Bargaining Power of Noorazah Caterers Suppliers (Weak Force)Suppliers influence Noorazah caterers in terms of the company’s production capacity based on the availability of raw materials. This element of the five forces analysis model shows the impact of suppliers on restaurant and the fast food restaurant industry environment. In Noorazah caterers’ case, the weak bargaining power of suppliers is based on external factors: High number of suppliers Low forward vertical integration of suppliers High overall supply The large population of suppliers weakens the effect of individual suppliers on Noorazah caterers.
This weakness is partly based on the lack of strong regional and global alliances among suppliers. In relation, most of Noorazah caterers’ suppliers are not vertically integrated. In Porter’s five forces analysis model, such low vertical integration weakens the bargaining power of suppliers. Also, the relative abundance of materials like chicken, flour and meat reduces individual suppliers’ influence on the restaurant. Thus, this element of the five forces analysis shows that external factors combine to create the weak supplier power, which is a minimal issue in strategic management.
Threat of Substitutes or Substitution (Strong Force)Substitutes are a significant concern for Noorazah caterers. This element of Porter’s five forces analysis model works with the possible effects of substitutes on company growth. In Noorazah caterers’ case, the following external factors make the threat of substitution a strong force: High substitute availability Low switching costs High performance-to-cost ratio of substitutes There are many substitutes to Noorazah caterers’ food and beverages services, such as food from food trucks, fast foods and restaurants around the university. Furthermore, consumers can cook their food at home. In the Five Forces analysis model, this external factor contributes to the strength of the threat of substitution in the food service industry. Additionally, it is easy to change from Noorazah caterers to substitutes because of the low switching costs. For example, shifting from the Noorazah to substitutes typically includes minor or minimal shortcomings, such as slightly higher costs per meal in some cases. Likewise, substitutes are competitive in terms of quality and customer satisfaction (high performance-to-cost ratio). In this element of the Porter’s five forces analysis of Noorazah caterers external factors make substitutes a crucial strategic matter that needs methods like product quality progress. In relation, the enterprise’s efforts include encouraging people to eat in our restaurant instead of resorting to substitutes.Threat of New Entrants or New Entry (Moderate Force)New entrants can impact Noorazah caterers’ market share and financial performance. This component of the Five Forces analysis denotes to the effects of new players on existing restaurant. In Noorazah caterers’ case, the moderate threat of new entry is centred on external factors: Low switching costs Highly variable capital cost High cost of brand development The low switching costs permit consumers to easily change from Noorazah caterers to new fast food restaurants. In Porter’s five forces analysis model, this external factor strengthens the threat of new entrants. Also, variable capital costs of establishing a new restaurant empowers new businesses to enter the global fast food restaurant industry. For example, small restaurant businesses involve low capital costs compared to major corporations in the market. This external factor leads to the moderate threat of new entry against other restaurants. On the other hand, it is costly to build a strong restaurant brand in the food industry. Many small and medium restaurants lack the resources to create a strong brand to match the Noorazah caterers. Thus, the external factors in this element of the Five Forces analysis shows that the threat of new entrants is a considerable but not the most important strategic issue.4.4 Financial Statement AnalysisA market analysis encompasses studying a company’s customers and competitors along with the general industry and environment (Clow & Baack 2010, p. 26).Market analysis determines the physiognomies exceptional to specific marketplace and investigates this information that supports to make decisions for business (Bplans 2015). Thereby understanding how a precise market works and what clienteles want is vital to maintain a competitive advantage. Noorazah caterers current for the past three years was good and with an increase in the previous year 2017 at 1.479. It means Noorazah is capable to have a strong financial stability to clear off its liabilities with its moderate assets thus ensuring stability of the business.Current ratio in years 2015, 2016 was 1.397 and 1.318 respectively. It is noted that whenever current ratio is 1 and above , it means the business is capable to pay its obligations while if it is below 1, then the firm is not well of to pay off its debts.Results show that there is ability to satisfy current