Fat Cats Restaurant: a Strategy Case Study

Mike employs several staff which are split into two broad categories: kitchen staff and front-of-house staff. In the kitchen, the head chef, Colin, is experienced and runs a clean, efficient operation. His food is well presented and there are rarely any complaints about the quality but the menu isn’t particularly inventive or exciting. Working with Colin is one sous chef and one commis chef. Serving the customers are several part-time waiters & waitresses managed by the maître d', Alison. The service is quick and efficient, although a recent write-up in the local paper criticized the one waiter’s lack of knowledge about the wine list.

The kitchen has its food delivered by a large produce company that supplies many restaurants in the region. The reason that Mike has chosen to get his food in this way is so he can source all his food requirements from one place, keeping the costs down.

Competition in the town has grown over the two years that Fat Cat’s has been open. Two new restaurants, La Guillotine and Il Appunito Cappello, have opened, both offering meals at similar prices. They seem to be capturing the kind of market that Mike had initially targeted. The map attached shows the layout of the local area. In the current situation, Mike’s turnover and profit are modest and he wants to identify a strategy that will increase his return on investment. He has a good relationship with his bank and has the option of borrowing more money to spend on his restaurant if the new strategy requires it.

Porter’s Generic Strategies

Porter’s generic strategies outline three broad approaches that an organization can consider when developing strategy.

• Cost leadership strategy – By following a cost leadership strategy a business tries to gain competitive advantage from producing its products and/or services at the lowest cost. easyJet and Lidl are examples of companies that have a cost leadership strategy.
• Differentiation strategy – A differentiation strategy is one where the business aims to offer a product and/or service that is perceived by the customer to be superior or have unique benefits. Apple, with their reputation for superior product design, and BMW, with their reputation for superior car engineering, are examples of companies that have differentiation strategies.
• Focus strategy – Also known as a niche or segmentation strategy, a focus strategy requires a business to concentrate its resources on a particular market segment. Once it has identified its target market customer, the business can then employ a cost focus or differentiation focus strategy. Saga, targeting the over fifties market with products ranging from holidays to private medical insurance is one example of an organization with a focus strategy.

Task 1

• Using each of Porter’s generic strategies, brainstorm as many different options as you can for Fat Cats.
• Once you feel you have exhausted all the possibilities, compare your ideas with the suggested answers given.

Task 2

• Now that you have a list of strategic options for Fat Cats, identify the advantages and disadvantages of each one. Remember, there are no right or wrong answers to this case study – the objective is to make you think about the different strategies that any organization could take.

Task 3

• Having completed the exercise for Fat Cats Restaurant, now use the same approach with your own organization.

Fat Cats Restaurant - Suggested Answers

Any strategy that is chosen should deal with one of the main issues that Fat Cats faces. These are that it is quiet during the university holidays and that main customer group is students, who are not particularly big spenders. Any strategy should help to increase the customer base and help improve trade during the quiet spells.

Cost Leadership Strategy

• Produce low-cost food during the day and the holidays
• Provide the lowest cost meal in town
• Maintain the current menu but reduce the cost of ingredients by identifying alternative suppliers

Differentiation Strategy

• Become a French cuisine restaurant, offering gourmet food. The quality of the food will bring customers in from further afield.
• Offer organic food only
• Offer local food made from local produce only. Investigate working with the local butcher etc.
• Become a vegetarian restaurant
• Become a top-quality Italian restaurant, using quality produce sourced directly from Italy (could partner with delicatessen to reduce import/export/distribution costs)

Focus Strategy

• Target the students specifically to get more regular trade from them by offering them discounts on quieter nights
• Attract the theater’s customers by offering a pre-theater menu. Investigate a working partnership with the theater to promote this.
• Work with the bed and breakfast proprietors – they will be able to promote the restaurant to tourists and students’ families using the B&B – maybe give some kind of discount to people staying at the B&B