Impact of Market Competition on Profit Margin for Restaurants

Huge competition from an ever-growing
restaurant market is affecting the profit
margin for restaurants
Bennelong

Table of Contents (TOC)
 1.1 Research Context
 1.1.1 Issue
 1.1.2 How the issue was discovered?
 1.1.3 The impact and its magnitude to the Company’s Operations
 1.2 Broad Problem Area and Generic Business Decision to be made
 1.2.1 Discussing the issue in a descriptive way
 1.2.2 Ascertaining the importance, magnitude and priority of the issue
 1.2.3 Actions being taken so far
 1.2.4 The generic business decision
 1.3 List of the information that will be sought
 1.4 Research Objectives
 References

1.1 Research Context
1.1.1 Issue
 Rising market competition has
impacted the profitability of
restaurant market (Leonidou,
Christodoulides, Kyrgidou &
Palihawadana, 2017)
 The changing social trends have
driven revenue growth in last few
years (Ibisworld.com.au, 2019). This
has encouraged the restaurants to
boost their competency in terms of
menus and pricing
 Bennelong despite being a flagship
restaurant of the Sydney Opera
House can be affected from the
current trend and the decreasing
profitability of the industry
(Traveller, 2019)
 This is why Bennelong seems like
quite concerned with its food menu
and the pricing (Dibrell, Fairclough &
Davis, 2015)

1.1.2 How the issue was discovered?
 According to a report published in IBISWorld of January 2019 edition, incrementing competition and
rent costs are eating into profitability (Ibisworld.com.au, 2019). This means restaurant brands are
forced to reduce the products’ pricing to firmly compete with their competitors. This is problematic
considering that despite incrementing rent costs there will be no adjustments made to food pricing.
Indeed, there was the need to make adjustments with the food pricing to counter the adverse
impact of incrementing rent costs on the overall profitability.
 According to IBISWorld, effective cost controls is one of the key success factors for restaurants
these days (Ibisworld.com.au, 2019). Now, Bennelong will be tested for its effective cost control
strategy that will help the company retain the competitive advantage and avoid reduction in
profits. This is to be noted that low product cost coupled with increased rent costs have negative
influence on the profit margin (Ramayah, Ling, Taghizadeh & Rahman, 2016)
 According to the Australian Bureau of Statistics, the population of Australia exceeds 22 million
(Traveller, 2019). This implies that consumer base for restaurant market will also increase. This is
the one positive trend that Bennelong can utilise to its advantage by offering diversified foods at
changed rates and thereby changing the food menu. The change will be made to attain feasible
rates for foods and drinks.