Competitive Strategies in UK Fast Food Industry

In last decade much has been discussed about the customer orientation, customer value management (CVM), customer relationship management (CRM), Customer Lifetime Value (CLV) metrics, Customer Centric organization models, customer retention, customer care & many more with a new theory added each time with word ‘customer’ preceding to it. But to the fact how many companies incorporate these concepts, how far they’ve been successful, if so why do we still see a major shift in the needs and wants of the customers is puzzling many researchers today. What a company thinks as a market or value proposition is often misunderstood by customer and responds in completely different fashion. What is the reason for this?

When a company looks at various products and values derived from it whereas customer is looking at satisfaction. The basic question is does all the strategy, innovative product features, add ons and value creation lead to ultimate customer satisfaction? All of this may seem a little contradictory. For better understanding let’s take an example of fast food company, these Companies are roll out a new product every now & then offering more value, in their perspective. The key point is why the customer switches over to different fast food company products or packages so often, if the products are offering value. The point to be noted is that more value propositions are being rolled out without looking at the very basic concept i.e. whether the value proposed gives satisfaction to the customers. If it is not, then it is not at all valuable. The customer is buying satisfaction. Highest value is derived when the customer is fully satisfied with his purchase. This highlights the importance of value creation for customers termed as customer value. The main purpose of this research is to understand how this customer value forms the basis in formulating the competitive strategies across various industries. Some common myths in Value Creation

‘ More is often considered value

Buy one get one free schemes are rolled out. There is of course an instant sales push. However at the end of the scheme the customer feels that he had all along been paying 100% more for the products and perceives that very product as costly once the scheme is withdrawn. May switch to another product at the same price.

Conclusion: Dissatisfaction leads to value erosion

Myth # 2 Price is value

Many business considers lower price as offering more value. More often than not lowest price products end up as the second best with a higher priced product with similar product attributes leading the market. The simple reason is the higher price product may be offering a higher satisfaction due to perceived values and imagery. Car markets are a prime example of this syndrome.

Myth # 3 More Features or add ons are value

Businesses load a product or service with more features thus offering a higher value. While this may be attractive if the features are not backed by adequate supports the satisfaction may be less and value is reduced.

We encounter this everyday. A customer buys a product with many features but not demonstrated properly or may not be serviced properly. Enquiries may not be handled effectively. Airlines offereing add ons like free overnite accomodation are still not favored if the services, like enquiry handling, reservations, and time schedules are poor. Cell phones companies may be offering plenty of add ons like national roaming or free incoming calls etc. However if the billing is poor and billing enquiries are not addressed properly the customer is dissatisfied and leaves the service for another provider.

1.1 Aims and Objectives of the project.

In this research study, the aim is to identify and describe the attributes of superior customer value & how its form an important basis in building competitive strategies in UK Fast food industry. Usually these attributes of superior customer value are a complete combination of Product quality, service quality, and price (PQ,SQ,PR). From the view of consumer’s perspective, PQ,SQ,PR is better understood as superior customer value with the resulting experiences about the various goods or services provided by the UK fast food companies. These values of PQ,SQ,PR have been embedded in the brand image, which has the potential to affect the buying decision of the customer. It is often said that consumers are always looking for satisfaction in the form of PQ,SQ,PR attributes and brand image that drives them in their purchase making-decision. In UK, most of the fast food companies have their priority over their customer’s satisfaction in their organisation’s guidelines and having their success vision behind the concept of marketing. There are always implications that these UK fast food companies have to try to adopt the concept of marketing via these PQ,SQ,PR attributes, to formulate successful business strategies in order to outperform their competitors in this competent world of fast food industry in UK.

1.2 Research Methodology

In this era of competitive world, creating a profitable value in the minds of the customers is tedious task and requires a lot of information. Among the wide variety of goods and services the customer’s perception of values can be quite subjective varying with the brand equity. Common knowledge of attributes and how these contribute values is not sufficient, rather important data must be gathered and analysed so as to provide enough information for the managers to make important marketing decisions.

This research provides the required skill and knowledge for the managers helping them in solving various problems and facing various challenges in this competitive era of the fast food industry. This knowledge may also be used in formulating new business strategies. Literature will be collected from selected areas of research for the purpose of evaluation. The research must be able to evaluate and clarify this literature to provide a theoretical and methodological base for the research.

Information is gathered from the two separate groups of respondent in order to analyse the respondent’s attitude from consumer’s and company’s perspective respectively.

