Executive Summary
Al Khettar is a local restaurant in Dubai. During the early years, the restaurant was serving traditional cuisine of the Arabian Peninsula similarly to the other establishments in the area. Eventually, the founders developed a more holistic concept of adding value to the services by expanding the cultural and ethnic dimension of the restaurant. However, despite the high level of commitment and consistency of operations, the transition towards the new design philosophy and strategic posture resulted in several issues. The following plan suggests the integration of the existing practices in order to ensure consistency of services and prioritize the functional aspect through incorporation of solid leadership practices and promotion of organizational culture. The recommended course of action is expected to enlarge the customer base, improve brand name recognition, and facilitate long-term customer loyalty and employee engagement.
Organization Description and Issues
History
Al Khettar was founded in Al Etihad Road, Dubai around 2001. During the early years, the restaurant was intended for serving traditional cuisine of the Arabian Peninsula similarly to the other firms in the area. Eventually, the founders developed a more holistic concept of adding value to the services by expanding the cultural and ethnic representation from the menu to the interior of the building and artistic pieces presented in the establishment. Around 2014, the restaurant has entered a major restructuring phase, during which the emphasis was shifted from the more conventional approach towards the authentic cuisine accompanied by visual communication of traditional values of the Peninsula.
Current Conditions
Currently, the organization’s type of ownership is a corporation. The address of the central office is Al Etihad Road, Opposite Dubai Police Head Quarter, Dubai, UAE (Al Khettar n.d.). The primary type of operation is retail (foods and beverages subtype). Main products offered by the company are a diverse range of foods in the traditional style. In addition, the restaurant offers services of hosting meetings and providing gallery space for exhibitions related to Arabian Peninsula’s culture. The company does not disclose the information on the corporate governance or the suppliers of capital. The restaurant employs workers on the full-time basis and uses direct labor. The suppliers are mostly local food producers. The primary customers are local residents and tourists who seek for culturally rich experience and are interested in the contemporary art of the region. The evolution of organization can currently be traced to a single shift in cultural emphasis described above and is consistent with the evolution of strategic posture towards greater cultural value through authenticity.
Strategic Intent
The company does not provide information on its vision, mission, and values directly. However, the information can be derived from the restaurant’s concept page. First, the management makes a clear emphasis on the cultural background and the traditional aspect of the Arabian Peninsula’s food (Al Khettar n.d.). This fact, combined with the evident goal of customer satisfaction, allows formulating the mission as providing innovative services through design and culinary solutions in order to connect the customer experience to the rich culture and environment of the region. By extension, the vision of the organization can be described as the creation of a culturally rich and engaging environment to communicate the national values and fascination with the region’s tradition. The installation of the acoustic systems the use of the traditional calligraphy for interior design, and the intention to promote the culturally relevant art identifies the establishment of cultural and ethnic standards as one of the objectives. The company also aims at spreading the cultural awareness by seeking partners among similar establishments willing to share the identified mission. The restaurant uses a relatively common business model for the industry, with one notable exception. Specifically, in addition to high-quality, friendly service and top-quality catering, the company relies on intangible experience created by the inclusion of the artistic layer that promotes cultural awareness. The restaurant offers the possibility of becoming a franchisee and receiving benefits of brand recognition, although it should be pointed out that the information on the existing partners is not available (Al Khettar n.d.).
Main Issues Facing Organization
Despite the high level of commitment and consistency of operations, the transition towards the new design philosophy and strategic posture created several issues. Currently, the pace of building a critical mass of the customer base is insufficient for a successful financial performance, as only a small fraction of the predicted audience segment is currently uses the restaurant’s services. At the same time, the company does not reach the majority of the potentially interested customers. Next, the synergy between the different aspects of available services (e.g. national cuisine and traditional art) is currently low. Finally, despite the clear intent to ensure participation of the local artists, the company does not have in its strategy the elements aimed at facilitating partnerships with the stakeholders. The combined effect of the identified issues hampers the financial performance of the restaurant and undermines the potential profits associated with the franchising option.
