Impact of Service & Quality on Customer Loyalty

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This assignment investigates the crucial role of service quality and product quality in driving customer satisfaction and loyalty within the restaurant industry. It examines various factors contributing to these aspects, including customer service interactions, menu variety and taste, ambiance, and overall dining experience. The analysis draws upon relevant research and case studies to understand the complex interplay between these elements and their impact on customer retention and positive word-of-mouth.

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Running head: ENTREPRENEURSHIP AND SMES
Entrepreneurship and SMEs
Name of Student
Name of University
Author Note

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ENTREPRENEURSHIP AND SMES
Table of Contents
Introduction................................................................................................................................2
Identification of the problem......................................................................................................3
Identification of theories............................................................................................................5
Application of theories...............................................................................................................5
Pestle analysis............................................................................................................................5
Political:.................................................................................................................................5
Environmental:.......................................................................................................................6
Social:.....................................................................................................................................6
Technological:........................................................................................................................6
Legal:......................................................................................................................................6
Economical:............................................................................................................................7
Competitive analysis..................................................................................................................7
Conclusion of Competitive analysis.......................................................................................8
Porter’s five forces.....................................................................................................................9
Threat of Substitution...........................................................................................................10
Supply power.......................................................................................................................10
Buyer power.........................................................................................................................10
Threat of new entrants..........................................................................................................10
Identifying specialist and non-specialist audiences.................................................................11
Recommendation......................................................................................................................13
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ENTREPRENEURSHIP AND SMES
Conclusion................................................................................................................................15
References and bibliography....................................................................................................16
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ENTREPRENEURSHIP AND SMES
Introduction
Entrepreneurship refers to the process of launching, designing and running a business,
offering a huge range of products and services to the target customers. The individuals, who
create a business, be it small or big, are called the entrepreneurs. The term entrepreneurship
deals with the willingness and capacity of developing, organizing and managing a business
for making a profit, keeping the risk factors into consideration. The risk factors typically
include; lack of funds, economic crisis, market demands, and bad decisions in the business
and others. In simpler words, an entrepreneur can be defined as the individual who starts a
business, organizes it and manages the enterprise (Hall et al. 2012).
The report throws light on the problems and issues faced by London's Spice Sky
restaurant. Spice Sky restaurant provides its consumers with high-quality Indian food since
the year 1988. It has been able to win the hearts of many consumers and mass appreciation.
The restaurant recorded an increase in the sales since its opening. However, the company is
facing a decline in the sales for the last two months, due to some issues. To start with, the
company needs to be more effective in the identification of the strategies, so that it can get
effective results in the long run. Furthermore, it needs to identify the demands and desires of
its target consumers.
The report highlights the issues of the company and the theories to be incorporated,
for the betterment of the organisation. The company needs to deal with the consumers more
systematically as well as creatively. Customers love surprises; therefore, it needs to introduce
a new range of food in their menu. The report discusses the theories and application of new
ideas as well as identifying the specialist and non-specialist audiences. In addition to this, it
consists of some recommendations for dealing with the issues more effectively and
efficiently.

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ENTREPRENEURSHIP AND SMES
Identification of the problem
The Spice Sky restaurant is a popular Indian restaurant located in the heart of London.
It has gained immense popularity for its high-quality services and a huge range of products. It
has recorded an increase in the sales since its opening. However, the sales dropped since the
last twelve months due to some issues. On identifying the problems, it was found that the
company had changed their menu a little, which might be a major drawback. In order to
reduce their costs' structure, they removed some items as well as beverages from their menu.
Moreover, their promotional activities are also less as compared to their competitors. The
company used the same advertisement strategy for many years. Their advertised their
company on the local radio and some other media, which is clearly not adequate.
Bringing a change on to this, the company can adopt different strategies in their
advertisement procedure. Firstly, the company needs to set up a clear budget for their
promotions. They can consult a professional marketing manager for this. Instead of giving
advertisements to the local radio, they can advertise their restaurants on television, with a
creative touch and catchy tune. This will be more impactful and help in grabbing more
attention of the consumers (Nambisan and Baron 2013). Secondly, it was found that the
company has only one billboard advertisement and that too on the main highway. This needs
to be changed immediately. The company needs to set up more billboard advertisements in
the city itself. Not only Indians, it will help grab the attention of others too.
