Strategic Management of Red Rooster in the Fast Food Industry of Australia

The report analyzes the strategic position of Red Rooster in the fast food industry of Australia through Porter's five forces analysis and value chain analysis. It also provides recommendations for the firm to improve its customer base through digital media marketing.

Running head: STRATEGIC MANAGEMENT
Strategic Management
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Executive Summary
The present report is conducted on the fast food industry of Australia particularly considering the
operation of Red Rooster, which is a fast food chain restaurant providing services across
Australia and New Zealand. The fast food industry in Australia is running the operation in a
competitive environment, where competitors’ market share is rapidly increasing but due to high
quality of product, Red Rooster has been able to build a significant market position. In order to
identify the current strategic position of the chosen organization, a porter’s five forces analysis
has been conducted which indicates that suppliers have low bargaining power. This means, the
firm might not face crisis of resource over coming five years. However, high competitive rivalry
in the industry damages the popularity of Red Rooster. Moreover, due to instable economy, the
consumers tend to switch to low cost vendors providing substitute items. Due to lack of
promotional activities, the firm is not able to increase its customer base. The customers in the
remote location hardly know about the products of Red Rooster. Thus, to improve or increase
customer attention, Red Rooster has been proposed with Digital media marketing.

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Table of Content
Introduction -...................................................................................................................................3
Porter’s five forces...........................................................................................................................4
Value chain of Red Rooster.............................................................................................................7
Primary activities.........................................................................................................................7
Support Activities........................................................................................................................9
Key findings and recommendation-.................................................................................................9
References and Bibliography.........................................................................................................11

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Introduction -
The following report is based on the strategic management of Red Rooster –a fast food
chain restaurant located in Australia. The fast food industry in Australia often faces a significant
change in consumer preference, which leads to influx of new business providing high quality fast
food alternatives. However, as the demand of fast food items in the sector is high, the existing
organizations adapt to the new trend. The fast food industry has been selected for the assessment
in the current report because the fast food sector has increasingly become competitive and started
contributing a large amount to the GDP. Thereby, it is necessary to conduct a research on the
sector to learn about the forces that drive the growth. Here, Red Rooster has been selected
because the chosen organization is one of the rapidly growing organizations throwing
unexpected challenges to its competitors. Thus, conducting on report on Red Rooster would help
to learn the current innovative marketing strategies.
The fast food restaurant chain Red Rooster was established in 1972 and within a short
period of operation, Red Rooster became one of the leading fast food brands with its increasing
range of products such as roasts, half roast, wraps, burgers, fish items, deserts and beverage (Red
Rooster 2018). By 2012, Red Rooster opened up 360 stores across Australia and New Zealand.
The firm has large workforce, which enables them to provide a superior quality of service across
the nation (Red Rooster 2018). Moreover, online selling opened by Red Rooster helped to
penetrate in the wide market where its outlets were not available. The presence and extending
operation of Red Rooster contributed to the revenue growth of the fast food industry. As put
forward by De Vogli, Kouvonen and Gimeno (2011), the revenue is expected to maximize at an
annualized 3.7% by 2017-2018 to $19.8 billion.

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Figure 1: Red Rooster
(Source: Red Rooster 2018)
However, the presence of some large brands such KFC, McDonald’s and rapidly
increasing street food vendors could prevent the growth of Red Rooster. The existing forces that
drive the growth of the firm have been presented with the strategic tool –Porter’s five forces.
Porter’s five forces analysis framework is applied to analyze the industry, particularly, the
external business environment. The application of this strategic tool helps to identify the possible
challenges that Red Rooster could face in the existing business environment.
Porter’s five forces
Bargaining power of the supplier- (Low)
Bargaining power of suppliers is low in the fast food sector of Australia. This is due to
the increasing number of suppliers of some major ingredients such as chicken, fish, and potato.

