Competitive Advantage and Value Chain Analysis

Today, in the businesses, a new landscape is characterized by the turbulent environment, which is competitive and dynamic. Firms and organizations of this century face more challenges and obstacles as compared to earlier times due to the outcomes of technological revolution, hyper competition, as well as, globalization. There is a constant pressure on the business managers and owners to find the competent solutions for keeping their firms efficient and effective (Bustinza, Bigdeli, Baines, & Elliot, 2015). Especially in the food and beverage industries, it has been seen that the globalization has pushed these organizations towards a very difficult and challenging objective, which includes increasing the range of fresher, newer, and higher quality items with a marvelous service level guarantee to the costumers with increasing unpredictability in purchasing behavior. This, in turn, forces the food and beverage industries to have a quick adapt of the supply strategies, as well as, configurations towards the unstable conditions of the market, and to  have a  continuous innovation strategy in the context of the socio-technological sector (Chakravorti, 2009). Due to the increasing competition and globalization, there is a requirement for the organizations to develop certain strategies that could promote the competitive advantage, as well as, its sustainability above the other rival firms. In this competitive and dynamic environment, acquiring or possessing the competitive advantage is the fundamental objective for the organizations. Hence, the strategic tool of value chain framework has been adopted for achieving the competitive advantage by various food and beverage industries (Fearne, Garcia Martinez, & Dent, 2012).

Competitive Advantage and Value Chain Analysis

The Concept of Competitive Advantage and Value Chain:

A competitive advantage can be defined as an advantage over the competitors that are achieved by offering greater values to the consumers, either through lowering their prices or through the provision of greater services and benefits, which justifies their higher prices. The competitive advantage exists when the organization is able to provide and deliver the profits to the consumers same as of competitors but provide it at a lower price or deliver the benefits, which exceeds the benefits of the competing products (Johansson & Newman, 2010). Hence, the competitive advantage comes in force over the competitors of the company when the company is able to exceed the average of the outcome with the similar product line. Therefore, the gist of the competitive advantage is the big concern for the firms to understand and how they will be delivering their products or services in the market. In Food and beverage sector, the competitors to attract  new customers may cause a reduction in their prices can introduce new substitutes or products, and can also increase the efforts for marketing. On the other hand, value chain can be defined as a set of various activities that are carried by an organization for creating value for their consumers (Hanifah & Mohamed, 2011). The manner by which these activities are performed and carried out determines the costs of the organization and affects its profits. Hence, the concept of value chain helps the organization to understand various sources of value that are beneficial for the organization. In food and beverage sectors, the value chain is mainly the network of various stakeholders that are engaged in the growing, processing, as well as, selling of the food, which  consumers eat starting from the farm and up to the table. Hence, value chain can also be defined as a linear map consisting of various ways by which the value is being added through the process of supply chain management from the raw materials towards the finished product that is being delivered and that involves services after delivery (Grigorescu, 2015).

Competitive Nature of the Sydney Food and Beverage Industry:

