Germany’s food and beverage industry has undergone remarkable growth over the past decade (Germany Trade and Invest 2013). In 2011, the industry’s customer base was estimated to be 82 million. Between 2010 and 2011, the volume of domestic sales increased from EUR 109 billion to EUR 121.6 billion (Germany Trade and Invest 2013). It is projected that the global food and beverage industry will experience considerable growth due to increase in the number of consumers of food and beverage products (Germany Trade and Invest 2013). The German Food and Beverage industry is experiencing an increase in the intensity of competition, which is evidenced by the entry of both large and small sized entities. Some of the renowned brands operating in the industry include Vion Food Group, Dr. Oetker, Nestle, Kraft Foods, and Tchibo (Germany Trade and Invest 2013). The large number of customers and hence its profitability potential has made the industry lucrative hence increasing the degree of industry concentration. In 2011, there were about 6,000 firms operating in the industry (Germany Trade and Invest 2013).
‘s Baggers Restaurant is one of the firms operating in Germany’s food and beverage industry. Since its inception in 2007, ‘s Baggers has attained remarkable success due to its innovative approach such as integration of state-of-the- art technology, which has improved its operational efficiency. The technology is patented giving the firm a competitive edge by limiting duplication of the technology. Additionally, the firm offers customers high quality food and beverage products at a competitive price (Davis et al 2008).
Due to its commitment in innovation, Baggers might succeed in exploiting the prevailing market opportunities such as the projected growth in the global food and beverage industry due to the changing customer behaviour (Melia 2011). Amongst the notable trends include increase demand for convenience, and growing degree of consumer consciousness with reference to health and wellness (The Hartman Group 2015). These trends will play an important role in shaping the industry. It is therefore imperative for industry players to integrate effective operational practices in order to cope with the changing trends (Deloitte 2015). This paper entails a case study analysis of ‘s Baggers Restaurant, which operates in the Germany Food and Beverage industry.
Unique selling point
One of the most effective ways through which profit oriented entities can maximise profitability is by being customer oriented (Molhotra 2011). Thus, firms are obliged to integrate effective internal approaches such as adopting a customer centric approach in the marketing process in order to enhance their sustainability (Dawar 2013). This goal can be achieved by developing a unique selling point, which differentiates a firm from its competitors (Goldner 2006).
‘s Baggers has successfully developed a unique selling point by integrating the innovative approach in serving customers. For example, the electronic point of sale (EPOS) at the restaurant’s tables has significantly contributed to improvement in the firm’s efficiency in serving customers. The EPOS acts as a unique selling point by streamlining the customers’ purchasing process by improving operational efficiency (Bryceson 2006). Thus, customers can conveniently make their orders at the table, which reduces the amount of time taken for an order to be served. Moreover, the firm has optimally developed the electronic point of sale to ensure that customers can get adequate product information from the touch screen embedded in the tables. For example, customers can access information relating to the supplier (Organisation for Economic Cooperation and Development 2001). Subsequently, the firm has succeeded in satisfying the customers’ demand for information regarding the health and safety of the products served by the firm (Canavari, Fritz & Schiefer 2015). Therefore, the electronic point of sale has played a fundamental role in enabling the firm create a unique customer experience. Anam (2016) emphasises that the unique selling point established by a firm must make the customer delightful. ‘s Baggers has achieved this goal, which is underlined by growth in the number of customers that the firm receives on a daily basis due to word-of-mouth recommendations on the restaurant made by customers (Davis et al 2008). In addition to the above aspects, the firm’s unique selling point is further underlined by the firm’s effectiveness in offering customers high quality and healthy foods, which are produced from organic raw materials (Davis et al 2008). Subsequently, the firm is able to satisfy the customers’ health and wellbeing needs hence providing them value for their money (Insel et al 2016).
Creating sustainable competitive advantage requires businesses managers to develop adequate understanding on the firm’s strengths, weaknesses, opportunities and threats (Khosrow-Pour 2015). Thus, ‘s Baggers’ long term success in the food and beverage industry is influenced by the firm’s internal and external environments. The SWOT model below presents an analysis of the firm’s internal and external environments.
i. Corporate reputation; the firm’s unique selling approach has improved the firm’s reputation amongst customers as evidenced by the repeat purchase behaviour (Davis et al 2008).
ii. Technological innovation; ‘s Baggers has entrenched innovative technology in its operation hence attaining operational efficiency (Davis et al 2008).
