COMPETITIVE FORCES OF RESTAURANTS IN
BATANGAS: BASIS FOR MAXIMIZING
PROFITABILITY
A Thesis
Presented to the Faculty of
College of Accountancy, Business, Economics and
International Hospitality Management
Batangas State University
Batangas City
In Partial Fulfillment
of the Requirements for the Degree
Bachelor of Science in Management Accounting
By:
Delacion, Jean Irene C.
Magboo, Ericka R.
Mayo, Jennifer Leigh S.
December, 2021
2
TABLE OF CONTENTS
Page
TITLE PAGE …………………………………………………………………....
i
APPROVAL SHEET …………………………………..………………..…….
ii
ACKNOWLEDGEMENT … ……………………………………………..……
iii
TABLE OF CONTENTS ………………………………………………………
v
LIST OF TABLES ……………………………………………………………... vii
LIST OF FIGURES ……………………………………………………………. viii
ABSTRACT …………………………………………………………………….
ix
CHAPTER I. THE PROBLEM
II.
Introduction ……………………………………….…………………..
1
Background of the study ...…………………………………………..
2
Statement of the Problem .…………………………………………..
4
Theoretical Framework ….…………………………………………..
5
Conceptual Framework ….…………………………………………..
6
Scope and Limitation of the Study ……….…………………………..
7
Significance of the Study ..……………….…………………………..
9
Definition of Terms ……………………….…………………………..
11
REVIEW OF LITERATURE
Conceptual Literature …..……………………………………………
15
Research Literature …….……………………………………………
24
Synthesis ……………….……………………………………………
34
III. RESEARCH METHODOLOGY
Research Design ………..……………………………………………
38
Respondents of the Study ……………………………………………
38
3
Data Gathering Instrument ……………………………………………
39
Data Gathering Procedure ……………………………………………
40
Statistical Treatment of Data……………..……………………………
42
IV. PRESENTATION, ANALYSIS AND INTERPRETATION OF DATA
Profile of the Respondents ………….………………………………… 44
Competitive Forces of Restaurants …………………………………… 49
Comparison of Assessment of the Competitive .…………….……… 64
Forces of the selected Restaurants
Proposed Program ………………………..……………………………. 71
V.
SUMMARY, FINDINGS, CONCLUSIONS AND RECOMMENDATIONS
Summary ….…………………………………………………………….. 81
Findings …...…………………………………………………………….. 82
Conclusion ..…………………………………………………………..… 86
Recommendations ………….……………………………………….… 87
BIBLIOGRAPHY …….…………………………………………………..…….. 91
APPENDICES …….…….………………………………………………..…….. 102
CURRICULUM VITAE …….…………...………………………………..…….. 106
4
LIST OF TABLES
Table No.
1
Likert Scale
Title
Page
40
2
Distribution of Selected Restaurants in terms
of Forms of Business Organization
44
3
Distribution of Selected Restaurants in terms
of Number of Employees
45
4
Distribution of Selected Restaurants in terms
of Number of Years in Operation
47
5
Distribution of Selected Restaurants in terms
of Type of Restaurants
48
6
Competitive Forces of Restaurants in Batangas
in terms of Competitive Rivalry
50
7
Competitive Forces of Restaurants in Batangas
in terms of Supplier Power
53
8
Competitive Forces of Restaurants in Batangas
in terms of Buyer Power
56
9
Competitive Forces of Restaurants in Batangas
in terms of Threat of Substitution
59
10
Competitive Forces of Restaurants in Batangas
in terms of Threat of New Entrants
62
11
Comparison of the Competitive Forces of Restaurants
in terms of Form of Business Organization
64
12
Comparison of the Competitive Forces of Restaurants
in terms of Number of Employees
66
13
Comparison of the Competitive Forces of Restaurants
in terms of Number of Years in Operation
68
14
Comparison of the Competitive Forces of Restaurants
in terms of Type of Restaurants
69
15
Proposed Plan for Assessment of Competitive Forces
in Shaping Strategy of the Selected Restaurants
73
5
LIST OF FIGURES
Figure No.
Title
Page
1
Porter’s Five Forces
6
2
Conceptual Paradigm
7
6
ABSTRACT
This research was conducted to understand how the restaurants during the
pandemic surge, continue to strive even at the middle of economic fallout,
inconsistent revenues, increasing costs and expenses, heightened precautionary
measures, decreasing number of consumers, and such. The abovementioned
factors were included in the Five Competitive Forces by Michael Porter as used by
the researchers to further determine the analysis of the restaurants’ competitive
advantage.
80 restaurant managers/owners participated in the online survey who were
selected using the convenience sampling. A questionnaire developed by the
researcher was used to gather data with mean, weighted mean, composite mean,
frequency and percentage, and descriptive statistics were performed to treat data.
Under all factors that are compared to competitive forces - competitive rivalry,
supplier power, buyer power, the threat of substitution, and the threat of new
entrants, corporations consistently ranked the highest weighted average. There
are 54 restaurants operating for one to five years while there are only three
restaurants operating for eleven to fifteen years and inferred that those restaurants
that are new in the industry are afraid to fail and are more focused on surviving,
especially in times of pandemic.
The interpretation and findings enable the researchers to propose a
symposium entitled: The Symposium: Roadmap to Industry Profitability where it is
intended to provide in depth knowledge about Porter’s Five Forces where the
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attendees will gain awareness and will know what to improve or what to change in
their strategies on profit maximization, hence creating a competitive advantage
among competitors.
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CHAPTER 1
THE PROBLEM
This chapter provides a brief description of the introduction, background of
the study, statement of the problem, theoretical framework, conceptual framework,
research hypothesis, scope and limitation, the significance of the research, and
definition of terms.
Introduction
Restaurants are the heart of many communities. It is where people enjoy,
celebrate, and gather. However, because the world combats with the COVID-19,
both national chains and independently owned restaurants quickly adapt and make
strategies to search for new ways to serve the communities. The pandemic has
redefined businesses and their operations. Restaurant owners are searching for
ways to strategically reduce their costs while making a profit during this seemingly
never-ending pandemic.
Today has been hard for the restaurant industry, yet they continue to make
changes to keep people safe without having a loss. They still make strategies to
maximize their profit and the safety guidelines for their customers. From the
competitive forces, the competitive rivalry has been referred to as the scope of
competition among businesses as determined by several factors, mainly its
marketing mix contributing massive impact to the profitability of a business, in this
study, restaurant. As the competition increases, the profitability of a restaurant
gradually decreases as it reflects the price cutting, massive spending on
9
promotional materials, and product and service innovation. As a restaurant
continues to compete with the other restaurants, it needs to be considerate of the
prices of its product quality and uniqueness to become more attractive and
appetizing to the customers. This force helps the managers find the best suppliers
to create or produce from raw materials to finished goods that are readily offered
to their restaurants. It is a vital force that controls the profitability of the business
as to the lowering and increasing of the prices of the raw materials. Whereas, the
customers also hold great positions in the food industry such as restaurants
because they are the main goal of this industry. They target specific customers for
their restaurants and serve them with best quality taste and with the service they
are giving to these stakeholders, the price of the product can be changed as to
their satisfaction. As to how the food tastes, the ambience of the restaurant, safety
of customers through their utensils, tables, chairs, and others that affect their
health when it comes to food, the attendants/serves, and many more, relate to the
customers’ satisfaction. If the preceding factors did not meet the customers’
preference, there will be a threat of substitution to the possible food substitutes
such as home-made food and ready-to-eat meals from other types of food
establishment. This will highly affect the profitability of a restaurant with respect to
its sales and reputation. Even if the restaurants possess many great competitive
edge, but lack on high brand loyalty, high initial capital investment, strong
government regulations, and limited suppliers and others affecting the start-up of
a possible competitors, a restaurant won’t be exempted by the threat of new
entrants which will have significant effect on the restaurant’s profit maximization.
