The changing social trends have resulted in a steady revenue growth for the restaurant industry in Australia over the past few years. As Lee, Hallak, and Sardeshmukh (2016) observed, changing lifestyles and busier schedules have caused the vast majority of food consumers to turn to restaurants their meals. As a result, the net value associated with the food industry has increased dramatically over the past few years, a phenomenon which has attracted more firms into the food industry. The purpose of this report, therefore, is to assess the strategy and provide a situational analysis of La Tortilleria - an Australian-owned private company dealing with authentic Mexican food- in order to evaluate the competitiveness of the company.
Strategic Approach of the Company
In an attempt to position itself competitively in the market, La Tortilleria has adopted a generic strategy of differentiation. Rather than offering the popular Australian foods, including vegemite or barbecue meat like other key players in the food sector, the company sought to offer food products that were instead popular in Mexico (Latortilleria.com, 2018). By adopting this strategy, La Tortilleria main objective was to change the perception of Mexican food in Melbourne through the provision of authentic Mexican dishes. Notably, the tortillas provided by the company are specially made, using a unique process known as the Nixtamal process (Latortilleria.com, 2018). Evidently, the differentiation strategy has not only influenced the rapid expansion of La Tortilleria from a small eatery in Melbourne dealing only with tortilla to an international company dealing with a range of food products and services, but has also enabled the company to introduce an authentic Mexican food and culture to Australia
Situational Analysis of La Tortilleria
Political trends and policies tend to affect firms in the food industry and La Tortilleria is no exception. The Australian government has adopted strict measures aimed at protecting food consumers within the country. For instance, there is a policy requiring restaurants to provide 'healthier food options' on their menus and ensure that their food offerings have lower sugar and sodium intakes (Jones et al., 2016). Further, there are several groups, including political groups such as the Nationals that are lobbying for the government to develop more stringent measures in an attempt to keep the food industry in check, particularly in regard to the safety and quality of produced by the restaurant sector (Magnusson & Reeve, 2015). According to Friel, Barosh, and Lawrence (2014), these groups are also calling for the public to change their eating behavior and be more conscious when buying restaurant food. Nonetheless, Australia boasts of a favorable political stability, a situation which is conducive for La Tortilleria operations.
The overall economic trend and the specific fiscal policies adopted by the government affects the performance of businesses in the restaurant sector. Notably, the Australian economy has registered a strong and enviable growth over the past years. Indeed, a report released by World Trade Organization in 2016 revealed that the unemployment rate in Australia is 4.4, representing one of the lowest unemployment rates across the globe (Langcake and Robinson, 2018). Similarly, the catering industry has recorded an impressive growth over the years and is expected to grow at a steady rate of 2.5% in the next three years according to Williams (2017).
The most prevalent issues affecting the food industry under which La Tortilleria operates are modelled around the perceptions and eating habits of the consumers. According to Booth and Whelan (2014); Tonkin (2016) individuals consuming food prepared away from home are becoming more health conscious. As a result, these consumers are now opting for quality and healthier foods. Fortunately, the food products offered by La Tortilleria are healthier and tend to appeal more to consumers. Notably, the population of Australia is increasing rapidly and the demographic is also changing. As of the late 2017, the Australian population stood at 24.6 million, with the younger generation taking up the largest chunk. This gives the impression that the demand for food products in the country will also grow steadily.
The advancement of technology over the past few years has significantly influenced the manner in which business, including firms in the food industry, operate. Notably, the vast majority of restaurants in the country has begun exploiting the benefits of technology, particularly information and communications (ICT) and mobile technology (Browne, 2015). Unfortunately, the government is yet to commit adequate resources for purposes of funding technological research and innovations in the food sector.
The key environmental factors which affect the food industry are modelled around climate conditions and food waste. Notably, climate change caused by the emission of greenhouse gases has led to global warming, a phenomenon which threatens the production of raw food materials (Guthrie, Cuganesan & Ward, 2008; Annison, 2017). The fluctuation of food production on farms in return causes price fluctuations and market uncertainty. Even with the threatened farm productivity, restaurants are associated with high level of food waste. In fact, a survey conducted by Mialon (2016) revealed that about two-third of all the food waste in Australia originates from restaurants.
The performance of the food industry in Australia is also affected by various laws regarding the conduct of restaurants in the country. The Australian government has established various rules and regulations in order to control the provision of food products, especially in regards to safety and health issues (O'Mahony & Lobo, 2017). There are also rules regarding the welfare and wages of the restaurant employees, and La Tortilleria has to comply with these regulations.