iii. Competitive pricing point; the firm’s innovation has enabled the firm to succeed in reducing the cost of operation hence improving its ability to set competitive price point (Davis et al 2008).
iv. Diversified product portfolio; the firm has developed an extensive product portfolio. Thus, the firm is able to serve diverse customer groups (Hutt & Speh 2013).
v. Human capital; the firm’s operations are facilitated by experienced staff, which minimises the amount of time taken in satisfying customers’ order (Davis et al 2008).
i. The firm is yet to integrate the concept of franchising and licensing in entering new market. Thus, the concept of licensing and franchising presents a new approach to marketing for the firm (Sidhpuria 2009).
ii. The company’s operations are currently based in Germany. The firm has not tapped the international market (Davis et al 2008).
i. Market expansion; the firm can achieve market growth by venturing into new markets. This goal can be achieved through implementation of franchising strategy (Cavusgil et al 2014).
ii. Intellectual property rights (IPRs); integration of intellectual property protection such as licensing might improve the firm’s capacity to generate revenue through licensing and patenting. These IPRs will provide the firm adequate protection to the restaurant’s invention on the transportation system and software hence limiting competitors from copying the innovation. Therefore, the firm will benefit from the technology for a substantial period (Ugur 2013)
i. Competition; the firm’s profitability might be affected by growing competition from both new entrants and incumbent industry players (Bondaryev & Sinichkina 2014).
ii. Political and legal challenges; the firm’s success in entering new international market through franchising and licensing might be hampered by complexity associated with gaining intellectual property rights for the franchise transportation system (Abell 2013).
iii. Economic crisis; economic changes such as financial crisis might affect the firm’s ability to generate sales revenue due to change in the customers’ consumption patterns. (O’Fallon & Rutherford 2011).
Table 1; ‘s Baggers SWOT
Personal views on the concept employed by the firm as a manager
The state-of-the-art information technology has played a fundamental role in improving ‘s Baggers strategic position and hence its capacity to compete in the contemporary restaurant industry by eliminating customers queuing (Deloitte 2015). Evans and Lindsay (2008) affirms that intelligent integration of information communication technology in a firm’s operation not only improves a firm’s quality of service and productivity, but also culminates in development of a high competitive advantage especially if the information technology is used in improving the efficiency with which customers are served (O’Fallon & Rutherford 2011). Therefore, the technology has improved the firm’s efficiency in serving customers by eliminating queuing. The level of customer satisfaction might be limited by the efficiency with which customers are served. One area that service oriented entities should consider in improving the level of customer satisfaction entails limiting queuing or waiting time, which is a major source of dissatisfaction within the restaurant industry. The restaurant has successfully reduced waiting time (Davis et al 2008)
In addition to waiting time, the use of state-of-the-art information technology has enabled the firm to develop competitive advantage with reference to product pricing (O’Fallon & Rutherford 2011). This has arisen from the fact that the firm is able to minimise the cost of labour, which trickles down to customers in terms of low product prices hence attracting price conscious customers. The low-cost strategy emanating from the use of information technology has enabled the firm to create an effective barrier to entry (Morrison 2011).
The firm’s operational efficiency is anchored on its ability to develop the software and the transportation system. However, the restaurant is contemplating expanding its market reach by selling the licence with reference to the transportation system used in the hotel (Davis et al 2008). Considering the fact that the transportation system constitutes a core component of the businesses’ source of competitive advantage, the firm might lose control of the transport system (Ma 2015). Therefore, during its initial phase of market entry, the firm should consider licensing but not to sell the license. By licensing, the firm will retain the power regarding the transportation system (Calboli & Dewerra 2016).
Personal views on the concept employed by the firm as a manager potential customer
Despite its quest to minimise the cost of operation through elimination of labour cost, ‘s Baggers appreciates the importance of improving customer experience through human interaction. Barnes (2008) argues that successful incorporation of self-service is influenced by the customer’s knowledge on how to operate the technology. This element is underlined by the fact that the restaurant has employed well trained waiters who are strategically located within the hotel’s premises. The waiters play a fundamental role in responding to questions and issues that might be raised by the customers. The firm has adequately trained the waiters as one of the front-line employees on how to interact with customers. For example, the waiters create a friendly environment by ensuring that customers are effectively welcomed and assisted to operate the touch screen at the table. The use of technology and waiters in serving customer has enabled the restaurant to succeed in establishing a balance between passive interaction, which is technology controlled, and active interaction, which is customer controlled (Barnes 2008).