External Assessment
Overview of Industry
The food and drinks industry in the UAE is currently extremely lucrative. This is especially true in Dubai, where all the factors responsible for the growing demand are present to the high degree. The rapid development of the region’s economy and the diversification of the stakeholders resulted in the growing influx of visitors from the other countries, initiated by the business-oriented individuals and later joined by the tourists. The situation also contributed to the actualization of the Arabic culture relevance and prompted the cultural aspect of tourists, which contributed to the opportunities of the hospitality sector (Wazir 2016). As a result, the industry is estimated to grow by 500 percent in the nearest decade (Scott 2014).
Natural Environment
The natural environment has relatively minor influence on the hospitality industry. Two factors can be identified that are marginally important for the sector. First, the climate and weather can be an issue considering the fact that a growing percentage of the customers are visitors from other countries. While the local population is accustomed to the conditions, the tourists from remote locations can find it inconvenient, which can decrease customer satisfaction and must be addressed accordingly. Second, the climatic conditions limit the possibilities of local suppliers of raw materials and, by extension, the diversity of products that the restaurant can offer to its customers. However, the latter is of minor concern in the case of Al Khettar, as its menu is composed predominantly of the traditional foods and therefore requires the components that are available locally.
Macro-environment
The political environment in Dubai is fairly uniform, with no significant discrepancies among the interests of business owners and state policymakers. The existing laws and regulations contribute to the stability of the for-profit organizations. The taxation usually varies between 5 and 10 percent for restaurants. In addition, the political system visibly aims at reaching the international standards of quality, which include favorable conditions for small and medium enterprises and diversification of the economy, both of which are desirable for the local restaurants and small chains.
With the introduction of oil trade as a major source of national profit, the economy of the region eventually shifted towards international commerce and tourism. By extension, the value of hospitality industry has grown dramatically in the recent years. It should also be noted that the surge in welfare of the population created a setting where the local residents are reluctant to occupy the low-level jobs, which are then filled by the expatriates (Thompson 2016). Such situation triggered the response from the authorities in the form of imposing strict regulations for foreign workers. On the other hand, the city is extremely attractive to high-level business executives and investors who seek partnerships and funding options. Such developments also contributed to the emergence of the reliable trading routes, which effectively minimized the possibility of raw material deficits. The average payment capacity of the population is relatively high due to the rapidly developing economy and the revenues of the residents. The same can be said about the expatriates, who consider the city one of the most financially attractive options in the region. Finally, it should be pointed out that the city’s unemployment rate is the lowest in the world, which equalizes the well-being of the population (Dubai Population 2017 2017). The combination of the said factors contributed to the quick improvement in Dubai’s business rankings – according to the latest data, the city is at the 26 position in the world (a 8 point increase over the 2016 ranking) (World Bank 2017).
Due to the influx of the expatriates and the government-induced measures described above, there exists an observable disparity between the foreign workforce and the local population. Namely, the improvements in lifestyle raised the cost of living in the country and thus limited the possibilities of the majority of the workforce. Besides, the government maintains the direction of improving the quality of life for the population by subsidizing education and healthcare, further raising the bar of quality of life. This eventually created the setting where the career and service quality are high. The global perception of Dubai as a successful and prosperous location further promotes the effect by attracting an audience that seeks luxurious products and services. However, despite the relatively challenging conditions for foreign workforce, the city is largely open to the diversity of the cultures and permits deviations from the traditional values of the Arab world (e.g. covering the head is not mandatory for women and alcohol consumption is permitted in the designated places). There is also considerable progress in terms of gender equality, with women occupying the important social roles traditionally reserved for men.
The population of Dubai contains predominantly of representatives of other countries, with only a small fraction (15%) being native residents (Dubai Population 2017 2017). The majority of the population (more than two-thirds) is male. Predictably, the immigration rate remains high. The income distribution is uneven due to the factors described in the previous section.
