Environmental Analysis and Strategic Direction

Environmental Analysis and Strategic Direction

Introduction

In the light of rising labor and food costs, Bennigan's and Steak & Ale, its sister restaurant could not keep up with the rising costs resulting in a decline in cash flows. This is an indication of the current trends prevailing in the industry. Since there are several restaurants in the market, consumers have a variety to select from resulting in competition on prices which is causing them to rethink their business strategy. Bennigan's could not reduce their prices as they were already in the red and had to return the dept. Thus, a decreasing cash flow was the primary reason they had to file for bankruptcy. This collapse could signal a warning for other restaurants in the region (Daley, 2012).

Discussion

The restaurant market is very crowded with restaurants such as Carrabba's Italian Grill, Outback Steakhouse , Olive Garden, Red Lobster, Chili's Grill & Bar, T.G.I. Friday's, and Ruby Tuesday competing fiercely with each other. Apart from these restaurants, there are several other independent restaurants that offer services similar to those offered by Bennigan's. Thus, it can be seen that there are several concepts of restaurants targeting the same customer in a market where gas prices are continuously increasing, and inflation is constantly rising. The key to survival in such a situation is to come up with occasional deals that increase the excitement of customers who eventually get attracted to the restaurant thus increasing its sales. This does not work every time and now that most of the restaurants are following this concept, it is difficult to distinguish between competitors (Reiley, 2008).

Bennigan's has competitive advantage in costs because it is not like traditional sit down restaurants. This is one of the best advantages it can have over its competitors. However, rising taxes and the inability to further reduce prices affected it badly because it had to maintain its customer numbers and at the same time pay off a lot of its debt in order to remain stability. The failure can be partially blamed on the company itself since it did not manage to maintain its competitive advantage and lost the battle since competitors began offering cheaper alternatives. Keeping its costs under control could result in better performances and even higher turnovers but in order for this to be a success; the debt had to first be reduced (Rzucidlo, 2008).

Bennigan's also lost because it attempted ...