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Background of the Study
There was a virus outbreak in Wuhan, China, last December 2019, which
rapidly spread across the globe then hit the Philippines on January 30, 2020. In
March of the same year, the country declared a lockdown that dragged everyone
down, especially the economy. Most businesses close and reduce employees
through lay-offs and downsizing to minimize costs and prevent future losses. The
country's economy declined further amidst pandemic based on the Asian
Development Outlook (ADO) 2020 Update since June, forecasting a 3.8%
contraction and expecting uncertainties due to global economic slowdown.
Based on the TVET Brief Issue no. 6 COVID-19 Impact to Economic
Sectors, the most at risk of this pandemic ranked by the International Labor
Organization (ILO) are labeled High Risk, Medium-High, Medium, Low-Medium,
and Low. Focusing on the High-Risk economies affected by the pandemic, listed
are wholesale and retail trade, repair of motor vehicles and motorcycles,
manufacturing, real estate, renting and business activities, accommodation and
food services/ hotel and restaurants, and other personal services. These
businesses are affected because they mainly offer face-to-face services through
dealerships and offline assistance.
Businesses must have their competitive advantage over their competitors
to engage and practice their company for sustainability and stability. Restaurants
are the best examples of industries with many competitors from new entrants and
even existing ones thriving before the pandemic occurs and maybe declining now
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considering the situation. However, it is undeniable that restaurants still at their
peak despite the happenings have consistently outgrown their mistakes in facing
the organization's challenges. These are understanding their strengths and
weaknesses better, handling well the opportunities and threats coming their way,
and most importantly, having a clear focus on the company's vision and mission.
These achievements were so far significant to circumstances like this pandemic
leaving uncertainty to vast companies that even those growing businesses in late
years struggle to absorb and withstand.
The researchers found out that as one of the most popular tourist
destinations in the Philippines, Batangas has created bright minds entrepreneurs
who are knowledgeable about building businesses. Such attracting customers
targeting students, low-income earners, young professionals, employees/workers,
and even high-net-worth individuals—merely catering to all kinds of individuals
serving them food, special orders, and offering services that vary from different
price ranges affordable and reachable by each type. Nevertheless, these are all
worthless when their customers are detected carrying viruses just because they
dined in and ate at the restaurant they used to go to and spend time. Businesses
like restaurants are positively affected because the sales and revenues might be
dropping in this one factor. The costs are constant (e.g., fixed costs). There are
unavoidable costs spent daily to maintain the operation and service. Additionally,
the pandemic risks put consumers and businesses at stake at all times. To
maximize their profit and minimize costs is to sustain the company in the long run.
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The researchers want to know how these restaurants survive the current
situation upon experiencing economic uncertainties in their industries and how
they compete against the rising and new entrants in profitability and stability in
positioning themselves in the business. This study will help start-up businesses
manage their daily operations and gain core competencies throughout and starting
from the basics and familiar to each company.
Statement of the Problem
The overall objective of the paper is to assess the competitive forces of restaurants
in Batangas. Particularly it seeks to find the answers to the following questions:
1.
What is the profile of respondents in terms of:
1.1 form of business organization;
1.2 no. of employees;
1.3 no. of years in operation;
1.4 type of restaurant
2.
How may the respondents assess the competitive forces in terms of:
2.1 competitive rivalry;
2.2 supplier power;
2.3 buyer power;
2.4 threat of substitution;
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2.5 threat of new entrants
3.
4.
How may the responses be compared?
Based on the result, what program may be proposed to maximize the
profitability of restaurants in Batangas?
Theoretical Framework
For the restaurants to sustain and maximize their profitability, the
researchers determined that understanding Michael Porter’s Five Forces and
setting them as a guide will enable them to adjust their strategies on point
depending on their needs. Although these businesses are seemingly applying
these competitive forces, it will be significant if the management studies and uses
more of the analysis considering sudden changes and uneven routines performed
by the workforce due to fortuitous events such as the COVID 19 pandemic.
The five forces are as follows: the threat of new entrants, customer
bargaining power, seller bargaining power, threat of substitute products or
services, and rivalry between existing competitors (Porter 1979). The first four
forces influence the fifth, competitive rivalry, which can be mild or intense,
depending on the number and intensity of competitors. Both of these powers have
a detrimental effect on profitability. Notably, Porter believed that these five powers
applied to all industries, regardless of their technological sophistication, whether in
developed or emerging economies and with or without government interference
(Porter, 2008). These theories are now being challenged, or at the very least are
being vigorously debated yet again. The structure is depicted in Figure 1.
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Figure 1. Porter’s Five Forces
A force explicitly explains that every business has created its
competition inside the industries. For the competition to go bolder and fiercer, a
business will have to spend higher costs and expenses. The suppliers' power in
influencing the restaurants is evident if few suppliers and limited supplies are
available in the market. Most restaurants in Batangas may not have familiarities
among them to inculcate that they are similar to each other.
Conceptual Framework
The Conceptual Framework of the study used was Input-Process-Output.
The input refers to the things that matter in the restaurant business. It includes
Competitive Rivalry, Supplier Power, Buyer Power, Threat of Substitution, and
Threat of New Entrants, showing how competent restaurants are.
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Information gathered on each force will be evaluated, analyzed, and then
displayed in a diagram. After that, a formulation strategy based on conclusions will
follow. Then there will be proposed recommendations for the restaurant to
increase/improve their profit maximization.
Input
Process
Output
Figure 2. Conceptual Paradigm
Scope and Limitations of the Study
The study will analyze Porter's five forces that affect the competitiveness of
the restaurants, particularly the Competitive Rivalry, Supplier Power, Buyer Power,
16
Threat of Substitution, and Threat of New Entrants in Batangas, specifically in
Batangas City, Lipa City, Tanauan, and Sto. Tomas. This study will determine how
restaurants survived and maximize their profit in times of pandemic.
The respondents of the study were the managers/owners of the selected
restaurants in the said location. However, due to the lack of sources to provide a
list of registered restaurants in Batangas and the effect of the pandemic, the
researchers will use convenience sampling for a convenient source of data and
the safety of everyone. The primary tool that the researchers used in gathering the
data was a researcher-made questionnaire. This instrument was disseminated to
the respondents by messaging them on Facebook pages and their email
addresses. Due to the pandemic and unresponsiveness of the respondents, the
researchers only gathered 80 responses that were supposedly 100.
The survey questionnaires, which the restaurant managers/owners
answered, comprise their business profile, particularly the forms of business
organization, number of employees, number of years in operation, and the type of
restaurant business the respondents have. It also comprises the following items
that assess the competitive forces of the restaurants in terms of competitive rivalry,
buyer power, supplier power, the threat of substitution, and the threat of new
entrants.
The study was limited to the five forces analysis by Porter Michael Porter
which includes the Competitive Rivalry, Buyer Power, Supplier Power, Threat of
Substitution, and Threat of New Entrants that serves as the framework of this
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study. Consequently, the restaurant managers/owners in the four key cities in
Batangas were selected to be the respondents to know how they are surviving in
this pandemic and to assess its competitive forces, which can maximize its
profitability.
