UNIVERSITY OF ECONOMICS HO CHI MINH CITY International School of Business ------------------------------ Bui Chau Sang INEFFECTIVE OPERATIONAL MANAGEMENT: A CASE OF PAPA GARDEN MASTER OF BUSINESS ADMINISTRATION Ho Chi Minh City – Year 2018 UNIVERSITY OF ECONOMICS HO CHI MINH CITY International School of Business ------------------------------ Bui Chau Sang INEFFECTIVE OPERATIONAL MANAGEMENT: A CASE OF PAPA GARDEN MASTER OF BUSINESS ADMINISTRATION SUPERVISOR: NGUYEN THI MAI TRANG Ho Chi Minh City – Year 2018 1 EXECUTIVE SUMMARY Due to high quality of life and increase in free time and income, enjoyment of cuisines has been given considerable attention – leading to a significant growth of fast-food restaurants, especially in the central area of Ho Chi Minh City such as District 1, which has turned it into a key factor of most young people’s cuisine desires. In business development of restaurants like McDonald’s BT, Burger King, Double B Spagetti, Con Ga Trong, Papa Garden has been facing with fall in sales volume and low level of customer satisfaction in period of 2016 to 2017 since its first launch in 2016. In food industry, operational management is playing a vital role of a successful business performance of any service organizations. The aim of this study is to investigate the main cause and the main problem leading to these above symptoms and then provide potential suggestions for attainable improvement.
The findings of this study identified that ineffective operational management is the key factor that results in low sales performance and low evaluation of customers on their experience at Papa Garden in comparison with others. Based on discussion and theories informed, this study also offered potential solutions and action plans to improve poor service operations management and overcome difficulties in low business performance and customer dissatisfaction. The two potential solutions that restauranteurs and many researchers have suggested include holding seminars, counseling sessions and team building activities; and applying recruitment and selection programs. Through insights of Board of Management and related theories informed, it is obvious to take consideration to execute the alternative solution of holding seminars, counseling sessions and team building activities at this time for improvement.
2 ACKNOWLEDGEMENTS This study was conducted as my thesis under the level of Master at the Master of Business Administration Program in 2018. I would like to express my sincere thanks and gratitudes to Professor Nguyen Thi Mai Trang for all her supervision, encouragement, valuable suggestions and precious advices throughout the period of this study. I would also like to take this opportunity to show my gratitudes to my colleagues at work and classmates at ISB for their continuous support. I must also send my sincere thankfulness to my parents and friends for their continuos support and encouragement.
Bui Chau Sang. 3 TABLE OF CONTENTS EXECUTIVE SUMMARY. 2 LIST OF FIGURES. 4 LIST OF TABLES .1 The restaurant background .2 The restaurant’s vision and mission.1 Global fast-food restaurants industry .2 Vietnam fast-food restaurants market .1 Current situation of Papa Garden in comparison with key competitors .1 Ineffective operational management .2 Inadequate inventory management and personal hygiene issue .3 Weak human resource management .3 Cause –and –effect diagram .1 Poor supervision from managers .2 Insufficient adequate staff for efficient operations .3 Lacking of strong interaction between departments .1 The first alternative solution: Applying recruitment and selection programs .2 The second alternative solution: Implementing seminars, counseling sessions and team building activities.
ORGANIZATION OF ACTIONS .1 Action plan from Papa Garden .2 Effectiveness measurement through taking actions. 69 LIST OF FIGURES Figure 1: Papa Garden’s Menu Figure 2: Global fast-food market's revenue share in 2017 Figure 3: Brand value of the 10 most valuable fast-food brands worldwide in 2017 Figure 4: Fast-food revenue in Vietnam from 2014 to 2017 (in million U. dollars) Figure 5: Top best-selling fast-food restaurants in HCMC from 2016-2017 Figure 6: Customer’s evaluation on service quality of Papa Garden and surrounding fast food restaurants Figure 7: Reasons for why customers do not intend to re-visit Papa Garden Figure 8: Cause –and –effect diagram LIST OF TABLES Table 1: Top 10 best-selling fast-food restaurants in HCMC from 2016-2017 Table 2: Customer satisfaction scores of Papa Garden and of restaurants around District 1 Ho Chi Minh from 2016-2017 Table 3: Sales volume of Papa Garden and other restaurants around District 1 Ho Chi Minh City in 2016, 2017 and first 6 months in 2018 Table 4: Explored factors of restaurateurs and customer’s evaluation on management issues Table 5: Estimating cost for recruitment and selection process Table 6: Estimating cost for group meetings and team building activities Table 7: Action plan Table 8: Board of Management’s expectations in improvement of current situation of Papa Garden 5 1.1 The restaurant background The restaurant industry is the sphere of business which is rapidly growing nowadays. In Vietnam market, entrepreneurs pay considerable attention to this field as it is becoming more in demand and widespread.
There is a strong competitiveness on the market in this area, thus it is essential to frequently improve the quality of service to satisfy customer’s needs and desires. The better the service is provided, the more profitable the company is. In view of life is getting more intense, the fast-food concept restaurants are gaining more and more popularity among full-service restaurants due to its time efficiency and cost saving. In customer’s viewpoints, fast-food used to be associated with something unhealthy and calorics, however, those thoughts have considerably changed recently.