The rapid development of the economy both stimulates and provides the resources for the technological development. As a result, Dubai, along with the rest of the UAE, consistently updates its technological background, most notably in the ICT sector. The majority of improvements are oriented towards consumer segment and quality of life. At the same time, there is no evident effort towards investment in long-term R&D base aside from specific segments directly associated with commerce (e.g. e-transactions and construction industry).
The city is one of the most active hubs of international relationships and is both influenced by and compliant with the expectations and cultural background of the other cultures. In geopolitical terms, the city enjoys a fairly stable environment with no pressure from neighboring countries and a strong orientation towards globalization.
Operating Environment
It is relatively easy to start a restaurant business since the legal and economic conditions are favorable for such activity. This, however, is only true for the small-scale cafes. Establishing a large franchisor would be a much more difficult task. Therefore, the threat of new entrants is moderate. The well-established supply chain and the dominance of the traditional dishes make the majority of the components easily accessible. On the other hand, in order to maintain high quality of the offered foods, at least some of the products must be high-grade. Therefore, the bargaining power of suppliers is low to moderate. The bargaining power of buyers is also low, primarily due to the high concentration and quantity of customers in the location, and also due to the above-average profitability of the majority of visitors. The threat of substitute products is high – there is a wide selection of cuisines in Dubai, and many establishments also offer unique cultural experience in addition to the basic services. Finally, the intensity of rivalry among the existing competitors is moderate to high. The industry is currently in the growth stage, with large amount of local players and international brands entering the segment. On the other hand, there is no consolidation between the rivals, and the diversity of the competitors is high with no evident leaders, which makes the competition less intensive.
Two important complementors in the industry are the tourism industry which ensures a steady influx of new customers and the hotel industry. The former is a necessary complementor considering the proportion of native population, and the latter is value added one as it adds to fulfillment of customers’ expectations.
Trends
The dynamics of industry evolution are within the stable range. The changes are mostly consequent and rarely deal with radical innovations. The customer base is also relatively unchanged, with increasing diversity being the most prominent change.
Driving Force Analysis
The most notable driving forces in the industry are value-added innovative services and collaboration with relevant stakeholders. The industry in its basic form offers little space for gaining competitive advantage, so it is expected from the firms to provide superior experience in imaginative and creative way and integrate cultural and social aspects into business.
Summary of External Assessment
The external economic, social, and cultural environment is extremely lucrative for hospitality business in general and the restaurant segment in particular. This predictably led to the large number of entrants of varying size, quality, and specialty. The ongoing increase in both economic growth and social and cultural diversity in the region creates the opportunities of adding value to the operations which need to be utilized in order to maintain competitive advantage.
Internal Assessment
Structure
Due to the focused set of well-defined goals, the restaurant has a simple organizational structure common for the industry. The business operations are within the responsibility of the general manager, who oversees the hiring practices and the performance of the personnel. The organization is divided into two traditional segments, front of the house and back of the house. The front of the house is overseen by the food and beverage manager and run by the employees who interact with the visitors and servicing the customer area. The back of the house is overseen by the executive chef and run by the kitchen staff.
Leadership
The leadership activities are mostly within responsibilities of the general manager and are delivered through regular meetings and on the daily basis when such necessity arises. Both the food and beverage manager and executive chef are responsible for communicating with the staff, although there is no indication of requirements for consistent leadership among their documented activities.
Organizational Culture
The culture in the restaurant is for the most part tight, with highly centralized decision-making stemming from the general manager. The issues related to the cultural and artistic aspect are usually solved with the help of external consultants who are not employed full-time. The culture is strengthened via regular meetings of the staff and occasional events focused on obtaining innovative recipes, as well as brainstorming sessions aimed at cultural enhancements. The latter two are noticeably scarce and unsystematic.