The data gathered by the researchers from the respondents’ answers
helped them assess the competitive forces of the selected restaurants and made
comparability of respondents’ responses.
This study is limited only to restaurants with the following types: cafes,
family-style restaurants, fine dining, and fast-food restaurants. The study also limits
the restaurants operating for less than a year. This is to assure that the study will
develop more established answers.
Significance of the Study
The researcher conducted this study to assess how restaurants maximize
their profit in times of pandemic. The value of this study will depend on the
helpfulness and benefits it provides.
To the restaurant owners, this research will provide strategies to maximize
their profit. This study will also give them information on how to survive in times of
pandemic. Thus, make their restaurants excellent and competent.
It will give them a good image of how restaurants can manage to overcome
this pandemic to the investors. Thus, it can provide them high accuracy on Return
of Investment (ROI).
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To the future owners, this study will give them information and view on how
to start a restaurant business. Thus, they will learn how to make a proper business
plan and strategies of how their restaurants will be profitable and successful.
To the future investors, this study will serve as their guide on how they will
know when a restaurant business is a good and profitable business. Therefore,
they can prevent losing investments and their money will be put on the business
that has a good return on investment only.
To the customers, it will serve them satisfying services and more highquality products. Thus, make them feel that they are the foremost priority and
essential to the business.
To the researchers, this study will be the best way for them to improve their
knowledge and skills. Through this study, researchers will gain strategies and
ideas that can be useful in the future. It will also help them to improve their skills in
data gathering and data analysis. Thus, make them more competitive and ready
for life.
Lastly, to the future researchers, the results will all be beneficial to them;
the data, ideas, strategies, and all the information of this study as their reference
to their study. The study can be used as a reference to amplify the validity of the
findings. Furthermore, this study will give them information about the effect of a
pandemic on restaurants and how they can surpass it.
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Definition of Terms
The following significant terms used in this study are defined conceptually
and operationally for the user’s better understanding of the contexts stated.
Competitive Rivalry. Competitive rivalry is a measure of the extent of competition
among existing firms. It is an external force that has some advantages and some
disadvantages for organizations in specific fields (Indeed Editorial Team, 2021).
Intense rivalry can limit profits and lead to competitive moves including price
cutting, increased advertising expenditures, or spending on service/product
improvements and innovation. Competition in business is the contest or rivalry
among the companies selling similar products and/or targeting the same target
audience to get more sales, increase revenue, and gain more market share as
compared to others (Pahwa, 2020). In this study, it pertains to the businesses’
competitors.
Costs. Cost is a monetary value of efforts, materials, resources, time and utilities
consumed, risks incurred, and opportunities foregone in the creation of a thing or
service, according to economic theory (Nitisha, n.d). The term "cost" in this study
refers to the amount that must be paid or given up in order to obtain any resource
or service.
COVID - 19 Pandemic. It's a disease outbreak that's affecting a big number of
people. Viruses, such as Coronavirus Disease 2019 (COVID-19), are the most
common cause of pandemics because they can quickly transmit from person to
person (Ready, 2021).
20
Economic slowdown. A situation in which economic growth slows but does not
stop. An economy is experiencing a slowdown if GDP grows at a rate of 3% instead
of 5%. Most analysts do not consider a slowdown to be a recession, but
unemployment may rise and productivity may decline (Farlex Financial Dictionary,
2012). In this study, this refers to the economy of the Philippines during a
pandemic.
Lockdown. It's a process that's implemented when the building's occupants are in
immediate risk. In the event of a lockdown, students, instructors, and staff would
be asked to stay in their rooms and not leave until the problem has been resolved.
This allows emergency personnel to secure the children and staff in place, deal
with the immediate threat, and evacuate any innocent bystanders to a safe refuge
(University of Pennsylvania, 2016). In this study, it is when the pandemic strikes
hard at the country and the President declares that no one will be going out unless
told.
Porter’s Five Forces. It is a model that defines and analyzes the five competitive
forces that dominate any market, thus assisting in determining an industry's
strengths and weaknesses. Five Forces analysis is commonly used to evaluate
the structure of a market and therefore corporate strategy. Porter's model can be
extended to any sector of the economy in order to better understand market
competition and to increase a company's long-term profitability. Michael E. Porter,
a Harvard Business School professor, is the creator of the Five Forces paradigm
(investopedia.com).
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Power of Buyers. It refers to the pressure that customers/consumers can put on
businesses to get them to provide higher quality products, better customer service,
and/or lower prices (Corporate Finance Institute, 2021). Buyers have the power to
influence price and the quantity of products sold. Powerful buyers can bargain on
volume or switching costs or they can simply find substitute products.
Power of Suppliers. Power of suppliers can be understood by observing how
suppliers can put pressure on organizations by raising their prices, lowering their
quality or reducing the availability of their products. It is a standard component of
business strategies for most organizations, (Harappa, 2021). Suppliers have the
power to influence the price as well as the availability of resources/inputs. They
are the most powerful when companies are dependent on them and cannot switch
suppliers because of high costs or lack of alternative sources.
Profit Maximization. In financial management, it refers to the process or strategy
for increasing earnings per share (EPS). Simply said, all decisions, whether
investment or financing, are made with the goal of increasing profits to maximum
levels (Finance Management, 2021). In this study, it means making use of the
resources and taking benefit of the costs and expenses to maximize the profit.
Restaurants. According to 21 CFR 1.328 [Title 21 — Food and Drugs; Chapter I
— Department of Health and Human Services, Food and Drug Administration], a
restaurant is described as "a facility that prepares and sells food directly to
customers for immediate consumption." Facilities that supply food to interstate
conveyances, central kitchens, or other comparable establishments that do not
22
cook and serve food directly to customers are not considered "restaurants." (US
Legal, nd).
Risks. Risk in financial terms is defined as the chance that an outcome or
investment's actual gains will differ from an expected outcome or return. Risk
includes the possibility of losing some or all of an original investment,
(investopedia.com). Additionally, it can refer to circumstances involving the loss of
property or facilities, as well as adverse effects on the environment. In this study,
it is the general and also profitability risks that the restaurants or other businesses
might experience in the long run because of the competition.
Saturated market. It is a situation in which companies satisfy all customer demand
for a service or good. As a result, existing companies' growth potential will become
highly constrained. When there are more products than buyers, companies must
compete for customers (Indeed Editorial Team, 2021).
Sustainability. It has been widely used to describe improvements in areas such
as overexploitation of natural resources, manufacturing operations (energy use
and polluting sub-products), linear product consumption, investment direction,
citizen lifestyle, consumer purchasing behaviors, technological developments, and
business and institutional changes (YouMatter, 2021). In this study, it refers to the
stability and survivability of the businesses.
Symposium. a gathering of people with extensive knowledge of a given subject
to discuss a topic of mutual interest (Cambridge University Press, 2022).
23
Threat of New Entrants. When new competitors enter into an industry offering the
same products or services, a company’s competitive position will be at risk. Refers
to the ability of new companies to enter into an industry, (CFI, 2021).
Threat of Substitution. Is the availability of other products that a customer could
purchase from outside an industry, (Accounting Tools). The threat of substitution
can affect the brand’s profitability and it is easy for customers to switch to the
substitute if the threat is high and vice versa, (Harappa, 2021). The threat of
substitutes is high when rivals or even companies outside the industry offer more
attractive and/or lower cost products. Buyers then have the opportunity to make a
price/performance trade-off. The cost of switching is also a factor; if it is high, the
threat of substitution is low.