The PQ,SQ,PR is analysed in the context of resulting experience and branding from consumer’s perspective that fast food companies must design in order to formulate competitive strategies in the era of challenging landscape of fast food in UK. The objectives of the study shall also assist the fast food companies to understand better the branding, consumer’s experiences and preferences towards their products and services. The purpose of the research projects will have the following area of interests.

a) To determine what are the important attributes of superior customer values that the fast food company must develop to meet the customer’s expectation.

b) To describe how these customer values designed by the companies influence the customer buying decision in the context of customer’s resulting experience and the branding.

c) To analyse if the UK fast food companies understand the importance of building strategic customer values through marketing concept i.e. understand marketing orientation approach of building strategies and practice them.

The research design will be carefully planned and structured for easy understanding, care will be taken to ensure the accuracy of the findings since, the basic purpose is to provide information regarding specific hypothesis. Firstly, research will collect various data about the customer expectations, opinions and attitudes. Precautionary measures will be taken on the all the weak points in the method of approach. In the first step of analysis, a detailed summary of the various characteristics of the respondent will be observed and analysed carefully. Later, this statistical data will be used for the reasoning of the proposed hypothesis using the evidence found sample of population studied. This is mainly to ensure the accuracy of the proposed hypothesis.

Specifically, the purpose of this research is not guarantee the success of Strategies formulated by UK fast-food companies using the gathered knowledge, but only to decrease the uncertainty in decision making process and increase the probability of success. However this research will be carried in a organised & analytical manner to achieve the above certainty. For this KFC is a selected organisation considered for this research. The findings of this research shall then lead to a better understanding of superior consumer value that act as a base in formulating competitive strategies in UK fast food industry

1.3 UK fast food Industry ‘ A brief Outlook

There are varieties of elements in the UK’s retail catering industry but fast food is perhaps the most prominent, most dynamic and the most rapidly growing industry. Though there are number of variations in the specific methods adopted by various fast food operators a number of general defining characteristics can be identified in common like drive thru service, meal deal packages, etc. Fast food restaurants offer a simple and fairly restricted menu within a carefully controlled operating system. Usually burgers, fried chicken, fries serve the main course. Typically ice creams and the drinks like milk shakes, fizzy drinks and tea and coffee are also included in the menu. Customers queue up to be served at a counter, the aim being to serve a large number of people with the minimum of waiting time and most operators look to serve customers within three minutes of their entry onto the premises. The food is sold in disposable packaging without cutlery. Some operators offer facilities for customers to consume their food on the premises while others tend to cater more for the take-away trade.

The fast food revolution essentially began in the US during the 1950’s and this style of catering grew immensely and spread to rest of the world in the decades since then.

US companies played major role in the development of fast food operations in the UK. Though McDonalds are now the market leaders and major player in this sector it was KFC (formerly Kentucky Fried Chicken) who were the pioneers in the field. KFC’s first fast foodoutlet was launched in 1965 at Preston. Following KFC’s introduction of the fast food concept into the UK in the mid 1960’s it was well over a decade later before the fast food revolution began to take off. The first McDonalds restaurant in the UK was opened in Woolwich in South London in 1974 and a decade later the company were trading from over 120 franchised restaurants and they had spread out from their initial base in and around Greater London to the Midlands and the North West of England. A number of other, then US based, companies including Burger King, Wendy’s and Pizza Hut followed McDonalds into the UK market in the late 1970’s but none were initially able to keep pace with McDonalds’ rapid expansion. During this period a number of UK based companies including Wimpy, Casey Jones, Mr. Big, Spud-U-Like and Oliver’s also entered this growing new sector of the retail catering trade. During the 1980’s and 1990’s the larger more successful chains like McDonalds, Burger King and KFC continued to grow rapidly and to expand their geographical coverage to, and within, all urban and some rural districts while some smaller operators disappeared from the map.

1.4 KFC ‘ organisational background

KFC is a division of Tricon Global Restaurants, which was later taken up by Yum brands Inc. This company has around 11,000 outlets in 80 different countries with over 290,000 employees selling around 2 billion meals annually to generate sales of $9 billion worldwide. Within the United Kingdom, KFC has around 500 outlets and among these 80% of them are being franchised. The KFC brand is lifetime achievement of a great personality of now deceased ‘founder’ Colonel Sanders who promoted the company’s wide variety of chicken products via a range of advertising methods like media, store advertising, etc. KFC claims to use only whole chicken other than the reformed or processed products. The chicken is cooked using the ‘Colonel Sanders secret recipe of 11 herbs and spices’ and is prepared freshly in the store. The specific nature of the chicken product range has varied over time but the company’s menu currently includes Original Recipe Chicken, Extra Tasty Crispy Chicken, Chicken Burgers, Crispy Strips and Chicken Wraps. These products can be ordered with fries and drinks as part of a standard or bucket meal.