liabilities using the current assets even when inventories are exempted. Acid test ratio for averaged at 1.06 for the past years 2015, 2016 and 2017.This means Noorazah caterers can easily pay off all its current liabilities with the current assets and actually have assets left.Leverage ratio To know a company’s state whether it can pay of its bills in a long term as well as identify the company’s major financial issues we use leverage ratio.Leverage ratio on the other hand measures the ability of a company to put up with its financial operations by comparing the debt levels with equity, assets and the company’s earnings.By calculating equity ratio, the aim is to show the proportion of owner capital that is used to facilitate the business’s assets. In Noorazah caterers’ case, shareholders own 59% in 2015, which increased in 2016 to 61.14%. However in 2017 it decreased to 58.85%. With debt ratio, a business’s ability to pay off all its liability, measure the financial leverage of the company determining whether the levels of liability are higher than the assets at hand.Noorazah caterers have a low debt ratio meaning the ratio is less 0.5 times to borrow more than the assets available.From the results, in 2015 debt ratio was 0.41, decreased in 2016 at 0.389 and rose back to 0.411 in 2017.Debt to Equity ratio = Total liabilities · Total equity2015 2016 2017Debt to Equity ratio =( RM 125,898)/(RM 181,170)= 0.69 Debt to Equity ratio = (RM 104,115)/(RM 163,819)= 0.64 Debt to Equity ratio = (RM 137,120)/(RM 196,092)= 0.70Table debt equity ratio of Noorazah caterersNoorazah caterers had a debt to equity ratio of 0.69 in 2015 which slightly diminished to 0.64 in the following year of 2016. However in 2017, it increased to 0.70 times.The lower the debt to equity ratio, the more stability of the company.it thus indicates. The above results showcase that Noorazah caterers have a financial stability evidenced by the low debt to equity ratio.Activity ratio Activity ratios measure the relative efficiency of a company based on use of its leverage, assets or other related balance sheet items. These are of help in determining whether a company’s management is performing a good job to generate revenues and cash from the available resources.Asset turn”over ratio = Net sales · Average total assets/22015 2016 2017 Asset turn-over ratio = (RM 576,510)/(RM 132,043/2)= 8.73 Asset turn-over ratio = (RM 637,400)/(RM 108,3944/2)= 11.76 Asset turn-over = (RM 728,264)/(RM 159,012/2)= 9.16Table asset turnover ratio of Noorazah caterersNoorazah caterers moderately uses its assets as far as generating revenue is concerned however there are signs of slow growth. The assets turnover was RM 8.73 then it increased to RM 11.76 in 2016. A decrease is asset turn-over ratio in 2017 to RM 9.16There is dire need to increase revenues so that there is efficient business management.Working capital ratio = Current Assets · Current liabilities2015 2016 2017Working capital ratio = (RM 132,043)/(RM 94,504)= 1.397 Working capital ratio =(RM 108,394)/(RM 82,241)= 1.318 Working capital ratio =(RM 159,012)/(RM 107,458)= 1.479Table working capital ratio of Noorazah caterersWorking capital ratio in 2015 was 1.397 times, then in 2016 it slightly decreased to 1.318 whereas it was 2.479 times in 2017.From the results, Noorazah caterers is proficient of securing credit to run the business better. Usually when the working capital ratio better ratio is above 1, it indicates the business is in a good financial position.Profitability ratio Profitability ratio is a vital to calculate the company’s returns on the investments made on the assets and inventories. Furthermore profitability ratio can be seen as a means to understand how restaurant generates more profits.Profit margin ratio = Net income · Net sales — 100 %2015 2016 2017Profit margin ratio = (RM 20,872)/(RM 576,510)— 100%= 0.0362% Profit margin ratio = (RM 16,287)/(RM 637,400)— 100%= 0.0256% Profit margin ratio = (RM 23,060)/(RM 728,264)— 100%= 0.0317%Table profit margin ratio of Noorazah caterersPercentages of sales balance after all expenses are met by the firm is what is referred to as profit margin ratio.In 2015, profit margin ratio for Noorazah caterers was 0.0362%, 0.025% in 2016 and 0.0317% in 2017.This implies the business made fewer overall sales the couple of year.4.5 Boston Consultant Group Matrix/BCG MatrixBoston Consultant Group matrix also known as growth-share matrix is a business planning instrument, which is used to represent firm’s brand portfolio or on a quadrant along relative market share and firm’s growth factors. BCG matrix enables evaluate potential of company portfolio and propose future investment approaches. To understand the BCG matrix, it is classified into four categories that are founded on industry appeal (growth rate of the industry) as well as competitive position (relative market share). Noorazah caterers can evaluate effectively the possibilities under which their business units operate best. QUESTION MARKS Cash flow: ModerateStrategy : Analyse if the restaurant can grow into