The company must compare its prices and products to
those of competitors and look for possible improvements. To the extent that it can do
better than its competitors, it has achieved competitive advantage (Kotler, 1999).
Statement of the Problem
The study deal mainly on the different aspect of competition in order to determine
the competitive advantage of restaurants in Baguio City. More specifically, this study was
conducted to find answers to the following questions:
1. What are the characteristics and kinds of restaurants in Baguio City?
2. What are the current profile, status, and purpose o deciding to engage in
restaurant business?
3. Who are their potential competitors?
4. What are their advantages, competencies and capacities as compare to other
competitors?
5. What are their problems regarding the competition and their solutions?
6. What are their plans to improve their strategies, management and advertising?
Objectives of the Study
The study aimed to:
1. Know the characteristics and kinds of restaurants.
2. To identify problems and solution encountered by the restaurants.
3. To determine advantages of high competition in restaurants at Baguio City.
4. To identify action plan to increase productivity and standard.
Competitive Advantage of Restaurants in Baguio City / Jay B. Veloso. 2007
4
Importance of the Study
The study will be a tool for comprehensive reference and contributes information
or knowledge regarding the competitive advantage in selected restaurants in Baguio City.
The volume of restaurants in Baguio City now is high, thus results of this study
will be beneficial information in order for them to gain new ideas on how to compete and
take advantage to be ahead and help them encourage to continue operate their business
efficiently.
Finally, this study could be the opening line or material for aspiring entrepreneurs
and students to get involved in the said enterprises.
Scope and Delimitation
This study is limited only on the profile of the restaurants towards the competitive
advantage in their enterprises.
The respondents of the study were the managers, owners of the different
restaurants in Baguio City.
Competitive Advantage of Restaurants in Baguio City / Jay B. Veloso. 2007
REVIEW OF LITERATURE
Competitive Advantage
Competitive advantage is defined as to carry out processes; a company needs
resources such as manpower, materials, machines and information. These resources can
be owned leased or rented. Traditionally, company’s sought to own and control most of
these resources that entered their business (Kotler, 1999).
In any industry, businesses create a competitive advantage through price or the
market. A price or cost advantage is tied directly to production costs, efficiency, or
available technology. A competitive advantage in the market requires you to develop
market differentiation—the aspect of your business that sets you apart from the
competitors in your industry. Companies that build and sustain a distinct market
differentiator generally have unique attributes (Kauffman, 2006).
Competitive Advantage Using Market Differentiators
Kauffman (2006), said that each of these companies has grown by using some
kind of market differentiator, such as the following:
• Unique way to meet the needs of a niche market
• Brand recognition in the market
• Proprietary or trade secrets for operations
• Customized or proprietary software or technology
• Patents and trademarks
• Unique combination of products/services
Competitive Advantage of Restaurants in Baguio City / Jay B. Veloso. 2007
6
• Access to leading or scientific research
• Highly skilled and creative staff
• Reputation for quality and innovation
Companies with a price, or cost, advantage over competitors usually have internal
strengths that are difficult for other competitors to replicate, including:
• Investments in production and equipment
• Expertise in designing products/services efficiently
• Access to less expensive materials
• Operational processes replicated consistently
• Outsourcing partnerships
• Efficient distribution channels
• Effective hiring practices, low turnover, and highly skilled/knowledgeable staff
• Efficient production or operational systems
• Innovative equipment or technology
• Strategic alliances that support delivery to customers
Six Differentiators that Build a Competitive Advantage
Kauffman (2006), identified six differentiators that build competitive advantage.
A true competitive advantage is one that is difficult for other competitors to copy and one
that customers find valuable. Ultimately, your competitive advantage is why customers
choose to do business with your company over anyone else. If customers don’t value
your differentiator, then you don’t have a competitive advantage. Here are six ways your
company can differentiate itself from the rest:
Competitive Advantage of Restaurants in Baguio City / Jay B. Veloso. 2007
7
Core competencies. The core competencies can be used to develop an edge over
the competition by providing products or services that customers value over products or
services your competitors offer. Core competencies are the strengths that allow you to
meet the needs of your customers. Keep in mind: your core competencies may change
over time, depending on the demands of the marketplace and the dominant position you
want to have over competitors.
Reputation for superior products/services. Provide the best products or services in
the industry or market. Your focus on quality will give you a reputation for expertise in
specific areas. For example, Nordstrom focuses on offering customers the best possible
service, selection, quality, and value. Nordstrom sets the standard for department store
customer service and a guaranteed, money-back commitment to meet customers’
expectations.
Niche market. Offer products or services to meet the specific demands of the
target market(s). A niche market is a distinctive group of customers within a larger
market or a smaller segment of a product line. For example, Tom’s of Maine®, by
positioning its toothpaste as a natural product, created a new category in the toothpaste
market. Since no other toothpaste filled this need, the company was able to charge a
premium price that consumers who buy organic or all natural products will gladly pay.
Unique distribution channels or delivery methods. Use a selling method that is
unique to the industry or difficult for competitors to use effectively. Provide multiple
products or services to the same or similar markets through an effective distribution
channel.
Competitive Advantage of Restaurants in Baguio City / Jay B. Veloso. 2007
8
Organizational efficiency. Look for less expensive materials and more efficient
equipment. Streamline your processes and find ways to make products or deliver services
more efficiently. Outsource to efficient and highly skilled suppliers. Hire staff with
expertise that can improve operations and efficiency levels.
Unique technology and innovative products or services. Use unique, innovative,
and leading technology to market, sell, and serve target markets. Consider using the
Internet to offer products or services to local, regional, national, or global customers.
Invest in technology to manufacture products, manage operations, or track customer
information.
Strategy is integrated action in pursuit of competitive advantage. Successful
strategy requires an understanding of the unique value that will be the source of the
firm’s competitive advantage. Firms ultimately succeed because of their ability to carry
out specific activities or groups of activities better than their competitors. These activities
enable the firm to achieving and sustaining competitive advantage. This unique value
must be something that competitors cannot match (Keegan, 2002).
Differences
in
management
styles, organizational skills, and strategic perspectives
create advantages and dis advantages for firms competing in different types of industries,
as do differences in the intensity of domestic rivalry. Domestic rivalry keeps an industry
dynamic and creates continual pressure to improve and innovate. Local rivalry forces
firms to develop new products improve existing ones, lower costs and prices, develop
new technologies, and improve quality and service (Keegan, 2002).