2.0 literature review

As suggested by Alan et al (2003), this literature review shall help me in the following manners:

1 To find what is already a known literature in connection to the research areas so as not to re-discover everything.

2 Moreover existing literature researchers’ important findings can be crucially observed and analysed and if any mistakes are to be found can be easily discarded.

3 To gain insight into the various theoretical and methodological approaches to my research.

4 To find various possible variables that might not otherwise have a possible application

5 The detailed analysis my findings will be further supported with wide reading of literature review.

2. Superior Customer value

The history of the customer value dates back to ancient times under the practices of trade and commerce known as barter system. wherein the buyers agrees to trade in , only if the sellers offer i.e. goods to be exchanged are of fair or better value and equal to the trading goods or services. Thereby we can define ‘value’ as satisfaction of the customer needs and requirements at lowest total cost of acquisition, ownership, and use. Value is the consumer’s overall assessment of the utility of a product based on perceptions of what is received and what is given. (Zeithaml 1988, p. 14) Value in business markets is the perceived worth in monetary units of the set of economic, technical, service and social benefits received by a customer firm in exchange for the price paid for a product, taking into consideration the available suppliers’ offerings and prices. (Anderson et al 1993, p. 5) Buyers’ perceptions of value represent a trade-off between the quality or benefits they perceive in the product relative to the sacrifice they perceive by pay- ing the price. (Monroe I990, p. 46) Customer value is market perceived quality adjusted for the relative price of your product. (Gale 1994, p. xiv) .customer value means the emotional bond established between a customer and a producer after the customer has used a salient product or service produced by that supplier and found the product to provide an added value. (Butz and Goodstein 1996, p. 63)

‘Superior customer value can be better understood as means of creating business experiences which exceed customer expectations'(Art & William, 2004). According to him superior customer value means continually creating business experiences that exceed customer expectations & designing and delivering this value is the key to successful business strategy in 21st century. As quoted by Philip Kotler (2000), total customer value is the package of benefits customers expect from a given product or services. Therefore, to understand the true meaning of superior customer values, the concentration must be on the various customer experiences over attributes of the product or services provided by the company. Colin & John (2002) explained customer experience as ‘If you take all of the different aspects of a commoditised world then everything is pretty similar: similar products, similar people, similar technology, and similar pricing. The differences are in the brand, the perception, and the feel of a company, all of which are delivered through the customer experience. It’s the customer experience that will differentiate a company’. According to R.R. Woodruff (1997) delivering this customer value raises many difficult questions such as

(1) What exactly do customers value?

(2) Of all the things customers value, on which ones should we focus to achieve advantage?

(3) How well do customers think we deliver that value?

(4) How will what customer’s value change in the future?

Here comes the task of managers as how they deliver this value, using what processes and methods can this customer value be efficiently delivered.

2.1 The Importance of Customer Value

According to art & william (2004) Customer value is combination of four core components namely service, quality, image and price altogether an approach known as the S-Q-I-P approach. These are also known as customer value triads which provide a basis for competitive business strategies. Huber et al (2001) states that many marketing strategists and economists emphasize that creation of superior customer value plays an important role in ensuring company are success. A clear understanding of the concept of value becomes essential for the success of value-based strategies (Woodruff, 1997). Indeed, superior value of products/services delivered to customers leads to customer loyalty, the real driver of financial performance ( Reichheld et al., 2000)

According to Azaddin (2004) loyalty and profits are strongly linked to value created for customers. Customers are loyal to a company as long as it offers them superior value compared to its competitors.

According to Art & William (2004) most of the firms today have positioned themselves under the S-Q-I-P approach with an objective of differentiating themselves from their competitors & also have given importance in meeting acceptable threshold levels with respect to the products quality, services quality and pricing attribute. A said by him designing and delivering superior customer value propels organisations to market leadership positions in highly competitive global field.

Philip Kotler (2000) expressed that the firms that won the customer loyalty are perceived to offer highest customer delivered value. In this context, total customer value is a combination of benefits customers expect from a given products or services. According, Robert and Sue (2003) customer values are categorized in two ways i.e. effectiveness and efficiency. When the products & services offered satisfy the needs of the customers then the value are said to be effectively delivered. The less is the cost more is the satisfaction of the customer that can be achieved efficiently.

2.2 Customer value ‘ a source of competitive advantage

According to woodruff (1997) in today’s competitive era, quality may no longer offer competitive advantage. It is customer value that gives a competitive advantage & how this customer value can be delivered efficiently forms the crucial part. He stated that adopting a customer value delivery orientation requires organizations to learn extensively about their markets and target customers. Deciding how to compete on superior customer value delivery raises difficult questions, such as the following:

(1) What exactly do customer’s value?