Thirdly, the company needs to be digitally active. Creating a page on the social
networking sites will be impactful and cost-effective as well. However, the company needs to
hire a person for managing the websites and pages, which needs to be updated regularly.
Promotional activities, the introduction of discounts and offers must be regulated on all the
advertising forums. Social media sites will also help the company gain feedbacks from the
consumers. It will further help the company gain an understanding of the consumers’
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behavior and expectations from them (De Mooij 2013). Moreover, the company has removed
some items from their menu, for reducing the production costs. In that case, the restaurant can
introduce a new range of food items and beverages for catering to their target customers. It
must be done in an effective manner. The new range of items must compliment the previous
ones.
Hiring new professionals may help in such situations. They must be trained on a daily
basis, in order to provide their best of services to the customers. In addition to this, the
company should keep a track of their competitors, in order to check their marketing
strategies. It is found that Spice Sky is lacking behind in this. In one hand the company needs
to focus on their marketing strategies and on the other, they need to keep an eye on what their
competitors are doing. Furthermore, the company should start hiring some professionals in
order to deal with these issues. The employees must be trained on a regular basis, for
providing the best of services.
Apart from all these, Spice Sky must know how to handle the competitive
environment. Customers love new things; therefore, the company needs to keep a track of
their behaviours and changing demands. It can be done by installing feedback machines or
tabs in the restaurant itself. The customers can give their feedback as well as
recommendations if any. This will help the owner in gaining an understanding of what the
consumers actually want and why the sales are declining. If the customers are facing any
issues regarding the restaurant's services, they must be encouraged to report it to the
management team. The management team must handle the issues with utmost sincerity and
ensure that such a situation does not happen in future. Moreover, it was found that the
company does not have any clear vision, which needs to be rectified as soon as possible. In
order to gain mass appreciation, the company needs to set up a vision and mission, which will
help in achieving its goals.
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Identification of theories
In the present scenario, it can surely be said that the owner of the restaurant is dealing
with various issues in his organisation and in most cases those issues are advertisement
related and the management related issues. It is seen that being one of the most reputed
restaurant in the city centre of London, SpiceSky is losing business day by day. There has
been a gradual decline in the sales for last 12 months and the owner of the organisation
initially thought that the problem is in the strategy of advertising (Domenech, Rizov and
Vecchi 2015). Later Ali, the owner of the organisation realized that the problem is in the
external operating environment and that is blocking the growth opportunities of the
organisation. Thus it can be said that a thorough external market analysis must be done to
locate the problems behind the decline in the profitability of the organisation. Thus a
PESTLE analysis, analysis of Porter’s five forces and a thorough competitive analysis is
done.
Application of theories
In this section to identify the basic external influences a PESTLE analysis is done.
Pestle analysis
Political:
As the restaurant owner was running the business in the heart of London for quite a
long time and delivers excellent quality Indian food, it contributes a lot to the tourism of
London, thus politically the organisation is in a quite favorable position. The owner Ali does
not have to face any types of political issues and it can be said that no threat can be seen
politically for the organisation (Martínez and del Bosque 2013).

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ENTREPRENEURSHIP AND SMES
Environmental:
As a responsible citizen Ali makes sure that all the waste product of his restaurant
should be kept a side and would be dumped in a safe place to ensure that the environment
does not get affected due to his business operations. Apart from that, the organisation does
get engaged in various sorts of CSR activities and that is why the organisation has earned a
reputation in today’s market (Martínez and del Bosque 2013).
Social:
The management of the restaurant gets engaged in various sorts of social activities
every weekend they feed homeless people and they actively participate in various social
activities like food festivals for the unprivileged people of the society, distributing food to the
homeless people in numerous occasion and many more (Chen and Lin 2015). The
management of SpiceSky also started providing a discount to the aged people and for these
activities the organisation gained quite good reputation in the market of London.
Technological:
The restaurant SpiceSky did not generate the desired revenue for the last twelve
months and that is mostly due to the management’s inability to adapt to the market changes.
