Marketing homework

B. Environmental Analysis

Introduction:

Our team conducted a PESTEL ANALYSIS which is a tool that marketers use to scan a business’s external environment to identify factors that can influence the success of a business. The PESTEL factors include political, economic, socio cultural, technological, environmental, and legal. The team identified the following factor for each of the PESTEL factors.

Political Factors:

· City of Portland Sustainability & Planning which is a local govt. Agency that looks at areas of the city and makes plans to promote urban growth. If there are plans for urban growth projects for the area the client operates the business the construction could negatively impact the client’s business in the short run. On the other hand, in the long run this could bring more people to the area and positively impact the client’s business.

· The Oregon Health Authority is a state agency that creates regulations and licensing requirements for any business that sells food products. Changes in these regulations or additional licensing requirements could affect the client's business.

Economic Factors:

· The recent extreme weather around the globe recently has caused devastation in several areas that may be suppliers of essential food ingredients and can affect the food supply. When there are shortages in the food supply that can lead to increased food prices that businesses pass on to the consumer.

· If the client takes on staff to help run the restaurant and catering services the recently scheduled raises in wages for Oregon employees can affect the client’s business. To make up for the wage increases the client may have to raise prices for products

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Socio Cultural Factors:

· Demographics of the target market for the client’s business can have effect on business. The Asian population in Portland has been growing over the past 5 years. This represents a large potential market looking for familiar foods offered by the client.  

· Health or lifestyle trends such as an increase in gluten free preferences and diets such as KETO have potential to affect consumer preferences for food. The client does use healthy ingredients and is looking to offer gluten free noodle options so this may only have a minimal impact.

Technological Factors:

· Food delivery services such as Postmates App and Grubhub App help restaurants capture more of the market by offering to deliver food from restaurants that they may not have gone to in person. This would be a benefit for the client and presents opportunity to speak to more of the market

· Social media can have huge impacts for businesses if they are maintained and managed correctly. The client currently has social media pages but has no ownership of them or knowledge of how to leverage those channels.

Environmental Factors:

· Consumer preferences for sustainability that includes a desire for more sustainable food packaging and more environmentally friendly ways to dispose of cooking oils used by restaurants. These are factors that the client needs to be aware of and try to be more sustainable that could be leveraged to gain a competitive advantage by letting customers know of sustainable efforts of the business.

Legal Factors:

· Employee wage requirements for the state of Oregon such as the scheduled increase in minimum wage for employees affect many businesses. Increases in the wages can affect how many staff the client can afford to bring on and cut into profits.

· Health Grades or scores given out by health inspectors can make or break a restaurant. The client operates a food service business so this is a factor that needs to be closely monitored.

C. Industry Analysis

Industry Profile:

The client’s business is a full-service restaurant that is a part of the hospitality industry. Restaurants are large segment of the hospitality industry and can include high end restaurants, quick service, fast food, and catering businesses.  The number of restaurants operating in Oregon are 9,923 and there are about 100 restaurants operating in the Portland metro area. The number of Asian style restaurants operating Portland Oregon totals 33((Association, 2017).  

Industry Financials and Growth:

This industry is a growing industry that makes up 10% of employment in Oregon and is projected to grow by 12.9% in the next 10 years. Restaurants in Oregon generated 7.8 billion dollars in 2017 and with expected growth that will result in significant increases in potential revenues for restaurant operators (Association, 2017).

Industry Challenges:

The challenges that face this industry include the Health and safety issues, food shortages due to extreme weather patterns, and changes in wages to close pay gaps. The first challenge mentioned is health and safety issues that include safe food handling, safe workplaces for employees, and more stringent licensing requirements. The second challenge mentioned is shortages in food supply due to extreme weather patterns. This is a big challenge for the industry as it affects common food items that are essential to most food service businesses. The third challenge that this industry among a number of other types of industry are facing are the increases in wages that are a political effort to close pay gaps.

