Executive Summary

The purpose of this paper is to analyse Spicy Queen’s business setup and operations by outlining the criteria for a start-up restaurant to be a success. Spicy Queen is located in an area with a continuous increase restaurants offering similar food at same prices. The problem related to the observation that Chinese restaurants provide spicy food sat cheap prices, and the use of low-cost strategy hinders competition and growth. Thus, Spicy Queen and other startups in same situation could differentiate their products and change marketing strategies.

The problem when solved could help startups like Spicy Queen faced with challenge of competition. The paper can act as a guide for entrepreneurs to start up a restaurant in a competitive market with similar products at low prices. The Spicy Queen’s business setup and operations analyses focused on the strategic and marketing aspects. Qualitative research method was applied in the analysis. Data was collected through interviews in form focus groups. In addition, surveys were used to collect statistical data.

The findings indicated that cost leadership could be replaced with more differentiated approach to enhance business competitiveness. Thus, a new marketing strategy and 4Ps were established to be necessary. Spicy Queen is not into social media platform such as Facebook, Twitter, and You Tube. Marketing in terms of price and can increase sales by 15%. For Startups like Spicy Queen which operate in competitive markets must change operations and business strategies. The 4ps has been recommended. Price should be premium and competitive. Also, Unique and differentiated products can be used to differentiate from competitors. Spicy Queen can use branding strategy to make a strong brand that can drive the company to success. It is necessary for marketers in Spicy Queen incorporate STP into its marketing strategy and identify its customers, and position its products to the targeted market.

Section I – Introduction/Background

The food and restaurant business is probably one of the toughest industries to operate because of the high levels of competition. In addition, consumer needs keep on changing every time, and this forces restaurant to be in line with such changes to remain competitive. Moreover, San Francisco remains as one of the most visited destinations with a lot of restaurants, which offer love spicy food. However, the restaurants and hotels offering the same kind of spicy food are the same. The paper is related to operations and strategic analyses of start-ups willing to operate in the food and restaurant business by offering spicy foods. The focus of the paper is to be a guide for entrepreneurs eager to start up a restaurant in a competitive market offering similar products at low prices.

In terms of the significance of the topic, it is evident that there is high competition in the food industry. This is because most Chinese restaurants provide spicy and delicious food at cheap prices, which limits the level of competition. Thus, the issue of low-cost strategy affected the ability by Spicy Queen to be successful in San Francisco.  By addressing this issue, startups in the restaurant industry such as the Spicy Queen will be in a position to compete favorably. The analysis of Spicy Queen’s business setup and operations focuses on the strategic and marketing aspects of the restaurant. The research provides facts and practical lessons and applications to business people eager to start up a restaurant and operate in competitive markets.

Section II – Statement of the Problem/Research Project

The purpose of this paper is to analyse Spicy Queen’s business setup and operations by outlining the criteria for a start-up restaurant to be a success. Briefly, Spicy Queen is the subsidiary of Spicy Empire which serves Sichuan Cuisine. Spicy Queen is located in Richmond one of the high density Asian neighborhoods in San Francisco. Currently, there has been a continuous increase in the number of Asian population in San Francisco; more and more similar restaurants have been opened in the area. The problem faced is that Chinese restaurants by default provide spicy and delicious food at cheap prices. Therefore, the use of low-cost strategy cannot enable Spicy Queen to be successful within the fragmented and competitive market in in San Francisco. Rather than being cheap, and a Spicy Queen is recommended to differentiate its products from other competitor by constantly developing its culture and dishes. Under marketing, operational analysis determined if Spicy Queen is delivering planned services and products.

Section III – Methodology

Qualitative research method was applied in the case to measure the quality of the data collected through primary and secondary research. It was applied to explore the interviewees’ insights, and opinions thus providing a wide range of evidences to strengthen the situation (Zikmund, 2003). Basically, it was preferred to understand people’s hidden motivations, thoughts or perceptions relating to the provision of Chinese food to Americans. Also, interviews among the sample were carried on focus groups. Zikmund (2003) explained that “Focus groups are being used to help understand how a product will be received and how it might be improved” (p. 230). Thus, focus groups in form of unstructured interviews with a small number of interviewees were used and questions asked based on the formulated questions in order to understand business setup operations and strategy analyses. Surveys were also conducted to determine the business strategies and marketing used by Spicy Queen have been explored to provide an outline for business success. The problem is that Spicy Queen business and marketing strategies do not meet the criteria for success. For instance, the marketing strategy and business strategy do not provide sustainable competitive advantage.