a star or will degenerate into a dogEarnings: Unstable , growing STARS Cash flow : Neutral Strategy : Invest for steady growthEarnings: High , stable and growingDOGSEarnings: Low and unstableStrategy : Divest Cash flow: Neutral/ moderate CATS Earnings : High stableCash flow: High stableStrategy : Milk Table 4.0: Showing BCG matrix for Noorazah caterersStars After over 10 years of running Noorazah caterers has grown into a stable and major player in catering compared to its rivals in the university. Long term opportunities make it to be a star, forward moving to invest and grow steadily which yields substantial revenue. Noorazah caterers in their dominant position have a relative market share with promising market. However Noorazah caterers can turn into a cash cow with heavy investment to expand its market share.Cash cowsWith high market share in a growing / mature market, it brings about highest cash flow. However Noorazah caterers look not to make heavy investments since there are limited to university management which limits them to milk as it would be in cash cow.Question marks With low relative market share in a young yet promising growing market, there is potential to become stars if the market share is steadily increased. Usually the business generates low cash yet cash needs are high. When conditions do not favour, market share is not reached thereby becoming a poor dog if the market grows big. Here both external and internal positions of business is threatened.Dogs In this quadrant of BCG matrix, services and products do not generate profit and may just break even.There is a low relative market share in a sluggish developing mature market. The problems include operation management that eventually has negative effect on the overall profitability of the business.CHAPTER 55.0 IDENTIFICATION OF PROBLEMATIC AREASWith reference to chapter 4 where we discussed the SWOT analysis, PESTLE analysis as well as BCG matrix it can be deduced that there exists external and internal factors that show case some of the problems Noorazah caterers faces.Among them are the weaknesses observed, this chapter will shall discuss the problems and limitations of the restaurant. These include finance problems, operational, human resources, marketing among others.5.1 OperationThe operational problems Noorazah caterers face are due to some weakness in the management. The supervisor is not keen enough to report everything that needs to be addressed. This as will includes the manager and owner who usually delegate their duties to lower level staff. Thus there is wastage some times in food and payment of workers who are not effective enough. Additionally, Noorazah caterers is still lacking in technology used in their premises like keeping of records which are actually hand written. No viable client satisfaction records or feedback so they can effectively evaluate as well as provide better facilities to consumers. 5.2 FinanceIn the beginning Noorazah caterers started on good financial base with support from family. However there was need to make profits which came slowly. There was less funding for the business until it brings some reasonable profits. There the difficult case is maintaining sales as well as profits. From time to time there is fluctuations which brings about financial uncertainty.Noorazah caterers also is taking longer to have their owner assets although the best side is they have managed to keep the liabilities in control 5.3 Marketing Noorazah caterers’ communication between itself and consumers is not good enough as they lack a proper marketing model. Neither advertise nor have a budget for it. Where they fail at marketing they have made a good new look at their premises with nice art. The owners need understand more advertising increases market target and base thereby increase sales. On social media, the blog and other accounts are not updated and almost inactive.5.4 Human ResourceHuman science is the set of persons or team that make up work force of any company.Human resource department lacking, basically there is no human resource team, officially it’s the manager and the supervisor that help manage the welfare of workers.Company has a total of 40 workers and mostly are on contract.However the manage makes sure they are immunised and have their salaries or wages catered for in time.5.5 Strategic ManagementStrategic management entails the ways to draft and implement crucial aims for the company on behalf of the management basing on the resources, critical assessment of external and internal business environment under which the company operates.5.6 Weakness in accepting business model implementationFor more than 10 years, Noorazah caterers have their self-made business model. This actually works for them and however much they face some difficulties in pursuit to run even better.The manager when asked if he could implement the new strategies I do have in plan for him, he is reluctant. Believes not much can be changed from the existing as long as they stick to their specialist of good food and customer care.