The firm has also developed an effective way to improve customer experience through integration of the customer reward system, which is evidenced by development of the loyalty bonus scheme. The loyalty scheme focuses on rewarding customers who recommend the restaurant’s services to their friends. The loyalty scheme underlines the restaurant’s commitment in establishing a sustainable relationship with the customers and hence appreciation of the customers’ value to the firm’s success (Rainardi 2008).
Despite the firm’s commitment to minimise the cost of labour by reducing the number of customer service employees such as waiters, the concept of using colour in labelling customer orders that are delivered to the customer through the implemented transport system might be a source of customer dissatisfaction. For example, despite the fact that the firm might experience a limited number of visits by customers suffering from colour blindness, the firm explicitly rule out such customers. Use of colours to label might lead to confusion of orders placed on the transport system hence creating customer dissatisfaction. The firm might experience the challenge serving the US market using colour to distinguish customer orders because of the large number of individuals who suffer from colour blindness. A study conducted in 2006 showed that there were 19 million citizens suffering from different degree of colour blindness in the US (Satyendra 2006).
Consumer trends likely to affect mid-market restaurant operations in the next five years
Firms in the mid-market restaurant industry are subject to changes occurring in the industry. One of the critical forces that might affect the firm’s future operations entails change in consumer behaviour. The following aspects with reference to change in consumer behaviour are likely to affect the firm’s operation.
- Growth in the degree of health and safety consciousness; the emergence and growth of digital age, which has been spurred by technological innovation has increased the consumers’ knowledge regarding the need to develop adequate understanding regarding product safety before making a purchase. Consumer knowledge is projected to increase due to the high rate of internet penetration (The Consumer Goods Forum 2014). Increase in consumer knowledge will influence the consumers’ choice for product. Consumers will incline towards organic food products. Therefore, restaurant firms must focus on developing products that are aligned with the customers’ needs.
- Increase in the level of savings; the firms will also be affected by change in consumer purchase behaviour. This trend has been spurred by the recent economic events such as the 2008 global economic crisis and the European sovereign debt crisis. These events have significantly altered consumers’ behaviour with reference to spending and saving. Consumers are increasingly inclining towards saving as opposed to spending (Flynn 2012). This trend might affect the firm’s capacity to generate sales revenue in the domestic market and the international markets that it intends to enter. To generate revenue, the firm must focus on offering customers value for money.
- Adoption of online shopping behaviour; consumers are increasingly integrating online sources of information in making purchase decision. Thus, in an effort to reach a large number of customers, the firm must improve its online presence. This move will enable the firm to reach and interact with a large number of customers. Integration of web-based platforms will enable the firm be efficient in managing customer relationship.
Hospitality operating cycle of control
Changes in the contemporary food and beverage industry might affect ‘s Baggers’ long term competitiveness. Thus, it is imperative for the firm’s management team to integrate effective approaches in developing sustainable competitive advantage. An example of such approaches that the firm should consider entails the operating cycle of control, which enables firms in the food and beverage industry to effectively coordinate their operations hence improving efficiency in serving customers (Rich et al 2012). The firm should consider the following aspects.
- Pre-purchase functions; one of the pre-purchase control aspects that the firm should consider entail developing a standardised recipe in order to improve its effectiveness in creating unique product experience by ensuring product uniformity and consistency. Thus, the firm should focus on developing an effective menu. The recipe used in developing the menu should be tested and adjusted to ensure uniformity.
- Back of house functions; the restaurant should ensure that it integrates an effective system of receiving the raw materials to be used in producing the orders. Therefore, the firm should integrate an effective inventory management system. This approach will minimise the likelihood of the firm running out of supplies hence limiting its operational efficiency. The supplies received should be effectively stored by observing health and safety aspects. In addition to these activities, the firm should ensure that the kitchen is equipped with effective technology and human capital to enhance the efficiency with which customer orders are delivered.
- Front of house functions; the firm should undertake comprehensive customer service training on all its waiters. This approach improves the customer service representative skills in assisting guests check into the restaurant and effectively make order using the touch screens.
The analysis shows that ‘s Baggers has integrated an effective operational strategy by employing the state-of-the-art technology. The technology has enabled the restaurant to develop competitive advantage with reference to customer service and product pricing. However, it is imperative for the firm to consider improving customer experience by promoting effective interaction between customers and the customer representatives. This outcome can be achieved through training the employees. Moreover, it is also imperative for the firm to consider entrenching an effective operating cycle of control as proposed above.
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