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Chapter II
REVIEW OF LITERATURE
This chapter deals with a review of related studies. The primary aim of this
literature review is to analyze research concerning the topic under study. This
review will provide profound insight into the subject and facilitate the interpretation
of the findings. The resource of this literature has been academic journals, the
internet, newspapers, and magazines, newsletters, and reports of specific
institutions.
Conceptual Literature
This section gives the readers a better understanding of the critical concepts
of the study through the research and related literature reviewed by the
researchers.
Competitive Rivalry
Competitive rivalry refers to the scope of competition among the companies.
Huge rivalry can limit the company's profitability and pushes them to competitive
moves such as price cutting, massive spending on advertisements, or
service/product improvements and innovation (The William and Anita Newman
Library). Competition proves the capability of every business as they carry on
improving every aspect of their business, and it tests how long they will operate in
the industry. Customers' preferences are linked with the competition within the
industry as it plays a role in building brand equity which determines a brand's
25
popularity and strength in the market industry against competitors. In addition, the
objective of competitive strategy is more about how the company will outlast its
competitors. These competitive forces may be overcome and succeed in the long
run if the ‘management can select from several competitive strategies: cost
leadership, differentiation (Najib and Kiminami, 2011).
There has been an article emphasizing that for a company to become
competitive, it shall excel at least in one of the three critical competitive areas cited
by Ordenes 2018, in Treacy & Wiersema's book The Discipline of Market Leaders,
the customer intimacy, product leadership, and operational excellence. The
degree of discipline that each restaurant manager or even other sectors possess
may also significantly affect its profitability. In addition, the Corporate Finance
Institute defined rivalry as an extent to which companies exert pressure on one
another in connection with strategy. Some level of competition is healthy because
it motivates every innovation in a company. Rivalry compels each company to give
its best and do better among other competitors.
Furthermore, as de Bruin (2016) stated, a rivalry is intense when there are
many competitors within the industry when it is growing, and when consumers get
the chance to switch to another competitor or brand easily, they can save up by
choosing the other option. A good indicator of this is the concentration ratio of an
industry. The lower the ratio, the more intense the rivalry will probably be. Intense
competition typically happens when a market is saturated. When a company
produces a product and is new in the market, there is a vast untapped market.
However, today, it is hard to find an untapped market, and companies have to steal
26
market share from each other as everyone is producing identical products.
Competitors are focused more on advertising the product and price wars when the
rivalry is fierce, which affects the business's bottom line. The intense rivalry also
happens when barriers to exit are high, and companies remain forced in the
industry even if their profit margins are declining.
Most of the restaurants upon the emergence of the pandemic closed and
stopped their operations due to the major adjustments from the services such as
onsite serving. This explicitly pressurizes diverse companies to transition their
operations from a very traditional and common function to more innovative,
efficient, flexible, and adaptive business practices. Currently, the restaurants that
are still on track gained a higher reputation and developed extensive rules and
regulations giving them opportunities to progress and respond to the recession.
This action will position these restaurants in the larger perspective of becoming
more competitive and contribute to their edge among other competitors.
Similarly, Batangas, as one of the richest provinces in the Philippines, has
established various businesses by entrepreneurs of the food industry, which is why
the majority of businesses in the province count to restaurants or food outlets. This
is a negative factor for the competitors of the restaurant industry and one reason
for this is the high density of restaurants and cafés in a small area, which allows
customers to easily choose one over another, especially since there are no costs
associated with the change, and also because it provides variety, which makes
consumers appreciate a broader range of alternatives and differentiation among
competitors, as stated by de Brito (2019).
27
Supplier Power
The bargaining power of suppliers is utterly opposite of the bargaining
power of buyers because this time, suppliers are the ones who can increase the
price and limit the quality of products or services. They can put much pressure on
the companies through decreasing product quality, increasing the costs, or
reducing the product availability (Patel, 2020). Suppliers are said to be assertive if
they can reduce the profitability in an industry, which cannot increase any cost.
The number of suppliers compared to buyers, the reliance of a supplier's sale on
a single buyer, the switching costs of supplies, the availability of suppliers for
immediate purchase, and the feasibility of forward integration by suppliers all affect
supplier power, as stated in Patel’s Porter’s Five Forces Analysis Fast Food
(2020).
Accordingly, de Brito (2019), in his research mentioned that maintaining
positive relationships with several suppliers is critical to ensuring that the best
quality and price are obtainable for each type of product or service. Additionally, it
is critical to establish strong relationships with many suppliers of the same (or
similar) goods (or similar) so that, in the event of one supplier failing, the other can
respond without jeopardizing the workflow. This firm will require the following
suppliers: raw materials and all food products, kitchen equipment and decoration,
communication services, accounting, insurance, management software, as well as
water, power, and gas. Not all suppliers may have equal bargaining strength.
Suppliers delivering restaurant packaging materials, for example, may not have
greater bargaining power due to the availability of similar products from other
28
suppliers. As a result of the reduced prices, the industry may save money.
However, the oligopoly in the restaurant business concerning other products and
services poses a danger to the industry's profitability (IvyPanda, 2020).
There is indeed a need for quality relationships with suppliers and
independent business organizations to create steady operations and maximize
profitability. This force increases as in the case of the catering industry, as
mentioned by de Brito (2019), 'the quality of food served is a critical factor for
success and source of competitive advantage, choosing suppliers a necessary
process to ensure customer satisfaction and retention, to maintain the value of the
products or services delivered or performed to the customers'. Suppliers of raw
resources, labor, and specialist services supply industries and wield power over
them (Quick MBA, 2010). The price of the commodities or services given is the
source of bargaining power. Many industries have a multitude of providers who
provide these necessities, while some do not. Some industries have only one or
two suppliers, and those suppliers can charge whatever they want for the
materials/services they provide. This is one of the more powerful forces in the
restaurant business. Despite the fact that supplier power is typically modest, it has
a significant impact on the sector. The majority of restaurants in the business
acquire their food from butchers, farmers, and packaging companies; they do not
produce their own. Most restaurants, for example, serve meat. There are
numerous possibilities for restaurants to pick from, and the price at which they will
sell their items will be determined by this (Booth, 2017).
29
The restaurants located in Batangas however explicitly consider supplier
power as a low force that contributes greatly to the competition because some of
them have lots of suppliers and have built strong partnerships with them. It is a big
deal for them to be able to control the suppliers for their daily operations and
maintain profitability along the way.
Buyer Power
According to DeBusk (2019), customers' bargaining power affects how
many customers exist in the market and how much it costs to attract new ones; the
more customers in your industry, the stronger their bargaining power, especially if
nothing distinguishes your products or services from those offered by your
competitors. Customers are one of the key stakeholders of a business. They play
a vital role in the profitability of the business. Restaurant owners must focus on the
factors that will satisfy their customers as it is very important in every business.
Customers are the determining factor of the success of every business.
Businesses need not only to maintain their current customers but also to attract
new ones and expand their base significantly (Journal of Business Strategy, 2014).
Satisfying customers should be the first priority of every business because it could
create brand loyalty, thus, having a competitive advantage among all competitors
in the industry. The determinants of buyer power includes the number of important
buyers, availability of substitutes for the industry products, buyer’s switching costs
(which is included as determinants of the other forces), buyer’s threat of backward
integration, industry threat of forward integration, contribution to quality or service
30
of buyer’s products, total buyer’s cost contribution by the industry, and buyer’s
profitability, as mentioned by MBA Crystal Ball.
