“We continue to remain focused on maintaining our core offering of serving good quality Spanish Tapas in a fun and vibrant Spanish atmosphere.”
Chief Executive – La Tasca Group PLC (2006)
During the year 2006 La Tasca Group PLC have made good progress in strengthening the position of La Tasca as the leading Spanish restaurant brand in the UK, while broadening the base of the Company by developing new brands and markets. They opened 8 new La Tasca restaurants in the UK to reach 54 in total (La Tasca Group PLC 2006). Their second Spanish concept called La Viña Bar and Restaurant has progressed well. Designed to appeal to a different customer demographic, it is allowing them to make further inroads in to the Spanish market segment and raise their sights on the number of restaurants and bars they can open in the UK (La Tasca Group PLC 2006).
The development and testing of La Tasca in the USA market is showing promising signs. Both the Washington and Clarendon Virginia restaurants are competing in the toughest casual dining market in the world and yet delivered excellent sales and operating profits. This not only confirms the strength of their unique brand but is providing valuable insight for their UK operations. Baltimore which opened in March in a spectacular site on the harbour front is their third outlet, in a plan to open 7 (La Tasca Group PLC 2006). Finally they have initiated a fourth new potential income opportunity. Specifically the team has created a new concept Sam and Maxie’s Bar, Grill and Smokehouse. This is a premium casual affordable dining offer and is targeted particularly for leisure parks and shopping centres – trading locations which are known well by the management team. The first outlet at Stevenage Leisure Park is off to a good start and two prime locations have been acquired, one in the Trafford Centre in Manchester and the other in Milton Keynes. The total number of restaurants in operation at the year end is 64 (La Tasca Group PLC 2006).
Strategic Analysis of La Tasca
La Tasca group Plc was founded in 1993 and operates the largest Spanish restaurant chain in United Kingdom. The industry it is mainly operating in is casual dining segment of the wider restaurant and catering industry. The group is successfully running its flagship brand La Tasca serving a large variety of tapas, Spanish beer and wines. La Tasca claims that it is a clear blend of everything that is good about Spain, warm décor, authentic cuisine and friendly hospitality that go together to create a unique and genuine atmosphere (La Tasca, Spanish Tapas Bar and Restaurant 2006).
The company has won several awards over the years as recognition for its best performance. In 2004 it won retailer retail “Best Concept of the Year” award, “North West Business of the Year” from Manchester evening news and “Group Restaurateur of the Year” award in the caterer and hotelkeeper awards (La Tasca Group PLC 2006). Along with all these success indicators for the current performance, the company needs to plan a strategy fore its future. As more and more competition is coming into La Tasca’s market segment, it needs to identify its competencies to build upon and the weaknesses that it should try to eradicate from its system. In order to do so the company needs to do its strategic analysis and devise a strategy for the future.
Strategic analysis is very important for any company to sustain its position or to achieve goals in the long run. Strategic planning can be termed as any effort of the management that is not aimed at producing results in current years rather it aims at producing results in five to ten years period. Strategic planning is the effort to positively shape the future of the company.
The strategic planning process includes four phases: during the first phase a situational analysis is undertaken and according to these results, strategies are formulated during the second phase. Phase three focuses on the implementation of these strategies and the process concludes with ongoing strategic control (Boshoff 2003, p. 252-258). Boshoff also describes the phases in the strategic planning process, but conclude with an evaluation of the results. By applying these steps, a service attempts to achieve a fit between its external and internal environment (Boshoff 2003, p. 252-258).
