Operations management strategy of Hard Rock Cafe

Global competition increasing every day, while others theme restaurants have come and gone Hard Rock cafe is successfully response to complexity, risks and competition of global economy with flexibility and speed. From one London cafe in 1971, Hard Rock Cafe (HRC) has grown to over 163 locations in 52 countries, and most of that growth has occurred in the last few years. With the mission ‘To spread the spirit of Rock ‘n’ Roll by delivering an exceptional entertainment and dining experience. We are committed to being an important, contributing member of our community and offering the Hard Rock family a fun, healthy, and nurturing work environment while ensuring our long-term success’ (Heizer & Render, 2009).HRC enjoys a 92% name recognition world-wide, putting it in the top 10 of all restaurants. HRC has accomplished this by changing from a ‘themed’ restaurant into one participating in what is now called the ‘Experience Economy’.

. Let’s identify how each of the 10 decisions of operations management is applied successfully and effectively at Hard Rock Cafe.

1. Design of goods and services:

HRC is flexible and unique with their product and services design base on the local market that they enter into. Every different restaurant has unique design by combining traditional and culture of the locals with the view in mind such as when they open HRC in Ho Chi Minh, Viet Name and decorate the bar with lantern. One of the most popular mistakes of restaurant is trying to make their food be the best to be successful. But reality is quite different when Bugger King and McDonald’s don’t have the best food. I didn’t mean that restaurant shouldn’t try to make the most delicious food but in the process of making delicious food (tangible product) they should keep their eyes on providing the intangible product which is called experience and HRC sells experience. HRC is using food as medium to inspire exceptional entertainment and dining experience. As Professor C.Markides of the London Business School says, ‘ The trick is not to play the game better than the competition, but to develop and play an altogether different game’. (Markides, 1997)

2. Managing Quality:

One of the most operations strategy is quality. According Jay Heizer, quality as ‘the totality of features and characteristics of a product or service that bears on its ability to satisfy stated or implied needs’. (Heizer & Render, 2009, pp. 222-225). In Hard Rock’s Cafe, the food is the product and quality must be top the charts. Menu and quality surveys are being constantly and regularly reviewed by operations personnel. In operation management, establishing quality standard and control to meet these standards is the key to success but HR do better when providing the unique experience. Hard Rock is quite successful when using food (tangible product) as the medium to deliver exceptional entertainment and dinning experience (intangible product) and customer almost satisfy with unique visual and sound experience not duplicated anywhere. (Heizer & Render, 2009, p. 83)

3. Process and capacity design:

When decide the locations of their facilities, Hard Rock cafe has the process and capacity design with effective analyses the whole production process from purchasing food ingredients, to preparing the food to ensure the products in an efficient manner, cost effectiveness and labour requirements.

4. Location:

According Oliver Munday, Senior Director Worldwide Cafe Development, ‘ when considering a new location, a careful decision making process is used, as the investment for a new location is large and for example usually includes agreeing to a longer term lease on the location of 10-15 years or more’ because it’s play a role to ensure organization recovered the initial investment capital as well as minimum profit. . HRC carefully looks at several factors when considering a location.

‘ Political risk: In general, stable political of country can impact the decision of economic activities. It can be seen by the consistency of government policies that helps to ensure the interest of investor. On the other hands, a stable political situation will make people feel safety in working and increasing number of people comes to entertaining places.

‘ Currency risk due to inflation causing the economic crisis. Consequence, enterprise faces with difficult in exchange rate when earning profit cannot enough to compensate. Currency discount means pricing escalate, people live from hand to mouth. At that time, consumer will be reduced and the resulting decline in business revenues and profits, even losses.

‘ Social norms: in perspective consuming capacity of customer, there are two factors dominant: people’s income and culture, spending habits. If people have high salary, they’re willing to spend much more money for better life. On the contrary, they just spend money on what they really need. Second, due to culture life and spending habit they spend money on entertainment, leisure activities that their culture allows. But there are places where even though people’s incomes are really high but they practice in saving and spending.

‘ Brand fit: This factor is very sensitive and important that Hard Rock should consider carefully before naming trademarks and deploying their business. Customer will be outraged and boycott immediately with goods or services that offend communities ethnic or their belief.

‘ Social costs: This is cost that businesses have responsibility to contribute to society including taxes’

‘ Business practices: Hard Rock interested in living standards and intellectual level where business located.

