Towards Entrepreneurial Strategy for Caffeine SME

ENTREPRENEURIAL STRATEGY EXECUTIVE SUMMARY The report follows the various entrepreneurial strategies like BCG matrix and McKinsey 7S framework and their importance in shaping the business. Although, the restaurant is the SME in United Kingdom but still there are certain changes that they need to prevail because the restaurant chain has not seen significant growth in the past few years, the sales have remained stagnant. This report includes detailed analysis of company by performing SWOT analysis, PESTLE analysis and applying management tools like McKinsey'

ENTREPRENEURIAL
STRATEGY

EXECUTIVE SUMMARY
The report follows the various entrepreneurial strategies like BCG matrix and McKinsey 7S
framework and their importance in shaping the business. The project focuses on the legendary
chef Caffeine restaurant. Although, the restaurant is the SME in United Kingdom but still there
are certain changes that they need to prevail because the restaurant chain has not seen significant
growth in the past few years, the sales have remained stagnant.
This report includes detailed analysis of company by performing SWOT analysis, PESTLE
analysis and applying management tools like McKinsey's' 7S framework, Porter's value chain
model, BCG matrix and lastly Ansoff matrix. A combination of these management tools can help
in identifying the problems faced by the restaurant chain company that are hampering its growth.
Also, it identifies the ways to overcome these problems and move forward as a company. Below
is shown the detailed diagnosis of Caffeine restaurant and at last a conclusion has been made.
The report will mainly emphasise on different entrepreneurial strategies and the position of the
company. Lastly, it will cover the organizational objectives of the organisation that will help
them to grow.

Table of Contents
EXECUTIVE SUMMARY.............................................................................................................2
INTRODUCTION...........................................................................................................................4
B. Evaluating a range of entrepreneurial strategies that can be used to develop or consolidate
the situation ................................................................................................................................4
C. Analysing organization's strategic situation, its capability and position and develop
objectives.....................................................................................................................................9
D. Organisational objectives.....................................................................................................12
CONCLUSION .............................................................................................................................14
REFERENCES..............................................................................................................................15

INTRODUCTION
An entrepreneur is a person who creates a new product or a business with his innovation and
creative ideas. He bears huge risks but also enjoys the rewards for these risks. An entrepreneur
has multiple roles to play. He has to make some strategies in order to make the venture
successful. Entrepreneurial strategy is concerned with development of creative and innovative
products or services in a competitive market. These strategies can help in better decision making
which will improve company's future growth prospects. Today, Hotel and Restaurant industry is
one of the fastest growing industries in the world. Hospitality and tourism are one of the fastest
growing industries where young entrepreneurs wish to invest their mind and money. One such
restaurant is Restaurant Caffeine restaurant located in London, United Kingdom. Founded in
1998, by famous chef Caffeine restaurant the restaurant has won three Michelin stars and is said
to be one of the best restaurants in the entire Britain. The current report will follow the
entrepreneurial strategy adopted by Caffeine restaurant, growth and expansion of the restaurant,
challenges face by them and how did they overcome it. (Eshima and Anderson, 2017).
The aim of this report is critically evaluate entrepreneurial strategies such as BCG matrix
to identify the area where the restaurant needs to work on and the area which has already been
improved.
The report will also practice Mckinsey's 7S strategies to analyse different strengths of the
company.
Porter's value chain model is important to identify the competitive advantage that the
company has.
B. Evaluating a range of entrepreneurial strategies that can be used to develop or
consolidate the situation
The McKinsey 7S framework is a popular management model to analyse the situation monitor
changes-
 Skills: Skills refer to the unique characteristics and knowledge of a company that
differentiates them from the rest of the competitors. Caffeine restaurant's restaurants'
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unique selling proportion has always been the name of the chef associated with the
restaurant. Therefore, all the skilled chefs applied to the restaurant and the best ones got
selected. This restaurant chain has been successful enough to retain the best talent from
all around the world. The company should focus on giving training to the employees of
The caffeine restaurant in order to enhance the productivity of The caffeine restaurant.