Strategic analysis gives an insight into the current position of the company i.e. where it stands now and what it is likely to face in the future. Strategic analysis consists of two parts (McComb 1997):
A typical Internal Situational Analysis examines (McComb 1997):
Organisation’s strategies initiatives or objectives
Organisation’s policies, procedures, and philosophy
Organisation’s resources (budget, staff, technology, equipment, facilities, ideas)
Typical External Situational Analysis examines (McComb 1997):
Market area’s economy
Legal and regulatory climate
Changing demographic trends
Changing psychographic trends
State of technology
The firms need to look for the strategic fit or the interface between the firm and its environment (Grant 2005, p. 16-17). Today is world that is changing rapidly. This enormous rate of change turns effective strategies into redundant ones. Any strategy is successful if it is consistent with firm’s goals and values, with its external environment, its resources and capabilities and with its organization and systems (Grant 2005, p. 16-17). In this case the fit between La Tasca’s external and internal environment is very important for their sustainable competitive advantage in the future.
For analyzing the strategic position of La Tasca its internal and external analysis needs to be done to get an idea of the important factors in both these environments and to base future strategies on those characteristics.
Situational analysis can be done by using the SWOT Analysis framework (Swinton 2006):
Strengths and Weaknesses (Internal)
Opportunities and Threats (External)
Internal analysis is important in the sense that it analyzes the internal environment of the company, its resources and capabilities (Swinton 2006). These characteristics are very important in developing a future strategy for the company as they outline the sources of competitive advantage over the competitors.
Strengths and Weaknesses
Strengths are the factors that add towards the competitiveness and productivity of the company while weaknesses are the areas where the company performance is not good and it lags behind (Swinton 2006). Strengths and weakness analysis is the first part of the SWOT matrix (strength, weaknesses, opportunities and threats). This first part analyzes the current or “now” positions of the company i.e. all the strengths that exist now and all weaknesses that exist now (Swinton 2006)
Strengths of La Tasca
La Tasca’s main strengths come from the way it is positioned in the market. It has been in operations since last thirteen years and is quite established in the market.
The first strength of the group lies in its unique positioning. It is a Spanish restaurant that promises to provide an experience of a holiday in Spain. The market trends are such that England’s population is getting more and more attracted towards the foods of other countries as well. Restaurant and catering industry is very competitive in United Kingdom with several renowned brands operating in the industry. But la Tasca has positioned itself in the casual dining segment of this industry. In this segment too La Tasca has maintained a very strong association with the Spanish culture. This Spanish association and the fact that La Tasca provides authentic Spanish food is the main strength for the brand. The brand is positioned as an authentic Spanish environment and cuisines which differentiates it from the rest of the players in the industry and is promising factor for the brand.
The second strength lies in the fact that it is the only Spanish restaurant chain that has over 53 restaurants operating in UK. The group has established its business from Aberdeen in the north to Plymouth in the south (La Tasca Group PLC 2006). This offers customers the ability to enjoy their favourite brand even when they are not in their home city and also enhances the popularity of the brand.
La Tasca group has strengthened its business by vertical integration with the establishment of La Cocina. The group has its own production and distribution business which is solely for the benefit of the restaurants operated by the group. La Cocina is established in Sal ford and provides high quality food products to the restaurants of the group. Maintaining such a production and distribution business allows a company to have complete control over the quality and timeliness of their inputs (Fearne 2004). Variety is another recognised strength of la Tasca group. La Tasca offers over 30 tapas and a wide variety of wines to select from. The offering is such that the customer can decide how much time and money to send in the restaurant.
La Tasca has priced itself very competitively. The lower price of the restaurant offers attraction for the casual dining customers. It serves tapas with price ranging from £2 to £4. This low price is strength for the restaurant as the customers can enjoy an evening with good food and service at low prices.
The addition of two new brands i.e. La Viña and Sam ; Maxie’s (Caterer Search 2006) has further strengthened the portfolio of la Tasca group. The original brand la Tasca offered an exquisite Spanish experience but was targeted towards youth and was not categorized as an expensive dining place. By adding La Viña the company has expanded its offering. It is designed for the needs of more sophisticated customer with age almost 35 – 40 years (La Tasca Group PLC 2006). It also offers more variety of dishes and expensive wines. Thus la Tasca derives its strength from the fact that it offers suitable places for both the youth and the sophisticated customers, both cheap and expensive options.
