Critically evaluate the operations management strategy of Hard Rock Cafe

Global competition increasing every day, while others theme restaurants have come and gone

Hard Rock cafe is successfully response to complexity, risks and competition of global economy

with flexibility and speed. From one London cafe in 1971, Hard Rock Café (HRC) has grown to

over 163 locations in 52 countries, and most of that growth has occurred in the last few years.

With the mission 'To spread the spirit of Rock 'n' Roll by delivering an exceptional entertainment

and dining experience. We are committed to being an important, contributing member of our

community and offering the Hard Rock family a fun, healthy, and nurturing work environment

while ensuring our long-term success' (Heizer & Render, 2009).HRC enjoys a 92% name

recognition world-wide, putting it in the top 10 of all restaurants. HRC has accomplished this by

changing from a 'themed' restaurant into one participating in what is now called the 'Experience

Economy'.

. Let's identify how each of the 10 decisions of operations management is applied successfully

and effectively at Hard Rock Café.

1. Design of goods and services:

HRC is flexible and unique with their product and services design base on the local market that

they enter into. Every different restaurant has unique design by combining traditional and culture

of the locals with the view in mind such as when they open HRC in Ho Chi Minh, Viet Name and

decorate the bar with lantern. One of the most popular mistakes of restaurant is trying to make

their food be the best to be successful. But reality is quite different when Bugger King and

McDonald's don't have the best food. I didn't mean that restaurant shouldn't try to make the

most delicious food but in the process of making delicious food (tangible product) they should

keep their eyes on providing the intangible product which is called experience and HRC sells

experience. HRC is using food as medium to inspire exceptional entertainment and dining

experience. As Professor C.Markides of the London Business School says, ' The trick is not to

play the game better than the competition, but to develop and play an altogether different

game'. (Markides, 1997)

2. Managing Quality:

One of the most operations strategy is quality. According Jay Heizer, quality as 'the totality of

features and characteristics of a product or service that bears on its ability to satisfy stated or

implied needs'. (Heizer & Render, 2009, pp. 222-225). In Hard Rock's Café, the food is the

product and quality must be top the charts. Menu and quality surveys are being constantly and

regularly reviewed by operations personnel. In operation management, establishing quality

standard and control to meet these standards is the key to success but HR do better when

providing the unique experience. Hard Rock is quite successful when using food (tangible

product) as the medium to deliver exceptional entertainment and dinning experience (intangible

product) and customer almost satisfy with unique visual and sound experience not duplicated

anywhere. (Heizer & Render, 2009, p. 83)

3. Process and capacity design:

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When decide the locations of their facilities, Hard Rock cafe has the process and capacity

design with effective analyses the whole production process from purchasing food ingredients,

to preparing the food to ensure the products in an efficient manner, cost effectiveness and

labour requirements.

4. Location:

According Oliver Munday, Senior Director Worldwide Café Development, ' when considering a

new location, a careful decision making process is used, as the investment for a new location is

large and for example usually includes agreeing to a longer term lease on the location of 10-15

years or more' because it's play a role to ensure organization recovered the initial investment

capital as well as minimum profit. . HRC carefully looks at several factors when considering a

location.

' Political risk: In general, stable political of country can impact the decision of economic

activities. It can be seen by the consistency of government policies that helps to ensure the

interest of investor. On the other hands, a stable political situation will make people feel safety in

working and increasing number of people comes to entertaining places.

' Currency risk due to inflation causing the economic crisis. Consequence, enterprise faces with

difficult in exchange rate when earning profit cannot enough to compensate. Currency discount

means pricing escalate, people live from hand to mouth. At that time, consumer will be reduced

and the resulting decline in business revenues and profits, even losses.

' Social norms: in perspective consuming capacity of customer, there are two factors dominant:

people's income and culture, spending habits. If people have high salary, they're willing to

spend much more money for better life. On the contrary, they just spend money on what they

really need. Second, due to culture life and spending habit they spend money on entertainment,

leisure activities that their culture allows. But there are places where even though people's

incomes are really high but they practice in saving and spending.

' Brand fit: This factor is very sensitive and important that Hard Rock should consider carefully

before naming trademarks and deploying their business. Customer will be outraged and boycott

immediately with goods or services that offend communities ethnic or their belief.