 Structure: The organizational structure of any company makes it successful. It must be
flexible enough and should follow effective level of communication. At Caffeine
restaurant the structure is a bit rigid but there is an effective and proper flow of
communication within the employees to avoid chaos and confusion. The top level
management gives order to lower level management and they follow it. The lower level
employees provide the top management and employers with valuable feedback.
 Strategy: Every company follows a certain strategy that allows them to survive and grow
in the competitive environment. Caffeine restaurant followed many entrepreneurial
strategies that allowed their restaurant to increase its profits and also counter its
competitors. Apart from serving good food, the restaurant always focused on the other
factors like view, interior and décor. Caffeine restaurant spent around 1.5 million pounds
in 2006 to renovate the place and this was a part of their entrepreneurial strategy that
made them the number one restaurant chain in the entire United Kingdom.
 Style: It refers to the behaviour style of the people in the organization. At Caffeine
restaurant the behaviour pattern of every employee, from waiter to manager is poised and
kind. This has created a positive image of the restaurant in the minds of the people.
 Staff: Human resource is the life blood of every organization. Especially in a restaurant
chain everything depends on the chef and the waiter. If the food is not good, then no
matter what the view is or how the decor is, the restaurant will fail miserably. Restaurant
Caffeine restaurant has always followed a systematic procedure to retain talented
employees. On the basis of their cooking skills and knowledge about the cuisines, they
are being appointed.
 System: The system involves the formal procedure that is used for measurement and
allocation of resources. The resources are limited and they must be used adequately. The
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organizational system also focuses on distributing reward and incentives for achieving
the targets and objectives.
 Shared values: This soft skill in McKinsey's 7S model refers to the ethical aspect of any
organization. It means that if the company's values are honest and positive then it will be
successful, therefore, it is important for every company to incubate positive behaviour
and attitude because it plays an important role in the growth of the economy. (Hartsfield,
Johansen and Knight, 2017)
Another important strategy that is important for the growth of any business is Porter's value
chain model. Porter's value chain divides the activities in two parts, Primary and Secondary.
Primary activities
 Inbound logistics: As the name suggests, the first step involves maintaining
relationship with suppliers and inclusion of all the activities that are required to
receive the raw materials and store them efficiently.
 Operations: Operations are concerned with the conversion of raw materials into
finished goods. In context of Caffeine restaurant's restaurant it is concerned with
converting the raw food into finished food by cooking and adding flavour to it.
 Outbound logistics: It is concerned with all the activities that are required to collect
and store the output. This is concerned with serving the prepared food directly to the
customers. The process starts with customer placing the order and ends with serving
them the ordered food.
 Marketing and Sales: Every company manufactures the product but they find it
difficult to sell it out. This is where marketing plays a role. Caffeine restaurant
restaurant's biggest strategy has been its brand name and this induced people to visit
the restaurant. Branding played a big role here.
 Services: Services are important to retain the customers. In terms of Caffeine
restaurant, the feedback and review are very important. The restaurant chain has
always emphasises on feedback and review because they believe that it will help them
in future to serve their customers better.
Secondary activities
 Procurement: Procurement refers to collection of all the raw materials and other
resources effectively and efficiently, which means that The caffeine restaurant should
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acquire these resources at right price and right quality. Caffeine restaurant should
procure raw materials like vegetables, fruits and other perishable items at a cheap rate
by purchasing them in bulk. The Caffeine restaurant must also make sure that the raw
materials are of good quality.
 Human resource management: Every company needs to recruit and select
employees according to their talent, even in hotel industry it is important to have an
efficient HRM so that the customers are satisfied. Caffeine restaurant must hire
employees by testing their practical skills live. This can be very beneficial for the
restaurant company.
 Technological development: Technology plays a significant role in the success of
company. It gives competitive advantage because efficient technology reduces the
cost and maximizes the profits of every business operating in competitive industry.