Kotler (1999), says that competitive advantage is a vis-à-vis relevant competition,
which is more attractive to customers. The advantage can exist in any element of the
Competitive Advantage of Restaurants in Baguio City / Jay B. Veloso. 2007
9
company’s offer; the product, the service, price, advertising and point of sale promotion,
or the distribution of the product. One of the most powerful strategies for penetrating a
new national market is to offer a superior product at a lower price. The price advantage
will get immediate customer attention, and, for those who purchase the product, the
product superior quality will make an impression.
Most business operate in a competitive environment which is expanding into the
global arena, and in order to get that sale they must satisfy customer needs better than
their competitors. This is called building competitive advantage. You will also find
terminology-differential advantage, competitive edge or USP-unique selling proposition.
In other words what a need of breakthrough opportunities-opportunities that help develop
hard to copy marketing strategies that will be very profitable for a long time. To be
innovative, always bear in mind that the success will greatly depend on the value and
need satisfaction offered in the target market (Schwerdtfeger, 2001).
Porter (2004), stated that a firm possesses a Sustainable Competitive Advantage
(SCA) when it has value-creating processes and positions that cannot be duplicated or
imitated by other firms that lead to the production of above normal rents. An SCA is
different from a competitive advantage (CA) in that it provides a long-term advantage
that is not easily replicated. However, these above-normal rents can attract new entrants
who drive down economic rents. A CA is a position a firm attains that lead to above-
normal rents or a superior financial performance. The processes and positions that
engender such a position are not necessarily non-duplicable or inimitable.
Competitive Advantage of Restaurants in Baguio City / Jay B. Veloso. 2007
10
Building Sustainable Competitive Advantage
Porter (2004), said that there are basically six types of assets that help build an
SCA. These categories are exhaustive and include all of the company's SCAs:
Organization and managerial process. Coordination and integration: Coordination
among teams in organization is key to organizational success. Interdepartmental
coordination and resource sharing to reach a common goal is fundamental to creating
"value". Integrating resources is key to the success of firms. Firms that are able to
integrate resources see synergistic effects of resources coming together.
Learning. Organizational learning is a key to the success of a firm. It determines
how a firm collects, distributes, interprets and responds to market based information
collection and changes in the environment. These changes in the environment could be
customer based changes, technological developments, legal and government restrictions.
Firms have to develop robust market sensing and spanning capabilities to effectively
collect information. Once they collect info they have embed this knowledge in the
products they produce.
Reconfiguring and transformation. The environment for firms is constantly
changing and constant reconfiguring and transformation is the key to form SCA. A
double loop learning and transformation is the best way to produce innovative products.
Innovative capacity of a firm determines how it reacts and learns from market
information.
Positions. Market positions are the assets of a company. Most of them are
technological assets, financial assets, reputation assets and structural assets. The structure
Competitive Advantage of Restaurants in Baguio City / Jay B. Veloso. 2007
11
of a company can determine how it performs. The hierarchy of a company can influence
its culture, procedure and routines.
Paths. Path dependencies: At the birth of a company usually accompanied with
certain orientations. The progenitor brings certain orientations and attributes that stay
with the company for a long time. The path the company takes then determines the
development of its competencies.
Technological opportunities. Technology development at a time can determine
how a firm can exploit opportunities to form SCA. Very often, we see the advent of
several technological factors converging into a capability that forms a SCA. An example
would be the rise of companies such as Genentech at the turn of the previous century with
the advent of gene mapping, significant developments in target selection and databases of
previous studies and gene pools.
Competitive Advantage of Restaurants in Baguio City / Jay B. Veloso. 2007
METHODOLOGY
Locale and Time of the Study
The research study was conducted during the period of October 2006 to
December 2006 in Baguio City where most restaurants are found.
Respondents of the Study
The respondents of the study were the managers, owners and supervisors of the
restaurants. The restaurants were classified according to their kinds and characteristics. A
sample of 35 establishments was chosen at random.
Data Collection
A structured survey questionnaire was used as a tool in gathering data. This was
given personally to the respondents by the researcher. Actual interview was done to
satisfy and validate some necessary questions. Personal observation was also done and
key informants were interviewed for additional information regarding the topic.
Data Gathered
The data gathered focuses on the profile of restaurant towards competitive
advantage. This includes the current status of the restaurants such as different strategies,
marketing strategies, problems on their operation, identified solutions and their planned
actions. Other data gathered were the pricing strategies, impact of SM City to outside
restaurants and factors in identifying competitors.
Competitive Advantage of Restaurants in Baguio City / Jay B. Veloso. 2007
RESULTS AND DISCUSSION
Profile and Classification of the Respondents
Table 1 presents the classification and profile of the respondents. This was
represented according to kinds of restaurants, their qualities and requirements, items
available inside or outside their business and their special services. Result show (28.57%)
of the respondents said that they are family restaurants followed by 20% which are fast-
food and only 2.86% for Japanese restaurants which is the lowest among the 35
respondents. The rest comprises to Ethnic restaurant (11.43%), 8.57% for Chinese
restaurant, while 5.71% for Fine dining, Café /bakery and Mongolian restaurant.
Quality. As shown in table 1, the respondents were asked to check the basic
requirements in operating or opening a restaurant business. Majority of them posses those
necessities and items as needed in the operation such as technologies, utilities, sanitation
and a lot more. Although some requirements are not necessary for their operation, this
was still the guide for approval of Department of Trade and Industry and business
licensing from the government unit.
Items available inside the restaurant. The table also shows the different
technologies or machines found with in and alone the premises of the restaurant. This
implies that they are completing the basic requirements in operating a restaurant. As
found in the Rules and regulations to govern the Business operation of all restaurants in
the Philippines under the Department of Tourism. This also serves as a guide in
identifying the class or levels of restaurants.
Competitive Advantage of Restaurants in Baguio City / Jay B. Veloso. 2007
14
Status of restaurant business. The table shows most (74.29%) of the respondents
are now risky while (68.57%) profitable, meaning, they have a wiser and good
operation.54.29% claimed that they are still competitive and 42.86% are now declining.
The result indicates that most of the respondents are operating with the same level
of environment but still the customers are looking for their own preference of food or
services. In addition, some restaurants lack proper management due to improper job
placement of staffs.
