SPEntrep Special Report: Blue Ocean Strategy by Evan Uy

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The blue ocean strategy from evanbrianuy

Red Crab: Developing Multi-Brand Restaurant Concepts Case Analysis

RED CRAB GROUP: Developing Multi-Brand Restaurant Concepts

Situation Analysis

The Red Crab Group started when Mr. Raymond Magdaluyo’s mother was offered a commercial space at the Mimosa Leisure Estate in 1998. The mother did not want to pay for expensive franchise fees so they decided to develop a restaurant concept on their own. She started by concocting their own crab recipes with the help of some friends and then hired consultants to complete the rest of the menu. The main concept was vague; they were just known to serve good local food. Raymond Magdaluyo’s involvement was mainly on the marketing side after leaving his job as a researcher at the AIM.

Relevant Facts:

·         The first Red Crab restaurant succeeded even without a specific identity.

·         Though Raymond Magdaluyo used to be a research assistant at the AIM, there was no market research involved in the initial stage of the Red Crab Group.

·         After a year, they decided to open a Red Crab branch in Malate, Manila. Sales were good during the first 5 month and then a 30% decline happened after that. This is when they realized that they need to study and analyze the location and situation of their businesses.

·         In 2001, they opened two more branches in Tomas Morato and Alabang.

·         During the process of opening the two branches, Raymond Magdaluyo started to conduct market research.

·         In 2002, Greenbelt invited him to open a restaurant in their new mall, Greenbelt 3. They required him to come up with new and unique concept. He came up with the Seafood Club.

·         Likewise, in 2004, the new Power Plant mall, also in Makati, invited him to establish a unique concept. He demanded for a space in the ground floor where he established Crustasia, a high-end Asian-inspired seafood bistro.

·         Unlike in his previous restaurants, he conducted intensive market research and product development for Crustasia. He even had consultants from abroad. They had 15 food tasting sessions covering some 300 recipes.

·         Their business model is “single product, multi-concept approach”

·         They believe that the product follows the location; you should find a location first and from there you can study and analyze the location to provide what the local market needs

·         For advertising, they believe having influential people (celebrities) endorse their restaurant to have the best impact.

·         Its first non-seafood concept, Heaven n Eggs, did not take off like their sister brands did.

·         They also established Seafood Island, a Filipino seafood restaurant, to cater to groups of friends and also families. It has a more informal theme than the other concepts.

Problem Analysis

Having too many brands under your umbrella can be quite challenging; it’s hard to manage varying missions and visions, menu items and overall theme. However, high-end malls require restaurant operators to come up with new concepts should they pursue the opportunity offered to them. By the time Crustasia was established, Mr. Magdaluyo already knows how to properly come up with a restaurant concept. Market research and intensive product development provide then with information they needed to create a concept that will succeed. The problem would be sustaining their expanding array of brands as their company further develops.

Alternatives Generation

Here are the alternatives I have thought of:

1.)   1.) Continue with the strategy of product follows location. In their business, they do not have full control of their decisions. Malls provide them with good opportunities but with corresponding conditions. In their case, requiring them to create a new concept is a prerequisite to leasing a prime mall space. How can you turn an opportunity like that? You cannot force your existing brand to a mall that required you to create a new one. Here are the alternatives should they continue to respond to offers and invitations of malls and other property management.

a.       Since they already have varying crab and seafood restaurant brands catering to different markets, they can try to be more aggressive in looking for commercial space. They have concepts for the upper and working classes. They can opt to expand in CBDs (Ortigas, Makati, BGC), provinces (Sta. Rosa, Batangas, Laguna, Davao, Cebu etc) and in places where seafood are best eaten (beaches – Boracay, Subic, Davao, Cebu)

b.      They can also provide more tummy-filling menu items since seafood are not usually filling. This will hopefully help gain them more market share. Many casual dining restaurants offer cheaper and filling set meals during office lunch times. They can follow this move and provide filling meals either during lunchtime or all day long for those who aim for value-for-money. Seafood, especially crabs, are very expensive and not even enough to fill our tummies thus the vast majority of the population cannot afford to pay a thousand pesos for a lunch that cannot even satisfy their appetite.

c.       Venture in non-seafood concepts even after the failure of Heaven n Eggs. Many new non-seafood concepts are still thriving nowadays which proves that the market is still lucrative.

d.      Create more themed seafood restaurants. They can look into American, South American, Chinese or Singaporean cuisine to draw some possible concepts.

2.)    2.) Avoid creating new concepts and stick to their current brands and build up on it. This will allow them to better manage their brands and provide focus.

Decision and Action Analysis (Deciding on best alternatives)

Given the prices of crabs, prawns, shrimps and other seafood, the Red Crab group cannot further position itself lower than its current Seafood Island concept. As a result, they can stay on its current position as a leading seafood restaurant operator and further strengthen its foothold on the market by following the first alternative.