Use of online booking, digital menu card and other automated services can help
caffeine restaurant to grow.
 Infrastructure: The infrastructure of Caffeine restaurant speaks for the place.
Majority of people visit the restaurant just to experience the vibe and interior décor.
Hence, the value of infrastructure cannot be ignored. (Kantur, 2016)
BCG matrix on Restaurant Caffeine restaurant:
Boston consulting group (BCG) is a commonly used business tool to analyse the attractiveness of
the firm against the market growth rate. BCG matrix operates in a hasty manner as it
distinguished the company's characteristics in four categories like stars, question cash cow and
dogs.
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 Stars: Restaurant Caffeine has the highest market share in UK when it comes to
Michelin star restaurants. The restaurant chain has created a brand name for itself and
it wouldn't be wrong to consider it as a star. The restaurant is priced on the heavier
end but it promises to be worth it. The Michelin restaurant in this case where the
revenue and also the investment is very high then it can focus on high growth rate as
the rate of growth decline in Star.
 Cash cows: Cash cows are the products that have reached their maximum potential
and cannot grow more. These companies have the largest market share, but they fail
to expand. Although, the Caffeine restaurant is not a part of this category but it will
soon be. This is mix combination of positive and negative.
 Dogs: Dogs are the companies or products that have a low market share and low
growth rate as well. These are also known as cash traps because it is very difficult to
generate profit from them. There is a high chance that money invested will be
blocked forever. The Thai cuisines has been low on demand and the restaurant
management fail to see a potential future for this cuisine. Therefore, the Caffeine
restaurant has decided to discontinue Thai cuisine from its food menu.
 Question marks: A combination of cash cows and dogs, it means that business has
high growth prospects but presently holds low share in the market. It is recommended
that companies should invest in question marks because they can grow any time. The
Caffeine restaurant has been planning to invest in an ice cream plant but it is confused
as it has been a big question mark for the company.
Question marks are generally the start-ups who have the potential to grow exponentially in the
near future. (Lumpkin and Doss, 2015)
PIMS: PIMS stands for Profit impact of market strategies. It is a long term strategy for the
performance of business in all major industries. PIMS is basically a collection of strategic
documents that contains all the business strategies and helps in deciding the best strategy for any
business. Major PIMS strategies include advertising, innovation and pricing. The restaurant’s
PIMS strategy has always been its multi-cuisine quality food and it has incessantly led to growth
of the company.
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Caffeine restaurant needs to become more flexible in order to grow more in the future. The five
star restaurant chain should indulge in online food delivery and make their websites more user-
friendly. They must introduce vegan food as it is on its peak and should also tap the future
opportunities available in the environment. The chain should promote themselves through
internet and blogs rather spending money on advertisements. These strategies will help the
restaurant chain in diversification. (Van Doon, Hayden and Volberda, 2017)
C. Analysing organization's strategic situation, its capability and position and develop
objectives
Organization's strategic situation can be analysed best by performing SWOT analysis and later
on performing PESTLE analysis. This helps the companies to get an overview of the market they
are operating in.
SWOT analysis of Restaurant Caffeine restaurant
STRENGTH:
The strength can be in any form example it can be proficient employees in the organization, it
can be sound technologies, strong balance sheet etc. Here the strengths of Caffeine restaurant are
its classic cooking, modern and sophisticated approach well added flavour and Gordon's passion
of cooking and serving it with all his dedication towards the work.
Caffeine restaurant is a famous multi-cuisine restaurant that serves Italian, Thai, Korean, Indian
and many other cuisines. The restaurant excels in all the cuisines and the versatility in its
offerings also attracts customers of different ethnicity and cultural background.
Caffeine restaurant properly manage their work and so does the employees. They always focus
on hiring prominent talent and efficient personality who can get the work done on time and
effectively. (Eshima and Anderson, 2017).
Weaknesses:
There has been no denying in the fact that caffeine restaurant is amongst the top restaurants in
UK but in order to overcome its competition and to increase their sales, they need to offer food at
a more competitive prices otherwise people would shift their priority to other competitors.
