First, we provide an overview of current thinking regarding resource allocation decisions and organizational structure in the general and hospitality literature. The literature review focuses on the impetus behind the strategy-structure debate, early findings regarding the environment, and more recent studies on resource allocation decisions and the relationship to organizational structure. An early study by Chandler (1962) provided a call for the influence of strategy and strategic choice on the organizational structure of the firm.
For practitioners, a useful outcome of this debate is an integration of the concepts of contingency theory and the resource-based view of the enterprise applied to a hospitality business. In reality, the concepts of the co-alignment principle and the structural-functionalist arguments may be two sides of the same coin. The importance of this area of study is the situational relationship between external environmental characteristics, the internal context, and the impact of the process on desired outcomes.
As highlighted in this and other studies, this decision involves an understanding of the influence of external factors (such as uncertainty, volatility, hostility and complexity) (Harrington, 2004a; Jogaratnam and Tse, 2006) and internal factors (structure [ size and ownership], culture, values, etc.) (Bradach, 1997; Okumus, 2004; Parsa, 1999; Ritchie and Riley, 2004; Schmelzer and Olsen, 1994) in hospitality industries. Several studies in the hospitality literature have suggested that there is value in designing organizations that use multiple forms at different levels of the organization. Harrington (2005) used the quick service restaurant (QSR) segment as an example of the multiple structural form model.
Summary
While the nature of networked and virtual organizations requires them to relinquish their control, the modular organization retains full control over strategy and objectives (Dess et al., 1995. As stated by the last president of McDonald's “I began to say strategically that in my opinion internationally we should have more of our own operators running our restaurants because having an owner operator in the facility is the most effective way to build the brand in that community. That's difficult because the profitability for the company [McDonald's]— if the restaurants are run well—the profit is greater when we own it.
To evaluate this potential restructuring decision, management at McDonald's followed a strategic decision-making process of 1. Analysis—(a) communication with operators; (b) assess the skills of operators; (c) analyze the market; (d) determine who is able to direct more units; (e) set a price for each unit that would be competitive, enable them to do well and yet provide the company with a good return; Part of this restructuring evaluation and implementation process involves using information from operators, managers, employees, and suppliers, as well as evaluating the company and asking questions to determine "what's working" and "what would you change."
The McDonald's experience underscores the importance of involvement across the organization and the time commitment to see such an endeavor come to fruition: spending time in restaurants, time to develop a gut feeling based on experiences from visits, training, mentoring and history working with operators . Much of the process involved in this turnaround was related to building trust and commitment from all members of the organization. This process provided greater turnaround success by breaking down barriers to implementation and avoiding costly mistakes prior to resource allocation decisions.
In a nutshell, previous literature and the example of McDonald's indicate that there is a need for a balance between external and internal factors in the decision-making process for resource allocation. Furthermore, the findings support the idea that there is no best way to do things and that leaders need to be aware of the options. Organizational options include traditional organic and mechanistic forms, as well as a variety of ownership forms to consider (Sorenson and Sorensen, 2001).
Application: key resource allocation factors
In the case of McDonald's, management has decided not to enter the branded food service retail market, while many of their quick service competitors (eg, Taco Bell) have. Therefore, leaders in the foodservice industry considering entering this field should answer the following questions: What is the strength of our brand equity? In the study, researchers compared consumer perceptions of national brands versus private label products.
They hoped a relationship with Newman's would allow them to leverage the brand equity of Newman's millions of sales in the retail market. This "channel blurring" in its reverse form has made McDonald's the largest product seller in the restaurant world. While value addition to the consumer may result from a variety of tangible or intangible attributes, in the case of a branded foodservice item, the value is likely to take the form of brand awareness linked to perceived quality.
There appears to be a wide range of opportunities for different types of foodservice businesses to be involved in the branding of a retail food product. One interviewee, director of a large food development company, supported the idea that one of the most important aspects to consider is the brand equity and the weight it carries in the market. In the case of product development companies, they try to tailor their relationship to suit the foodservice operator as well as provide services such as product development, retail service and production outsourcing.
A final area presented in Figure 11.2 for consideration is the uncertainty in demand for the branded product. To ensure a stable level of demand, a key consideration in distribution in a food retail environment is to get the product on the store shelf and in front of the consumer. Thus, the level of vertical integration (both forward and backward in the supply chain) by a firm involved in the process of bringing a branded foodservice product to market will depend on the product and situation.
Barriers to imitation have been discussed above, but traditional barriers to entry ideas are important in the decision about branded food products. A good example of implementing and realizing these benefits is placing Lick's Homeburger products in Metro Group grocery stores across Ontario. In the case of Lick's retail products, a coupon is included in most packaging that drives business to food service locations.
The implicit benefit of this process, in addition to the revenue from the retail product line, is the increased advertising in the form of keeping the foodservice name constantly in the forefront of the retail consumer's attention.
Conclusion
After all, any quality problem will reflect poorly on the entire foodservice brand—not just the retail product. While Lick's is strictly a Toronto regional restaurant chain, the brand's foodservice product offerings provide province-wide exposure and give Lick's a platform for potential future growth with an already established branded product line. A second leverage used by Lick's is brand marketing in both retail and grocery products.
An additional benefit of this marketing campaign is that it allows Lick's to monitor the crossover between retail and foodservice activities. In many cases, much of the financial risk can be absorbed by the producers and processors of the products, with a foodservice operator receiving royalties for the use of its brand if the organizational structure is set up in this way. This integrated approach reveals the need for alignment between external and internal factors, as well as the need for leadership to consider both context and process when determining and implementing resource allocation decisions.
We argue that concepts such as the co-alignment principle and the structural-functionalist arguments are two sides of the same coin. This business model creates an alternative paradigm for marketing foodservice products. Based on our interviews, it appears that the typical business model involves the foodservice operator developing a menu item in their company's kitchen and testing it on restaurant guests to verify its food quality and popularity.
At the same time, the operator builds the operating brand through reliable quality, positioning the item as a signature plate. The consultant or retail product manufacturer then takes this signature menu item and develops it for the retail market. Once the product is ready for market, the product expert uses connections established within the retail industry to gain access to limited shelf space and sell the product to retail stores.
A key benefit of this process for the product expert and retailer is a reduced need to promote the new product as a brand as the product benefits from the existing brand equity of the foodservice operation. By leveraging the capabilities of these three key stakeholders. food service operator, product expert and retailer), this business model and collaboration benefits everyone involved, including the retail consumer, who has less uncertainty and anxiety about the initial purchase of the food product.
The emerging trend of channel blurring between retail and foodservice demonstrates important resource allocation decision issues for this strategic option, as well as the impact of level of control considerations, resource availability, and demand uncertainty on structural decisions. Organizational structure options in this example highlight a range of possibilities, including organic and mechanistic forms, a range of ownership forms to consider, and new organizational forms such as networks, modular and other hybrid arrangements. Middle-up-down and top-down approaches: Strategy implementation, uncertainty, structure and foodservice segment.
The effect of self-esteem and anxiety on information seeking in reducing consumer risk.