Evaluate the OM strategy of Hard Rock Cafe Essay Example
Evaluate the OM strategy of Hard Rock Cafe Essay Example

Evaluate the OM strategy of Hard Rock Cafe Essay Example

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  • Pages: 13 (3447 words)
  • Published: September 3, 2017
  • Type: Case Study
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The text discusses the Operations Management (OM) strategy of Hard Rock Cafe (HRC) in relation to the 10 key OM decisions outlined in the Principles of Operations Management - Heizer and Render, Pearson Global Eighth Edition. These decisions include the design of goods and services, which can involve improving existing products or creating new ones. It is important for the design strategies to align with the product life cycle in order to minimize costs and maximize profits. Additionally, the principles of innovation must be consistently applied throughout the product design processes for business success.

The designed merchandise must meet the following requirements: respond to customers' needs in terms of quality, size, color, and layout. The designed items should be feasible and profitable when produced. In its 39 years of existence, HRC has grown from a small pub in London to a global powerhouse

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. It manages 129 cafes, 12 hotels/casinos, live music venues, and an annual Rockfest concert in 40 countries, serving 100,000 meals daily. The author believes that product design contributes to the impressive success of HRC. Evidence from case materials shows that HRC consistently seeks reliable suppliers for quality products and timely services. HRC's products have always been designed with their distinctive red color and create value through good food and entertainment. All products are designed and tested before being produced; production only proceeds if ingredients are available from qualified suppliers. The website and case materials show that HRC has designed different menus for different restaurants, constantly updating the menu to offer higher quality products than their classic American food offerings.

The success of the nutrient and drink concern depends on cardinal factors, as people's tastes

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differ. HRC incorporates the merchandise construct in its merchandise design, attracting customers not only for the quality of its cafe, but also for the unique dining experience it offers. This includes its style, entertainment, service attitude, valuable memorabilia pieces, and friendly atmosphere. All of these well-designed products are displayed at HRC to differentiate itself. The core value of HRC, "Love all - Serve all," is applied to all staff members who provide warm greetings and attentive service to all customers. Managing quality is crucial for any franchise and merchandise business, as customers purchase the business's products/services due to their widely recognized quality. The success story of HRC, with approximately 70 franchised restaurants worldwide and 48% of a typical cafe's revenue coming from merchandise sales, confirms the quality of its goods and services.

The information provided reveals that HRC places a strong emphasis on the quality of its food and service. HRC continuously improves its offerings to cater to changing tastes and considers any customer dissatisfaction as a failure. Food safety and cleanliness are also crucial factors for success in the food and beverage industry. Despite serving over 100,000 meals daily for 39 years, there have been no reported cases of food poisoning associated with HRC. During my visit to HRC in HCMC in 2009, I was impressed by the enthusiastic and healthy staff, vibrant red color, and cleanliness, all indicating the quality of HRC's products. Additionally, a process strategy determines how an organization transforms resources into goods and services.

The objective of a procedure scheme is to develop a production procedure that satisfies the client's demands and product specifications while considering cost and other managerial limitations. The

chosen procedure will have a lasting impact on the efficiency, effectiveness, cost, and quality of the produced goods. In the case of HRC, the organization is utilizing a process focus approach to meet the demands of food safety and customer preferences for low-volume and high-variety food. Based on the provided case materials, it can be observed that HRC's use of the process and capacity method, alongside the Microsoft Project planning and managing tool, enables the administration to successfully serve over 100,000 enthusiastic fans in large events such as Hard Rock Live Concerts and Annual Rockfests, even when unexpected circumstances arise.

HRC uses long-range prediction for capacity planning, intermediate-term prediction for contracts, and short-run sales prognoses. These prognoses help run the business efficiently, including employee scheduling, bonus setting, and menu planning. When deciding on a business location, entrepreneurs must consider PESTLE analysis (political, economic, social, technical, legal, and environmental factors) as well as human resources, wages, currency policies, raw materials, and real estate due to the rapid globalization and government regulations affecting foreign direct investments and free trade agreements.

The objective of the location scheme is to maximize the advantage of the property's location. HRC demonstrates a strong commitment to location analysis, such as dedicating three years to prepare its Moscow restaurant. HRC utilizes the Hard Rock Standard Market Report to perform a comprehensive analysis of various factors including demographic trends, visitor market, transportation, restaurants and bars, political risks, real estate market, and comparable market analysis specific to HRC. Additionally, it considers currency, social norms, and potential brand development. The company also employs break-even analysis to determine investment options for its facility.