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Caffeine restaurant has always focused on their food quality but lately the management has not
been paying enough attention to the quality and hygiene which has become a major factor for
their deteriorating sales.
The restaurant should up its game otherwise it would lag behind therefore the top-level managers
have decided to recruit new and experienced staff that would never compromise on the food and
its quality. Also, the founders have decided to promote the restaurant by offering exciting
discounts and rebates. This can give them a competitive edge.
Opportunities:
In Caffeine restaurant there are various opportunity to overcome and get back to the previous
position.
Gordon did not stop after opening single restaurant he kept the industry expanding and kept it
agile and showed alacrity in his work.
Caffeine restaurant can do merger with other popular Restaurant giant for its expansion and for
the better results. It will also increase the profitability with the fair price to be charged and will
learn the culture and the working style of the other restaurant giants. It will also be letting know
the different or special food recipe the other restaurants are making.
Threats:
Caffeine restaurant, if keeps up doing the same thing which they doing after getting kicked out of
the ranking then it can be hazardous for them as it will make a full stop towards there growth and
they will face problem to even exists because outside competition will kill Caffeine restaurant.
Caffeine restaurant, should not invest in the country where price fluctuation is very high because
it will lead to negative impact on the Caffeine restaurant, by not charging the standard price due
to which the Caffeine restaurant will lose the goodwill.(Wales and et.al., 2019).
PESTLE analysis
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PESTLE analysis is equally important as it helps a business in identifying the effects of external
environment. Although, the external environment is beyond the scope of control of any company
but it can be analysed and its effects can be minimized subsequently.
 Political factors: The government rules and regulations, taxation policy and subsidies are
some of the political factors affecting the environment. The UK government is stable and
being a developed country, the hotel industry do not accept any negative political
changes. Therefore, The caffeine restaurant must be prepared for the political changes
which can arise in the future. The caffeine restaurant can make a contingent fund for that.
 Economic factors: The economic factors of a country do have a subsequent effect on the
financial prospects of a company. Inflation, deflation used to affect UK, but for the past
few years their economy has remained stable. The main issue of concern for the Caffeine
restaurant is BREXIT because it is estimated that after the BREXIT the restaurant will
lose many potential clients. The caffeine restaurant needs to implement new policies like
offering exciting discounts and rebates that would give them the economic advantage.
 Social factors: Social factors has had a deep impact on the Caffeine restaurant because
today's generation has become more focused about health and fitness and they do not
wish to eat junk food. Also, many people in UK and USA are turning vegan and Caffeine
restaurant do not serve vegan food. So this is a big concern for them and the restaurant
chain has to take care of this problem.
 Technological factors: Technology is used everywhere. Many restaurants now have
their own application and website that allows customers to order food online. Many
luxury restaurants do not follow this policy, and they don't understand the fact that it can
have an adverse effect on them. Caffeine restaurant should take care of it if they want to
grow further.
 Environmental factors: These ecological factors are imperative for every company to
follow. Be it a five star restaurant or a local stall everyone must take care of the
environment that we live in. Also, one must makes sure that the food prepared is of good
quality and made from fresh ingredients. No restaurant should indulge in adulteration and
they must avoid the use of plastic to protect the environment.
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 Legal factors: Legal factors are the regulatory framework that every company must
follow. It is also important to abide by all legal factors otherwise the company may have
to face consequences. Caffeine restaurant has made it their priority to follow all the laws
and regulations.
D. Organisational objectives
 5% increase in sales within the next 3 months. This is the Specific goal of the Caffeine
restaurant it is not the general goal of the organisation and can be achieved by hiring
more skilled and talented selling team by offering them lucratice salary.
 To increase in market share by 20% till the end of year 2020. It is a measurable goal in it
can be achieved by more and more branding which can be done by expansion.