(2) Of all the things customers value, on which ones should we focus to achieve advantage?

(3) How well do customers think we deliver that value?

(4) How will what customer’s value change in the future?

According to sharma (1994) many researchers have argued on fact that there are differences in what managers think customers’ value and what customers say they value & these gaps can form the potential sources of mistakes for the organisations in delivering customer value. Customers tend to think differently when buying a product and using it which is well explained by Woodruff (1997) that Customers learn to think concretely about value in the form of preferred attributes, attribute performances, and conse- quences from using a product in a use situation. A customer forms a evaluative or predictive opinion during the value experience of a product i.e. customers may predict a received value, but during use they actually experience received value.

2.3 Defining Value Proposition from Firm Perspective

Michael J. Lanning, the chairman, the DPV Group, LLC stated that value proposition is a decision and commitment of resulting experiences, including price, to a group of target customers, profitably and better than competitors. Frederick Webster (1994) explained that value proposition is a verbal statement that matches up the firm’s distinctive competencies with the needs and preferences of a carefully designed set of potential customers. He also explained that the description of value proposition created by the firm’s needs to be clear, concise, and credible and consistence over time and has to be communicated and shared between the firm and its customers.

Since the customers have a better say on the true value criteria, every firm must ensure that the value proposition is positioned effectively as the value proposition takes into consideration the interpretation of value of customers’. Art & William (2004) explained that this S-Q-I-P approach not only provides the basis of an organisation’s value proposition but also establishes a solid business philosophy for the organisation. It guides all strategic decisions, and ultimately affects business performance. The uniqueness of articulation of core and augmented value proposition gives a memorable message to be successful. As most of the firms compete based on their own identities and their potentials, value proposition ingredients needs to be carefully analysed

Dave Brock, the President of Partners In EXCELLENCE relates superior customer value with value proposition. To define and communicate value proposition, the firms must focus on the following issues.

‘ The customer must have a need and without any needs to buy a product or services, the customer values can never exist.

‘ Value is described as the difference between the perceived benefits and consequences of selecting a solution or needs.

‘ To differentiate, your value proposition must be perceived by the customer as superior to every alternative available in the market.

Thus, it is imperative to understand that the value proposition is in the ‘eyes’ of the customers not the product. It has to be customised to the specific needs of each customer.

2.4 Quality Attributes

Quality has been recognised by companies as a major ingredient in a customer’s choice of products and service and hence it is important to have a working definition of quality if the customer has to enjoy a consistent high standard of goods and services. The official definition of quality by American National Standards Institute and the American Society for quality Control is the ‘totality of features and characteristics of a product or services that bears on its ability to satisfy given needs’.

2.41 Consumer’s Perspective about quality.

It is important to understand how the customer defines quality that delivers the best values as customer has the perceptions of which firms are producing better quality than others, and they choose to purchase accordingly. According to W.Edwards Deming, the customer is the most important part of the production line. Quality should always be aimed at the present and the Future needs of the customer. Since the customers possess different quality level of product or service with different quality expectation, a commonly definition of quality can be drawn. In other words quality is determined by what the customer wants and is willing to pay for.

‘A desire to purchase an attractive product would disappear by poor service and support’ (Colin and Graham, 1993). He also emphasised the importance of the need for decent combination of product and service quality. Sparks & Legault (1993) incorporated Garvin’s eight dimension of quality and applied them to the firm’ business cycle.

2.42 Dimension of Service Quality

In this competitive environment, the pursuit of service quality is considered by many organizations to be an essential element of their corporate strategy (Paradize-Tornow 1991). Service organizations are constantly searching for sources of competitive advantage, but as product quality rises and products become less distinguishable from one another, companies are seeking competitive advantage through the service elements of their product (Buttle 1999). Roberta & Bernard (2003) stated that the proportion of service quality differs from product quality. Colin & Graham (1993) mentioned that the definition of service quality is needed in managing of quality as quality would not sufficiently built superior customer values. In addition he also redefined that the Garvin eight dimension of product quality would not sufficiently built superior customer values. . Art & William (1999) cited that a user of services has a set of attributes or characteristics in mind when determining service quality. Service attributes are more directly related to time, and the interaction between employees and the customer. Evans & Lindsay (1996) identify the following dimensions of service quality.

1. Time and Timeliness: It is related to promptness of service. It is the time the customer is expected to wait for his turn to receive the service. To ensure customers’ needs are responded in time every firm must possesses dedicated employees to work extra mile.

