Introduction
Quality management refers to an organization-wide strategy that enables managers to understand customers’ needs and to consistently design solutions in a manner that is cost-effective, timely, and has minimal harmful effects to the society. Effective quality management involves four processes namely, planning, control, assurance and consistent improvements.
Quality management focuses on services or products, as well as, business processes. In the modern business environment, quality management is considered to be one of the best strategies for improving the competitiveness of a business. This is because it facilitates innovation, customer satisfaction and efficiency in production.
In the last two decades, most businesses have embarked on implementing quality management strategies in order to overcome competition in their industries. This paper discuses the concept of quality management in the context of the hospitality industry. Concisely, it will analyze the Procini’s Pronto case study. The analysis will focus on the company’s approach to customer feedback, competitive advantage and growth opportunities.
The Company’s Approach to Customer Feedback
Procini’s is a full-service restaurant chain that operates mainly in the US. Thus, it is a business that focuses on the provision of personal services. A service refers to an experience that is not only intangible, but also time-perishable. The experience is enjoyed by a customer who plays the role of a co-producer. The objective or role of services in an economy is three fold.
First, personal services are produced to satisfy specific needs of the citizens. For example, Procini’s sells food to customers who are travelling to various destinations. Second, provision of services is one of the major sources of employment. Third, provision of services facilitates economic development. Procini’s intends to improve the quality of its services by obtaining feedback from its customers concerning the quality of its products.
An effective quality management system focuses on customers’ needs. The business must understand the current and future needs of its customers. Conducting a market research is one of the methods of obtaining feedback from customers. At Procini’s, market research helped the managers to understand customers’ tastes and preferences. For example, they were able to estimate the prices that customers were wiling to pay.
Similarly, they were able to identify the best locations to construct their restaurants. The rationale of obtaining feedback through market research is that managers can obtain useful insights on the expected demand for their services before joining a new market.
The weakness that can be identified in the market research that Procini’s relied on is that the sample size was very small. Concisely, the information obtained from the 64 respondents might not represent the views of most of the targeted customers.
Procini’s intends to adopt modern information and communication technology to obtain feedback from its customers. The strength of this strategy is that the feedback can be obtained immediately and processed in real time. Moreover, the information is likely to be reliable since it will be obtained from actual customers. The system will enable the firm to measure customers’ satisfaction in order to improve the quality of its services.
However, the company has to take into account the fact that not all customers have the skills to complete the digital questionnaires. Besides, travelers might not have enough time to complete the questionnaires. The questionnaires might also be ineffective, especially, if they are based on closed end questions. For instance, using an ordinal scale to rate the quality of meals or services can restrict customers’ response choices.
Even though the discount cards are likely to encourage more customers to give their feedback, it might not be sustainable. This is because the company has to lose $ 3 whenever a customer completes the questionnaire. Since the industry is already saturated, the profit margins are expected to be low. Thus, the discount is likely to reduce the company’s earnings.
An effective quality management system should enable managers to communicate customers’ feedback to employees. In this regard, Procini’s has embarked on recruiting individuals with the right attitudes towards customer service. Besides, the company intends to implement a performance based remuneration system.
Recruiting the right people will help the company to foster the culture of providing services which meet the customers’ expectations as reflected in their feedbacks. Moreover, a performance based reward system will encourage employees to obtain feedback from customers on a regular basis.
Elements of the Pronto Concept
Service quality can be improved tremendously if the resources and activities of a company are managed as a process. This can be achieved through an effective service strategy.
In this context, Procini’s developed the Pronto concept in order to provide excellent services in the full-service restaurant chain industry. The Pronto concept is based on incremental innovation which is meant to improve Procini’s services. The elements of this concept can be explained as follows.
Target Market Segment
Pronto is expected to serve the full-service restaurant chain segment of the industry. The company intends to serve customers who are travelling from one state to another. According to the 2010 estimates, the full-service restaurant chain segment of the industry recorded the lowest revenue. Additionally, the segment had the lowest growth in profitability.
However, this can be explained by the fact that this segment had the lowest number of firms. The risk in this segment is that revenues are sensitive to changes in disposable income. Thus, sales are likely to reduce due to a reduction in customers’ disposable income. High competition from the low-priced fast-food restaurants is also a threat to the incumbent firms.
Pronto is likely to overcome this risk due to the fact that it will offer high quality meals at low prices. Travelers are often served by fast-food restaurants. This is an opportunity for Pronto to serve travelers who are interested in the services of a full-service restaurant.
Service Concept
Pronto is expected to offer the best services in the industry. In order to achieve this objective, the firm will adopt an electronic quality monitoring system. The system will enable the firm to obtain feedback from the customers. Consequently, the quality of its products or services will be improved according to the customers’ feedbacks.
Wireless order-taking devices will be used in order to reduce the time spent in serving each customer. The benefit of this strategy is that it will improve the productivity of wait-staff. Additionally, satisfaction among customers is likely to increase if little time is spent to serve them. However, adopting the new technology will definitely come at a cost.