Table 1. Profile of the restaurants
CHARACTERISTICS
FREQUENCY
PERCENTAGE
Kind of Restaurant
Fast-food
7 20.00
Chinese
restaurant
3
8.57
Public
house
restaurant 0
0.00
Family restaurant
10
28.57
Café
and
Bakery
restaurant
2
5.71
Ethnic
restaurant
4 11.43
Fine
dining
2
5.71
Japanese
restaurant
1
2.86
Mongolian
restaurant
2
5.71
Italian
restaurant
4 11.43
TOTAL
35
99.99
Competitive Advantage of Restaurants in Baguio City / Jay B. Veloso. 2007
15
Table 1. Continued…
CHARACTERISTICS PERCENTAGE FREQUENCY
Services Offered/Utilities available
Parking
availability
12
34.29
Clean
comfort
rooms
22
62.86
Lounge/lobby
14
40.00
Furnishing
and
lighting 21
60.00
Entertainment/sound
system
18
51.43
Carpeting
15
42.86
Pantry/cold
storage
20
57.14
Back
sink
35
100.0
Quality
service
staff
30
85.71
Foreign
exchange
counter
8
22.86
Security
personnel
25
71.43
Adequate
location
19
54.29
Strict
maintenance
33
94.29
Good
air
conditioning
18
51.43
Reception
area
8
22.86
Elevator
3
8.57
Telephone
35
100.0
Menu
book
35
100.0
Linen/table
cloth
17
48.57
Crockery/glass
wares
26
74.29
Competitive Advantage of Restaurants in Baguio City / Jay B. Veloso. 2007
16
Table 1. Continued…
CHARACTERISTICS PERCENTAGE FREQUENCY
Cuisine 14
40.00
Separate
bar
16
45.71
Housekeeping
13
37.14
Good
atmosphere
25
71.43
Emergency
power
33
94.29
Fire
fighting
facilities
28
80.00
Status of Restaurant Business
Risky
26
74.29
Profitable
24
68.57
Competitive
19
54.29
Declining
15
42.86
*Multiple response
Mode of Services the Restaurant Offers
As shown in table 2, the restaurant offers different aspect of customer service,
91.43% are offering delivery service upon order of the food with the restriction of
waiting because it will still be cooked. 82.86 % offers full service, and 25.71% for self
service. As observed from the research, most self-service restaurants are fast-food
centers.
Competitive Advantage of Restaurants in Baguio City / Jay B. Veloso. 2007
17
Table 2. Mode of services the restaurant offers
CHARACTERISTICS PERCENTAGE FREQUENCY
Mode of Services
Self
service
9
25.71
Delivery
service
32
91.43
Full
service
29
82.86
*Multiple response
Respondents Advantages from Other Restaurants
Table further shows that 88.57% of the respondents have unique strategy as their
advantage to other restaurants, followed by the efficient trained staff (85.71%) f the
trained staff, for quality service 77.14%, and product differentiation (68.57%). Among
the other advantages, these four are the topmost reason for being ahead in the
competition. Some of other reasons are fast service, low price and established research
analysis.
In other aspect, the three reasons as the lowest also give emphasis on effective
operation, even though majority of the respondents do not use this as their basis for
success. It still helps develop more customers’ attention.
Accessibility and availability to target customers. In this table, it shows that the
respondent’s rate good ambiance and spacious dining 77.14% because it is where
customers are usually relax. (71.43) is given to romantic and intimidating. Most
customers in this area are partners, couples, lovers. They enjoy most if the environment is
conjoint to their situation, and followed by 34.29% for spacious parking area. The
Competitive Advantage of Restaurants in Baguio City / Jay B. Veloso. 2007
18
customer is also looking for availability of parking area; this is the most problem of other
respondents because some customers roll back if parking area is not available. This
problem has something to effect in the sales.
Table 3. Respondents’ advantages from other restaurants
PARTICULARS
FREQUENCY PERCENTAGE
Advantages to other competitors
Product
differentiation 24
68.57
Low
prices
of
food
9
25.71
Established
research
analysis
8
22.86
Unique
strategy 31
88.57
Trained
staff
30
85.71
Quality
service 27
77.14
Fast
service
15
42.86
Accessibility and Availability to Target Customers
Good ambience and spacious
dining
27
77.14
Romantic
and
intimidating
25
71.43
Spacious
parking
area
12
34.29
*Multiple response
Competitive Advantage of Restaurants in Baguio City / Jay B. Veloso. 2007
19
Ways Considered in Identifying Competitors
Table 4 shows the things considered in identifying competitors. This was obtained
by knowing the competitor’s objective plan, their strategies, competitor’s capability,
present status, services offered, and prices of food commodities. Basically some of the
respondents admit that they are personally observing and assigning staffs to determine
competitors operation. Out of the 35 respondents, 91.43% identified for competitor’s
capabilities were usually considered in identifying other restaurants. This was followed
by competitors present status (85.71%), services offered (82.86%), prices of food
commodities (71.43%), objective plan (62.86%) and identifying strategies (60%).
Table 4. Ways considered in identifying competitors
PARTICULARS
FREQUENCY PERCENTAGE
Ways Considered in Identifying
Competitors
Competitors
objective
plan
22
62.86
Strategies
21
60.00
Competitors
capability 32
91.43
Competitors
present
status
30
85.71
Services
offered
29
82.86
Prices
of
food
commodities
25
71.43
*Multiple response
Competitive Advantage of Restaurants in Baguio City / Jay B. Veloso. 2007
20
Status of Competitors
Table 5 shows the result of knowing the status of the competitors after identifying
the competitors. In this area, it was considered that majority of the restaurants were also
offering the same food variety (97.14%), followed by (91.14%) affected by geographical
changes. Some other status of competitors that will create bankruptcy is financial stability
(62.86%). Likewise large marketing and advertising was declared 54.26% while longer
histories of operation (51.43%).
Table 5. Status of competitors
PARTICULARS
FREQUENCY PERCENTAGE
Financial
stability
22
62.86
Large
marketing
and
advertising
19
54.26
Longer
histories
of
operation
18
51.43
Same
food
services
34
97.14
Also affected by geographical
changes 32
91.43
Offer
lower
prices
8
22.86
*Multiple response
Action Plan of the Respondents
after Identifying Competitors
Table 6 shows the action plan after the respondents have identified the profiles of
their competitors. Most (79.29%) from the respondents said that they need to focus on the
planning of future commodity prices, closely followed by awareness on food safety
Competitive Advantage of Restaurants in Baguio City / Jay B. Veloso. 2007
21
(71.43%). This implies that majority of the restaurant owners are very strict on sanitation.