The organisation did not invest much in digital promotion and social media campaign so that
the young generation could find them (Domenech, Rizov and Vecchi 2015). They only have a
set customer base and other than them they are failing to expand the customer base only due
to lack of technological adaptation in their business operation.
Legal:
The management of restaurant SpiceSky did not ever violate any of the trading
standards set by the government of United Kingdom and thus they do not have any threat
from the legal aspects.
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Economical:
The organisation has a good reputation in the market of London, but it is a matter of
fact that for quite a few months the restaurant is failing to generate profit and that is a huge
matter of concern. The astonishing part is that the restaurant has a glorious past record of
generating huge revenue each financial year (Martínez and del Bosque 2013). The mist
astonishing part is that the decline in profitability was gradual and not at all sudden. In the
market of UK where most of the citizens are well off and they can eat out in a posh restaurant
like SpiceSky, the restaurant had initially faced no issues or problems, but just as they started
to get lagged behind technologically the profitability got lower day by day.
Competitive analysis
Competitive factors SpiceSky Aquavit Rowley’s Restaurant
Products and service Good quality Indian
food, Fine dining
Multi-cuisine themed
restaurant
Finger food, Pub
Market share 18% 27% 19%
Basis of competition Good quality
food
Fine dining
Great
ambience
Location
Good quality
food
Beautiful
ambience
Competent
management
Pricing
Favourite place
for the college
goers and
young adults
Pricing High to moderate Moderate Low
Strength Quality food
Ambience
Reputation
Quality food
Ambience
Competent
management
Pricing
Crowd of
young adults
due to
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ENTREPRENEURSHIP AND SMES
Crowd of
young adults
due to
extensive
social media
campaigning
extensive
social media
campaigning
Weaknesses Lack of
digital
marketing
Lack of
innovative
approach
High pricing
High pricing Quality of food
Management
could be better
Table: Competitive analysis
(Martínez and del Bosque 2013)
Conclusion of Competitive analysis
From the table provided above, it can surely be said that there are some competitive
advantages of SpiceSky and some major weaknesses of the restaurant (Chen and Lin 2015).
The owner of the restaurant needs to understand one fact that they need to adapt to the market
changes or they will get replaced by the rival organisations in a market that is full of
competition. The owner Ali has not invested much time in digital marketing and social media
campaigning (Wade, Holmes and Gibbs 2017).
. Thus the restaurant is failing to attract the young generation and the inability to
expand the customer base is becoming concerning. The organisation has set high pricing as

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they are trying to provide the best quality foo to their customers and to maintain cost they are
stopping to prepare those delicacies. This is something that is not at all a[appropriate in this
market and by this the organisation is losing its uniqueness, as those dishes were the signature
dishes of the restaurant that have been attracting a huge crowd. On the other hand the
restaurant Aquavit has excelled in every aspects of the competitive analysis framework and
they only need to work on their pricing structure. Rowley’s restaurant’s target customers are
college goers and young adults only and thus they have set their pricing very low and stressed
on ther digital promotion of their restaurant, but they need to work on their quality and the
structure of management (Chen and Lin 2015). Thus, in short it can be said that there is a
huge potential in SpiceSky to again taste the height of success only if they are able to work
on a few aspects.
Porter’s five forces
Figure: Porter’s five forces framework
(Wade, Holmes and Gibbs 2017)
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Porter’s five forces is a framework that is used in this section of this report to analyse
the competition of the business of SpiceSky in the market of London. In this section a
detailed analysis regarding operating the business in a competitive market is provided.
Threat of Substitution
In the present scenario the restaurant is somewhat got replaced by Aquavit as the
management of that restaurant successfully eradicated most of their weaknesses and their
ability to adapt to the changes of market has led them to take over the leading position from
SpiceSky (Saeidi et al. 2015). Thus, the management of SpiceSky will have to vigorously
work on their weaknesses and use their strengths to reduce the threats of the competitive
market immediately in order to regain the past status.