Another strength of la Tasca comes from its internal operations. These restaurants have very flat structure which enables quick decision making in the restaurant. The internal culture of la Tasca is such that they term their structure as “lowerarchical” (La Tasca Group PLC 2005) instead of hierarchical.
La Tasca has shown very good growth rate in the last several years and the profits grew by about 21.6% in 2005 (La Tasca Group PLC 2005). This strong financial position gives leverage to the company and this is because it is able to finance the expansion by itself (La Tasca Group PLC 2005).
Weaknesses of La Tasca
The first weakness is that there are several players competing in the market and la Tasca has a very little share out of the total restaurant and catering industry. Even in the casual dining sector Nandos has 94 sites (Tragus Holdings Limited 2005) while la Tasca has only 53 sites of its flag ship brand. To overcome the weakness they should have more geographical expansion for more Brand visibility.
External analysis is very important for analyzing any company and developing its future strategies. No company can exist solely in its internal environment. Therefore external factors have a continuous and regular effect on the company’s policies, strategies and even the profitability.
There are several models available that can be used to analyze the external environment like porters five forces model and PEST-EL etc that give an insight into the company’s micro and macro environment. In this study Porter’s Five Forces Model has been used.
(Refer to Appendix for Porter’s Five Forces Model)
Opportunities and threats for La Tasca
The future can bring threat or opportunities for any company. For La Tasca the opportunities are the growing market segment. As mentioned above the segment of La Tasca is growing at a rate of 25.7%. A retail rule of thumb is that a strong brand can expand up to 175 to 250 sites (Tragus Holdings Limited 2005). Thus there is huge opportunity for expansion in UK.
Apart from this the concepts of La Vina and Sam & Maxie’s provide opportunity for portfolio enrichment. The sites in US also represent an opportunity because US eating out market is more established than UK’s. The increasing trend of the population of the country towards tourism to Spain also complements and provides opportunity for La Tasca.
As far as the threats are concerned, La Tasca is not the original food of the people of England. Current trend is that people like trying new tastes and thus Spanish cuisines offer great potential but if there are changes in this taste, La Tasca will have a problem. Another threat is from Italian and other origin food restaurants because apart from the regular competition they offer a threat towards changing the trend for Spanish food. They should focus on promotions and publicity along with advertising to make locals more adaptive of Spanish culture and tastes. They can also work on hybrid or mixed recipes to give a local flavour and not be totally alien for the locals.
Competitive advantage is the edge of a company over its competition. Competitiveness is derived from positional advantage and resources and assets used (Drejer 2002, p. 46-64). Positional advantage is derived from external factors and the resources represent internal factors. Thus competitive advantage is achieved through effective combination of both internal and external factors. To keep on gaining competitive advantage in the long run, especially in services industry, a firm needs to focus a lot on its marketing mix (Butler ; Collins 1995, p. 83-96).
La Tasca’s competitive advantage lies in its unique positioning in a growing market segment. It is currently performing well and is showing competitive edge over the competition but is this competitive advantage sustainable. A successful competitive advantage is sustainable not temporary. It is known as sustainable competitive advantage which is valuable, rare, costly to imitate and unsuitable for competitor (Lomax 2006, p 187).
The analysis shows that within this market, leisure dining is the strongest growing sector (Tragus Holdings Limited 2005). If the UK market continues to follow US trends, where over 50 per cent of all household expenditure on food is on eating out (compared with only 30 per cent in the UK), then this sector could potentially be enormous (Tragus Holdings Limited 2005). However, leisure dining is changing, developing new areas as a restaurant revolution takes place. Of the new trends emerging, two are having the most impact on the sector. These are the emergence of ‘fast casual’ restaurants, following the same trend in the US, and the growth of ‘all-day dining’ options. What these new trends have in common is increased choice in terms of when consumers eat out and how much they want to spend (Tragus Holdings Limited 2005).