More than half of the respondents (57.14%) also revealed in anticipation of company
cost, which means cost cutting should be applied in all kinds of expenditures. On the
other hand, 40% replied that making projections on environmental changes and generate
marketing conditions. However, 48.57% said that responding immediately on customers
demand will also help in building up good rapport to the customers.
Table 6. Action plan of the respondents after identifying competitors
PARTICULARS
FREQUENCY PERCENTAGE
Generate
marketing
conditions 14
40.00
Planning
of
future
commodity
prices
26
74.29
Awareness
of
food
safety
25
71.43
Anticipation
of
company
cost
20
57.14
Making projections on environmental
changes
14
40.00
Responding immediately on
customer
demand
17
48.57
*Multiple response
Strategies Implemented by Respondents
after Identifying Competitors
Table 7 present the strategies implemented by the respondents after identifying
competitor’s advantages. Majority (82.86%) of the respondents said that human resource
efficiency and capacity is the most effective strategy in order to stay in the competition or
Competitive Advantage of Restaurants in Baguio City / Jay B. Veloso. 2007
22
even ahead. This is more effective to influence proper duties and responsibilities of every
staff that has a task.
According to Keegan (2002), firms ultimately succeed because of their ability to
carry out specific activities better than their competitor’s do, this enable the firm to create
unique value for their customers.
On the other hand, 74.29% said that technology adoption is a wiser strategy in
order to have quality products or food and be able to meet the standard of customers.
65.71% replied that appropriate organizational chart will develop proper order or detailed
working. However, 62.86% said that they need to improve their management while
54.29% need to access on reliable information system.
The table emphasized that majority of the respondents have a greater plans in
implementing their own strategy.
Table 7. Strategies implemented by respondents after identifying competitors
PARTICULARS
FREQUENCY PERCENTAGE
Appropriate
organizational
chart
23
65.71
Technology
adoption
26
74.29
Human
resource
affectivity
29
82.86
Information
system
access
19
54.29
Improved
management 22
62.86
*Multiple response
Competitive Advantage of Restaurants in Baguio City / Jay B. Veloso. 2007
23
Factors to Consider in Human
Resource Management
Table 8 represents the emphasis on human resource management. 74.29% from
the respondents claimed that there should be strict and proper training on all stations.
2.86% on update tracking of performance followed by 45.71% immediate relay of needed
information. However some respondents include 42.86% on proper job placement.
Table 8. Factors to consider in human resource management
PARTICULARS
FREQUENCY PERCENTAGE
Proper
training
on
all
stations
26
74.29
Immediate relay of needed information
16
45.71
Update
tracking
of
performance
22
62.86
Proper
job
placement
15
42.86
*Multiple response
Pricing Method Adopted by Respondents
One of the most powerful strategies for penetrating a new national market is to
offer a superior product at a lower price. The price advantage will get immediate
customer attention, and for those who purchase the product, the superior quality will
make an impression (Kotler, 1999).
Table 9 presents the different pricing method. In this method of pricing, majority
of the respondents uses 2 or more pricing strategies to avail the exact price for their
products. 85.57% usually use cost-based method. This method was taken from cost plus
method, return on investment pricing, and experience curve pricing. This was followed
Competitive Advantage of Restaurants in Baguio City / Jay B. Veloso. 2007
24
by integrative pricing (68.57%), under this method; marginal approach is commonly used
as to competitive bidding approach and multi-stage pricing. However, 62.86% claimed
that they are using demand based, in this method it covers value pricing which demands
on the value of the product, prestige pricing wherein it was denote from ranking the
products, odd-even pricing, price lining and leader pricing.
Furthermore, 48.57% replied that competition based is one-way method to have
common price of products. This method was based on market share prices, price
leadership and customary pricing.
Table 9. Pricing method adopted by respondents
METHOD
FREQUENCY PERCENTAGE
Demand
based
22
62.86
Cost
based
31
88.57
Competition
based
17
48.57
Integrative
based
24
68.57
*Multiple response
Purpose in Engaging Restaurant Business
Table 10 shows the purpose of the respondents in engaging restaurant business.
All of the respondents said for family income and source of livelihood, followed by
82.86% to create employment, and 57.14% as application of educational skills. Among
other reasons are less priority of the respondents; 28.57% to join the competition, 5.71%
is just for past time.
Competitive Advantage of Restaurants in Baguio City / Jay B. Veloso. 2007
25
Table 10. Purpose in engaging restaurant business
PURPOSE
FREQUENCY PERCENTAGE
For
past
time
2
5.71
Application
of
educational
skills
20
57.14
Family
income 35
100.0
To
create
employment
29
82.86
To
compete
10
28.57
*Multiple response
Technology Adoption
Table 11 shows that among the 35 respondents, 80% said that adapting or
upgrading new technologies is necessary to their business, while 20% revealed that they
are already contented with their old machines because buying another set of technologies
will cost them so much.
Technology is expected to contribute to greater effectiveness in generating
revenues, whether achieving same location revenue growth, increasing customers count
as well as increasing size of average sales. It also plays a vital role in differentiating the
service and product offering (Kotler, 1999).
Competitive Advantage of Restaurants in Baguio City / Jay B. Veloso. 2007
26
Table 11. Technology adoption
PARTICULARS
FREQUENCY PERCENTAGE
Adopt
technology
28
80.00
Do not adopt technology
7
20.00
TOTAL 35
100.0
Impact of Fast-Food Centers and Solutions to
Counteract Impact at SM City Baguio to
Outside Restaurants
Impact. Table 11 shows that fast-food centers In SM City Baguio greatly affect
the operation of restaurants outside SM. More than half (54.29%) said that they lost their
regular customers and their income had reduced, while 48.57% reveals that they have
already minimal customers.
Solutions to counteract impact. The table shows that after being affected with the
opening of SM City Baguio, the restaurants have implemented solutions or action for
continuous operation; 71.43% said that they need to have cost cutting or control to avoid
expenditures that are unnecessary, 68.57% from the respondents claimed that they need
to expand their advertisements like advertising in adz, media, brochures, billboards etc,
62.86% replied that they would improve the quality of their products and services,
54.28% also said that they need to orient more their staff to improve their customer
service approach and 42.86% revealed that they reduced price of food served.
Competitive Advantage of Restaurants in Baguio City / Jay B. Veloso. 2007
27
According to Machado (1996), gaining advantage is a company’s liability to
define because it has something to do improve their quality. Looking for solutions can
foster competition rather than cooperation.