The company will have to incur the cost of acquiring the devices and training the employees on how to use them. If these costs are very high then using the new technology will not be sustainable. Pronto’s menu will be less extensive as compared to Procini’s. This will enable the former to sell its meals at a lower price.
Operating Strategy
The restaurants will be located at interstate exits. The sites that are being considered for establishing the restaurants include areas that are close to gas stations, economy level lodgings and large office buildings. These locations are normally visited by customers who are interested in low-priced meals. Consequently, the demand for Pronto’s services is likely to be high in these areas.
Pronto has also put in place a multistage recruitment system that will enable it to hire the right people. The problem with a multistage recruitment system is that it can be time consuming and expensive. Besides, it can discourage potential employees from participating in the recruitment exercise. Paying quarterly bonuses to employees will facilitate high productivity and motivation among workers.
Even though financial incentives can boost productivity, they hardly facilitate commitment among employees. In the absence of commitment, turnover will still be high. Consequently, the company will lose its best employees to competitors. Additionally, the success of the financial incentive system is not guaranteed since it has never been tried by the company.
Service Delivery System
Technology will play a critical role in Pronto’s service delivery system. Modern information and communication systems will be used to execute functions such as taking orders and obtaining feedback from customers. The employees are expected to offer high quality services to the customers. This will help the firm to improve its efficiency and competitiveness.
Pronto’s outlets will be able to accommodate 85 patrons. Outlets with low capacities tend to have low fixed costs such as rent. However, little revenue is often obtained from such outlets. Generally, revenue tends to increase with an increase in seat capacity. Even though Pronto has a low capacity, it can still make high profits by reducing its operating costs.
Sustaining Quality and Competitive Advantage
Pronto intends to sustain the quality of its services and competitive advantage by simultaneously pursuing different generic strategies. In a nutshell, the company will pursue both cost leadership and differentiation strategies. A cost leadership strategy involves offering products at the lowest possible prices in order to penetrate the market. In this regard, Pronto is targeting low-cost customers by offering cheap meals.
A specific menu will also be developed for Pronto in order to standardize the services. Finally, the company intends to reduce the human element in its service delivery system. This will be achieved through the use of advanced technology to execute functions such as taking customers’ orders.
The rationale of pursing the cost leadership strategy is that it will enable the firm to increase its market share in an industry that is already saturated. One of the factors that can enable Pronto to sustain this competitive advantage is that it has a highly skilled chef who is capable of designing high quality low-cost menus. However, there are several factors that might prevent the company from sustaining its low cost competitive advantage.
First, providing services at low prices might not add any value to the company since other firms can also lower their prices. Second, maintaining low prices can be difficult because the cost of providing the services is expected to increase. Finally, a cost leadership strategy requires investments in efficient production systems. However, Pronto might not access enough capital to undertake such investments.
Differentiation in the service industry involves developing a unique brand image. The strengths of Pronto’s differentiation strategy can be described as follows. The quality of the meals will be significantly higher than that of the competitors. Training and development will be given priority in order to enhance service quality.
Finally, an effective quality control system will be put in place to ensure that the expected standards are achieved. These strengths will enable the firm to improve its competitiveness in the industry. However, the following factors might prevent the company from sustaining its competitive advantage through differentiation. To begin with, offering high quality services is always expensive.
Thus, the company is likely to make losses by selling its high quality products at low prices. Moreover, the firm lacks a strong brand image that is known for high quality in the industry. In this regard, the demand for its services might not be high.
Growth Options
Pronto’s growth options include establishing new outlets, franchising, and syndication. Establishing new outlets seems to be the best growth alternative due to the following reasons. First, establishing new outlets will enable the firm to have full control of its operations. Consequently, it will be able to maintain the desired service quality.
A franchise system, on the other hand, will limit the company’s control of its operations and service quality. For instance, some franchisees might not be able to maintain Pronto’s quality standards. Besides, the cost of monitoring the franchisees’ quality standards can be very high.
Syndication will also enable the firm to have full control of its operations. However, the outlets will be owned by investors. The risk in this case is that Pronto will be out of business if the investors decide to choose a different firm to manage their outlets.
Second, establishing new outlets is more profitable than a syndication deal, as well as, a franchise system. The initial costs of the franchise system are less than what the company would incur if it constructed its own outlets. However, Pronto can still sell its outlets and recover its capital.
Finally, the company own-and-operate approach provides the best long term growth opportunities. Franchising and syndication are based on temporary contracts. Thus, Pronto can not depend on these systems to implement long term growth plans.
Conclusion
Procini’s Pronto intends to improve its value proposition by expanding its operations and maintaining the quality of its services. In this regard, the company intends to invest in modern technology in order to obtain and process feedbacks from its customers.
The company intends to expand by implementing the Pronto concept. Through this concept, the firm will provide high quality meals at low prices, and the restaurants will be located at interstate exists.
The strength of this strategy is that it can help the firm to penetrate the market. However, maintaining low prices and high quality can be difficult due to the expected increase in the cost of providing services.
The company own-and-operate approach to expansion can help the firm to sustain its competitive advantage and service quality. This is because it is more profitable, and will enable the firm to have full control of its operations.