Section IV – Findings

The findings indicated that cost leadership was the primary approach used and a more differentiated approach could be used to make the business competitive. With reference to marketing level strategy, 90% of the participants indicated that a new marketing strategy that differentiates what it offers to its Asian consumers is needed for startups to be successful. In addition, all the participants (100%) recommended the use of 4ps model to improve the profitability and market share of Spicy Queen. The areas that needed change related to products, prices, place, and promotion. The choice was supported by past studies which have established that 4Ps  are create an optimal package of variables required to satisfy customer’s needs within the target markets, and optimize on the restaurants profit and performance (Kotler & Keller, 2011). 80% pointed out that Spicy Queen was not into social media platform and that Facebook, Twitter, You Tube, and other media platforms could be used. Marketing is necessary for Spicy Queen because Kotler and Keller (2005) established that price promotion leads into a 15% sales volume increase volume. 90% of participants pointed out that branding could be used to position Spicy Queen in the market.

The strategic alternatives that might have been used to solve the problem are the (1) differentiation and focus leadership strategies, and (2) marketing level strategy. The research findings of the primary research conducted showed that more than 90% of the participants agreed that these differentiation and market level strategies were appropriate for startup businesses operating in competitive markets offering products at low-cost pricing.  Generally, it was accepted that for Spicy Queen to be successful, low-cost strategy cannot be effective because most of the restaurants provide Chinese foods at low prices. Subsequently, a competitive pricing based on quality and uniqueness of its products was recommended to the management. The 4ps were selected because the Mix model provides marketing tools and variables applied by a company when pursuing marketing goals. It also plays an integral role in implementation of marketing strategies (Kotler & Keller, 2005).

For a start-up restaurant like Spicy Queen, it is important to adopt a business level strategy that provides actions to be carried out to offer value to customers and at the same time gain a competitive advantage through the exploitation of core competencies (Hitt, Ireland, & Hoskisson, 2009). Moreover, a business strategy occurs at a product or unit level and it stresses on improving the competitive position of an organization’s services or products in a particular market segment (Johnson, Scholes, Whittington, 2008). A differentiation strategy was chosen because it emphasizes “on developing a unique product or (equally useful) a perception of a unique product that customers are willing to pay a premium for” (Gallagher, 2008, p. 1). When a differentiation strategy is used, a business charges a premium price for its products that are different from those of other players in the San Francisco. Startups can develop products and enhance its resources in order to promote customer responsiveness, and quality of its products.

Section V– Conclusions

Startups like Spicy Queen which are operating in competitive markets should change its operations and business strategies. Differentiation and marketing strategies were established to be used for the business. For instance, to improve its success and market share in the food industry by differentiating its products. In addition, segmentation, targeting, and positioning (STP) model and 4Ps model can also be improved to enhance Spicy Queen success. Spicy Queen could charge a premium price for its products and develop products that are unique to promote customer responsiveness, and quality of its products. The differentiation must be based on the preferences and needs of the customers. A differentiated marketing or segmented marketing can also be used to integrate local consumer culture positioning by providing foods that meet the culture of the locals and that of Asian population.

Section VI – Recommendations

Differentiation is a viable strategy that can be used by business startups like Spicy Queen to earn above average returns, thus creating brand loyalty, which in turn, lowers customers’ sensitivity to price (Tanwar, 2013).  Based on past research studies, differentiation strategy is an effective tool that has the capability to generate higher profits when compared to a low-cost strategy (Tanwar, 2013). This is because differentiation creates can increase the market share of the business. In order to be successful when using a differentiation strategy, startups are supposed to study the preferences and needs of the customers to determine the viability. For instance, when products and services are differentiated can increase market share and profitability of the business (Miller 2009). A start-up like Spicy Queen relies heavily on Asian customers or people who had tasted Sichuan food before and they have a high expectation. So in order to differentiate its product, taste quality must be incorporated in Spicy Queen products.

One ways that can be adopted by startups in restaurant markets to differentiate a brand is by stressing on superior product quality (Kokemuller, 2015).  Success in differentiating a Chinese spicy food depends on taste quality and it should focus a great product. Although the products could have higher price points in comparison to what is provided by others around San Francisco, it is important that customers believe that product’s taste quality goes beyond the quality of less costly competitors. Thus, developing a distinctive taste is usually a better opportunity for the restaurant to adopt for differentiation rather than competing on cost (Kokemuller, 2015). In addition, a new startup business can attract a number of customers by providing health diet consolations for customers, and by offering regular but free healthy diet education, and healthy diet plans for its loyal customers. Over the year’s cultural trend toward the consumption of more health-conscious products has been an opportunity that can be used by Spicy Queen to create differentiation. Notably, quality products can be offered and diligently differentiated from its competitors, thus becoming a healthy option in the region (Grosglik & Ram, 2013).