The food and beverage industry involve businesses employed in the manufacturing, as well as, packaging of the food products and beverages from the raw materials to the finished products that are fit for consumption. Moreover, this sector also involves the manufacturing of the food packaging equipment and products. The industry supplies a diverse range of products to all distribution channels: retail, food service and food ingredients (“Food Processing and Beverages”, 2016). Flexibility in the organization indicates that the product supply rapidly matches the trends of the consumers like wellbeing and healthy, value for money, and convenience. Food and beverage industry are one of the major business areas of the economy of the Australia, in term of its employment and financial contribution. The processing of food products and beverages are largest manufacturing area in Australia. The food and beverage industry are dynamically driven by the demands of the customers who seeks diversity, value, and quality. The Australia’s cultural and ethnic diversity is reflected and can be seen in the food range that is available. Several specialty products show influences of  Asia, Europe, and Middle Eastern countries. Further, the food processing and beverage industry symbolize the strongest and major manufacturing area in the Greater Western Sydney (GWS). The food and beverage sector in the North South Wales has a turnover of more than $22 billion every year and employs more than 50,000 people. In GWS, the industry significantly benefits from the outcome of the agricultural sector located in the rural area of the NSW and have direct access to the market, which is the largest consumer market in the country, i.e., Sydney (“Food Processing and Beverages”, 2016). Moreover, extensive transport connections also provide the country’s critical access to the international and interstate markets. Primarily, the sector in the Greater Western Sydney includes companies involved in the manufacturing of food products and beverages for the local markets, as well as, national distribution. While, the international market at present represents a small component but the growing element of the sector (“Food and Beverage – Austrade’s industry capability information – Austrade”, 2016). Further, Greater Western Sydney is home to various successful food and beverage industries in Australia that ranges from the smaller niche manufacturing units to the national corporates. It is also a home to various world’s largest multinationals including the manufacturing of food products and beverages under the name of the recognizable brands globally. The industries in GWS is involved in the manufacturing of  some of the biggest brands of the beverages of Australia. Major operations consist of the production of various alcoholic beverages that also includes wine, beer, and spirits, and also the manufacturing of the fruit juices, soft drinks, and milk processing. Moreover, the food packaging area also represents a vital component of the food and beverage area in GWS with industries involved in the manufacturing of machinery, plastic, glass, paper, and aluminum packaging elements. The companies in GWS also involves the distribution of their products to the wholesalers, as well as, customers. The Asian market symbolizes the significant opportunities for the growth of food and beverage industries in Greater Western Sydney. The more educationist customers and less protectionist market is increasing fastly in Asia and is becoming more available towards the imports of the food products, with GWS ideally situated to provide the opportunities for the export. Major units of food & beverage industries and businesses that are currently situated in GWS involves Blacktown, Huntingwood, Chullora, Penrith, Lidcombe, Silverwater, Wetherill Park, and Smithfield. Moreover, it has been observed that the significant opportunities are emerging for the development and expansion of the food and beverage businesses in GWS (“Food Processing and Beverages”, 2016).

The Concept of Competitive Advantage in Australia:

 The food and beverage sectors, fresh products and grocery manufacturing industries are worth $114 billion contributing towards the economy of the Australia. It is the Australia’s largest manufacturing business and is about four times larger as compared to the manufacturing industry of automotive parts. The food and beverage companies employ about 300,000 people, which represents around 2.6 per cent of the Australia’s total employed people. Due to the increasing competition in the food and beverage industries, there are various companies and restaurants that are including the concept of competitive advantage to compete with their competitors and have a good name in the market. For instance, Lion Nathan and Fosters is observed to have a large number of competitive advantages in comparison to other beverage companies in the market. Lion Nathan is capable of attracting a huge mass of people due to its excellent and effective broad base portfolio. The value chain activities involved in Lion Nathan business is the broad range or varieties of alcoholic beverages. The main focus of the firm is innovation and find different ways to expand and grow their business. The massive portfolio of Lion Nathan satisfies almost all the demands and needs of the consumers. For instance, its new innovation of low-carb alcohol has attracted a large number of individuals and led to the increased consumption of their beverages. Italian beer that was also launched by Lion Nathan was successful in snatching away the consumers of Coca-Cola Amatil’s Peroni brand. Hence, its strategy of meeting the high demands of the customers have made it gain competitive strength (Kirkegaard, 2011). Moreover, there are various upcoming restaurants that work on the concept of the value chain to attain the competitive advantage in comparison to the other competing restaurants. One such example can be observed in Bennelong restaurant. The Bennelong restaurant attracts the customers by focusing on providing different dining experiences. The concept of the value chain by Bennelong restaurant takes advantage of its multi-level layout via presenting various options for customers for dining purposes, which includes The Restaurant, The Bar and the kitchen that offers an experience of an exclusive chef table, as well as, Cured & Cultured. These various dining options are designed so that there is the provision of flexibility and accessibility to the customers while dining at their restaurant. The concept of theirs has attracted various customers and provided a competitive advantage to them in comparison to other restaurants (“Dining”, 2016). Number one bar and restaurant has also used some value chain activities for attracting the customers. The idea of offering the modern cuisine of Australia with some European influences has been an asset to the firm. Moreover, the location of the restaurant provides the picturesque view to the guests while preparation of the foods in an open kitchen. This concept of theirs have attracted the customers and somehow provided the competitive advantage (“Number One Restaurant and Bar”, 2016).  The other example can be considered of the beverage company Coca-Cola that experiences competitive advantage over other companies. The value chain activities that are being adopted by Coca Cola includes consumer marketing that involves designing of market investments for enhancing consumer awareness, as well as, increases consumers’  preferences for Coca-Cola brands. It develops precise customers’ communications and includes feedbacks from the consumers. The central value chain activity that has led to the competitive advantage of the Coca-Cola company is the addition of the customer service. It is such an important activity to be used as a competitive weapon as it allows Coca-Cola for creating value immediately before the eyes of the consumers (Elmore, 2013).