2. Completeness: The service provider firm has to distinguish and understand the customers’ true needs rather than what is stated and constrained by the system and has to ensure that everything the customer requested is provided.

3. Courtesy: This refers to the kindness of service personnel and how employees treat customers.

4. Consistency: Expectation of services has to be consistent. There must be a certain level of consistency in the services provided to each customer each time.

5. Accessibility and convenience: The service must be easily accessed and conveniently located. The conventional convenient time to receive service and location of operation has becoming increasing important.

6. Accuracy and reliability: It involves consistency of performance and dependability. Each firm must perform the service right the first time and keeping to their promises. Any rescheduling of meetings with customers must be made only when absolute necessary.

Neil Botten& John (1999) have listed the following service elements in additional to the above service attributes

1. Competence: It means the knowledge of the Product and necessary skill to perform service and support tasks. In this way, customer confidence is enhanced by experienced and knowledgeable staff especially the operational supported personnel.

2. Credibility: It involves in believability, trustworthiness and honesty of customer contact personnel that work towards the customer’s best interests. It contributes to credibility of company name and reputation.

3. Understanding the Customer: It means attempting to know the customer’s need and making the customers feel in control. In this aspect, the firm must recognise the regular customer understand the customer’s specific requirements, rendering individualised attraction.

4. Tangibles: It includes physical evidence of the services. This includes the appearance and quality of facilities provided. For example, a conformable car showroom with friendly sales executives ready to serve the waiting customers.

2.43 Managing Service Quality

It is a common assertion among management and marketing theorists that customer service quality is essential to business success (Kristensen et al., 1992). Firms providing this superior service quality, measured by customer satisfaction also experience higher economic returns than those of competitors, even though they are not so service oriented (Aaker and Jacobson, 1994; Bolton, 1998). Satis?ed customers are center to the longterm success of business, and the bondage between customer satisfaction and customer behaviour has been well documented in marketing literature.. In this study, there has been a broadened definition of service quality to derive the superior customer value that customers seek for. It is more complex to define quality for services than for products in view of its intangible and variable nature of service characteristics.

Parasuraman (1990) and his colleagues explained that service quality is a comparison of what a consumer feels a service provider should offer against their perception of what the service provider actually can offer. They related service quality as a measure between service perceptions as well as expectations. Therefore, to provide superior customer service, the firm must ensure that the service offered meets or exceed customers’ expectation.

2.44 Strategic Implications of Quality

We have emphasized previously on the entire product and service characteristics that are considered to be an important customer value trait to built and deliver a superior customer value. These attributes of quality must be incorporated into the design of the product that results in the products and service consumers’ want and having quality they expect. Why is then so significant of quality in the formulation of strategy?

John Beckford (1988, p.11) has highlighted from the citation of Jiang Zemin, President, Peoples Republic of China, 1996 ‘focus on quality, not quantity’. He further pointed that China is treating quality not just as an organisational issue but also as a national one though they are the world’s largest emerging economy consisting of 1.2 billion potential consumers. Such a position supplements a message that all organisations, which want to survive and succeed, must take quality seriously. Pursuit of quality must be considered as a winning strategy dimension tool. In the context of strategic management, firstly, the process for formulating strategy must display quality characteristics in that the business strategic planning itself must be correctly designed and implemented. Secondly, the impact of the choice to pursue quality fits with the generic strategy of differentiation. Thirdly, the pursuit of quality has an impact on strategic decisions because it may generate changes in consumer behaviour. This in turn may fulfil the changing expectations of customers by eliminating the need to establish additional facilities or new distribution channels. Roberta & Bernard (2003) cited that firms in which quality drives their competitive strategy have certain common characteristics. They concentrate on customer satisfaction through quality by following a clear strategic goal, vision, or mission. For example, Motorola’s company objective of ‘Total Customer Satisfaction’ reflects their commitment to customer satisfaction and quality as par of their overall strategy and vision. On the other hand, quality must be inherent throughout the organisation in order for it to survive and Commitment of employees and strong leadership are also the key to successfully integrating quality into a company’s strategic plan.

2.5 Price Attribute

Art & William (1999) quoted ‘Price is what you pay. Value is what you get.’ (Warren Buffett, CEO, Berkshire Hathaway).

2.51 Communicating Value through Price

Price varies substantially according to whose perspective we are taking from. To the firm, price is used to signal value for their products or services, to differentiate their offer from those of the competitors, and also shift consumer demand. To consumers, price generally reflecting how much they have to give up taking possession of the product or service. Price influences the perceived value. From the competitor’s point of view, price is used as benchmark to compete (e.g. as entry barrier in price war). Philip Klotler (2000) pointed out that many firms see buyer’s perception of value, not the sell

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