' Social costs: This is cost that businesses have responsibility to contribute to society including

taxes'

' Business practices: Hard Rock interested in living standards and intellectual level where

business located.

5. Lay out :

Another reason helps HRC stands out the crowded restaurant is their layout. Just looking their

big guitar outside, definitely it stimulates your curiosity get inside. The wall is being slapped with

lots of memorabilia: guitars, drums, shirts, pants, shoes, scarves, handwritten come from music

band or legendary musicians, such as Jimi Hendrix, Elvis, John Lennon 'HRC seems to be a

'live' museum.

6. Human Resources:

Company from small to large just only archive their operation management strategy with

competent and motivate people. Many organizations have demonstrated that competitive

advantage in operation can be build through a good human resource strategy. In Hard Rock

Café, part of their missions is creating a friendly, funny working environment not only for

employee but also for their family to make them feel not just come for work only but to enjoy the

work since then they can deliver professional unique entertainment and dining experience to

their guests and to ensure long term company success . Hard Rock has an employee Bill of

Rights, outstanding pay, benefit and promotion that helps employee self-motivated individual,

they also have policy hiring the best qualify not just best available. Human resource can be

expensive, difficult to archive and hard to sustain but what we've seen in Hard Rock Café with

practice training and treat employee as you need individuality that not only good for business

but also definitely 'rock'. (Heizer & Render, 2009, p. 445)

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7. Supply-chain management:

Hard Rock has been explored new global resources to achieve maximum profitable via supply

chain. Be aware the most advantages of outsourcing is cost saving and improve services level.

Hard Rock has selected USCO logistics, a subsidiary of Kuehne & Nagel, to take over

distribution and replenishment of collectible and fashion merchandise for its cafes, hotels, and

casinos in North America. (Albright, 2004)

8. Inventory, material requirements planning, and JIT

Inventory is one of the most expensive assets of many companies and Hard Rock is not

exclusive. With more than seventy thousand pieces of memorabilia, Hard Rock also has

invested forty million dollars in one of the world's largest collection of rock-and-roll memorabilia

inventory. According Jay Heizer ' the objective of inventory management is to strike a balance

between inventory investment and customer services' and by using effectively software such as

Excel OM, POM, Hard Rock has done a great of cataloguing every single item. With thousand

memorabilia spread out 163 cafes world-wide in 52 countries, they know exactly what is on the

wall in what cafe. Through inventory system and technology they're quite comfortable to recall

any memorabilia to refurbish it every 5 to 7 years. (Heizer & Render, 2009, pp. 500-501)

9. Intermediate and short-term scheduling.

In Service Sector such as restaurant and hotel, we must forecast capacity for long term,

purchasing contract lending orders for intermediate term and for short term we must forecast

schedule and purchase labour, food, supply. Hard Rock Café is using a lot of forecasting

techniques such as moving averages, weighted Moving Averages, Exponential Smoothing and

Regression Analysis that helps manager to see the impact on demand of other menu items if

the price of one item is changed. For example, 'if the price of a cheeseburger increases from

$6.99 to $7.99, Hard Rock can predict the effect this will have on sales of chicken sandwiches,

pork sandwiches, and salads. Managers do the same analysis on menu placement, with the

center section driving higher sales volumes' (Heizer & Render, 2009, p. 647).

10. Maintenance

Hard Rock Cafe got the goal of maintenance when they succeed to maintain the capability of

the system over 52 countries and keeping a system's equipment in working order in 163 cafes

around the world. To get maintenance activities more effectively Hard Rock need to

implementing or improving preventive maintenance and increasing repair capabilities or speed.

(Heizer & Render, 2009, pp. 682-683)

In light of the above,'discuss'the operations management challenges and

opportunities for'Hard Rock when considering an'expansion of its business into Hanoi.

Opened the first one in December 2009 in Ho Chi Minh, Hard Rock is facing with challenges

and opportunities to expand the second one in Hanoi capital of Viet Nam. Let's using SWOT to

analysis their strengths, weaknesses, opportunities as well as threats when coming to Hanoi

1. Strengths:

' With more than 40 years strong experience deploying services: hotels, cafes, restaurant

spread out over 52 countries. Hard Rock absolutely brand power with high capacity, technology

and network relationship.

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' Hard Rock had experienced about VN market through the first Hard Rock in Ho Chi Minh. Hard

Rock absolutely has some lessons learn from the first one about human resource, supply chain,

inventory that is a challenges factor for 'Multi-Domestic' strategy.