Table 12. Impact of fast-food centers to other restaurants outside SM City Baguio
PARTICULARS
FREQUENCY PERCENTAGE
Impact of Fast-Food Centers
in SM City Baguio
Less
customers 17
48.57
Less
income
19
54.29
Loss
of
regular
customer
19
54.29
The restaurant needs more
improvement
16
45.71
Solutions to Counteract Impact
Improving
goods
and
services 22
62.86
Lower
prices
of
products
15
42.86
Delegating staff to improve
qualities 19
54.28
Cost
control
25
71.43
Anticipate
customers
needs
18
51.43
*Multiple response
Business Promotion Strategies
Table 13 presents the impression of respondents towards business promotion,
97.14% declared that they are always promoting, and it is one major form of their
Competitive Advantage of Restaurants in Baguio City / Jay B. Veloso. 2007
28
competencies and expenses, while 2.86% said that they lack funds for promotion because
they are on the stage of declining.
Machado (1996), further said that business promotion is also called marketing
communication. Various activities are undertaken to communicate its products benefit to
persuade the target customers to buy them. In order to differentiate promotion – be
innovative in communication with customers and ensure your advertising is unique and
different from competitors.
Table 13. Business promotion strategies of respondents
PARTICULARS
FREQUENCY PERCENTAGE
Promote Business?
Yes
34
97.14
No
1
2.86
TOTAL 35
100.0
Strategies in Promoting
Business Restaurants
Advertising (adz, media, bill-
Boards,
coupons)
32
91.43
Sponsorship
17
48.17
Reasons of not promoting
Business
Lack
of
budget
1
2.86
Not
necessary
1
2.86
Competitive Advantage of Restaurants in Baguio City / Jay B. Veloso. 2007
29
Actions in promoting business restaurants. The table shows strategies taken to
promote their restaurants. Majority (91.43%) said that they are advertising in adz, media,
billboards and flyers. 48.17% also said that they are sponsoring any kinds of parties like
wedding, birthdays, children’s day or any other kind of occasion.
Reasons for not promoting business. Table show that 2.86% are the reasons for
not promoting their restaurant because they lack budget, and it is not necessary.
Competitive Advantage on Price
Price flexibility. Table 13 presents the competitive advantage of restaurants on
price. Among the respondents who experience this kind of situation, 100% declared that
they are offering senior citizen discounts only if the customers present a valid I.D,
31.43% said that they are giving discounts to their regular customers, some (22.86)
replied that they are giving discounts every time there is a holiday like Christmas season
while 20% said that they have always lesser price as compared to other restaurants, and
45.71% declared that they are increasing their prices due to increase of materials used.
Causes of price inflation. Table presents the causes of price inflation. All of the
respondents said that salary increase is the major cause of increasing the prices of their
product, followed by 65.71% increase in materials needed and as the second topmost
cause. Furthermore, 60% declared that rentals and utilities expense is also one factor.
Competitive Advantage of Restaurants in Baguio City / Jay B. Veloso. 2007
30
Table 14. Competitive advantage on price
PARTICULARS
FREQUENCY PERCENTAGE
Offering
senior
citizen
discounts
35
100.0
Seasonal
price
discounts
8
22.86
Discounts
to
regular
customers 11
31.43
Price
flexibility 16
45.71
Lesser
price
7
20.00
Causes of Price Inflation
Salary
increase 35
100.0
Land and construction cost
9
25.71
Rentals
and
utilities
expense
21
60.00
*Multiple response
Special Qualities /Uniqueness
of the Restaurants by Respondents
Table 15 presents the qualities or unique specialties of the respondents. 80% as
the topmost was declared because of fast and clean service. Majority of the respondents
said that cleanliness in their premises is a big factor to have regular customers. 71.43%
said that their unique qualities was satisfaction of the customers from food, service etc.
However, 31.43% declared that they have their own specialty food as one reason for
having regular customers.
Competitive Advantage of Restaurants in Baguio City / Jay B. Veloso. 2007
31
Table 15. Special qualities/uniqueness of the restaurants by respondents
CHARACTERISTICS FREQUENCY PERCENTAGE
Focus
on
one
specialty 11
31.43
Fast
and
clean
service
28
80.00
Satisfying
service
25
71.43
*Multiple response
Factors Considered to Stay in
the Competition
As presented in Table 16, result shows the factors considered by restaurants
management in-order to stay in the competition. All of the respondents said that they are
avoiding bad image because it will destroy their reputation, 71.14% said that proper
assessment of complaint will yield them to stay in the competition because the customers
were secured to any kind of misunderstandings. Some (54.29%) said that strict and
disciplined management creates a well-mannered staff, and 45.71% said that consistent
quality of product and service should be maintained.
Table 16. Factors considered to stay in the competition
CHARACTERISTICS FREQUENCY PERCENTAGE
Strict
and
disciplined
management
19
54.29
Avoiding
bad
image
35
100.0
Proper
assessment
of
complaint
25
71.14
Consistent
quality
16
45.71
*Multiple response
Competitive Advantage of Restaurants in Baguio City / Jay B. Veloso. 2007
32
Aspect in Focusing Competitive
Advantage
Table 17 presents the different aspect of the respondents in focusing their
competitive advantage. Among the respondents who have high risk of competition,
62.86% reveal that they are concentrating in industry specialization compared to 37.14%
who said that they focus on unique product or service; in aspect they declared some
thoughts that it is still the better way as part of competition to determine customer’s
preference. However, 25.71% also said that geographical location is an advantage
because it is easy accessible and compatible to any kind of customers.
Table 17. Aspect in focusing competitive advantage
CHARACTERISTICS FREQUENCY PERCENTAGE
Unique
product
or
service
13
37.14
Geographical
location
9
25.71
Industry
specialization 22
62.86
*Multiple response
Factors Considered in Industry
Specialization as Form of Competition
Table 18 presents the factors that restaurant owners/respondents considered as
form of industry specialization. Majority (91.43%) revealed that they are focusing on
customer’s preference. The respondents focused on customer’s preference because they
are aiming to have regular customers. Most (80.00%) declared that they are observing
who the potential customers are, this has something to affect the level and kind of their
restaurant. On the other hand, 28.57 said that they are trying to identify the different
Competitive Advantage of Restaurants in Baguio City / Jay B. Veloso. 2007
33
knowledge, ethnic, culture of customers as a basis in determining the approach to be
employed.