Porters Five Forces
La Tortilleria is faced with tough competition because the restaurant market is highly saturated in Australia as indicated by Annison (2017). According to Williams (2017), the strong force of competition within the food sector is based on several external factors, including firm's high aggressiveness, low switching costs, and high number of firms. Notably, the fast food industry consists of many firms of different sizes. In addition, La Tortilleria customers experience low switching costs, which mean that it is easy for them to shift to other restaurants.
Bargaining Power of Customers
La Tortilleria faces a strong bargaining power of customers. According to Kristina and Wijaya (2017), there are several external factors that lead to stronger bargaining power of customers, including a large number of providers, high availability of substitutes, and low switching costs. Because of the ability to easily change from one restaurant to another influenced by low switching costs, customers can impose their demands on the company. Additionally, due to market saturation, consumers have a wide variety of food restaurants other than La Tortilleria.
Bargaining Power of Suppliers
Notably, the company faces weak bargaining power of suppliers. According to Williams (2017), the weak bargaining power of suppliers is based on several factors such as high overall supply, large number of suppliers and low vertical integration. The large number of suppliers tends to weaken the impact of individual suppliers on La Tortilleria due to the lack of regional alliances among suppliers. The suppliers are also not vertically integrated.
Threat of Substitutes
Notably, substitutes are also a great concern for La Tortilleria. In regards to the strong threat of substitute, Kristina and Wijaya (2017) noted that there are several factors involved, including low switching costs, high performance to cost ratio and high substitute availability. There are many substitutes to La Tortilleria products, and consumers can prepare and cook their food at home. It is also easy to change from La Tortilleria products to other substitutes.
Threat of New Entrants
New entrants can affect a company's market share negatively. In the case of La Tortilleria, the threat of new entry is, however, moderate. According to Lee, Hallak, and Sardeshmukh (2016), a situation of moderate threat of new entrants may be based on several factors, including moderate capital cost, low-switching costs, and high cost of brand development.
Table 1: Porters five forces
Elements of Five Forces Threat Intensity
Competitive Rivalry Strong Force
Bargaining Power of Customers Strong Force
Bargaining Power of Suppliers Weak Force
Threat of Substitutes Strong Force
Threat of New Entrants Moderate Force
Analyzing the Fit between the Company Strategy and its Context using the Resource-based View
Using the resource-based view approach, which deals with the strategic resources available to a firm, it is clear that La Tortilleria is taking advantage of the bundles of valuable resources associated with the company for its own good. One of the most distinguishing aspects of the firm, in line with the generic strategy adopted by the firm, is modelled around the food preparation process. Notably, the food preparation process ensures that all the tortillas are prepared through an ancient Mayan process or the Nixtamal process, a phenomenon which assures that the company's food offerings are tastier, healthier and stronger in comparison to other food products provided by the competitors in the market. In particular, the Nixtamal process assures that the health benefits associated with corn are released and that the availability of calcium and amino acids in the body is increased (Latortilleria.com, 2018). Another aspect of heterogeneous bundle of valuable resources at the company is the experience and the passion of its founders, especially Diana, who is a passionate traveler and a lover of Mexican food and culture. This, therefore, gives the impression that the strategy adopted by La Tortilleria fits well with the company's business context.
Conclusion and Recommendations
From the discussion presented in this report, it is clear that the differentiation strategy adopted by the company represents a form of uniqueness that differentiates La Tortilleria from other competitors, something which consumers are willing to associate themselves with. Notably, the company faces potential opportunities in regards to technological adoption, social and economic factors. Nonetheless, the situational analysis of the company reveals that La Tortilleria faces serious risks and threats, particularly in regards to the environmental, legal and political factors. There are also imminent risks from the threats of substitute, the bargaining power of customers and competitive rivalry within the food industry. The current report, therefore, recommends that La Tortilleria should consider targeting the younger generation as they represent the largest portion of the Australian population. Also, the company should consider adopting innovative technology so as to further improve its food products and services.
Annison, G. (2017). The triumvirate underpinning Australia's food industry. Food Australia, 69(3), 18.
Booth, S., & Whelan, J. (2014). Hungry for change: the food industry in Australia. British Food Journal, 116(9), 1392-1404.
Browne, R. (2015). Conference: Sustainability, genetics, and new technologies. Food Australia, 67(5), 34.
Friel, S., Barosh, L. J., & Lawrence, M. (2014). Towards healthy and sustainable food consumption: an Australian case study....
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