Products and Services
The food served in the restaurant is of high quality and conforms to the descriptions in the menu and the individual requests of the customers. Some items are flexible enough to be modified individually, although most dishes follow a well-defined procedure in order to maintain the genuine authenticity. The aesthetic aspect of all foods is carefully maintained and consistent across the menu. The perceived quality is expected to be high due to the permeating quality of cultural influences for each newly added item.
The services are for the most part consistent in timeliness, convenience, and completeness with the respective product dimensions. The staff is courteous, attentive, and well-trained in expected areas. It is worth mentioning that the cultural competencies necessary for maximizing the desired effect are unsystematic across the staff.
Important Resources, Capabilities, and Competencies
The restaurant is comparatively small in terms of scope of activities, for which reason its physical resources are situated directly within the building. The access to raw materials is facilitated through timely deliveries by suppliers. All necessary cooking and refrigerating equipment can be found in the building. All technological processes are generic, industry-standardized, and do not rely on proprietary intellectual property. The intangible resources consist of human resources and do not involve innovative or unique capacities in managerial or organizational routines. The restaurant shows a clear orientation towards brand recognition but is currently targeting the local market.
The most important core competency clearly emphasized in the strategy is orientation towards culture-rich experience. The competency is currently in its early development stage and lacks consistency.
Activities
As is common within the industry segment, the most value is generated on the stage of marketing and service, with operations stage being of secondary importance. In the case of Al Khettar, the marketing stage is especially important since the firm aims at gaining competitive advantage through unique and relatively uncommon approach that has to be promoted in order to garner the attention of the public.
Performance Appraisal
The company does not disclose its financial performance information. However, it is likely that the benchmarks used for the appraisal are those traditionally used in the industry and include profitability, customer service levels, compliance with industry standards, and, in this particular case, satisfaction with additional services and unique experience such as the presentation of historical values.
Competitive Status
Currently, the firm has significant potential for gaining competitive advantage and standing out among its rivals. However, due to the early stage of implementation and lack of consistency, only a small fraction of the potential is realized.
Summary of Internal Assessment
The company displays the above-average level of core competencies and intangible resources that allow for exceptional performance and high level of customer satisfaction. However, the lack of integral leadership practices and unsystematic nature of activities that make use of the said resources undermine the effective utilization of opportunities.
Current Strategic Assessment
Summary of Main External and Internal Factors
The most significant external factors are the economic growth of the region and the surge of the tourism industry. The highly diversified target segment and the increasing relevance of cultural and social contexts can be deemed important for the new directions taken by the company. The internal factors include the buildup of cultural competencies and the involvement of the artistic dimension as a manifestation of creative innovation necessary for gaining competitive advantage.
Assessment of Effectiveness and Efficiency of Strategy
Due to the scope of operations, certain levels of strategy are not included. On the business level, the company tries to position itself as prioritizing the customer experience through diversification of influences (e.g. artistic qualities of the interior) rather than focus on the product and service excellence. This aspect is fairly generic and does not aim at the specific competitors. The functional level is almost non-existent, with no clearly defined leadership roles and lack of systematic activities aimed at organizational culture improvement. The operational level is focused on delivery of authentic dishes and assisted by the occasional consultations with local sources of knowledge. The groups and teams are traditional for the industry. Finally, the individual contributions are either unspecified or insignificant for the organization’s functioning.
The information above identifies the poor level of integration, especially regarding the newly added cultural and artistic dimension.
Strategy Formulation
Strategic Alternatives
Considering the information above, the mission and vision do not require adjustments as they are consistent with the firm’s goals. Therefore, it would be reasonable to emphasize the integration of the existing practices in order to ensure consistency of services and provided experiences. Alternatively, it is possible to prioritize the functional aspect through incorporation of solid leadership practices and promotion of organizational culture. Finally, the individual aspect can be introduced in order to boost and diversify the creative dimension.