Increasing restaurants are offering healthy and delicious food which can fit people with gainful diets. In Vietnam, there are many vegetarians, hence lots of restaurants tend to offer as many choices as possible to satisfy customer’s specific needs. Papa Garden restaurant is one of the fast-food concept restaurants in Vietnam which offers healthy and beneficial food. As the high level of competitiveness on the market, it is more important to overtake the quality of service, to make customer satisfied and be able to establish a loyal customer base and then boost revenue respectively.
Based on that, customer satisfaction and service quality research were conducted to enhance the restaurant’s effectiveness of operations and to atttract more customers for higher profitability.2 The restaurant’s vision and mission As Vietnam has been taking more and more steps advanced to become a developmental country in 2020s, the restaurant industry sector is more considered as one of the most important sectors in Vietnam. In facts, the number of well-known fast-food chains in Vietnam is continually increasing. KFC, Pizza Hut, Lotteria, Carl’s Jr., especially McDonald’s and Burger King – the two biggest name in the world of fast-food chains have been currently presented in Vietnam. Most restaurants are located in busy areas like large supermarkets, main streets and tourism destinations.
This truly attracts plenty of customers. In other sides, it indicates that there is a strong competition among these big brands in this area today; thus it it more necessary to make differences, continous innovations or to enhance the quality of services provided to meet customer needs and desires. Papa Garden is a two-year-old restaurant with fast-food concept famous for its healthy and 6 delicious food. The restaurant offers a variety of vegetarian options, meals containing meat.
The main products are Papa’s bread, fried chicken fingers, fried rice with chicken, fried rice with minced meat and spaghetti. Moreover, Papa Garden also offers various types of special beverages such as Green tea ice blended, Choco chip ice blended, Peach tea, Mint tea, Caramel frappuchino and many others fresh smoothies and juices. Customers have a considerable possibility to choose from various ingredients with precise origins to experience. Besides, Papa Garden offers catering for various occasions for a party or event of ten people.
Reservation can be made no later than four days before the event and they are processed during the weekdays only. There is an official web page of Papa Garden on Facebook where customers can access and leave messages or make reservations for the catering specifically indicating the meal plans and number of attendances. The menu is provided both in Vietnamese and English and it is shown as belows: 7 Figure 1: Papa Garden’s Menu (Source: Operation Department of Papa Garden) 2.1 Global fast-food restaurants industry According to Transparency Market Research(1) – a global market research, analysis, and intelligence firms with offices in India and the U.S, the global fast-food market was valued at 8 approximately 495 billion USD in 2014 and is expected to reach 645 billion USD by 2020, growing at a CAGR of 4. The global fast-food market observed significant expansion in North America in its early years.2% of global revenue share is estimated in North America, with 40% of global revenue concentrated in the United States.
It indicates that North America is really a large market for the fast-food concept. Other developed regions also have a high concentration of industry revenue, including Europe at 17%, with a particularly high concentration in Germany (and France to a lesser extent) the powerhouse economy of the EU. In the coming years, however, the non-traditional fast-food markets are expected to generate a significant chunk of the global revenue – these include Asia Pacific and Rest of the World. Asia Pacific also makes up 4.2% of global revenue, and includes Australia and partly Vietnam, which has a strong affinity for fast-food(2).
In addition, peer pressure among consumers to switch to Western eating habits is also a key factor influencing the growth of this market. Georgraphically, North America stood as the largest market for the fast-food concept followed by Eroupe and Asia Pacific. In North America, the busy lifestyle of individuals that does not leave adequate time for fresh cooking on a regular basis and dependence on convenient restaurants are driving the market. It is obvious that the development of fast-food market is turning to Asia, especially developing country like Vietnam.
As shown in Figure 2, the sector of global fast-food restaurants market is categorized into the four segments by geography in 2017. Global Fast-Food Market's Revenue Share in 2017 North America Eroupe Asia-Pacific Rest of the World 35% 44% 4% 17% Figure 2: Global fast-food market's revenue share in 2017 (Source: Transparency Market Research in 2017) In the whole market, some restaurants chain – a group of related ones based in different locations that are operated either by franchise agreements or under shared corporate 9 ownership such as McDonald’s, Starbucks, Subway and KFC dominate the fast-food market and together value 176,647 million U. This was illustrated by The Statistics Portal(3) as belows: Figure 3: Brand value of the 10 most valuable fast-food brands worldwide in 2017 (in million U.2 Vietnam fast-food restaurants market Since 1997, Vietnam's fast-food restaurants market has been on the rise with many big names such as Lotteria with 162 restaurants, KFC with 130 restaurants and Jollibee with 30 restaurants. The Subway restaurant chain announced its expansion plan in late 2012 and other names that are becoming more familiar are Burger King, Pizza Hut and Popeyes.
Vietnam is a promising market with more 90 million people, of whom over 65% are under 35 years old. Though people have tightened their belts during the economic downturn, the fast-food market is still growing at the annual rate of 26% while other industries saw a decline. Vietnam was also ranked 8th in the Asia Pacific region in terms of food and beverages business environment by Business Monitor International in 2011. Nguyen Thanh Tam – Lotteria Vietnam's Business Development Director said that 10 We suffered a tough time when we were first established in 1998, and the growth rate only picked up in 2010 and till now, we are expecting over 50% annual growth rate.
Hoang Tung – a marketer of Ipsos Company – a top market research company in Vietnam acknowledged that Vietnam's fast-food market witnessed the first milestone 10 years ago when KFC arrived and openned the first fast-food restaurant chain.