This emphasized that majority of the respondents are looking forward to improve
their industry and specializing in different factors will help them determine the proper
approach, strategy in caring and winning customers.
Table 18. Factors considered in industry specialization as form of competition
FACTORS
FREQUENCY PERCENTAGE
Factors of Industry Specialization
Observing who are the
potential
customers
28
80.00
Customers
preference
32
91.43
Customers
education
10
28.57
*Multiple response
Factors that Affect the Performance of the Restaurants
Table 19 shows the possibilities affecting the performance of their business.
Among the 35 respondents, all declared that it is because of traffic patterns or volume of
competitors, followed by 82.86% marketing conditions where majority of their
competitors are very aggressive in marketing studies and implementations. On the other
hand, 57.14% said that they are being affected by political conditions, and 34.29% said
that they cannot manage to get new technologies necessary to their business.
Competitive Advantage of Restaurants in Baguio City / Jay B. Veloso. 2007
34
Table 19. Factors that affect the performance of the restaurant
FACTORS
FREQUENCY PERCENTAGE
Technology
problems
12
34.29
Traffic patterns or volume
of
competitors
35
100.0
Political
condition
20
57.14
Marketing
conditions
29
82.86
*Multiple response
Competitive Advantage of Restaurants in Baguio City / Jay B. Veloso. 2007
SUMMARY, CONCLUSIONS AND RECOMMENDATIONS
Summary
The study was conducted to identify the competitive advantages of restaurants in
Baguio City. It aims to determine the characteristics and kinds of the different restaurants
operating in the city, to identify their problems regarding the competition and the action
plans or solutions.
A total of 35 respondents were chosen within the city with different aspect of
operations. Structured questionnaire was used as a tool in gathering data. The
supervisors, managers and owners were the respondents of the study. A personal
interview is done to some respondents who preferred an actual interview and personal
observations around the premises and key informants were also interviewed for
additional information regarding the topic. The data gathered were examined and
analyzed using descriptive method like frequency and percentage.
Most of the restaurants in Baguio City belong to the economy class, and most of
them are offering full service.
The main reasons of the respondents to engage in restaurant business are for
family income and as a source of livelihood, to create employment, and application of
educational skills.
All the respondents believed that they have unique strategy as an advantage to
other restaurants. Most of these strategies are differentiation focus and cost management,
well trained staff, technological assets, financial assets and structural assets, low prices of
products and quality service.
Competitive Advantage of Restaurants in Baguio City / Jay B. Veloso. 2007
36
Although some respondents focus on customers satisfaction as an advantage. In
this aspect some restaurants offer extra services like, good ambience and spacious dining,
romantic and intimidating environment, spacious parking area and presence of bar lounge
with acoustic bands. Out of the strategies identified, unique product, industry
specialization, and geographical location that competitors cannot replicate
Most of the respondents are doing actions to identify their competitors specially
their competencies. In identifying, they focus on the strategies, status, plans and
capacities of their competitors.
For the general problems encountered by the respondents, most say the traffic
patterns or volume of competing restaurants, technology problems, marketing and
political condition. Other problems identified were minor because immediate solutions
were acted to avoid its emphasis on the operation.
Some of the restaurants operating outside the premises of SM City Baguio
declared that they are very much affected. Majority of the problem they encounter are
loss of regular customers, their sales decreased and some restaurants are declining.
However, they immediately implement solutions for continues operation; improving their
goods and services, proper management of pricing, asses their staff to improve their
qualities, also cost control and generate their advertising aspect. However, some
respondents also said that it is an opportunity for them to expand their business because
they open branches at SM City Baguio.
For business promotion strategies, majority of the respondents said that they are
advertising in adz, media, billboards, distribute coupons or flyers, sponsorship and mouth
Competitive Advantage of Restaurants in Baguio City / Jay B. Veloso. 2007
37
dispersal. In this aspect, majority of the respondents claimed that it is costly and time
consuming, however, it helps a lot to gain customers.
Majority of the respondents have their own orientation in pricing their products as
to demand based, cost based, competition based and integrative based. In some areas,
price is one of their major competitive advantages to other restaurants because they said
that customers are now looking for cheaper prices. To stay in the competition regarding
prices of commodities, they offer discounts to the senior citizens, to their regular
customers and also discounts during holidays. However, some of their complaints
regarding price inflations are increase in labor costs, government demand for salary
increase, cost of rentals, increase in government taxes and business permits.
For them to improve their marketing sector or competitive advantage. They need
to sustain or gain a lot of ideas so that they will be ahead or even competitive. They have
implemented a lot of factors such as strict and disciplined management, maintaining good
reputation, consistent quality, proper assessment of complaints, technology innovation,
cost control, proper order of supplies and resources, acceleration of advertising and
proper evaluation of the human resource management.
Conclusions
Based on the findings of the study, the following conclusions were made:
1. The respondents have different trade names or kinds but majority of them are
offering the same products although some have unique features in preparation
and few of them are focusing on one product.
Competitive Advantage of Restaurants in Baguio City / Jay B. Veloso. 2007
38
2. There are hundreds or more restaurants in Baguio City now that are
competing. As observed majority of them are in good operation due to
constant and very updated management. However, the competition is very
strict and some restaurant businesses are now declining. Most of their reasons
to engage in this kind of business are for family income and to create
employment.
3. The restaurant operators are competing with each other to be ahead and to
have sales. Monitoring their competitors is one factor to create an advantage.
4. Competitive advantages of the respondents are almost similar, but they are
still trying to differentiate in order to develop their competencies and
capacities.
5. Majority of their problems are technology assets, volumes of competitors,
marketing and political condition.
6. They plan to establish more strategies, cost cutting, and proper delegation of
the human resource management.
Recommendations
1. Although it was known that restaurants in Baguio City have an organization.
They need to cooperate in all the rules and regulations of their organization to
avoid conflicts and mis understandings.
2. Change their attitude of come what may because now a days, if there is no
action no possible result.
Competitive Advantage of Restaurants in Baguio City / Jay B. Veloso. 2007
39
3. Respondents should be aware of cleanliness or sanitation in their premises so
that the customers feel secured and be satisfied.
4. Continue research product development, or develop unique food products to
be differentiated from other restaurants.
5. It is further recommended that respondents need to be strict and disciplined
their staff to avoid complaints from the customer. In this case, you are
maintaining good reputation.
6. Marketing activities should be always updated in areas where it was done and
expansion is very much recommended.