A critical part is the online and offline systems that enable clients to rate and
review restaurants based on their quality and service, keeping them informed and
updated. de Brito (2019) in his Strategic Plan for A New Restaurant Business, it is
critical not to underestimate the power of word-of-mouth, since a positive review
on any site or social network can result in future business clients, and vice versa.
Finally, there is the challenge of consumer loyalty, since the increased diversity of
possibilities instills in the customer a persistent desire to try new places and
flavors, resulting in location switching based on trends, pricing, service, and other
factors.
The buyers take advantage of their impact on the businesses by forcing the
market to lower the prices of the products or services offered to become a major
driving competitive force that each business faces; this may involve eventual
backward integration. As stated by Muriuki (2013), the 'buyers compete in the
industry by forcing the prices down, bargaining for higher quality or more services
and playing competitors against each other at the expense of industry profitability.'
The power of buyers depends on how the business perceives them such that it will
determine if there are significant effects when viewing them, whether as individuals
or communities. They will differ in the level of losing their interests and loyalty to
the business relevant to the overall effect of this force on its competitive advantage,
among others (de Brito 2019). And so, buyers are demanding better quality
services/products and pressure the market. According to the study, buyers are
31
considered influential if they can set prices and limit the supply industry's
profitability. Buyers are convincing when they concentrate, possess credible
backward integration options, purchase a significant portion of the supplier's
output, and quickly and cheaply switch to other suppliers or substitutes (CFI,
2020). Clients, or customers, are the existing and prospective purchasers of a
business's goods and services who shape the market and affect demand.
When it comes to restaurants, the primary clients are those seeking to
purchase meals. It is critical to recognize and identify the target audience that the
restaurant wants to serve; only then can a strategy be defined that will result in the
achievement of objectives, which obviously implies gratifying consumers in order
to earn their loyalty. Clients in this situation will mostly be locals, whether residents
or workers, as well as those who, despite not living in the physical area on a daily
basis, identify with the concept and visit for that reason, as mentioned in de Brito
(2019). These restaurants in Batangas consider this force as a competitive driver
that influences their profitability as they lower their prices to compete with other
restaurants and build a good image while serving the same quality to customers.
Threat of Substitution
A threat of substitute is a substitute product or service used to replace the
company's products or services. It is a threat because when there are substitute
products or services, you can't increase your profit which is unfavorable and can
weaken your business power. The threat of substitution exists when the change of
price influences product demand in the sector analyzed. When consumers elect to
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dine at a casual or fast food restaurant or at home, the fear of alternatives enters
the picture. This force is relatively strong as a result of a vast number of
alternatives. Fast food restaurants can compete with fast casual restaurants since
they can offer lower prices. In difficult economic circumstances, people may avoid
quick casual restaurants in favor of eating at home or at fast food restaurants. Fast
casual restaurants continue to have the upper hand since they provide superior
meal preparation and quality, as well as a more casual eating lounge. Casual
restaurants are only a threat if the customer wants to sit down and be served, and
if they are willing to spend extra. Companies can lessen the threat of replacements
by staying in tune with their customers' tastes. If the company can offer a variety
of items that are in line with what customers want, it will be able to maintain a
competitive advantage over other firms and retain clients rather than losing them
to replacement eateries, according to Booth (2017) from Fulton, Akridge, and
Ehmke (2001). According to de Brito (2019), due to the dynamic interests of the
consumers, they tend to explore more of the unique tastes and preferences in
distinct ventures present in the market like ubiquitous restaurants. However, the
non-traditional type of business still has extreme competition with small
establishments. Parallel to this, the cafes, bars, tea houses, pastry shops,
takeaway, and others similar to these are considered substitutes to restaurants
despite differences in serving and food quality; consumers still think the delight
that they are receiving is alike but cheaper and consistent too in filling their hunger
and thirst.
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And as McLeod (2020) stated, 'equally threatening, it will be a long time until
the social distancing rule of four square meters is relaxed and many restaurants
cannot survive devoting so much space to each person,' most families, as well as
those belonging to other sectors, are rather to stay at home and cook foods for
themselves for higher prevention. The same with Lucas' (2020) article showing a
transcript of what Oliver Wright, a global lead of Accenture, said, "I think
restaurateurs are going to have to think increasingly more systematically about if
the food in the home is going to become much more the norm," and that "in terms
of what we eat and where we eat, it's probably going to be the biggest shakeout
we've seen in our adult lifetimes." Restaurants, because of their near proximity to
one another, the sector remains competitive. Furthermore, their rates vary in
accordance with the quality of services and facilities provided. As a result, guests
face significant hurdles while deciding on a specific restaurant (IvyPanda, 2019).
For the price management, the study obtained from Restaurant Revenue
Management by Heo (2013), stated that customers are willing to switch their dining
time to hours where discounts are made available in connection within its menu,
proving that price ranges and discounts are vast determinants of consumers in
choosing restaurants in their meal period. The price that consumers are willing to
pay per meal is determined not only by the price of the meal itself, but also by the
price of nearby substitutes, the healthiness of the food, the degree of services
provided, and the location in which a restaurant is located. Consumers will find it
easy to switch because these near substitutes provide the same services, quality,
convenience, and are sometimes closer to them. These will have a stronger impact
34
on how restaurants operate and compete, resulting in a decrease in industry sales
and profitability. Restaurants must emphasize how eating out saves customers
time and bother in the kitchen, as well as how customers can relax while eating
and not have to worry about cleaning up afterwards (Knowledge Center for
Students, 2011).
For restaurants in Batangas, the threat of substitution remains quite evident
and has grown in strength, harming business profitability even more in this current
circumstance. Customers who have lots of time to spend at home and discover
new things are more likely to want to cook their own meals and add more spices
that are far different from what they may obtain if they continue to order from
restaurants as they did previously.
Threat of new entrants
The threat of new entrants is the ability of new companies to enter into an
industry offering the same products or services. The position of a competitive
company will be at risk once a new competitor enters into the same industry
because people will now have the choice, unlike before. Moreover, entering an
industry is also not that easy because you have to compete with other businesses
with more experience.
Thus, the threat of new entrants largely depends on the reactions of
available competitors and entry barriers, economies of scale, product
differentiation, initial capital requirements, access to distribution channels, cost
disadvantages, and governmental policies. In this case, de Brito (2019) mentioned
35
that the threat is primarily posed by small businesses and new restaurants seeking
to diversify their operations and concepts, because not only are the "typical" (less
differentiated and more traditional) restaurants reaching maturity or even declining,
but they are also what consumers want. This dynamic promotes the growth of new
eateries, hence increasing the threat level of new competitors. Additionally, renting
premises, equipment, furniture and furnishings minimizes initial capital expenses
and borrowings in the restaurant industry. Franchising allows operators to enter
the business with pre-installed equipment, training and infrastructure. Given the
high owner/operator income in this field, it may be conceivable to buy an existing
firm or a closed restaurant. Increasing competition and decreasing profit.
Competitor advantage will be built on non-price product differentiators such as food
quality and nutrition (KCS, 2011).