Menu Engineering:

The other concept that is being used by the food and beverage industries is the concept of menu engineering. Menu engineering can be defined as the study of the popularity and profitability of menu items and the way in which these two factors can influence and affect the placement of the menu items on the menu card. In short, the goal of the menu engineering is simple, which is increasing the profitability per guest. While the concept of menu engineering is mostly mentioned in respect to the restaurant’s traditional paper menus, but these concepts are very well applicable to the menus that are posted online, written on boards, drink menus, and on table tents (Raab, Mayer, & Shoemaker, 2009). Menu engineering is the concept that provides the manager of the organization the information about the popularity and profitability of the item on the menu so that there is a proactive planning, design of recipes, as well as, decision regarding customer pricing can be formulated. Hence, menu engineering can not be considered as a substitute for food rotation, standard recipes, proper purchasing, or any of the basic controls of the kitchen, which can have the negative impact on the costs of the organization. Instead, menu engineering is a method by which one can do an evaluation of every item that is placed on the menu card in relation to its contribution towards the bottom line dollars in the current situation, thereby allowing recognition of the items by the managers they want to trade (Kwong, 2005). The process of menu engineering includes four different steps that consist of costing the menu, categorizing the items on the menu according to their popularity and profitability levels, designing the menu, and testing the new design of the menu.  Costing a menu can be defined as a process of splitting or breaking down the items on the menu into its single ingredients, as well as, determining the exact cost of creating each of the items. While categorizing the items on the menu on the basis of their popularity and profitability levels includes three steps, which are splitting the menu into sections and categories, placing of the menu items, and determining the fate of every item placed on the menu. The third step is the designing of the menu, which is very important in the restaurants and food delivery businesses (Gil, Berenguer, & Ruiz, 2009). The design process basically includes highlighting of the products and items on the menu that the firm wants to trade the most, for instance, use of visual cues for highlighting the items (Kwong, 2005). Moreover, various firms use photographs on their menu as visual cues and research have shown that the use of photographs can increase the sale of the product or item on the menu. While others use the description of their items like addressing the ingredients being used in the preparation of the food items and also using some evocative text that attracts the guest’s interest in the particular dish (Smith, 2015). The last step of the menu engineering involves the testing of the design of the menus as the menu is the thing that each customer will visualize, hence, it is always an area for profit improvement (Kwong, 2005). For instance, re-plating or re-naming the menu item to enhance its appearance or to make it sound more appealing and attractive is also used as an another alternative by the restaurants. Hence, menu engineering is the process of re-engineering the item on the menu for reducing its cost but not sacrificing its popularity, which can, for instance, can be achieved by substituting a relatively expensive element or ingredient with the one that is cheap in its price (Thomas, 2015).

Conclusion

The concept of competitive advantage for the organization does not just means surpassing or matching what other competitors can perform, but also discovering the needs and wishes of the and then satisfying their needs profitability, and even exceeding the expectations of the customers (Sigalas & Pekka Economou, 2013). As barriers to the international and interregional trade have decreased in the  present era and there is growth in the access of services and goods, consumers can locate, as well as, acquire what they want in the best and at a genuine or acceptable price. Hence, under growing competition and increasing expectations of the customers, an organization’s penalty for complacency can even become greater (Smith, 2011). Therefore, a strategic tool that can be used to measure the needs and importance of the perceived values of the customers is an analysis of value chain. By allowing organizations to determine their strategic disadvantages and advantages of their activities, as well as, value-creating systems and procedures in the market, the analysis of the value chain has become an important tool for the assessment of the competitive advantage (Sigalas, 2015).