5. Lay out :

Another reason helps HRC stands out the crowded restaurant is their layout. Just looking their big guitar outside, definitely it stimulates your curiosity get inside. The wall is being slapped with lots of memorabilia: guitars, drums, shirts, pants, shoes, scarves, handwritten come from music band or legendary musicians, such as Jimi Hendrix, Elvis, John Lennon ‘HRC seems to be a ‘live’ museum.

6. Human Resources:

Company from small to large just only archive their operation management strategy with competent and motivate people. Many organizations have demonstrated that competitive advantage in operation can be build through a good human resource strategy. In Hard Rock Cafe, part of their missions is creating a friendly, funny working environment not only for employee but also for their family to make them feel not just come for work only but to enjoy the work since then they can deliver professional unique entertainment and dining experience to their guests and to ensure long term company success . Hard Rock has an employee Bill of Rights, outstanding pay, benefit and promotion that helps employee self-motivated individual, they also have policy hiring the best qualify not just best available. Human resource can be expensive, difficult to archive and hard to sustain but what we’ve seen in Hard Rock Cafe with practice training and treat employee as you need individuality that not only good for business but also definitely ‘rock’. (Heizer & Render, 2009, p. 445)

7. Supply-chain management:

Hard Rock has been explored new global resources to achieve maximum profitable via supply chain. Be aware the most advantages of outsourcing is cost saving and improve services level. Hard Rock has selected USCO logistics, a subsidiary of Kuehne & Nagel, to take over distribution and replenishment of collectible and fashion merchandise for its cafes, hotels, and casinos in North America. (Albright, 2004)

8. Inventory, material requirements planning, and JIT

Inventory is one of the most expensive assets of many companies and Hard Rock is not exclusive. With more than seventy thousand pieces of memorabilia, Hard Rock also has invested forty million dollars in one of the world’s largest collection of rock-and-roll memorabilia inventory. According Jay Heizer ‘ the objective of inventory management is to strike a balance between inventory investment and customer services’ and by using effectively software such as Excel OM, POM, Hard Rock has done a great of cataloguing every single item. With thousand memorabilia spread out 163 cafes world-wide in 52 countries, they know exactly what is on the wall in what cafe. Through inventory system and technology they’re quite comfortable to recall any memorabilia to refurbish it every 5 to 7 years. (Heizer & Render, 2009, pp. 500-501)

9. Intermediate and short-term scheduling.

In Service Sector such as restaurant and hotel, we must forecast capacity for long term, purchasing contract lending orders for intermediate term and for short term we must forecast schedule and purchase labour, food, supply. Hard Rock Cafe is using a lot of forecasting techniques such as moving averages, weighted Moving Averages, Exponential Smoothing and Regression Analysis that helps manager to see the impact on demand of other menu items if the price of one item is changed. For example, ‘if the price of a cheeseburger increases from $6.99 to $7.99, Hard Rock can predict the effect this will have on sales of chicken sandwiches, pork sandwiches, and salads. Managers do the same analysis on menu placement, with the center section driving higher sales volumes’ (Heizer & Render, 2009, p. 647).

10. Maintenance

Hard Rock Cafe got the goal of maintenance when they succeed to maintain the capability of the system over 52 countries and keeping a system’s equipment in working order in 163 cafes around the world. To get maintenance activities more effectively Hard Rock need to implementing or improving preventive maintenance and increasing repair capabilities or speed. (Heizer & Render, 2009, pp. 682-683)

In light of the above,’discuss’the operations management challenges and

opportunities for’Hard Rock when considering an’expansion of its business into Hanoi.

Opened the first one in December 2009 in Ho Chi Minh, Hard Rock is facing with challenges and opportunities to expand the second one in Hanoi capital of Viet Nam. Let’s using SWOT to analysis their strengths, weaknesses, opportunities as well as threats when coming to Hanoi

1. Strengths:

‘ With more than 40 years strong experience deploying services: hotels, cafes, restaurant spread out over 52 countries. Hard Rock absolutely brand power with high capacity, technology and network relationship.

‘ Hard Rock had experienced about VN market through the first Hard Rock in Ho Chi Minh. Hard Rock absolutely has some lessons learn from the first one about human resource, supply chain, inventory that is a challenges factor for ‘Multi-Domestic’ strategy.