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Due to the bulk orders, many suppliers agree to the terms and conditions of Red Rooster. As the
sector hinders product differentiation, the number of suppliers is increasing with low bargaining
power. As put forward by Red Rooster (2018), in 2007 Red Rooster terminated the contract of
one supplier due to their crude slaughtering of the hens and the firm made a long-term contract
with another suppliers.
Figure 2: Porter’s Five Forces analysis
(Source: Chib 2012)
Bargaining power of the consumers- (Medium)
The bargaining power of customers remain moderate; although consumers have several
options with respect to fast food items but due to the cultural effect and economy, people in
Australia tend to live a trendy lifestyle (Mak, Lumber and Eves 2012). Thus, they prefer high

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quality products and services which street vendors are not able to provide. Even though,
customers shift to another competitor but the quality of products remain same.
Competitive rivalry-(High)
Although, Red Rooster is one of the rapidly growing organizations in the fast food sector,
it is facing a tough competition from the major players such as KFC, McDonald’s, Pizza Hut,
etc. As put forward by, Chib (2012) McDonald’s is pushing its head on the top position in the
international market. Although, there is a product differentiation in some particular products,
most of the items are common such as chicken, drinks, salads, mayonnaise, etc. Consequently,
each competitor on frequent basis comes up with schemes to attract customers. For example, the
major competitor launched membership card for the young customers that not only provide them
with discounts at KFC but also to a number of other fast food outlets (Kfc.com.au 2018).
Barriers to entry-(Low)
The threats of new businesses in the fast food sector are low because the fast food sector
requires a high amount of investment, product development as well as marketing. As put forward
by Chib (2012), some existing brands such as Red Rooster, KFC and McDonald’s have
developed a sustainable brand image; thereby, they have developed a loyal customer base.
Similarly, the customers have also made their habit of visiting the same restaurants where their
needs are effectively fulfilled. In addition to this, the trade tax for the new business in Australia
is reaching a benchmark of 30% of overall revenue (Findlay and Warren 2013).
Threats of substitute products-(High)-Threats of substitute products are high as there are
many small and medium size restaurants and street vendors providing a strong substitute for Red
Rooster (Pearson et al. 2011). These small food vendors provide some side dishes such as rice,

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mashed potatoes and instant pizza that Red Rooster does not offer. As the consequence, Red
Rooster seeks to retain its customers by providing intangible services such as Wi-Fi service in
the outlets and launching the morning breakfast menu for the consumers (Red Rooster 2018).
Porter’s Value chain Analysis
As put forward by Fearne, Garcia Martinez and Dent (2012), a value chain is considered
as the chain of activities that an organization conducts to offer valuable products and services for
the sector.
Value chain of Red Rooster
Primary activities
1. Inbound logistics-Red Rooster purchases raw chicken and other raw product items such as
potato, tomato and other required vegetables from its existing suppliers, thereby, by maximizing
capital as well as labor, their production could maximize. In this context, Ming, Ismail and
Rasiah (2011) that Red Rooster tend to adopt a backward vertical integration by replacing many
of its suppliers in order to minimize cost and ensure that the products are of top quality. This
strategy is possible because industry has high availability of suppliers. The suppliers of other
ingredients such as vegetables are supplied by large grocery and Coca- Cola supplies soft drinks.

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Figure 3: Rooster Raps
(Source: Red Rooster 2018)
2. Operation
In order to reduce the time of operation and produce the more items within a same time period,
Red Rooster changed the design of its kitchen. For example,
 A significantly large grill where one kitchen staff could make several roasted chicken
items
 A developed fryer where one individual can make a huge bulk of French fries

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 Multiple numbers of counters where customers can do place and receive the order
separately. This helps to avoid crowding near the counter
Outbound logistic
Red Rooster builds the commitment of providing the highest quality food and service at a
significant value in a clear and enhancing environment (Red Rooster 2018). Thus, the firm
works with the employees, suppliers to provide a balanced array of food choices as well as
provide nutrition information required for consumers to make reasonable buying decision.
Support Activities
 Infrastructure of Red Rooster is sophisticated and modern , as the firm is using IT
services such as Wi-Fi but they have a strong focus on the green activities
 Red Rooster tends to maintain an eco-friendly workplace where the outlet reflects its
sustainability goals
Key findings and recommendation-
The above-mentioned discussion helps to observe that Red Rooster is operating in a
competitive environment where competitors have a large market share. Moreover, the aggressive
marketing strategies of KFC and McDonald’s often place push Red Rooster in danger.
 Even though, Red Rooster is going with the same pace of operation like its competitors in
the sector but with respect to strength and competencies, the competitors are a step ahead
than Red Rooster.