2. Weaknesses:

' Maybe need more research in emerging market as well as living habit in Hanoi.

3. Opportunities:

' Hanoi is the capital of Vietnam and was formed 1000 years ago, the center of politics, culture

and economy of Vietnam. Hanoi is the first stop of tourists on their way to visit Ha Long Bay

which is a natural wonder of the world, Tuan Chau resort, The Hai Phong port city

' Hard Rock will create a exchange cultural bridge between Vietnamese singer and international

singer.

4. Threats:

' Considerations should be taken as well on regional segmentation of the market, like we usually

say in the marketing and advertising industry, in Vietnam:' Saigonese makes 10 bucks, borrows

1 and spends 11 while Hanoiians makes 10 bucks, spends 1 and saves the rest.' Don't go

rushing to Vietnam hearing the rosy stories. Take your time and breathe like a local before you

make your move.

' Vietnam, like any other emerging market, is a long-haul market for any investor. While it is

looked at as one of the 10 hottest emerging markets in the world with a very young population

and a rising middle class, it is by no means providing a quick return on investment'especially

when you are offering a new product or service concept.

' Educating the market on the specialty coffee category. Try to understand consumer perception

towards the category and match it with what you have in your pocket. You either are a pioneer

and spend money to educate the market or wait until your competitors have done so and piggy

back on market growth. Nevertheless, if your pocket is real deep, buy out a local business in the

category and take it from there.

Let me use the PEST framework for deep analysis and see other perspectives of challenges as

well as opportunities to expand Hard Rock in Hanoi.

PEST Analysis:

Political:

' Government Stability:

Since 1975 up till now, the political situation in Vietnam is very stable. This is a country of no

violence, no terrorism, no constant protests that causing the political situation, culture and

economy of the country. People feel peace in mind to work and live, play and entertainment.

Therefore, many foreign do invest to Vietnam, and many tourists from all over the world visited

Vietnam. Hanoi is the capital of Vietnam so that it's inherited all the best characteristics.

Economic:

' Growth, Inflation& Interest Rates:

In 2010, gross domestic product GDP in Hanoi increased 11% over the same period last year.

Foreign investment in Hanoi reached $ 800 million, total revenue per capita GDP reached about

37 million per year (approximately $ 1,950 per year). But people who work in services, stock,

handicrafts, owner of large, medium or small business have really high income.

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Price index increases, especially food commodities increased to 5.37%. Beverages price index

rose 4.17%. Cigarette price index is up 2.25%. General food sector services have increased the

price index

' Real Estate Market: Hanoi is a growing and expanding city so that real estate prices increasing

so fast. Wherever roads and public services are built, the property prices rose faster and quite

high. Although the city is planning to expand but property prices in the old city still very high and

that led the fact, although Vietnam is a poor country, but property prices is more higher than

other countries in the world.

' Tourists/business visitors: According to statistics, the number of international visitors come to

Hanoi in 2010 increased 62% compared to 2009 while a domestic tourists increased by 10%.

And has more than 30,000 international tourists visited the capital in 10 days Hanoi organized

the celebration of 1000 years of Thang Long ' Hanoi

' Hotel: There are lots of luxury five start hotels in Hanoi such as Hilton, Sofitel Plaza, Sheraton,

Sofitel Metropole, Nikko.

' Convention Center: Hanoi National Convention Center Vietnam was built with scale and

international level, located at 57 Pham Hung Street, Tu Liem district. It was held the Economic

Cooperation Forum Asia - Pacific Economic Cooperation (APEC) in 2006.

' Retail: As well as other cities of a developing country, outside the supermarket and shopping

center, the old town around Hoan Kiem's lake where the famous retailer of the city including

most of the essential goods from individuals and families stuffs to souvenirs.

Socio-cultural

' Population Growth/Age Profile

Population of Hanoi is about more than 6 million people. Especially, urban areas, downtown

area and old town such as Hoan Kiem, Ba Dinh, Dong Da, Hai Ba Ba Trung district is very

crowded. In these areas, the population density is up to about 35,000 people/km2 while other

areas just 2000 people/km2. Age of working capacity is about 66% of the total population.

' Education, Social Mobility: Hanoi now has 52 elementary school, 27 colleges and 50

universities. There is also the Academy and the Center for scientific research.