Supply power
A restaurant business is immensely dependent on the supply chain and the
management of the restaurant must make it sure that there is no gap in the supply chain, else
the organisation would have to suffer badly. Especially in today’s market the competition is
fierce and thus the management of the restaurant will have to ensure that the organisational
supply chain is continuous (Wood and McCarthy 2014).
Buyer power
For a restaurant to run successfully attracting more customers is the key. Nowadays a
the market competition is getting more steep day by day, the organisation SpiceSky will have
to ensure that their customers are satisfied with their food and the ambience provided by
them. If the organisation starts losing the customer base, they would not ever be able to
regain their past profitability and if the customers show discontent with their experience, the
organisation would surely lose their hard earned reputation. Thus the owner of SpiceSky will
have to monitor these aspects very carefully (Wade, Holmes and Gibbs 2017).
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Threat of new entrants
Nowadays in the market of London, there is a steep competition and many people are
joining the business seeing the prospects of this business. In the food business the profit
percentage are a bit higher and that is attracting many individuals to invest in such a business.
Thus the threat of new entrants will always be on the higher side. Nowadays as the restaurant
SpiceSky is lagging behind a bit in a few aspects, they will have to focus on the fact that no
new organisations can substitute them. The management of SpiceSky would have to
understand the fact that to sustain in this competitive market they will have to work on these
factors (Wade, Holmes and Gibbs 2017).
Thus to conclude, it can be said that though currently the position of SpiceSky has
become a bit lower than their main rival organisation Aquavit, but being one of the oldest
restaurants in town with a huge reputation, the restaurant SpiceSky has the potential to regain
its past stature and if the management religiously work on their shortcomings they will surely
be able to regain the throne of one of the best restaurants of London.
Identifying specialist and non-specialist audiences
In order to maintain proper communication with the customers, an organisation needs
to understand the needs and demands of the customers. Most organisations are of the opinion
that customer satisfaction is important for maintaining profit and increasing the reputation of
the company (Aijing, Terui and Kannan2016). Hence, organisations need to understand the
types of customers or audiences that are most likely to respond to the products and services.
In this regard, it is important for the organisations to ensure that customer satisfaction is
maintained and that customers are treated with utmost importance. However, before
communicating with the customers, it is necessary for organisations to maintain target
customers. This can help them to understand the type of people that exist in the society and

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the manner in which they can communicate with them. The identification of specialist as well
as non-specialist audiences is required in order to reach the customers.
According to Angus et al. (2016), specialist and non-specialist audiences consist of
people that have different knowledge about a particular company and its products. Specialist
audiences are those that have a significant knowledge about the type of company and the
products that they manufacture. These audiences are usually loyal to the companies and any
glitch in the services can affect the perception of the people. Hence, reaching out to these
people can be easy as an organisation can maintain regular contact with these people via
phone or social media. As stated by Saeidiet al. (2105) organisations need to publish articles
that define the purpose, products and the types of services they perform. This information
needs to be vivid so that customers can get a clear idea about the company. Hence, in this
regard, it can be said that writing an article based on the company is depended upon the type
of customers that are dealt with.
For example, the non-specialist audiences consist of the type of people that are not
aware of the company or the products that are sold by them. Hence, these people require
extensive knowledge about the company. Jahanshani et al. (2014) stated that in order to
understand the target market it is important that the organisations sort out the specialist from
the non-specialist audiences. It can be considered as a competitive advantage if a company
can focus on the communication with the non-specialist audience. This can help in improving
the reputation of the company. Hence, articles published for addressing the non-specialist
audiences need to be precise about the type of services that are provided with an organisation.
Based on the analysis of the case study relating to Spice Sky, it can be said that the restaurant
needs to maintain proper communication with both types of audience. This needs to be
keeping in mind the recent changes that have been to the restaurant.
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ENTREPRENEURSHIP AND SMES
From the case study, it is seen that Spice Sky is one of the most popular restaurants in
London. However, with the change in menu and the monotonous use of advertisements the
company had a decline in sales in the past year. In order to remain competitive in the market,
Spice Sky needs to analyze the market for competitors that serve similar type of cuisines. In
doing so, the restaurant can get a proper understanding of the market and the type of message
that needs to be communicated to the audiences. In this case, both the specialists and the non-
specialist audiences need to know the reason behind the change in menu. This is because the
restaurant was famous for serving Indian food, which was frequented by customers from all
origins. The article also can be a mode of change in the advertisement method of the
restaurant. Martínez and del Bosque (2013) observed that publishing an article providing
details about the reasons behind the change in a menu can be of immense importance for the
company. This can provide a competitive advantage, as most people would understand the
different approach taken by Spice Sky.