Among those possible threats, Porter highlighted five significant forces that
highly concern the companies throughout their plan and influence their tactical and
strategic decisions. There is a massive increase in competition, especially
nowadays that the technology has been continuously evolving. Companies are
thriving more due to the high demand for acceleration in advancement, and
consumers are looking for new and innovative products or services offered to the
market. Some of the existing firms are currently seeking more excellent profitable
products that are different from those being served and built by the other firms
proactively to become more competent. Several huge companies set high
standards such as a large amount of capital invested in the business, for instance,
the restaurants in real estate constructions or leasing, economies of scale, built a
36
solid independent organization of suppliers and specific market, thereby
constituting high customer loyalties, and have been strictly complying with the
government regulations and policies (Muriuki 2013). These restrictions within the
location for new entrants implemented by the government may become one of the
most significant barricades in starting up a business to a vastly competitive
environment over its strict compliances and licensing requirements. Conforming to
de Brito (2019), without the licenses and policies bestowed by the government, the
companies, even in the existing market, will be limited in getting the beneficial
aspects for a business to run competitively through easy access to distribution
channels, technology, and suppliers.
The restaurants in Batangas is moderately evident that this force strikes the
businesses’ competitiveness and may allow several newcomers as seemingly
possible even at times of recession such as the global pandemic. This is because
various young entrepreneurs or even other people grabbed the opportunity of
many food industries closing because of the losses brought by the situation, and
starting even from a small amount of capital. The existing restaurants might have
started from high capital costs but as the new entrants began differently may seem
profitable and a lot better to survive and sustain its operations for the next few
years.
Customer satisfaction
Customer satisfaction is an attitude, assessment and emotional response
shown by the consumer after the purchase process. It is an indication of being
37
pleased with a product or a service according to Ningsih and Segoro (2014).
Customer satisfaction is very important in the business, it is one of the factors that
makes the business successful because satisfaction is what makes the customers
trust the business. It is supported in the study of Gul (2014) that empathized that
when customers are loyal towards a product or service it means that they are
basically trusting in it and according to Ahmed, Rizwan, Ahmad and Haq (2014),
he highlighted that a customer can't enter in loyalty set without the trust of a brand.
Customer satisfaction meets the customers' expectations in terms of
parameters associated with satisfaction (Malik & Ghaffor, 2012). It is a customer's
feeling of pleasure or disappointment due to a comparison of the product's
perceived performance to expectations according to (Tarus and Rabach, 2013). In
the study of (Eid, 2015), customer satisfaction can also be described as an overall
emotional response towards the customer's experience after the purchase and
consumption of a product/service. If the customers are satisfied with the services
or products, they tend to be loyal to the business (Vithya Leninkumar 2017).
In the context of relationship marketing, customer satisfaction is the way
that leads to long-term customer retention because unsatisfied customers have a
very high switching rate (Lin & Wu, 2011). Pertinent to this, Haghighi et al. (2012)
stated in their study that restaurants are giving more importance to retaining their
existing customers rather than attracting new ones. This strategy will assure
greater effect in the long run because of the probable increase in restaurants’
profitability. It is important to be on the good side of the customers because it is
what will help the business to grow and be successful.
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Profitability
As defined by Hofstrand (2019), profitability is the primary goal of all
business ventures. The business will not survive in the long run without profit. The
company's income and expenses measure it. Revenue is generated from the
business's daily operations, while expenses are the cost of resources used up in
the said operation of the company.
Besides, Bragg (2020) defines profitability as a situation when an entity is
producing a profit. A company is profitable when the revenue is greater than the
number of expenses in a reporting period. However, if an entity uses the accrual
basis of accounting, the profitability condition will probably not be matched by the
company's cash flows since some of its transactions, like depreciation, do not
involve cash flows. Furthermore, they can become more profitable by selling
assets that accumulate immediate gains; however, it is not sustainable since they
must have a business model that allows their ongoing operations to generate a
profit or eventually fail.
Research Literature
The research literature is composed of different studies which are relevant to the
present study. Those critical details were taken mainly from published and
unpublished thesis to understand better how to achieve financial sustainability.
The recent health crisis caused by the COVID-19 pandemic quickly turned the
businesses into a financial downturn due to the restrictions imposed to control and
eliminate the spread of the pandemic. The restaurant business has been one of
39
the most affected by this unexpected crisis and was forced to close its businesses
or to operate with many limitations. As the COVID-19 pandemic increases
severely, it shows an adverse impact on restaurant firms' liquidity and operational
risks. Ozili and Arun (2020) conducted a study entitled ‘Spillover of COVID-19:
impact on the global economy. The researchers used secondary data containing
COVID-19 statistic in different countries. The variables used in the study are the
number of lockdown days (SDL), restriction in internal movement (RIM) and
international travel restrictions (IR). Also, the researchers used monetary policy
decision (MP), size of fiscal policy spending (FP), and the number of COVID-19
confirmed cases (CC). The findings revealed that at the size of the coronavirus
crisis, the increasing number of lockdown days, monetary policy decisions, and
international travel restrictions severely impacted the level of general economic
activity as well as the opening, lowest, and highest stock prices of major stock
market indices. The imposition of internal movement restrictions and fiscal policy
spending, on the other hand, had a beneficial impact on the level of economic
activity, while the number of confirmed cases was positively associated to the
opening, highest, and lowest stock prices of major financial stocks. In relation to
the study, restaurant firms experience significant shortfalls in their revenue since
there is an intense decrease in customer demand and even temporarily interrupted
operations. Since there is no certainty as to when COVID-19 damage abated, the
sudden increase of operational risks and shortage of liquidity would possibly make
the shareholders sell stocks they hold, thereby leading to a sharp decline in
restaurant firms. Ding et al (2021) examined stock price reactions to COVID-19
40
cases as basis of five pre-2020 firm traits through their study entitled ‘Corporate
immunity to the COVID-19 pandemic’. The following are the variables used in the
study; financial conditions, international supply chain and customer locations, CSR
activities, corporate governance systems and ownership structures. The
researchers revealed that firms with stronger financial condition before pandemic
experience a better stock price reactions than the other firms. Also, Companies
that are more susceptible to the COVID-19 pandemic through their supply chains
and client locations experience a greater decline in stock prices as a result of the
pandemic. The study also revealed that enterprises with stronger CSR activities
before to the pandemic exhibit improved stock market performance in response to
COVID-19 and The CSR-resilience nexus is greater across economies with social
norms that set a higher value on environmental and social issues. In response to
COVID-19 cases, companies with fewer entrenched executives perform better and
stock price reactions to pandemic incidents are highly linked to ownership.
According to the study of Yang Yang et. al (2020) entitled ‘COVID-19 and
restaurant demand: early effects of the pandemic and stay-at-home orders’, the
world has been shocked by the emergence of the pandemic which has put the
restaurant industry's survival in doubt. Due to the continued spread of the said
virus, the government imposed physical separation measures, prohibiting
restaurants from serving dine-in customers. As a result, numerous restaurants
experienced financial losses and were forced to shut down. As the virus spreads,
many individuals are unable to go outdoors due to the fear of COVID-19. Many
people enjoy eating but are afraid of becoming infected with the virus, which is why
41
food delivery has become more popular. According to this study, customers prefer
takeaway, food delivery, and drive-thru services to on-site eating during this
pandemic since they can order their food without rushing or worrying about
becoming infected with the virus. As a result, the negative effect of COVID-19 is
less for fast-food restaurants than for full-service restaurants. According to the
study, the negative impact of COVID-19 pandemics differs between fast food and
all restaurants. One possible reason is that, due to the pandemic situation,
restaurant customers had universally switched to off-site consumption, and thus,
fast food restaurants take the financial hit no less than other restaurants during
stay-at-home orders.
