Statutory Minimum Wage in Hong Kong

Part A

Demographic segment

Hong Kong retail sales of goods decreased by 7.8% until November 2015. The reason is the decreasing number of visitors to Hong Kong, especially Mainland tourists. The trend will cause reducing salary. For those low purchasing power customers, they will greatly demand on Café de Corals which price range is affordable. Therefore, it benefits Café de Corals to increase sales.

Economic segment

According to Census and Statistics Department, it indicates that overall consumer prices rose by 2.7% in December 2015. The inflation rate rose by 2.4%. It leads Café de Corals’ cost and operational expenses to increase. In order to compensate the increasing cost, Café de Corals can adjust the price of meals or find cheaper raw materials and rent of stores. Moreover, in these five years, Hong Kong interest rate increases by 0.25% which will cause investment rate on Café de Corals decreasing. These factors stop the development of the company.

Political segment

Statutory Minimum Wage (SMW) has been established since 2011. The SMW rate was raised from $30 per hour to $32.5 per hour last year. It will burden the production cost of raw materials and staff salary. Other than SMW, ISO 9001 by HKQAA should be followed in aspects of Management Responsibility, Resource Management, Product Realisation and Measurement, Analysis and Improvement. Café de Corals should put more effort on maintaining the requirement.

Sociocultural segment

There are more and more people who have difference characteristics such as cultural background and physical abilities working in a company. It can provide different opportunities to the companies to develop their businesses. Because of the customers of Café de Corals also diverse, the employees come from different background to provide the high quality services to the customers.

Technological segment

Most companies tend to create and subsequent introduce a new product or service or improve the existing product in order to gain the attention from the customers. In order to face the competition of the quick service restaurants, Café de Corals introduces the new products to the customers at the reasonable price. For examples, hot pot and milk tea are the popular products of Café de Corals. In addition to introduce the new types of food, it mainly makes the improvement of the existing product to retain the customers. At the same time, Café de Corals adopts PRC operating units to differentiate form the other competitors to increase the efficiency and quickly response to the market change.

Global segment

Nowadays, the purchasing power of Chinese is increasing and becoming more and more important in the global market. In order to increase the market share of the Café de Corals and face the keen competition in the fast food industry, it opened eight more stores in the main cities of Southern China. For example, Café de Corals opened the stores in Guangzhau and Foshan which located in the major transportation hubs to establish the reputation and business relationship.

Part B

Q1.

7- point scale is used for the five forces analysis. The highest mark 7 means the particular force is attractive for the firm and the lowest mark 1 means the force is unattractive for the firm.

Step 1: Rivalry among competitors

Today, the pace of life in Hong Kong is increasing with increased working hours, people are automatically engaged in eating fast food for saving time. Therefore, from business perspective, this fast food trend becomes a business opportunity and hence more businesses enter this industry which make the competition becomes more intensive. Apart from Cafe de Coral, the competitors in Hong Kong include Mcdonald, Fairwood, Yoshinoya, Pepper Lunch Express and other fast food providers. As there are many existing strong competitors in this industry, the rivalry among competitor is intensive, so it is unattractive to Cafe de Coral. But, from the article mentioned that Cafe de Coral is still the market leader of the fast food industry, so the mark is 4.

Step 2: Power of suppliers and buyers

From supplier's’ perspective, one of the supplier, labour possesses high bargaining power as Hong Kong has enacted minimum wage ordinance, every worker enjoys minimum wage which increases the operation cost of the firm. Besides, since large portion of the raw materials used in producing food is imported from mainland China which is very cheap; Cafe de Coral relies so much on this source, so the bargaining power of supplier is very high. It is unattractive to Cafe de Coral and receive low range mark (1-4). From buyer's perspective, since there are so many different types of restaurants in Hong Kong which means customers have plenty of choices of their meals, so customers possess high bargaining power as they can switch their choices easily. Therefore, it is unattractive to Cafe de Coral and receive low range mark (1-4).

Step 3: Other factors affect forces in step 2

A factor that affects the supplier power is the high turnover rate of fast food industry, people are usually not willing to work in fast food industry in long term because of less promotion chances. Therefore, the shortage of the workforce of fast food industry causes low operation efficiency of Cafe de Coral. Hence, the mark of power of supplier is 2 which is unattractive to Cafe de Coral. Besides, health issue is the major concern when people choosing restaurants. As many food provided by fast food shop is added MSG, so people may not choose to eat fast food. Therefore, this factor makes the power of buyers unattractive and receives 2 marks.

Step 4: Threat of substitutes and new entrant.

For the threat of substitutes, Cafe de Coral is facing keen competition in fast food market as there are lots of different kinds of fast food providers in Hong Kong and they are providing simialr services with each other. For example, American fast food restaurant KFC and Burger King, Japanese fast food restaurant Yoshinoya. However, the quality of food of Cafe de Coral is high and hence maintain its high reputation, so customers are willing to choose Cafe de Coral. Therefore, threat of substitutes is in a high range mark (5-7) as this environment is attractive to Cafe de Coral. For the threat of new entrant, there are not many fast food restaurants want to enter into Hong Kong market as this industry has high competition and the industry is saturated, new entrants enter to this market are difficult so that the threat of new entrant for Café de Coral is low. Therefore, it is attractive to Café de Coral and it receives high range mark (5-7).