7. It is recommended that further study in operations of restaurants should be
made with regards to knowing the requirements and be informed on the
government laws.
8. For those individual who want to venture into restaurant production, you must
first develop a strategic and concise plan, observed the different restaurants
and of course gain knowledge on how to have advantage.
9. Often, the only element of business that management can truly control, is its
technology. And as technology continues to change and improve, it is positive
for managers to embrace the currents trends that have proven ROI and provide
operational efficiency.
10. It is also recommended that do not start a price war if you decide to build
competitive advantage around price.
.
Competitive Advantage of Restaurants in Baguio City / Jay B. Veloso. 2007
LITERATURE CITED
ANONYMOUS, 1998. Promotional Strategy: Marketing Communication in Practice
Koekemoer, Juta Inc. Retrieved December 12, 2006 from
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Competitive Advantage of Restaurants in Baguio City / Jay B. Veloso. 2007
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APPENDICES
Appendix A
Letter to Respondents
College of Agriculture
DEPARTMENT OF AGRICULTURAL ECONOMICS
AND AGRIBUSINESS MANAGEMENT
Benguet State University
La Trinidad, Benguet
December 2006
Sir/Madam:
I am a graduating Agribusiness student of Benguet State University and in partial
fulfillment of the requirements for the degree; I am presently conducting an
undergraduate research study entitled “COMPETITIVE ADVANTAGE OF
RESTAURANTS IN BAGUIO CITY”.
In this regard, may I request a portion of your time to answer the attached
questionnaire to complete the research undertaking as a requirement for graduation. Rest
assured that the data will be used for academic purposes only and will be treated with
strict confidentiality.
Thank you very much and God bless.
Very respectfully yours,
(Sgd.) JAY B. VELOSO
Student researcher
Noted by:
(Sgd.) JOVITA M. SIM
Competitive Advantage of Restaurants in Baguio City / Jay B. Veloso. 2007
42
Appendix B
Survey Questionnaire
Direction:
Please respond to each item in the questionnaire by putting a check mark or
providing the information asked on the appropriate space provided for.
I. Profile
Name of Restaurant (Trade name) Optional:
____________________________________
Years of operation: ______________________
Address: ___________________________________________________
Name: _______________________________________
Position in the Business: __________________________
Kind of restaurant business (pls. check)
( ) Fast-food
( ) Chinese restaurant
( ) Public house restaurant
( ) Family restaurant
( ) Café and Bakery restaurant
( ) Ethnic restaurant
( ) All around restaurant
( ) Others, pls. specify ___________________________
Pls. check if the following items are available:
( ) What size ___higher than 25 seating capacity
( ) Adequate location
___25 seating capacity
( ) Strict maintenance
___lower than 25
( ) Good air-conditioning
( ) Parking availability
( ) Reception area
( ) Clean comfort rooms
( ) Elevator
( ) Lounge/lobby
( ) Telephone
( ) Furnishing and lighting
( ) Menu book
( ) Entertainment/sound system
( ) Linen/table cloth
( ) Carpeting
( ) Crockery/glass wares
( ) Kitchen ___pantry/cold storage
( ) Cuisine
___Back sink
( ) Bar
( ) Quality service staff
( ) Housekeeping
( ) Foreign exchange counter
( ) Good atmosphere
( ) Security
( ) Emergency power
( ) Special facilities and services
( ) Fire fighting facilities
___ Private dining room with audio-visual facilities
___ Smoking lounge
___ French service and flambi cooking
___ Car paging system
___ Customer paging system thru public address or pageboy
Competitive Advantage of Restaurants in Baguio City / Jay B. Veloso. 2007
43
___ Telephone jacks to bring telephone to customers
___ Separate bar lounge
___ Separate wine list and wine steward
___ Special food or beverage display
___ Toilet facilities
___ Others, pls. specify ___________________________________
II. Competitive Advantage
1. What mode of services your restaurants offer?
( ) Self service
( ) Full service
2. What are the pricing method you use in the different kinds of food and services
offered?
Demand based
Cost
based
( ) Value pricing
( ) Cost plus method
( ) Prestige pricing
( ) ROI pricing
( ) Odd-even pricing
( ) Experience curve pricing
( ) Price lining
( ) Leader pricing
Competition based
Integrative
based
( ) Price leadership
( ) Marginal approach pricing
( ) Customary pricing
( ) Multi stage approach pricing
( ) Market share pricing
( ) Competitive bidding pricing
3. What is your purpose in engaging in restaurant production?
( ) Just for past time
( ) Recreation of hobby or application of educational acquired
( ) For family income
( ) To create employment
( ) To join the competition among other restaurant
( ) Others, pls. specify ___________________________
4. How much capital you have invested at the start of the operation?
___________________________________________________________
5. At present, what is the status of your restaurant?
( ) Risky
( ) Profitable
( ) Competitive
( ) Declining
6. Do you adapt in the fast upgrade of technology?
( ) Yes
( ) No
Competitive Advantage of Restaurants in Baguio City / Jay B. Veloso. 2007
44
If yes, what are the machines?
( ) Point of sale computers
( ) Credit Card verification machine
( ) Back office computers
( ) Video surveillance equipment
( ) Inventory bar coding tracking
( ) Speakers monitoring equipment
( ) Sound system
( ) Advance equipments used in any stations
( ) Others, pls. specify __________________________________
If no, Why?
( ) No available funds for advance technologies
( ) Some machines not suitable for the operation
( ) Others, pls. specify ___________________________________
7. What are your advantages as compared to other restaurants?
( ) Product differentiation
( ) Lower the prices of food
( ) Already established research analysis towards the company
( ) Unique strategy
( ) Trained staff
( ) Quality service
( ) Others, pls. specify _________________________________
8. How do you implement product differentiation in your company?
( ) Changing ingredients of the food
( ) Changing packaging style to improve brand equity
( ) Additional benefits to the food ordered (side dish, toppings)
( ) Others, pls. specify ___________________________
9. In identifying your competitors, what are the important things you consider?
( ) Competitors objective and plan
( ) Strategies
( ) Competitors capability
( ) Competitors present status
( ) Services offered by other competitors
( ) Others, pls. specify ___________________________________
10. What is the status of your competitors?
( ) Established restaurants with branches and greater financial resources
( ) Large marketing and advertising budgets
( ) Longer histories of operation
( ) Offering the same variety of foods
Competitive Advantage of Restaurants in Baguio City / Jay B. Veloso. 2007
45
( ) Affected by changes in consumer tastes and by national, local economic
conditions, and demographic trends.