The UK eating out market is undoubtedly taking its lead from the other side of the pond. It is currently valued at around £28 billion – between 2000 and 2004 the market grew by around a fifth, with further growth (5 per cent) anticipated in 2005 (Eating Out Review 2005). This expansion should be set in the context of the numerous factors that have adversely affected leisure and tourism in the UK in recent years, especially in central London – terrorist attacks on public transport, 9/11, the war in Iraq, SARS and the introduction of the congestion charge in central London (Tragus Holdings Limited 2005).
On analyzing La Tasca and looking at the industry and SWOT analysis, the strengths of La Tasca which provide competitive advantage are its vertical integration, expansion, the “lowerarchical” culture, catering to wide variety of customers (La Tasca Group PLC 2005) and the unique Spanish holiday experience etc. All these factors combine to make competitive advantage for La Tasca that although is not impossible to imitate but is costly. They have targeted the openings at the economically strong South East of the country, particularly central London where they have been underrepresented. The team has worked particularly hard to improve the management retention rates which are the key to growing customer loyalty and shareholder value in this industry (La Tasca Group PLC 2006).
Turnover for the period rose from £48.8m to £55.6m, an increase of 13.8% (La Tasca Group PLC 2006). EBITDA was up to £10.0m from £8.4m an increase of 18.5% and operating profit (pre amortisation of goodwill) was up to £7.1m from £6.1m, an increase of 16.8% (La Tasca Group PLC 2006). Profit before tax (before goodwill amortisation) was up 55.3% to £6.1m and diluted earnings per share (before goodwill amortisation) increased by 50.1% to 7.88p (La Tasca Group PLC 2006).
Expansion of La Tasca is self financed which is hard for new entrants to do because La Tasca has established itself for over thirteen years. La Tasca’s shares are being traded well on the stock exchange which is providing them the ability to generate funds at low costs. Going public has its weaknesses which arise from rivalry among the Directors and shareholders interests. The shareholders are usually more interested in dividends while the Directors are more interested in Retained Earnings for sustained growth of the company. These contentions can arise due to the fact that La Tasca Group is a PLC. However, this can be tactfully handled by the higher management by maintaining a logical balance.
By far the largest part of La Tasca’s business and now trading throughout the UK From as far north as Aberdeen to as west as Swansea and Plymouth as south as Brighton and Portsmouth and as east as Norwich, La Tasca is the biggest national group of Spanish restaurants.
Thus, La Tasca group should diversify its business without loosing the focus on their core competency i.e. Spanish cuisines and environment. They can also work on hybrid or mixed recipes to give a local flavour and not be totally alien for the locals.
With the people, systems, and strong brand line up that they have in place, they should strive harder for further future growth. The success of La Tasca lies in its core value on which it should consistently focus and as explained well by their chief executive: “We have a proven business that has much potential to grow in an expanding marketplace. We have the infrastructure in place and have nurtured our people to take advantage of this highly attractive environment.” (La Tasca Group PLC 2006)
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Porter’s five forces model
This model was presented by Porter in 1980 to analyze characteristics and extent of competition in any industry (Campbell, Stonehouse ; Houston 2003, p. 134-135) Porter argued that there exist five forces in any industry that determine the nature of competition in that industry. The figure below represents Porter’s five forces model (Campbell, Stonehouse ; Houston 2003, p. 134-135)
Bargaining power of suppliers
Bargaining power of buyers
Threat of new entrants
Threat of Substitutes
Threat of substitutes refers to the extent to which other substitutes for the product are available and customers will shift to those products. In case of La Tasca, it operates in a wider restaurant and catering industry. This industry has several players in the market which are offering wide variety of products for the consumers. Although they vary from each other in taste and origin but they act as substitute for each other. So keeping in view its current status the company should focus on customer retention and loyalty (Reichheld 1993, p. 64-73).