HRC's core value of "guaranteeing the long

term growth and success of our administration" is strictly upheld in its location strategy. For any location decision, HRC requires a commitment of at least 10-15 years. HRC always chooses cities that attract a large number of visitors. For example, the Orlando-based headquarters is situated in a World City, home to Walt Disney World, which draws around 52 million visitors annually. Moscow is a city of millionaires, Bogota is known for its art and culture in South America, Venice has more tourists than residents, and Bangkok, Beijing, Hong Kong, and Ho Chi Minh (HCM) City are the most visited cities in Asia [1] ... The selection of a specific site within a chosen city is also part of the location strategy. HRC has opened its first cafe on 53 Le Duan Street in HCM City, which is known as the street frequented by visitors and entrepreneurs. The layout strategy plays a crucial role in establishing an organization's priorities regarding capacity, processes, flexibility, cost, quality of work life, customer contact, and overall image.HRC's website and physical location demonstrate that they possess efficient kitchen layouts, motivated staff, a well-organized schedule, and the ability to provide the right ingredients in the right place. The displayed Hard Rock Values of 'Love all - Serve all' at the entrance further enhance the satisfaction of their customers with their efficient layout designs.

HRC utilizes its distinctive red coloring in various aspects such as banners, logos, websites, restaurant and bar layouts. Additionally, they invest heavily in rock 'n' roll memorabilia and retail bars, along with light and sound systems, screens, and music. These layout schemes set HRC apart from other restaurants and contribute

to its high brand recognition of 92%. Furthermore, HRC has created a website as part of its communication and layout strategy. Human resources, job design, and work measurement are crucial for the success of a business. The employees are the most valuable asset, not the building, equipment, inventory or accounts receivable. The key to success lies in hiring the right people for each job and providing pleasant working conditions. The purpose of a human resource strategy is to effectively manage labor and design jobs for efficient utilization of people. [2]

Establishing positive industrial relations in business requires a common commitment and trust between directors and employees. The success of human resource strategy relies on fair staffing policies, encompassing appropriate work regulations, wage programs, fringe benefits, and working conditions. HRC's case materials demonstrate the development of an exceptional HR strategy.

The HR department at HRC prioritizes applicants who possess job skills, a positive attitude, self-motivation, a passion for music, a love for serving people, and the ability to convey the HRC experience to customers. New staff members undergo a two-day orientation training from the training department followed by additional courses aimed at promoting personal and professional growth.

All new staff are introduced to Hard Rock's core values which emphasize innovation, creativity, self-motivation, and productivity. Upholding honesty, integrity, professionalism is also encouraged as it contributes to long-term growth and success while protecting the environment.

HRC is establishing an organization that values inclusivity and diversity, aiming to create a conducive work environment where individuals can derive full satisfaction from their jobs. In order to achieve this, HRC provides attractive remuneration and benefits not only to regular employees but also to part-timers who

work for just 19 hours per week. Additionally, HRC encourages internal growth by promoting hourly employees into managerial positions, accounting for 60% of the current management staff. This unique organizational culture and work environment contribute to a low employee turnover rate and attract talented individuals worldwide.

However, the available case materials do not offer clear insights into how HRC assesses employee performance. The author proposes the adoption of a results-based performance evaluation system as a potential solution. Under this proposed system, each employee collaborates with their supervisor in determining a set of key objectives that they must accomplish within specified timeframes. These objectives may encompass both personal and organizational goals.

The consequences must be SMART (specific, measurable, achievable, realistic, and time-bound) and should be regularly reviewed, updated, and evaluated to ensure employee productivity and personal development as well as growth of HRC. Supply chain management involves integrating activities that acquire materials and services, transform them into finished goods, and deliver them to customers. These activities encompass purchasing and outsourcing. The objective is to establish a supplier chain that prioritizes maximizing value for the end customer. Key success factors of supply chain management include strategies of low cost, quick response, consistent quality, and quantity.

OM directors in HRC are primarily concerned with the direction of providers. This is because HRC relies on high quality ingredients like chicken, pork, beef, eggs, and other ingredients to create fresh and high quality food that meets the demands of their discerning customers. Essential criteria for choosing suppliers include food safety, freshness, and the ability to respond quickly. The importance of supplier selection is evident in the case materials. HRC only produces menu items

if the ingredients are available from qualified suppliers. When HRC opened in Moscow, it took three years of advance preparation to establish a Russian supply chain. However, there is limited information in the case materials about the strategies that HRC uses to manage supply chain risk and ensure food safety in all its restaurants. The author suggests that effective management of supply chain risk could involve regular and unexpected visits to suppliers, third-party audits of supplier processes and logistics, or the development of a small number of exceptional suppliers who offer the lowest costs and highest quality.