( ) Others, pls. specify ____________________________________
11. After knowing all the profiles of your competitors what was the plan identified to
go ahead of them?
( ) Generate marketing conditions, competition and pricing
( ) Forward-looking statements including future capital expenditures, business
strategies, strengths, goals and expansion.
( ) Planning of future commodity prices and complete availability of food
products
( ) Awareness of consumers perception on food safety
( ) Assessment of materials and employees.
( ) Proper anticipation of company cost
( ) Ability to make projection on changes in the environment
( ) Ability to respond on customers demand
( ) Others, pls. specify ____________________________________
12. In implementing your strategy, what are they that you have identified?
( ) Appropriate organizational structure
( ) Technology adoption
( ) Human resource affectivity
( ) Information system access
( ) Management style
( ) Others, pls. specify _____________________________________
13. How do you control strategic problems in case strategies are indistinguishable?
( ) Encourage efficient operations that are consistent with the plan while allowing
the flexibility to adapt changing conditions.
( ) Develop performance indicators, information system and specific mechanism
to monitor progress.
( ) Budgetary assistance to control financial expenditures
( ) Others, pls. specify ____________________________________
14. In actual cases, what is the impact of fast food centers at SM city to your
restaurants? (Optional to Non-SM operators)
( ) Less customers
( ) Less income
( ) Loss of regular customers
( ) The business found itself for more improvements
( ) Pls. specify some other aspect being affected __________________________
15. How did you come up to settle these problems? (Optional to Non-SM operators)
( ) Improving goods and services to the customers (extra benefits)
( ) Lower prices of products
( ) Delegating staff to improve qualities
Competitive Advantage of Restaurants in Baguio City / Jay B. Veloso. 2007
46
( ) Cost control
( ) Develop more social impact or anticipate what customer’s wants and needs
( ) Advertisements
( ) Others, pls. specify ___________________________________________
16. How do you give emphasis on human resource management?
( ) Proper training on all stations
( ) Immediately relays information if innovation or improvement arise.
( ) Others, pls. specify _________________________________________
17. Do you promote your business?
( ) Yes
( ) No
If yes, how?
( ) Advertising in ads, media type, house publication
( ) Publicity or sales promotion (show stands, coupons, billboards)
( ) Personal selling (house to house)
( ) Sponsorship
( ) Others, pls. specify ________________________________________
If no, why?
( ) Lack of budgetary finance
( ) Others, pls. specify _______________________________________
18. Do you counteract competitive advantage around price?
( ) Yes
( ) No
If yes, how?
( ) Offering senior citizen discounts
( ) Seasonal or special price (Christmas, special holidays)
( ) Discounts to regular customers
( ) Price flexibility
( ) Lesser price
( ) Others, pls. specify _____________________________________
If no, why? Pls. specify
_________________________________________________________________
19. What are some of the causes to price inflation in all restaurants?
( ) Increase in restaurant labor costs
( ) Government demand for salary increase of employees
( ) Land and construction costs
( ) Rentals
( ) Others, pls. specify _____________________________________________
Competitive Advantage of Restaurants in Baguio City / Jay B. Veloso. 2007
47
20. How do you make the business easily accessible and available to target
customers?
( ) Good ambience and spacious dining
( ) Romantic and intimate atmosphere
( ) Language proficiency of staff
( ) Availability of parking area
( ) Others, pls. specify ______________________________________________
21. Do you think your restaurant have unique or special qualities?
( ) Yes
( ) No
If yes, what are they?
( ) Focus on one specialty food/unique food/ethnic food
( ) Design of the building coincides with the products and services
( ) Fast and clean service
( ) Satisfying service
( ) Others, pls. specify _________________________________________
22. What are some of the factors you have implemented that made you stay in the
competition?
( ) Strict and disciplined management
( ) Avoiding bad image and reputation
( ) Proper assessment of complaints
( ) Others, pls. specify _____________________________________________
23. In general, what aspect do you focus competitive advantage?
( ) Unique product or service
( ) Geographical location
( ) Industry specialization
24. If you include industry specialization as form of your competition, what are the
factors you considered to attain advantage?
( ) Who are the potential customers
( ) What are their preferences (what are the products they usually consume)
( ) What are their educations, ethnic/culture do they share
( ) Others, pls. specify __________________________________________
25. Finally what are the factors that affect the performance of your restaurants?
( ) Technology problems
( ) Traffic patterns or volume of competitors
( ) Political condition
( ) Marketing conditions
( ) Others, pls. specify ______________________________________
THANK YOU VERY MUCH AND GOD BLESS!!!!!!!!!!
Competitive Advantage of Restaurants in Baguio City / Jay B. Veloso. 2007
Document Outline
- Competitive Advantage of Restaurants inBaguio City
- BIBLIOGRAPHY
- ABSTRACT
- TABLE OF CONTENTS
- INTRODUCTION
- Rationale of the Study
- Statement of the Problem
- Objectives of the Study
- Importance of the Study
- Scope and Delimitation
- REVIEW OF LITERATURE
- Competitive Advantage
- Competitive Advantage Using Market Differentiators
- Six Differentiators that Build a Competitive Advantage
- Building Sustainable Competitive Advantage
- METHODOLOGY
- RESULT AND DISCCUSSION
- Profile and Classification of the Respondents
- Mode of Services the Restaurant Offers
- Respondents Advantages from Other Restaurants
- Ways Considered in Identifying Competitors
- Status of Competitors
- Action Plan of the Respondentsafter Identifying Competitors
- Strategies Implemented by Respondentsafter Identifying Competitors
- Factors to Consider in HumanResource Management
- Pricing Method Adopted by Respondents
- Purpose in Engaging Restaurant Business
- Technology Adoption
- Impact of Fast-Food Centers and Solutions toCounteract Impact at SM City Baguio toOutside Restaurants
- Business Promotion Strategies
- Competitive Advantage on Price
- Special Qualities /Uniquenessof the Restaurants by Respondents
- Factors Considered to Stay inthe Competition
- Aspect in Focusing CompetitiveAdvantage
- Factors Considered in IndustrySpecialization as Form of Competition
- Factors that Affect the Performance of the Restaurants
- SUMMARY CONCLUSION AND RECOMMENDATION
- Summary
- Conclusions
- Recommendations
- LITERATURE CITED
- APPENDICES
- APPENDIX A
- APPENDIX B (Survey Questionnaire)