3. Market Analysis

A. Market Segmentation

Market segmentation is incredibly important for our client to find who and to whom she wants to capture with her new marketing plans. There are many different ways to break down the market into segmentations. Some of the segments to put the markets in are geographic, demographic, behavioral, and psychographic. The team considered these market breakdowns and are focusing on the geographic and demographic aspects of the target markets to give more insight on how to speak to these markets and what their needs are.

Customer segments that would be most desirable and profitable for our client to reach would be neighborhood locals, small businesses, and Thai food lovers. Within these segments that we have selected for our client the only one that currently has any traction is locals. We will be encouraging our client to pursue a larger presence in the catering field. This will greatly increase her profitability while allowing her to manage her schedule in a way she wants. According to a study done by Carl Sacks the profitability on overage runs around 25 percent. While in past years the average profitability has sat around 7 or 8 percent, over the past five years the profit margin is growing. (Sacks). This would also help greatly with variable costs as she would then not have to pay staff when the business is slow. Our client’s movement into the catering field will greatly help her profitability while fitting her style of running her restaurant. (Sacks)

Target Customer Profiles

The neighborhood community that our client’s restaurant is located in has an average income of $45,200 per household. This data was gathered from the US post office based on 2017 data. (Every Door Direct Mail) This can tell our client quite a bit as it would imply that disposable income is relatively low. Cost of living for this area on average ranges from about 35 to 50 thousand a year. (Coleman) With this available data it will show our client that value will mean everything to her potential customers. She will need to make sure her products are competitively priced to help capture the largest share of market. The average age of our client’s community is 34 years old, but over the last 5 years has a growing population of 10% per year. This is good news at this means more potential customers. (Portland)

Our client also has little to no customer loyalty keeping existing customers is incredibly cost effective when compared to obtaining a new customer. Her ability to grab and maintain loyal customers will greatly affect business growth for the client and affect the sustainability of the business going into the future.

The figure below shows the Portland household income on average is growing consistently and at a higher rate than the average metro U.S.

Figure 1: Median household income in Portland   (MA)

Figure 2:  Oregon Job Growth    (MA)

In Figure 2 it is illustrating the growth in wage by job category has also increased except for the middle class which is still below 0 but on the rise. This data will help show our client as much information as she needs about who where customers are and what kind of money, they have available to spend. On average our client’s customers will be on the low to middle class wage category.

The third target market is focused on Thai food enthusiasts.  This customer market could add great value to our client’s businesses and put the business on the radar of potential customers that look to reviews by such influencers. This can be done in a plethora of different ways. The first way is through the internet with bloggers. Bloggers have a large role in the Portland market especially when it comes to food. There are many local popular blogs who go around to many different restaurants and rate them. Capturing this young millennial market would be a large step for our client. (murphy)

B. Target Market Profile

Table 1: Target Market Matrix

Customer Needs:

The current customer needs are incredibly large. There is a high and growing demand for authentic Thai food in the PDX market, however our client captures little of this demand. The clients true, pure needs is to feed themselves and their family while also curing a craving for authentic Thai food. This is great for our client as every human needs to eat. She is providing a basic customer need that every person has. The need for food. The customer also needs to feel like the food they are eating is “safe”. By this we mean that the customer will not get sick from eating at our client’s restaurant. Knowing this we have spoken to our client about making sure her store always looks as clean as possible. Potential customers are less likely to return to a restaurant if they feel the conditions in which their food being prepared is unsatisfactory. (Murphy)

Buying behaviors:

The buying behaviors of current clients are incredibly unpredictable and there is little to no loyal following. There are very sporadic times in which our client is busy and one of these times we have been able to identify is when the Vietnamese restaurant across the street from her is closed she gets busy. This is normally on a Monday afternoon or mid-day for lunch. We have seen this and are encouraging our client to take advantages of these opportunities where you can be profitable. The buying behaviors for the client's current customers shows that they are eating Thai food at a regularly infrequent interval. We found a statistic showing that people on average eat out at least once per week, and are generally eating out for dinner, with a growing lunch community.   Our client has a very flexible schedule and could compete to meet the buying behaviors of the current and potential customers. (Jaaskelainen)