Developing long-term partnerships and integrating with providers is a good strategy for managing supply chain risk. HRC could consider developing and signing long-term partnership agreements with manufacturers or manufacturers' groups, as well as agricultural co-ops, to improve its supply chain. Additionally, HRC could conduct a value chain analysis of its major products, such as chicken and eggs, to identify opportunities for upgrading and improving the value chain. This would help ensure the organization's cost and competitive advantage. Effective planning for inventory materials and adopting a just-in-time (JIT) approach is also crucial. Inventory is often one of the most expensive assets for many companies, accounting for up to 50% of total invested capital.

Stock list management is crucial for companies to reduce costs and efficiently manage production. The main goal of stock list management is to find a balance between investing in inventory and providing excellent customer service. It is important for businesses to control critical aspects, maintain accurate records, regularly count inventory, and prevent theft and damage. In the case of the food and beverage service industry, inventory is especially

important to ensure that all products do not exceed their expiration date. HRC always ensures that fresh ingredients, food, drinks, and products are available in order to serve their customers on time.

HRC is dedicating a significant amount of money ($40 million) to its memorabilia collection, which includes unique and highly valuable items such as Clapton's silver suit from 1969, Biting's Fender Precision Bass used in 2001, a guitar worn and used by Guns N' Roses in the early 90s, Madonna's bustier from 1990, a guitar owned by Glen Matlock, guitar player of the Sex Pistols from the 1970s, and a cembalo used by The Beatles in 1967. It is crucial for HRC to carefully manage these valuable pieces by maintaining accurate records and regularly conducting inventories to prevent theft or damage. Efficient intermediate and short-term programming is essential to reduce costs and ensure timely and dependable delivery. For HRC, capacity planning, annual programming, and short-term scheduling are all highly significant.

HRC ' OM directors ensure that they always have employees who are capable and available to serve clients on time for daily matters and important periodic events. They have developed proper schedules to effectively and efficiently manage and turnover employees. HRC considers sales, priorities, short-term sales trends, annual sales forecasts, upcoming major events near the restaurant, and seasonality when creating schedules. HRC directors also consider the seniority of employees when filling the daily schedule; this is crucial because senior employees are more experienced and therefore more profitable.

Attention: Ensuring quality and control are crucial for success. HRC possesses various equipment and furniture, including valuable pieces of memorabilia that require proper care. Additionally, HRC regularly reviews its menu

and conducts customer surveys to update and improve its food and beverages.

Other references: Heizer and Render, Principles of Operations Management - Pearson Global Eighth Edition, pages 56, 57, 83, 222, 346, 452, 453, and 616.

Political:

- Vietnam has a mixed economy with private, foreign, and collectivist enterprises, with the government still playing a significant role in planning and governance.
- Some countries have not yet recognized Vietnam as a market economy.
- Vietnam enjoys great political stability, and Hanoi is recognized by UNESCO as the City for Peace.
- The government and communities show positive attitudes and provide strong support for foreign investments.

Economic:

- Inflation is relatively high at 12%, but manageable.
- Poverty rates have decreased from 22% in 2005 to 9.45% in 2010.
- Vietnam maintains a consistently high rate of economic growth at around 7-8% annually.

Social:

- Vietnamese people have a fondness for street food and beverages.
- Young individuals are becoming more dynamic and have a preference for trendy restaurants and cafes.The number of visitors to Hanoi has been increasing in the last 10 years, with approximately 4 million visitors per year. This growth can be attributed to factors such as the availability of power and internet access at reasonable prices. However, there are challenges in terms of legal implementation, including poor quality of human resources and corruption issues. There are also strict regulations for businesses such as bars and clubs, with a closing time of 11:30 PM. Hanoi has invested heavily in infrastructure development over its 1000-year history, but traffic congestion remains a major issue. The availability of a low-cost workforce is a benefit for the service industry in Vietnam, with approximately 1 million new entrants to the labor

market each year. However, wages in the food-service sector are not attractive to young talents, while the values of the Hanoi Red Cross could be appealing to Vietnamese youth. In terms of currency policies, the exchange rate is not flexible and the low value of the Dong compared to the Euro and USD is beneficial for importing goods. Additionally, climate change has an impact on agricultural production.

  • Foods safety is a major issue due to uncontrollable production processes;
  • Vietnam is an agricultural state, with 60% of laborers working in agribusiness, forestry, and aquaculture;
  • Rice, aquatic products, coffee, vegetables, cashew nuts, black pepper and tea are the main exported items of Vietnam.

