Business strategy and organizational structure - A Case of US Restaurants firms.

1. Business Strategy and Organizational
Structure- A Case of US Restaurants firms
Presented By-
Sunil Ku. Behera 317SM1004
Aditi Das 317SM1008
Rakesh Kumar 317SM1012
Shankar Pradhan 317SM1024
Akash Upadhyay 317SM1032
SCHOOL OF MANAGEMENT

2. ABOUT MICHAEL PORTER AND HIS
WORKS
Michael Eugene Porter (born May 23, 1947) is an American academic known for
his theories on economics, business strategy, and social causes. He is the Bishop
William Lawrence University Professor at Harvard Business School, and he was
one of the founders of the consulting firm The Monitor Group (now part
of Deloitte).
Porter's generic strategies describe how a company pursues competitive
advantage across its chosen market scope. There are three/four generic strategies,
either lower cost, differentiated, or focus. The generic strategy reflects the choices
made regarding both the type of competitive advantage and the scope. The
concept was described by Michael Porter in 1980.
PORTER’S GENERIC STRATEGIES

3. PORTER’S GENERIC STRATEGIES
GENERIC STRATEGIES
Cost Leadership
Superior profits
through lower costs.
E.g. : Walmart, Tesco
Differentiation
Creating a product
or service that is
perceived as unique
“throughout the
industry”
E.g. : Mc Donald,
FedEx
Focus
Concentrating on a
limited part of the
market.
E.g. : Pespi Co.
Lets discuss about these strategies in details

4. COST LEADERSHIP STRATEGY
• Aiming to become Lowest Cost Producer.
• The firm can compete on the price with every other industries and earn
higher unit profits.
• Cost reduction provides the focus of the organization’s strategy.
• Targets a board market.
• Competitive advantage is achieved by driving down costs.
• Especially beneficial : where customers are price sensitive.
• Examples (In India) – Moser Baer India, AMUL, Tata Steel, Tata Docomo.

5. • It calls for the development of a product or service that offers unique
attributes that are valued by customers.
• Customers perceive the product to be different and better than that of
rivals.
• The valve added by the uniqueness of the product may allow the firm to
change a premium price for it.
• It requires flair, research, capability and strong marketing.
• Example (In India) – Orient Fans, Parle Agro, GATI, etc.
DIFFERENTIATION STRATEGY

6. • The focus strategy concentrates on a narrow segment and within that
segment attempts to achieve either a cost advantages or differentiation.
• The premise is that the needs of the group can be better serviced by the
focusing entirely on it.
• Because of their narrow market focus, firms perusing a focus strategy
have lower volumes and therefore less bargaining power with their
suppliers.
• A firm using a focus strategy often enjoys a high degree of customer
loyalty, and this entrenched loyalty discourages other firms from
competing directly.
• Example (In India) – Pepsi Co. India
FOCUS STRATEGY

7. ORGANISATIONAL STRUCTURE
DIMENSIONS OF ORGANISATIONAL
STRUCTURE
Formalisation Complexity Centralisation

8. ABOUT THE CASE STUDY
• It study of US Restaurant firms to extend Porter’s framework of business
strategy to the service industry
• Around 296 American Multi-unit restaurant firms where mailed the
questionnaire regarding the same. They were divided into Fast-food,
theme, family and cafeteria chains.
• 91 firms participated and returned the survey, 30.7% response rate.
• A low cost strategy is most prominent in fast food area as per survey.
• Larger firms may compete using cost leadership or differentiate
strategies.

9. OBSERVATIONS FROM THE CASE STUDY
13
8
5
7
14
77
6
23 0 2
LOW COST STRATEGY GROUPS
DIFFERENTIATE
FOCUS
Fast food Dinner House Coffee Shop Cafeteria
11 10
6
18
9 83 9 2
LOW COST STRATEGY GROUPS
DIFFERENTIATION
FOCUS
Scope of competition
National Regional Local
10
13
46 5 52 6 4
8
2 3
7
3 0
LOW COST STRATEGY GROUPS
DIFFERENTIATION
FOCUS
Company size
less than 25 units 26-100 units 101-250 units
251-1000 more than 1000

10. 17
15
5
15
13
10
LOW COST STRATEGY GROUPS
DIFFERENTIATION
FOCUS
Franchise Operation
Yes No
15 14
5
18
14
1.8
LOW COST STRATEGY GROUPS
DIFFERENTIATION
FOCUS
Numbers of concepts
Single Multiple

11. WE HAVE LEARNT…
• COST LEADERSHIP : Being the lowest cost producer in the industry as a
whole.
• DIFFERENTIATION : The exploitation of a product or service which is
believed to be unique.
• FOCUS : Restricting activities to only part of the market and providing goods
or services at lower cost to that segment.
• According to the Research, the theory does not applies to the service sector.
• Reasons for the inconclusive findings are : Porter’s generic strategies may not
be applicable to service industries and the characteristic of restaurant business
and relatively short product life cycle are unique.

12. Thank You for your
attention
Questions are invited…