Usage / Loyalty:

The target market we are suggesting use loyalty programs quite frequently. Punch cards are a great way to do this and have a high usage rating in low income areas such as our clients. It is much more economically friendly for our client to grow her loyalty base than it is to consistently run marketing campaigns to attract new customers. Another loyalty program can involve the use of an app with discounts being sent out through the app. This is a much more expensive option but has shown a lot of success with many different companies in the food industry. To obtain a new customer on average costs a company 5 times more and keeping an existing customer. Having a loyal base that can spread our clients name through word of mouth will be incredibly valuable for the success of her company.

C. Target Market Demand for Customer Segments

Table 2: Target market demand calculations

Table 2 shows the potential demand for our client’s product per quarter. In general, as an entire market the demand in the PDX market is higher than this. This demand is calculated showing the three target market segments we have suggested for our client. We want our client to grow a bigger market in this area.

Table 3: Market Potential

Table 3 shows the current market share our client is able to take. If simple math is done it shows that our client holds about .02% of the total market share. This is incredibly low and can be increased through marketing campaigns.

Projected Growth for Customer Segments:  The projected growth for our target segments is constantly growing. As stated earlier in this paper both the local area where the restaurant is growing and the local Thai community is growing. This has great potential for our client as the markets we have suggested will become bigger markets every year. According to the Oregonian the Asian community is the fastest growing community in the Portland area. This is a large portion of our customer base with a constant growth rate of about three to five percent each year (      ).

4. Competitive Analysis- Adrienne Corcoran

A. Competitive Environment

Paitong Thai Cuisine is operating in the “Hospitality” Industry in Portland Oregon. The hospitality industry encompasses a broad field of businesses in the service industry and restaurants are the largest piece of the hospitality industry. There over 100 restaurants currently operating in Portland so there is no shortage of options for consumers to choose from. There are low barriers to entry for other restaurants to come into the market which makes competition high and fierce. This means that restaurant operators need to stand out and offer unique dishes that appeal to consumer preferences and provide them with a competitive advantage. The client offers traditional authentic dishes that connect with her Thai culture and include healthy ingredients plated with decorative food carvings. This is a differentiation point for the client’s business compared to other competitors.  

Porter’s Five Forces Analysis

Porter’s Five Forces is a tool for analysis that helps a business to understand the competitiveness of their business environment. It also is used to identify a business’s strategy potential for profitability. The forces to that this analysis tool looks at are Competitive rivalry, Threat of new entrants, Buyer power, Supplier power, and Threat of substitutes.

Competitive Rivalry:

· -- There are a high number of restaurants of all sizes currently in the market making competition high.

· ++ Product and service range is in favor for the client

· - The client has some differentiation but lacks strategy to compete

Threat of new entry:

· -- Entry and exit barriers are low with little regulations to stop competitors from coming and going in the market

· + The client’s business is located right off the freeway and has a major bus line running right to the business

· + Costly to start up and secure location

Buyer Power:

· -- There is no shortage of consumer choice in the market

· + There is a large population of consumers and high potential

· + Cost for products are competitively priced and buying frequency is moderate

Supplier Power:

· -- Little brand awareness and lack of control of brand

· + Products are healthy and of quality

· - mixed customer reviews indicate low customer trust

Threat of Substitutes:

· -- high number of alternatives available to consumers

· +Competitively priced compared to product and budget competitors

B. Key Competitors and landscape

The client operates in the Montavilla neighborhood in SE Portland on the border of NE Portland and there are currently 20 plus restaurant options in this neighborhood that consist of a range of cuisines and restaurant styles. There are about 10 direct competitors that compete with the client in this area and a top competitor is Hanoi Kitchen which is located directly across from the client's business and their customers come over to the clients business when this competitor is closed on Mondays. This competitor is a category competitor that offers Vietnamese food. Another direct competitor that competes with the client in product is Thai Carnation located just 5 miles from the client. This competitor offers Thai cuisine in a fast-casual setting and has a high web rating. Additional competitors include budget competitors such as Wendy’s, Burgerville, and Mcdonalds. There are also generic competitors that include Giant Gyro, East Glisan Pizza, and Safeway which are all within 5 miles of the client’s business.