 To enhance consumer experience by 10% in another 6 months. In attainable much
realistic and measurable goals are made and here this goal is achieved by efficient in
operational activities and which can be achieved by better utilising the inputs of the The
caffeine restaurant.
 To increase profitability by 15% till the end of year 2021. This includes the objective
which matters a lot for The caffeine restaurant. The target can be formed with the team
of expert.
 To enhance quality of services by 10% within the next 3 months. It involves time in
which the goal is to be achieved here the goal can be achieved by achieving the target
little by little.
The entire management team and the owner himself decided that the Caffeine restaurant must
increase its turnover by at least 5% at the end of the year. This can be done by
 Product development: The Caffeine restaurant should introduce new product in its
existing market. The best product would be the introduction of vegan food in Caffeine
restaurant restaurants. Vegan food is very much in demand and also vegan food has a
huge range of products under them. This can definitely help them to boost their sales.
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 Market development: Market development means selling the existing product in a
new market. This means that the Caffeine restaurant should open new restaurant and
enter into a new market but this is fairly risky and would require huge investment.
 Diversification: Diversification is concerned with introduction of new product in
new market. This is riskier but the plan has potential. The company can do proper
research and identify the needs and wants of target customers in new market.
Research like their favourite cuisine, interest in vegan food, buying capacity and
demographic can help them in diversifying effectively.
Diversification would be the appropriate strategy for restaurant to increase their sales but the
strategy would take more than 3 months to implement, meanwhile they can adopt product
development strategy because it has minimum risk and high growth potential.
(Weerakoon and Kodithuwakku, 2018)
Porter's five forces can be a useful strategy for caffeine restaurant to achieve their organisational
objectives.
 Power of suppliers: This is concerned with evaluating the power of suppliers and the
prices at which the raw materials are sold, how unique their product is and whether they
supply the products on credit or not.
 Bargaining power: The bargaining power of buyers also affect the profits. The caffeine
restaurant holds a strong bargaining power because of their brand name and image. This
gives them cost advantages.
 Competitors: It has become imperative for caffeine restaurant to increase its market share
by offering better quality products at a competitive price.
 Threat of substitutes: Existence of substitute products affect the profit of the company.
Caffeine restaurants should not reduce the quality of their food otherwise it would lose
market share to substitute products.
 New entry: Caffeine restaurant need not fear new entrants in the market instead they
should continue selling good quality food and services.
Recommendation
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Bargaining power is high in the Caffeine, which is good for them. The caffeine restaurant must
focus on the product which can be bargained and should not focus on the low profit margin
product, In spite The caffeine restaurant should focus on high profit margin so it will make cover
the cost of the low profit product and even can make the low profit product profitable.
The caffeine restaurant should not be dependent on a single supplier of the product, this will
increase result in distribution of the risk. It is recommended to sell the product on credit
evaluating the profile of the customer. If the customer is of high profile or simply rich then The
caffeine restaurant should focus on them in order to retain them and generate more revenue form
them.
The caffeine restaurant should regular update itself in order to get the competitive advantage, the
updation can be in any form for example, modern services, technological update etc.
CONCLUSION
The above study focused on entrepreneurial strategy and its importance in the successful growth
and survival of business. The report also emphasized on how important strategies are for the
achievement of goals and objectives of an organization. McKinsey's 7S framework segregated
the features of restaurant chain and it was found out that the company excelled in all of them.
SWOT analysis identified the potential strength and weakness of the restaurant and the
opportunities and threats that it may face in the future. Porter's value chain model followed the
entire process from receiving raw material to selling the food and PIMS helped the restaurant
chain in identifying the way to boost its sales. These strategies and models diagnosed the entire
restaurant chain and made one thing clear that despite having a big brand name, top class chefs,
mouth watering food, classic décor and exotic interior after a point of time every business, no
matter big or small will find it difficult to survive in the industry if they do not adopt change
because change is the only constant and a company that does not change is bound to fail. The
detailed analysis will definitely help the Restaurant Caffeine restaurant to grow as a business.
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