Evidently, this pandemic serves as the recession of many businesses in various
industries where the hotels and restaurants were highly affected. Numerous and
apparent changes made some companies temporarily close their operations while
most small and micro restaurants remain profitable and sustainable for a few
years. Included in these micros were the fast-food eateries and chain restaurants
that perform significant rebounds despite the pandemic due to cheaper offers,
drive-thru lanes, and even the service they offer. According to Lucas (2020),
'Technomic is projecting that the fast-food sector's market share will grow about
8% this year. Domino's Pizza and Papa John's are the two most obvious winners
since consumers quickly transitioned to ordering their pizzas for delivery during
lockdowns. But burger chains like McDonald's and Wendy's, which saw sales take
deeper dives in March and April, also reported relatively quick rebounds to their
U.S. businesses.'
42
Under such circumstances, every company inside the industry aims to maximize
its profit through various ways and processes aligned to the vision and objectives
from its day-to-day activities to its sustainability. Each day, the companies do not
only operate for survivability and serviceability to the market but also to establish
a significant position in the industry and gain competitive advantage among the
competitors, as well as the external factors affecting them and those opportunities
that may or may not be visible to the public.
Due to the never-ending high demand of the buyers and increasing competition in
the industry specifically in the restaurant industry, different studies were made in
order to determine the possible factors that could be the basis of the profitability of
the said businesses, how to sustain and maximize it especially now in the time of
the pandemic. Agarwal & Dahm (2015), conducted a study entitled ‘Success
Factors in Independent Ethnic Restaurants’, which identified the factors
contributing to overall restaurant success. The researchers interviewed twenty (20)
successful independent ethnic restaurant owners to find out which factors is the
most essential. According to their gathered data, ethnic restaurant owners agreed
that “competent management” was the most essential contributor to its success.
Business and/or culinary experience were also considered as important. Cost
controls, market-driven pricing, and loyal patrons were deemed to be more
essential rather than the formal hospitality education. Another study related to the
success factors of restaurants is the study of Noone and Maier (2015). The
researchers conducted a decision framework for restaurant revenue management
restaurant owners with a comprehensive decision making framework for restaurant
43
revenue management. The model encourages the systematic use of data created
both internally and externally to support RRM-related decisions. This framework
reflects a broad RRM goal that focuses on creating long-term demand and
profitability while assisting with short-term revenue growth too. The study also
recommended that well-designed and flexible menus along with strategic pricing
and design decisions will lead to sustained revenue in growth and profitability. In
relation to the study, implementing the framework of Porter's five forces may
heightened competitiveness, enhance cost controls, and satisfy the needs of
exacting customers.
One of the factors that were associated with the profitability of the restaurant
industry is the competitive rivalry. This happens because there are numerous
existing competitors, and all of them are equal in size and position in the market.
Quality, prices, and satisfaction are the common factors in the competition. As
stated in the study of Mohammad Movahed (2018) entitled ‘Quality Competition in
Restaurants Industry: How Restaurants Respond to Fluctuating of Consumers’
Review Rating of Rivals’, in which it examines the theory through an assessment
of the longitudinal data set of a restaurant’s quality. The researchers uses the
average customer review ratings from 7,610 restaurants in Phoenix Metropolitan
Area. The ratings were collected from yelp.com from the each month, from the
year 2014 to 2017 to investigate the effect of the rivalry on restaurants’ quality. It
is said that the goal of every businesses is to generate profit which is affected by
the quality competition. According to the quality competition theory, as competitors'
quality improves, the market becomes more competitive, causing a business to
44
improve its quality. The result indicate restaurants having the same category and
price range have influence on its competition and rivalry. The findings of the study
also revealed that quality competition has a more significant impact on the
restaurants with a high price range than the lower ones. Consequently, quality and
price are the two key components of spatial rivalry among the said industry.
Another study that will support the previous one is cited on the study of Mohammad
Movahed (2018). Biscegliay et al (2018) added to the previous research on spatial
quality competition by looking at government-regulated markets. They discovered
that in order to attract customers, businesses improve their quality. In an
oligopolistic market, Chioveanu (2012) suggested simultaneous price and quality
competition. He emphasized the tradeoff between quality and price and how profits
change when some consumers consume the high-quality product, and others
spend less money to finish a lower quality product.
As stated in the study of Kotler et al. (2011) as cited in the study of Haghighi
et al (2012), customers are looking for benefits inside the restaurants by the
services they offer such as the unique product packaging where their foods are
taken out or maybe the utensils they use whenever they go to the restaurant.
Moreover, this certain service might elevate customers’ preferences in selecting
restaurants as they exceptionally serve their customers differently.
Having quality service in the restaurant industry leads to customer satisfaction
thus, creating brand loyalty and competitive advantage among competitors. The
study of Janghyeon et. al (2011) investigates the conciliating effects of customers’
satisfaction on the relationship between customer-based brand equity and brand
45
loyalty in the hotel and restaurant industry. The five dimensions of brand equity
which are physical quality, staff behavior, ideal self-congruence, brand
identification, and lifestyle congruence are said to have positive effects on
customer satisfaction. The findings of the study suggest that customers’
satisfaction partially conciliates the effects of staff behavior, ideal self-congruence,
and brand identification on brand loyalty. The effects of physical quality and
lifestyle congruence on brand loyalty are fully conciliated by customer satisfaction.
On the other hand, in today’s crisis, most restaurants are communicating with their
customers online since customers cannot easily go outside and eat in their
preferred restaurant because of restrictions and limitations caused by the COVID19 pandemic. Madeira et al. (2020) discussed the impact of the Pandemic Crisis
on the Restaurant Business, which states that the restaurant industry should
consider increasing the advertising expenditure during this crisis to start recovery
immediately and communicate its business to the customers the essential safetyrelated information. Thus, focusing on this is a strategy to be followed by
entrepreneurs. Additionally, restaurants should develop businesses located in
large cities more sustainably and all marketing contexts for the hotel industry,
starting with products and going through prices, promotion, and distribution.
According to the study, restaurants use more proactive strategies than passive
ones in response to certain types of crises. The methods observed in the study
with concern about hygiene regulations to provide safety protocols to customers.
The main originality of the study lies in the fact that it began during the first
moments of awareness of the pandemic.
46
The restaurants are ventures of food and services experiencing wide competition
with their relative players in the market serving the same products to satisfy the
customers' preferences and meet the demand of consumers in the sense of
quality, efficiency, and loyalty. Accordingly, the businesses' needs were all
destined to achieve as they strategically plan for the short, medium, and long-term
goals. They first encompass environmental analysis, whereas highlighted by de
Brito 2019 in the study they conducted entitled, ‘Strategic Plan for a New
Restaurant Business’, identifies the company's position in the market depending
on its surroundings and how they can use the resources effectively and efficiently.
Another factor that was considered by the researchers is the buyer's power that is
affiliated with the threat of substitution. As the pandemic continues, consumers
tend to discover new talents and skills they can apply to their daily living, and one
of these is cooking. They slowly appreciate the essence of homemade meals,
delicacies, and even those steaks you can exclusively buy as you order in most
restaurants nearby. While some see this pandemic as a glimpse of their retirement
days and started cooking meals for themselves for their safety and health, the
restaurants view these home-cooked meals as a threat of substitutes that are
currently becoming steady in the long run because of the existing endless situation.