5. SWOT Analysis

SWOT analysis is a framework for assisting a marketer or a planner to be able to identify a business's core competencies and use this information to build strategies to meet business goals. This section analyses the SWOT framework of Paitong Thai Cuisine with the aim of identifying areas that could create competitive advantage, finding the best position for our client’s business and products in the market, and help our client to leverage its strengths and opportunities and minimize the weaknesses and threats to become more profitable and sustainable.            

SWOT MATRIX

Table 4: SWOT Matrix

A. Strengths and Weakness

Strengths:

The biggest strength for Paitong Thai is that our client has created a business around her culture and knowledge of Thai cuisine. She is experienced in creating traditional dishes of her culture in a manner that preserves her culture. This is a competitive advantage for our client. Our client can leverage this advantage to better meet the needs of target customer market segments. Our client can also use her knowledge of the culture and food to gain advantage over competitors who might not be aware of the taste preferences and needs of thai people and food enthusiasts that have experience with authentic thai food. Our client has a growing market to target which is another advantage for the client’s business. The oregonian recently published an article that states the population of Asians in Oregon increased 26% from 2010 and has even surpassed that of the Hispanics and the Latinos (Ma,Annie 2017). This growing population represents a growing customer market trend for our client.

The client also partners with some local agencies that provide staff at a low cost or for a percentage;this keeps costs low for staff. For example, the partnership between the client and IRCO provides the clients business with interns who help her with the staffing needs and the client gives the agency 20% of what the wages would be and they pay the rest to the interns. This also keeps HR needs for the client business at a minimum since they handle all the hiring process. The other agency that the client partners with is DHS work training program that sends staff to gain experience and pays the wages in return for the client providing work training.

Weaknesses:

The client could have more opportunities by taking English language classes to increase communication skills. Increased English language skills would offer opportunity to get more from business workshops and communicate her brand messages more effectively, therefore it could help her business get more follow-ups which will drive her profit up.

The client has almost no technology skills this has been another area of weaknesses that has hindered gaining more advantage and brand awareness. The client recently has attempted to sign up with Postmates a food delivery service. Due to the client’s lack of knowledge in using technology she has been unable to complete the sign up process and only the restaurant name appears on Postmates. The client’s menu does not appear on Postmates preventing customers from ordering. The client also has social media pages on Facebook and Instagram that could offer great marketing opportunities, but she has no ownership of them or knowledge how to optimize these channels.  

B. Opportunities and Threats

Opportunities:

The increase in Asian population of Oregon offers opportunity to increase customer base and market need for our client’s business. The Thai culture blends well with other Asian cultures that may offer opportunity to cross promote restaurants in the community. The client’s vast experience with Thai culture and food gives an opportunity to capture some of the increasing Asian customer segment.

(Insert new paragraph about an external opportunity)

Threats:

(Adrienne will write about undesirable market threat)

Currently, the lack of loyal customers is driving the client’s business profit down.

C. Implications and conclusions for Marketing Strategy

(Adrienne will write) The analysis reveals that Paitong Thai Cuisine is strategically positioned for takeoff only it has to revamp the following areas for it to be successful in its endeavors.

-A change in the marketing strategy that has to be informed by customer traits and the reality of the market.

-Formulation of a clear organizational structure for staffing and accounting.

-Expanding the employee base to bring in professionals who will manage the new departments. This will also make it possible for the client to take advantage of English language classes that can help capture more market opportunity. Also, would allow for the client to generate more profits if there are staff that can help increase customer satisfaction.