Thus the threat of substitute is high in this industry especially for La Tasca because it is offering Spanish food which is not the actual food of the United Kingdom population and thus it can be substituted by Italian, Mexican or other origin restaurants.
Solution: The threat can be reduced by serving high quality food at affordable prices and the buyers should perceive that they are getting good value for their money.
Bargaining power of buyers
Bargaining power of buyers refer to the extent the buyers have the power to command their choices and preferences. It is high if service providers are in large number and are small and widely separated.
For La Tasca, bargaining power of buyers is quite high. Restaurant industry experiences very high number of players competing for each and every customer and also several new outlets open each year. This results in giving more and more power in the hands of eth buyers as they have more choices available to them to choose from. They can select casual dining or a very formal one, fast food or the relaxed environment with quality service, Spanish, Italian or any other cuisine and a lot more. This high power in the buyers hand means that La Tasca needs to cater to the very needs of its customers or they will shift to some other outlet as the switching cots is very less.
Solution: La Tasca is a very unique and differentiated offering till now. Since they have a Spanish background which many other dining offerings have not, they already exercise some power over the buyers. La Tasca should now promote itself as a unique Spanish brand which not many other players in industry are not.
Bargaining power of suppliers
In restaurant industry bargaining power of suppliers is at a moderately high level. This is because of the fact that restaurant use food products as their inputs and there are several players in the industry which are the customers to these suppliers. Thus suppliers have the power to command their terms and conditions bit not to a very high extent.
Solution: For La Tasca, bargaining power of suppliers is not very high and thus this problem is not very significant. This is because of La Cocina which is La Tasca’s own producer and distributor for the raw material of its products. La Tasca is pursuing the objectives of vertical integration by doing backward integration to ensure that it has proper and timely supply of quality products for its customers.
Threat of new entrants
Restaurant and catering industry in England is not a difficult industry to enter. However the level of this threat varies within the segments in this industry. The barriers to entry in the expensive restaurant and hotels like five star etc are very high due to high capital intensive requirements of the business. However in the leisure dining segment of the business, the entry barriers are quite low. There is no leader or widely established group that can eliminate the new entrant. The capital requirement for a business in this segment is also very less. The market offers growth opportunity and is thus attractive to new entrants.
As La Tasca is operating in the casual dining segment, it faces high threat of new entrants in the industry because the barriers to entry are very less. Also the customers have a trend to try new opportunities combined with the fact that switching cost is very less thus it further lowers the barriers to entry for new entrants.
Solution: In this scenario, La Tasca should capitalise from its established name and focus on customer relationship management so that they can have repeated sales. The customers shouldn’t only get food from La Tasca but it should be an exquisite dining experience. For this they already have the captivating ambiance mixed with their unique offering.
Intensity of rivalry in the industry
Intensity of rivalry in the industry is not very high at the current moment. This is so because the industry is at its growth stage. The UK eating out market is undoubtedly taking its lead from the other side of the pond. It is currently valued at around £28 billion – between 2000 and 2004 the market grew by around a fifth, with further growth (5 per cent) anticipated in 2005 (Eating Out Review 2005).
Any industry has intense rivalry when it is at its maturity stage or is reaching that stage because of the fact that this stage does not offer growth and new opportunities which result in increasing competition over the existing markets and customer base. However the market segment of La Tasca which is casual dining segment offers a growth rate of 25.7% in future (Mintel 2004). The figure below gives an idea about the players and competitors in the segment of La Tasca in UK (Tragus Holdings Limited 2005).
Solution: To counter competition La Tasca should follow the words of their Chief Executive published in La Tasca Group PLC Annual Report and Accounts 2006:
“We continue to remain focused on maintaining our core offering of serving good quality Spanish Tapas in a fun and vibrant Spanish atmosphere.”
Chief Executive – La Tasca Group PLC (2006)