Hence, it can be said that communication about the problems and change in the
organisational system can help an organisation to be strategically ahead of the competitors.
This is because customers may pose feedbacks that can be of importance for the company.
Applying these solutions can be a huge advantage for an organisation as it can help in
bringing organisational change and improve the quality of the products. Based on this and the
analysis of the external factors certain recommendations can be proposed to Spice Sky in
order to help the restaurant to gain back its reputation.
Recommendation
The most important recommendation needs to be the improvement of advertising. It
has been seen that since its inception, Spice Sky have been using the same mode for the
advertisement of products. This is one of the reasons for the falling standards of the company
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in terms of reputation. The advertisement used by the company need to be based on the use of
banner and billboards that are considered to be more advanced in the modern world. The best
method of promoting can be the use of moving billboards that can attract the audience.
However, budgetary expenses need to be kept in mind that can be done by the application of
a proper marketing analysis about the appropriate placement of the banners and billboards.
This can help in grabbing the attention of the audience and ensure that the promotion of the
company is done in an effective manner. Apart from this, the restaurant also needs to be more
flexible in terms of putting a price on the products. From the case analysis, it is seen that the
restaurant focuses on the price rather than the quality and quantity of the products.
Such a strategy results in a huge loss for the restaurant. This is because a change in
the menu along with competition in the market may force customers to choose from the
different restaurant. Hence, profitability can decrease that may hamper the marketing
management of the restaurant. Spice Sky needs to be flexible depending upon the demand in
the market. The financial stability in the economy may fall due to various external reasons
such as the boom in the economy or recession. Hence, Spice Sky needs to adjust its price and
ensure that the quality remains moderate so the people can afford to visit the restaurant. In
order to gain profit from such situations, the restaurant can provide discounts on meals in
order to attract more customers. Another recommendation that can be suggested is the change
in a target market. Spice Sky targets Indian people as the restaurant deals with the services of
Indian food. However, this needs to change, as the local residents of UK also need to
understand the food that is served in the restaurant.
Despite being famous in the place of business, Spice Sky lacks the ability to attract
customers of non-Indian origin. This may be due to the non-flexibility of the menu that
attracts the Indian audience more. This needs to change by hiring chefs that are capable
enough to prepare food for the non-Indian people. Targeting these people can help in gaining

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the competitive edge over the rivals. The restaurant can also focus on creating organic food
that is suitable for any type of people. This includes people with specific diseases that remain
timid in the consumption of various foods. Another recommendation tactics that can be
applied is the use of social media. This can be another promotional strategy in order to attract
the audiences. The use of social media is one of the most trends among people in the modern
world. Creating a page on Facebook does not cost as much as setting up digital
advertisement. Hence, for a cost-effective purpose, the use of social media is an important
aspect of Spice Sky. It can help in reaching customers particularly the younger generation in
an effective and easy manner. This strategy can also help in the promotion of the restaurant
using word of mouth promotional strategy. The recommendations suggested can be useful for
Spice Sky to regain the lost reputation and attract more audience by increasing its financial
stability.
Conclusion
Hence, it can be concluded that in order to survive in the business market, Spice Sky
need to remain updated about the services that are being used for promotion. Keeping the
budget in mind, the restaurant needs to select the best promotional practice that can help in
addressing the people of the country and gain back the reputation. The use of article writing
in order to identify specialist audience from the non-specialist ones can act as a huge
advantage for the restaurant. The analysis of the external environment suggests major flaws
in the restaurant that can be mitigated using good strategic and marketing management.
Maintaining the price and quantity of the food is a major requirement for any restaurant.
Hence, Spice Sky needs to maintain this feature in order to remain competitive in the
hospitality industry of UK. Social media can help the restaurant to remain famous in the
market.
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