2. Weaknesses:

‘ Maybe need more research in emerging market as well as living habit in Hanoi.

3. Opportunities:

‘ Hanoi is the capital of Vietnam and was formed 1000 years ago, the center of politics, culture and economy of Vietnam. Hanoi is the first stop of tourists on their way to visit Ha Long Bay which is a natural wonder of the world, Tuan Chau resort, The Hai Phong port city

‘ Hard Rock will create a exchange cultural bridge between Vietnamese singer and international singer.

4. Threats:

‘ Considerations should be taken as well on regional segmentation of the market, like we usually say in the marketing and advertising industry, in Vietnam:’ Saigonese makes 10 bucks, borrows 1 and spends 11 while Hanoiians makes 10 bucks, spends 1 and saves the rest.’ Don’t go rushing to Vietnam hearing the rosy stories. Take your time and breathe like a local before you make your move.

‘ Vietnam, like any other emerging market, is a long-haul market for any investor. While it is looked at as one of the 10 hottest emerging markets in the world with a very young population and a rising middle class, it is by no means providing a quick return on investment’especially when you are offering a new product or service concept.

‘ Educating the market on the specialty coffee category. Try to understand consumer perception towards the category and match it with what you have in your pocket. You either are a pioneer and spend money to educate the market or wait until your competitors have done so and piggy back on market growth. Nevertheless, if your pocket is real deep, buy out a local business in the category and take it from there.

Let me use the PEST framework for deep analysis and see other perspectives of challenges as well as opportunities to expand Hard Rock in Hanoi.

PEST Analysis:

Political:

‘ Government Stability:

Since 1975 up till now, the political situation in Vietnam is very stable. This is a country of no violence, no terrorism, no constant protests that causing the political situation, culture and economy of the country. People feel peace in mind to work and live, play and entertainment. Therefore, many foreign do invest to Vietnam, and many tourists from all over the world visited Vietnam. Hanoi is the capital of Vietnam so that it’s inherited all the best characteristics.

Economic:

‘ Growth, Inflation& Interest Rates:

In 2010, gross domestic product GDP in Hanoi increased 11% over the same period last year. Foreign investment in Hanoi reached $ 800 million, total revenue per capita GDP reached about 37 million per year (approximately $ 1,950 per year). But people who work in services, stock, handicrafts, owner of large, medium or small business have really high income.

Price index increases, especially food commodities increased to 5.37%. Beverages price index rose 4.17%. Cigarette price index is up 2.25%. General food sector services have increased the price index

‘ Real Estate Market: Hanoi is a growing and expanding city so that real estate prices increasing so fast. Wherever roads and public services are built, the property prices rose faster and quite high. Although the city is planning to expand but property prices in the old city still very high and that led the fact, although Vietnam is a poor country, but property prices is more higher than other countries in the world.

‘ Tourists/business visitors: According to statistics, the number of international visitors come to Hanoi in 2010 increased 62% compared to 2009 while a domestic tourists increased by 10%. And has more than 30,000 international tourists visited the capital in 10 days Hanoi organized the celebration of 1000 years of Thang Long ‘ Hanoi

‘ Hotel: There are lots of luxury five start hotels in Hanoi such as Hilton, Sofitel Plaza, Sheraton, Sofitel Metropole, Nikko.

‘ Convention Center: Hanoi National Convention Center Vietnam was built with scale and international level, located at 57 Pham Hung Street, Tu Liem district. It was held the Economic Cooperation Forum Asia – Pacific Economic Cooperation (APEC) in 2006.

‘ Retail: As well as other cities of a developing country, outside the supermarket and shopping center, the old town around Hoan Kiem’s lake where the famous retailer of the city including most of the essential goods from individuals and families stuffs to souvenirs.

Socio-cultural

‘ Population Growth/Age Profile

Population of Hanoi is about more than 6 million people. Especially, urban areas, downtown area and old town such as Hoan Kiem, Ba Dinh, Dong Da, Hai Ba Ba Trung district is very crowded. In these areas, the population density is up to about 35,000 people/km2 while other areas just 2000 people/km2. Age of working capacity is about 66% of the total population.

‘ Education, Social Mobility: Hanoi now has 52 elementary school, 27 colleges and 50 universities. There is also the Academy and the Center for scientific research.