' Transportation:

' Airport:

a) Age of airport: NoiBai International Airport had built in 1977 and official opened in 1978.

b) Number of Passengers: In 2010, Noi Bai International Airport has average 170 flights taking

off and landing daily, and has served 9.5 million passengers

c) Airlines: Vietnam has three airlines Vietnam, Jetstar and Vietjet airline. And most major

airlines around the world have representative offices in Hanoi .

d) Direct Flights: Noi Bai Airport has direct domestic flights to other cities in VietNam such as Ho

Chi Minh, Nha Trang, Hue and international flights to other cities around the world as: Moscow,

Paris-Charles de Gaulle, Seoul-Incheon, Kuala Lumpur, Tokyo-Narita'.

e) Hubs: Currently, Noi Bai International Airport is not on transit routes the international flights.

However, visitors can stop to visit the capital Hanoi in Vietnam on the way to Hongkong, Japan,

Korea, China,Singapore'.

' Rail: Hang Co railway station is the center of the country, the starting point of five railway lines

throughout the province from north to south and to the northern border. From the border,

Vietnam railway connect to international railway to Beijing, China, and continue to many

European countries.

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' Road: Hanoi is the traffic junction of the roads in the country. Hanoi is the starting point of the

route of Highway 1A entered into southern and route into Laos and Cambodia as well as go to

the north border VietNam-China.

' Sea / River: Hanoi is laying on both sides of Red River, an important routes to Hung Yen, Nam

Dinh, Thai Binh, Viet Tri, Pha Lai.

' Restaurants and Nightclub: Hanoi has many Restaurants and Nightclub and mainly

concentrated in urban districts such as Hoan Kiem, Hai Ba Trung, Ba Dinh and Dong Da .

' Sports: My Dinh Stadium which was built in 2003, located in the south of the city,

accommodating 40,192 seats. Sports Congress in Southeast Asia in 2003 and football

Championships Southeast Asia 2008 was held here.

' Entertainment:

' Parks: There are lots of parks as Thong Nhat, Tuoi Tre, Thu Le which attracting visitors.

' Lake: One of the most prominent feature in Hanoi is a lot of natural lakes i.e Hoan Kiem, Dong

Da, Thien Quang. The lakes in Hanoi are also attracting lots of visitor especially Hoan Kiem

turtle lake associated with history.

' Theaters: Most of these theaters are concentrated in two districts of the city center is the Hoan

Kiem and Hai Ba Trung district.

' In addition, the old city where the traditional villages and many other historical sites that

tourists often come to Hanoi to first priority visit i.e 'Quoc Tu Giam' place where President Bill

Clinton had visited in 2000.

Technological

' Impact of Emerging Technologies.

' Impact of Internet and Reduced Communication Costs.

' R&D Activity.

' Impact of Technology Transfer..

Vietnam is a developing country and all needs for life constantly increasing. Vietnam is also a

place attracting many tourists from Europe, Americas..

Because of these reasons, the consideration of expanding Hard Rock Cafe in Hanoi in this

period is a job should be considered.

Assume Ba Dinh Square or Hoan Kiem Lake is center point, the most potential area for

business location should be placed on Ba Dinh or Dong Da district or adjacent to the Hoan Kiem

or Hai Ba Trung district. Similar as people in Ho Chi Minh and other cities across the country,

every night, people is going toward downtown. It has created resurgence of "City Centers" at

night

Thus, Hoan Kiem and Hai Ba Trung district or near the Hoan Kiem area is absolutely a great

ideal for location, but found available space here is extremely difficult.

Moreover, location decision is at a 10-15 years commitment. First, lease premises from 10 - 15

years to ensure have enough time to recover the initial investment capital and gain a profit.

Second, the premises are not in the areas that the government put into the clearance plan

within 10-15 years.

In the other hands, due to harsh natural conditions, Hanoi usually got flooded annually or

disasters that damaged crops. Since then demand of entertainment will be cut off. The

consumers will significant decrease.

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Also consider psychological factors of Hanoi in particular and people in northern Vietnam

general. Due to undergo the hardships of constant war

Due to undergo the hardships of constant war, the harsh natural conditions, people are saving

as a precaution for the risks in the future, with hope to build a better life for next generations.

Therefore people are considering on spending something.

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