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 The operation indicates that Red Rooster is running the operation on short-term goals but
increasing consumer awareness of the significance of healthy eating could transform the
sector, which could again be a significant challenge for Red Rooster.
This is a challenge because if product-manufacturing process to has to be changed due to
consumer awareness regarding healthy eating, the firm has to focus on R&D, which would be a
matter of large investment. On the other side,
 Red Rooster is not able to attract new customers or lure competitors’ customers due to
lack of promotional activities. Therefore, following suggestions have been provided to
avoid the above-presented issues.
Digital media adoption- In order to gain consumer attention or to remain in the limelight, Red
Rooster needs to publicize its brand to a large platform. Hence, social media is one such option
that provides the facility of reaching wide audience in a most time-efficient and cost-efficient
manner. Red Rooster needs to take help some popular social media channels such as YouTube,
Facebook and Twitter to advertise its healthy chicken items. When the responses can be recorded
from the global environment through digital media, the customers in the domestic environment
could show interest.

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References and Bibliography
Chib, S.S., 2012. Relationship matrix between customer satisfaction and service quality in fast
food industry-a comparative study of KFC and McDonald. International Journal of Retailing &
Rural Business Perspectives, 1(1), p.43.
Cushen, M., Kerry, J., Morris, M., Cruz-Romero, M. and Cummins, E., 2012. Nanotechnologies
in the food industry–Recent developments, risks and regulation. Trends in Food Science &
Technology, 24(1), pp.30-46.
De Vogli, R., Kouvonen, A. and Gimeno, D., 2011. ‘Globesization’: ecological evidence on the
relationship between fast food outlets and obesity among 26 advanced economies. Critical
Public Health, 21(4), pp.395-402.
De Vogli, R., Kouvonen, A. and Gimeno, D., 2014. The influence of market deregulation on fast
food consumption and body mass index: a cross-national time series analysis. Bulletin of the
World Health Organization, 92(2), pp.99-107A.
Fearne, A., Garcia Martinez, M. and Dent, B., 2012. Dimensions of sustainable value chains:
implications for value chain analysis. Supply Chain Management: An International
Journal, 17(6), pp.575-581.
Findlay, C. and Warren, T. eds., 2013. Impediments to trade in services: Measurements and
policy implications. Routledge.
Kfc.com.au. (2018). KFC Australia | Home. [online] Available at: https://www.kfc.com.au/
[Accessed 4 Feb. 2018].

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Mak, A.H., Lumbers, M. and Eves, A., 2012. Globalisation and food consumption in
tourism. Annals of tourism research, 39(1), pp.171-196.
Mialon, M., Swinburn, B., Allender, S. and Sacks, G., 2016. Systematic examination of publicly-
available information reveals the diverse and extensive corporate political activity of the food
industry in Australia. BMC public health, 16(1), p.283.
Ming, T.T., Ismail, H.B. and Rasiah, D., 2011. Hierarchical chain of consumer-based brand
equity: Review from the fast food industry. The International Business & Economics Research
Journal, 10(9), p.67.
Pearson, D., Henryks, J., Trott, A., Jones, P., Parker, G., Dumaresq, D. and Dyball, R., 2011.
Local food: understanding consumer motivations in innovative retail formats. British Food
Journal, 113(7), pp.886-899.
Red Rooster. (2018). Red Rooster. [online] Available at: https://www.redrooster.com.au/
[Accessed 4 Feb. 2018].
Shill, J., Mavoa, H., Allender, S., Lawrence, M., Sacks, G., Peeters, A., Crammond, B. and
Swinburn, B., 2012. Government regulation to promote healthy food environments–a view from
inside state governments. Obesity reviews, 13(2), pp.162-173.