‘ Transportation:

‘ Airport:

a) Age of airport: NoiBai International Airport had built in 1977 and official opened in 1978.

b) Number of Passengers: In 2010, Noi Bai International Airport has average 170 flights taking off and landing daily, and has served 9.5 million passengers

c) Airlines: Vietnam has three airlines Vietnam, Jetstar and Vietjet airline. And most major airlines around the world have representative offices in Hanoi .

d) Direct Flights: Noi Bai Airport has direct domestic flights to other cities in VietNam such as Ho Chi Minh, Nha Trang, Hue and international flights to other cities around the world as: Moscow, Paris-Charles de Gaulle, Seoul-Incheon, Kuala Lumpur, Tokyo-Narita’.

e) Hubs: Currently, Noi Bai International Airport is not on transit routes the international flights. However, visitors can stop to visit the capital Hanoi in Vietnam on the way to Hongkong, Japan, Korea, China,Singapore’.

‘ Rail: Hang Co railway station is the center of the country, the starting point of five railway lines throughout the province from north to south and to the northern border. From the border, Vietnam railway connect to international railway to Beijing, China, and continue to many European countries.

‘ Road: Hanoi is the traffic junction of the roads in the country. Hanoi is the starting point of the route of Highway 1A entered into southern and route into Laos and Cambodia as well as go to the north border VietNam-China.

‘ Sea / River: Hanoi is laying on both sides of Red River, an important routes to Hung Yen, Nam Dinh, Thai Binh, Viet Tri, Pha Lai.

‘ Restaurants and Nightclub: Hanoi has many Restaurants and Nightclub and mainly concentrated in urban districts such as Hoan Kiem, Hai Ba Trung, Ba Dinh and Dong Da .

‘ Sports: My Dinh Stadium which was built in 2003, located in the south of the city, accommodating 40,192 seats. Sports Congress in Southeast Asia in 2003 and football Championships Southeast Asia 2008 was held here.

‘ Entertainment:

‘ Parks: There are lots of parks as Thong Nhat, Tuoi Tre, Thu Le which attracting visitors.

‘ Lake: One of the most prominent feature in Hanoi is a lot of natural lakes i.e Hoan Kiem, Dong Da, Thien Quang. The lakes in Hanoi are also attracting lots of visitor especially Hoan Kiem turtle lake associated with history.

‘ Theaters: Most of these theaters are concentrated in two districts of the city center is the Hoan Kiem and Hai Ba Trung district.

‘ In addition, the old city where the traditional villages and many other historical sites that tourists often come to Hanoi to first priority visit i.e ‘Quoc Tu Giam’ place where President Bill Clinton had visited in 2000.

Technological

‘ Impact of Emerging Technologies.

‘ Impact of Internet and Reduced Communication Costs.

‘ R&D Activity.

‘ Impact of Technology Transfer..

Vietnam is a developing country and all needs for life constantly increasing. Vietnam is also a place attracting many tourists from Europe, Americas..

Because of these reasons, the consideration of expanding Hard Rock Cafe in Hanoi in this period is a job should be considered.

Assume Ba Dinh Square or Hoan Kiem Lake is center point, the most potential area for business location should be placed on Ba Dinh or Dong Da district or adjacent to the Hoan Kiem or Hai Ba Trung district. Similar as people in Ho Chi Minh and other cities across the country, every night, people is going toward downtown. It has created resurgence of “City Centers” at night

Thus, Hoan Kiem and Hai Ba Trung district or near the Hoan Kiem area is absolutely a great ideal for location, but found available space here is extremely difficult.

Moreover, location decision is at a 10-15 years commitment. First, lease premises from 10 – 15 years to ensure have enough time to recover the initial investment capital and gain a profit. Second, the premises are not in the areas that the government put into the clearance plan within 10-15 years.

In the other hands, due to harsh natural conditions, Hanoi usually got flooded annually or disasters that damaged crops. Since then demand of entertainment will be cut off. The consumers will significant decrease.

Also consider psychological factors of Hanoi in particular and people in northern Vietnam general. Due to undergo the hardships of constant war

Due to undergo the hardships of constant war, the harsh natural conditions, people are saving as a precaution for the risks in the future, with hope to build a better life for next generations. Therefore people are considering on spending something.