Real estate

  • There has been a high fluctuation in prices in recent years;
  • Supply is increasing, but prices remain high due to the expensive cost of buildings, materials, and interest rates;
  • Land law and real estate business law are available;
  • The real estate market is closely connected to the gold and stock markets.

Design of goods and services
The culinary specialties and draft beer of Hanoi are highly valued by tourists and residents. HRC will need to study the food and drink culture in Hanoi in order to design its goods and services.

It is suggested to have two types of food/drink products for two groups of customers. The first group includes local young people and entrepreneurs, who will be offered Western-style products. The second group consists of visitors, who will be offered Hanoi's specialty products. In order to improve the business, the entertainment provided, the attitudes of the staff, displays of souvenirs, and the enthusiastic atmosphere should all be strengthened. The core value of "Love all - Serve all" should also be emphasized.


Managing quality

Food

safety is a major concern in Vietnam, especially in Hanoi and Ho Chi Minh City. According to a 2007 announcement by the World Health Organization (WHO), there are around 8,000 reported cases of food poisoning in Vietnam each year. However, this number only represents 1% of the actual cases due to underreporting. The main cause is the use of uncontrollable pesticides in agriculture. Local vendors can provide fresh and affordable local agricultural products for a competitive advantage, but they are not yet familiar with long-term contract-based businesses. Therefore, HRC will need to carefully manage the quality of these local products to avoid food poisoning issues. Currently, the enforcement of laws on quality management and control is weak, and forgery and imitation are widespread throughout Vietnam.

Particular measures need to be taken in the design of high-tech goods to prevent imitation. These goods are only sold in authorized retail outlets.

Procedure and capacity design

HRC needs to focus on the procedure and capacity design. It is crucial for employees and menu planning at Hanoi cafes as most active individuals in Hanoi have their meals at fast-food establishments. Vietnamese organizations and individuals often spontaneously organize parties to celebrate both organizational and personal events, such as New Year, Women's Day, Labor Day, birthdays, and even events like new cars at bars or cafes with colleagues and friends.

Peopless are not familiar with pre-booking patterns and HRC will need to be proactive in making frequent studies and forecasts of potential clients for procedure and capacity ' design.

Location Scheme

HRC will need to clearly identify its targeted clients for the choice of a specific site within Hanoi. Actually, Hanoi owns 3.324,92 kmA?, but it

will be enlarged to 13.436 km2 in 2020 (largely to South-West and North-West). If HRC will target visitors, a site in Old Quarter is a good place. If HRC would like to serve young talents and entrepreneurs, a site in the South-West, where rich people live, and locating the national bowl, national conference centers, is better. Real estate market in Hanoi doesn't work with market rules, due to speculation and corruption, the selling price is much higher than the actual price.

HRC may wish to utilize interruption and analysis techniques for its investment decisions in facilities. HRC will need to improve its designed layouts that help customers easily distinguish HRC from other popular cafe establishments in Vietnam. Regarding Human Resources, according to the ILO and General Department of Vocational Training in Vietnam, there are approximately 1 million new entrants into the labor market each year in Vietnam, but they lack proper training in service-business, working discipline, and entrepreneurship, as vocational training in Vietnam does not prioritize these subjects in the curriculum. In addition to providing orientation and follow-up training on HRC's business values and practices to its employees, HRC will need to provide training on discipline and entrepreneurship and prepare them to work productively in the enterprise. Supply chain management is also important. Currently, many international organizations such as CARE International, World Vision, ADB, WB, UN agencies... support rural poor communities in producing safe agricultural products for better market participation through the establishment and operation of farmer's groups, agricultural cooperatives, and rural enterprises. It is recommended for HRC to collaborate with these organizations to develop and manage local suppliers.HRC plans to use two approaches to reach

potential clients from these administrations while also contributing to poverty reduction and societal responsibility in Vietnam with government support. Another strategy involves building strong partnerships with a select few local suppliers and conducting regular and surprise visits, as well as third-party audits, to mitigate supply chain risks related to food safety.

Annameses are not accustomed to long waiting time in restaurants; the quick service is a key factor for success that HRC will need to consider for its services. As mentioned above, HRC will need to carefully schedule its employees for lunchtime and have additional employees available for spontaneous parties. Forecasting of sales and regular reports are good practices for short-term planning. Hanoi has a very humid climate, so it is important to take care of its furniture and memorabilia pieces to prevent damage.

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