As opposed to waiting and responding to invites, they can aggressively look for prospective locations for their current brands and even for future concepts.  Currently, their strategy is to find a good place and develop products the best suits the new location. They can also implement the opposite and find locations for their existing brands. Good places to penetrate are near tourist attractions like Boracay and Subic. Foreigners love to eat seafood in the Philippines since we are known to have an abundant source of it. They should take advantage of that specific market.

 For people who have huge appetite, eating seafood might not be the most practical choice since it is very expensive and not enough to fill our tummies. I suggest they create set meals with meat and seafood to achieve higher value-for-money. They can partner pork/beef/chicken and fish since there are now inexpensive but quality fish products. This will hopefully attract those people who always look for value-for-money options aside from those seafood lovers.

Since they are already considered to be veterans in the restaurant industry, they can now venture into non-seafood restaurants provided that they do their marketing research homework. This move will further capture more people and the market outside the seafood-lovers’ zone.

Submitted by: The Great White

Red Crab Group - Case Analysis - Alvin Bilolo Spentrep

THE RED CRAB GROUP: Developing Multi-Brand Restaurant Concepts - Alvin Bilolo

Situation Analysis

It is thus very evident that the red crab group grew successfully as time goes by. From the small beginnings of a restaurant in Clark, Pampanga that caters food to high-end casino players and ‘high rollers,’ they are now conquering the market with different restaurant concepts lying in one goal and mission – to be known as a seafood restaurant. The concept and determination of Raymond Magdaluyo to be known as such and not just Filipino or Asian restaurant drives the group of company into a huge success. There are a lot of factors that contributes to where the company is right now and those factors are worth evaluating and studying for.

Problem Analysis

Like any other businesses, the Red Crab group undergoes a lot of challenges and difficulties while the operation of their business in on-going. They have started several restaurants without studying their market first. They haven’t position their business in the market. There is indeed a problem on positioning and knowing the target market. One factor that could contribute to their instant success in their early stage of development is that food industry is actually booming in the Philippines. Whenever there are new restaurants in town, a lot of people are willing to try it to see if it is good. The challenge is on how to retain your market and find ways to sustain and let your business fully grow.

Raymond himself acknowledges that he needs to position his restaurant first. It is indeed true for any businesses. There are a lot of things that should be considered while starting/opening and running a business. Raymond admits that he lacks market research and this somehow contributes to the decline in sales of his restaurant for a while. The good thing is that he was able to identify his lapses quickly and find alternatives and solutions to address them.

Alternative Generation

Raymond tried repositioning his restaurants. As an entrepreneur, it is true that we need to know first how we want to be branded in the market. In a simpler parlance, we must really know who we are first before we market ourselves. We need to know our vision and mission. In this case, they wanted to be branded as a ‘crab and seafood restaurant.’ This is a challenge for the company since they can easily be associated as a Filipino or Asian restaurant, but with their moves, they have proven and let the people see that they are a ‘crab and seafood restaurant.’

Another move that the company did is to give what their clients wanted. For the Greenbelt 3, they conceptualized a new seafood restaurant fitted with the place. For Rockwell, they made a mixture of Asian seafood cuisines since it is the demand of the place. This is a good strategy though they really need to do a sort of research to cater the need of the crowd. This greatly affects their success since they give what the market needs. In business, you should either give what your market needs or tempt them to like what you are offering them.

The restaurant also emphasize that they are not just selling crabs, rather they are selling experience. It is worthy to note that people patronize your restaurant not just because they love your products but also because they have a satisfying experience with what you are offering.

They also did an extensive product development and market research to create a great menu for each restaurant that they have. This is a very important thing to do when we are having our business. We should never stop innovation. There must always be something new for the market. Our customers should be surprised with what we can offer them – an extraordinary service for very valuable customers.

Another important thing is the price positioning. As we define our market, we must also evaluate the prices of our products/services fitted for our market. This is true for the Red Crab group since they have different concepts and different prices which depend on the market where their restaurants are situated.

Decision Analysis

All alternatives enumerated above are helpful for the growth and success of Red Crab group. But above all else, I believe that the key factor to success of their business, and any other businesses, is that everyone should know what their vision or mission is. Every owner and even employee should live and act within their vision and mission. They should be moving forward in one vision. They should know who they are and reposition their business based on this accordingly. If vision and mission is clear, I believe the rest of the strategies will follow.

Action Analysis

In this case, Raymond determines their vision and mission which is focused on being the crab and seafood restaurant chain. They have the vision of being the top crab and seafood restaurant chain in the country. This vision and mission drive them to achieve their goals. They improve their industry and set standards that will last for generations. All businesses should thus have a fuel that will push them to do beyond what is expected of them.