Evaluation of Alternatives
The last option requires the most changes since it relies on the employee proficiencies that are uncharacteristic for the industry and therefore necessitates the modification of HR practices. In addition, it may compromise the operational aspect, which is unacceptable given the industry standards. The introduction of sound leadership would require additional investment and additional staffing but presents the opportunity for long-term improvements. Besides, it is associated with the least risks since the leadership practices are extensively researched. Finally, the integration of cultural and operational aspects of the services requires the least deviation from the existing direction and is not resource-heavy. On the other hand, it is the least predictable modification and cannot be conclusively assessed, especially in the case of small organization such as a local restaurant
Selection of Strategies
The evaluation shows that the third alternative is the least feasible one. Therefore, the first two are recommended for implementation, with the functional aspect being implemented in the short- to medium-term and the integration across segments extended for long-term facilitation. Since no apparent risks are identified except for the financial pressure, the contingency plans can be limited to allocation of additional funds.
Strategy Implementation
Action Items
First, the restaurant needs a manager that would oversee the artistic dimension created as a part of new image. This person would seek partnerships with local artists and historians to ensure a steady update rate of contemporary exhibitions. Next, in order to develop the appropriate leadership practices, an external consultant should be hired. The strategies of HR department can be adjusted without major reformation. Finally, the staff training must be developed that would provide the necessary level of knowledge.
Action Plan
The initial stage of the implementation process is expected to take two months. The development and incorporation of leadership practices would require two weeks, with six more weeks allocated for training of company’s managers. Once the art direction manager is hired, he would evaluate the current state of the company (approximately 1 week) and establish cooperation with local artists (3 weeks). Simultaneously, marketing department would modify the existing strategy to emphasize the shift in priorities from the customers’ perspective. Once the leadership framework is established, the next phase (approximately four months) would include training sessions for the existing staff and/or hiring new workers proficient in culture of the region. The training can be enhanced by involvement of the artists brought in by the art direction manager. At this time, the improvements in corporate culture are expected to increase employee engagement in corporate activities (e.g. search for new authentic recipes). The cost of the described items would consist of the salary of one additional manager, services of one external expert, and cost of training sessions, and would not exceed AED 120,000.
Summary of Execution Plan
The restaurant management would hire a full-time specialist who would synchronize the operational and cultural activities of the organization and an expert who would aid in establishing sound organizational culture. The plan is expected to enlarge the customer base, improve brand name recognition, and facilitate long-term customer loyalty and employee engagement.
Strategic Evaluation and Controls
Balanced Scorecard
The most important perspective of the balanced scorecard in the case of Al Khettar is the customer value perspective. The key measurement is the amount of positive feedback by 20% in six months. Next, employee engagement perspective must be taken into account. Therefore, reported involvement is expected to improve by 15% in 3 months. Brand recognition is another important dimension and can be measured by the increase in perceived association with culture of the region by 25% in four months. Finally, the financial dimension can be assessed by the increase in daily customers by 30% in six months.
Strategic Control Systems
Since the suggested changes are only marginally related to restaurant’s primary functions and are expected to produce financial improvements in the long run, the most relevant dimension of control is behavioral control of organizational culture. The current financial control system will remain suitable both during and after the change and, therefore, should be retained.
Summary of Evaluation and Control Measures
The financial performance of the restaurant can be left intact as no major changes are expected at the initial stage. The feedback from customers can be collected from online resources. The survey must be administered to the employees. Failure to meet the formulated objective must be discussed at the staff meeting and timely addressed. The dimensions identified in the balanced scorecard are to be retained for future operations in order to maintain the high level of quality and customer satisfaction.
Reference List
Al Khettar n.d., Our story. Web.
Dubai Population 2017. 2017. Web.
Scott, A 2014, ‘Appetite for growth in UAE as food and beverage sector expands’, The National. Web.
Thompson, M 2016, Employment trends: United Arab Emirates. Web.
Wazir, B 2016, ‘UAE’s rulers bet on the arts to bring in more visitors’, Financial Times. Web.
World Bank 2017, Doing business in United Arab Emirates. Web.