References

Bustinza, O., Bigdeli, A., Baines, T., & Elliot, C. (2015). Servitization and Competitive Advantage: The Importance of Organizational Structure and Value Chain Position. Research-Technology Management, 58(5), 53-60.

Chakravorti, S. (2009). Extending Customer Relationship Management to Value Chain Partners for Competitive Advantage. Journal Of Relationship Marketing, 8(4), 299-312.

Dining. (2016). Bennelong restaurant. Retrieved 4 September 2016, from http://www.bennelong.com.au/dining

Elmore, B. (2013). Citizen Coke: An Environmental and Political History of the Coca-Cola Company.Enterprise And Society, 14(4), 717-731.

Fearne, A., Garcia Martinez, M., & Dent, B. (2012). Dimensions of sustainable value chains: implications for value chain analysis. Supply Chain Management: An International Journal, 17(6), 575-581.

Food and Beverage – Austrade’s industry capability information – Austrade. (2016). Austrade.gov.au. Retrieved 4 September 2016, from https://www.austrade.gov.au/International/Buy/Australian-industry-capabilities/food-and-beverage

Food Processing and Beverages. (2016). http://www.rdasydney.org.au/. Retrieved 4 September 2016, from http://www.rdasydney.org.au/imagesDB/wysiwyg/FoodProcessingandBeverages.pdf

Gil, I., Berenguer, G., & Ruiz, M. (2009). Wine list engineering: categorization of food and beverage outlets. Int J Contemp Hospitality Mngt, 21(1), 69-84.

Grigorescu, I. (2015). Value Chain Analysis – Basic Element Of An Organization’s Competitive Advantage. International Conference KNOWLEDGE-BASED ORGANIZATION, 21(2).

Hanifah, M. & Mohamed, Z. (2011). Value configuration through value chain for competitive advantage. J. For Global Business Advancement, 4(4), 368.

Johansson, B. & Newman, M. (2010). Competitive advantage in the ERP system’s value-chain and its influence on future development. Enterprise Information Systems, 4(1), 79-93.

Kirkegaard, M. (2011). Killing beer softly… | Australian Brews News. Brewsnews.com.au. Retrieved 4 September 2016, from http://www.brewsnews.com.au/2011/02/killing-beer-softly/

Kwong, L. (2005). The application of menu engineering and design in Asian restaurants. International Journal Of Hospitality Management, 24(1), 91-106.

Mihiotis, A., Mylonakis, J., & Ntalakas, G. (2007). Value Chain Analysis: an ECR tool for assessing business competitive advantage. IJMP, 2(3), 240.

Number One Restaurant and Bar. (2016). Racv.com.au. Retrieved 4 September 2016, from http://www.racv.com.au/wps/wcm/connect/racv/Resorts/RACV+Resorts/RACV-Torquay-Resort/dining-and-bars/Number+One

Raab, C., Mayer, K., & Shoemaker, S. (2009). Menu Engineering Using Activity-Based Costing: An Exploratory Study Using a Profit Factor Comparison Approach. Journal Of Hospitality & Tourism Research, 34(2), 204-224.

Sigalas, C. (2015). Competitive advantage: the known unknown concept. Management Decision, 53(9), 2004-2016.

Sigalas, C. & Pekka Economou, V. (2013). Revisiting the concept of competitive advantage. Journal Of Strategy And Mgt, 6(1), 61-80.

Smith, A. (2011). Managing supply chain complexities and integration issues for competitive advantage: a comparative analysis. International Journal Of Logistics Systems And Management,9(3), 351.

Smith, M. (2015). What’s on the Menu for an Equitable Approach to Nutrition Labelling in Restaurants?. Public Health Ethics, 8(1), 98-102.

Thomas, E. (2015). Food for thought: obstacles to menu labelling in restaurants and cafeterias. Public Health Nutr., 19(12), 2185-2189.

 

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