For a startup to be successful, it is necessary offer a diet that can help its loyal consumers with weight problems to lose weight and maintain a healthy body. A culture of promoting superior nutritional value is thus created compared to its close competitors. For example, such a business provides nutritious, natural, and healthy foods with a fine time of exotic flavours supported by Chinese touch. In addition, the restaurant could offer traditional healthy Chinese food such as congee breakfast, shredded egg soup, seafood soup, and Beijing chicken rolls. Moreover, soup and salad menus could have offered and promote Chinese traditional dishes in its menu. Subsequently, Spicy Queen is going to develop a competitive advantage over its close rivals.

Marketing Mix

For a business with a limited presence on the online platform, the restaurant can apply social media marketing in order to be successful. This is a marketing strategy that is based on social media networks such as Facebook, Twitter, You Tube, and other media platforms that can increase the presence of the restaurant in the targeted market (Mangold & Faulds, 2009). In addition, for Spicy Queen and other new startups, a business website can be used to advertise and promote its products. Also, a website could also incorporate Chinese menu, map show its location and hours of operation as well as prices of products offered.

Branding is an integral element of marketing that could be used to position Spicy Queen and other startups in the market.  Branding is a marketing strategy that is applied to communicate the core values of a company, such as the name of the company, what products the company sells, a company’s logo, packaging, and the website (Social Enterprise Canada, 2010). Subsequently, the company could become well-recognized and meet needs and expectation of customer, and offer quality food and services. In order to delivery its strategy; banners can be used to communicate its unique products to the targeted consumers. Logos and banners can be used as branding strategy to drive strong customer response. The degree of brand awareness impacts customers’ ability to identify with and recall the brand of the business in the midst of similar but different restaurant brands. The idea of familiarity is to emphasize on customers’ ability to be knowledgeable adequately with regard to the product features and services provided.

Price and pricing strategy has influence on the consumers and their ability to purchase. Pricing is complex because different products cost and demand inter-connection, and are subjected to varied levels of competition (Kotler & Heller, 2005). For a business like Spicy Queen to be successful, low-cost strategy cannot be effective because most of the restaurants provide Chinese foods at low prices. Nonetheless, a competitive pricing based on quality and uniqueness of its products could be effective. This is because consumers could be loyal when provided with unique and quality products regardless of the price. Therefore, using a pricing strategy and providing products to enhance customer maximum satisfaction could be effective (Kotler & Heller, 2011). A value-based pricing can also be used whereby the price of the products is pegged on the maximum perceived value of the products and the optimum price Chinese food consumers are willing to pay. Although value-based pricing relies on the benefits a consumer can derive, Spicy Queen could offer its customers with high prices premium relative to its costs.

The mix of products is combination of food products that are to be cooked and packaged or served in a different manner than that of its competitors. Unique and differentiated products can attract new customers from rival restaurants to increase the sales as well as its market share. The quality of the products is a variable that is beneficial when communicating to the consumers the product/brand.

Segmentation is recommended to divide the market into shares based on the needs and expectations of the targeted consumers. The startup can use target market segment strategy, and target consumers in the identified segments based on their income levels, demographics, and geographical locations (Hanlon, 2013).

Spicy Queen and other related startups can use Demographics, Psychographics, Behavioral characteristics, and Benefits sought to provide an opportunity to create customer-matched, novel, and cost-effective business design. Thus, the segments that Spicy Queen should target should be male and female Americans, but particularly married couples with small families living in San Francisco (Mind Tools, 2014). This is because young couples are more into Chinese foods compared to the elderly Americans. With regard to geographic, Spicy Queen would target others areas around San Francisco which highly populated areas and have high numbers of populations from the Asian descent. Spicy Queen could target small and big families that are willing to spend on Chinese spicy foods, especially those who have the habit of purchasing products occasionally. Understanding the groupings of customers in the targeted market can help Spicy Queen in providing products and services that are tailored to the needs and preferences of the customers.

A positioning strategy is necessary to determine the position of a Spicy Queen’s products and services in the market. Spicy Queen can use an approach which allows positioning of differentiated products in the market by keeping in mind the expectations and needs of targeted consumers. For example, targeted consumers are Americans, Asians, and other people who prefer Chinese foods, especially those with small families. Spicy Queen could focus and link its products with the Chinese and Asian cultural meanings so s to remain relevant in the market. Therefore, other than identifying with the Asian population, Spicy Queen could identify itself with the local people. Spicy Queen could also apply a differentiated marketing by targeting two or more unique market segments, which have varied demands and needs. The strategy could allow Spicy Queen and similar startups to target particular, but a large population. The strategy could be employed in case of Spicy Queen because it operates in food industry which has numerous consumers with different needs.

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