In addition, for the market players to gain a competitive advantage in the restaurant
sectors, the operators must maximize revenue through its subordinating
management such as capacity, price, menu, time, and customer perception, which
are all essential contributors to profitability maximization towards sustainability.
Aside from this, take the study in South Africa inscribed by Muriuki 2013, focused
47
on Micro and Small Restaurants in Nairobi's Strategic Response to their
Competitive Environment said 'the key factors that promote competition in the
quick-service restaurants are speed of service, quality of food and a good price to
value relationship.' These are directly attributable to the success of the companies
showing excellent performance not only by focusing on internal strengths and
converting weaknesses but improving relationships with external stakeholders.
According to the research analysis, of all the hypotheses conducted among the
factors affecting customer satisfaction, the impact of food quality, service quality,
price, and customer satisfaction on customer trust are accepted at the 95%
confidence level, all was analyzed using data envelopment analysis, structural
equation modeling, and LISREL software (Haghighi et al. (2012). It only proves
that most of the considerations provided for the customers to stay and develop
loyalty to restaurants were the critical factors in their profitability.
Similarly, 'to survive in a competitive market, restaurant operators need to provide
good value as well as quality food and services; a high level of customer
satisfaction should maintain and to increase the customers' return visits and give
them a greater market share,' acquired from Restaurant Revenue Management
(Heo 2013). According to the study of Rosalin et al. (2016), entitled ‘Strategy
Communication in Family-owned restaurants: Ad Hoc and Ad-Lib where it
investigates the communication of strategies in family-owned restaurants possible
effect of family ownership on strategy communication. The data was gathered
through the means of interview. The findings revealed that communication was
largely ad hoc, relating to tactics more than strategies. It was also stated that many
48
restaurant owners lacked the skills necessary to operate a going concern
business.
Another factor was presented from the study of Muriuki (2013). The study was
entitled ‘Micro and Small Restaurants in Nairobi’s Strategic response to thei
Competitive Environment’ wherein its objectives is to investigate various strategic
responses to combat competitive pressures. A survey was done in 311 licensed
micro and small size restaurants in Nairobi. According to the researcher, finding
an advantage in a competitive environment is connected to strategies ranging from
franchising, co-branding, market coordination, product differentiation, service
differentiation, and customer relationship management (CRM) strategies. The
researcher found out significant forces that are concurrently active in the restaurant
industry large enough to create competition, notably to micro and small
restaurants, as evidenced in the study made in Kenya. It conducted surveys falling
into Porter's five competitive forces and respectively segregated them from one
another as they categorically simplified strategic responses obtained from the
managers of the restaurants. Among those forces, the highest which mainly
triggers the restaurants is the supplier power, where they raise prices of raw
materials needed for the operation of their products to perform the services. In
response to this, restaurants strategically develop relationships with lots of
suppliers and, as much as possible, low-cost and employ high inventory level
maintenance. As ranked in the study acquired, the competitive forces experienced
by MSE Restaurants in Kenya started from the issue of supplier power having a
mean of 3.48 and a standard deviation of 1.34, as an average rate; followed by
49
customer demand fluctuations with a mean of 3.45 and standard deviation of 1.39
producing the same rate; then to the lowest effect of a mean 2.48 and standard
deviation of 1.53 of new entrants performing similar services.
Restaurants are engaging in a strategy that best incorporates their goal to become
the market leader in the industry. Based on the research entitled performance of
restaurants: Recognizing competitive intensity and differentiation strategies,
obtained by Kankam-Kwarteng, Osman, & Acheampong (2020), there examine the
relationship between differentiation strategies, competitive intensity and restaurant
performance. The study also estimate how the interaction of differentiation
strategies and competitive intensity affects the restaurant performance. The
following data were gathered from 160 restaurants managers/owners in the
Ashanti region of Ghana through the means of structured questionnaire.
Regression Analysis was used to estimated and test the paths of the relationships.
The study revealed that differentiation strategies have a significant effect on the
restaurant performance while competitive intensity partially affect the performance.
Competitive intensity was then found not to moderate the relationship between
differentiation strategies and restaurants’ performance. Consequently, having a
power that creates a unique product or service is quite hard to compete with and
tends to avoid the threat of new entrants as the business is considered unique and
only a certain firm can only produce the product or service.
Houqiang Wu and Zaoxuan Xu (2013) also conducted a study about rivalry
specifically, analysing how companies respond to competition in an industry. The
objectives of the study is to demonstrate some of the competition that businesses
50
face and assess how businesses respond to it when operating in the e-commerce
sector. The researchers conducted a case study to investigate the competition
tactics of two organizations in order to gain a better understanding of the ecommerce competitive environment and recognize the relevance of responding to
various competitors in the e-commerce industry. They interviewed respondents
from two Chinese B2C enterprises in order to acquire vital information. JD
Company and Amazon China are two B2C enterprises. Amazon China is a
worldwide corporation, while JD Company is a domestic corporation. This study
illustrates that businesses must increase their competitiveness in order to adapt to
competition, such as by enhancing product quality, logistics, and after-sales
service. Furthermore, it is preferable for businesses to develop strategies such as
low-cost strategy and differentiation strategy in order to adapt to competition.
Porter's five forces which are the competitive rivalry, suppliers power, buyers
power, threats of substitution, and threat of new entrants are the most critical and
most influencing forces to the companies' profitability. These forces were to
analyze competition and compare the influence of forces on a particular company
with other competitors. Exploring the companies' and competitors' five forces can
make a strategy to improve one's position like the differentiation of products or new
positioning. These five forces can also explain how the companies will prevent the
new entrants and how to manage the substitute products. The bargaining power
of suppliers and buyers is significant to the companies because the bargaining
power of the companies is changing with the bargaining power of industry
competitors.
51
Moreover, based on Porter's work, analyzing an industry in terms of the five
competitive forces would help the firm identify its strengths and weaknesses
relative to the actual state of competition. He supported his idea with the main
argument that if the firm knows the effect of each competitive force, it can take
defensive or offensive actions of firms to place itself in a suitable position against
the pressure exerted by these five forces.
In these five forces models, Porter helps businesses evaluate their industry as a
whole in any cluster, forecast the industry's growth, and conceptualize their
positions compared to one another. Thus, awareness of the five forces can help a
company understand the structure of its industry and stake out a more profitable
position, and be less vulnerable to attack. Following the evaluation, a business
should implement a competitive strategy, in other words, favorably position itself
or at least protect its situation to succeed, particularly in a hostile environment with
a deep consideration at the threat of available and new entrant competitors,
product substitutes, and bargaining power of suppliers and customers.
Synthesis
The literature presented in this chapter provides additional information in
conducting this study. Furthermore, the studies considered in this research were
found to be similar to the present study in some aspects.
The study of Ozili and Arun (2020) investigates the Impact of COVID-19 on the
Global Economy. The study is relevant to the present study as the researchers aim
52
to investigate Porter's Five Forces as the basis for profitability of the restaurant
industry in this time of the pandemic.
In relation, the study of Ding et al (2021) evaluates the connection between
corporate characteristics and the stock returns to the COVID-19 pandemic. The
researchers consider the five pre-pandemic characteristics which are the financial
conditions, international supply chain and customer exposures to the pandemic,
corporate social responsibility, corporate governance, and ownership structure.
Yangyang et al (2020) cited different studies regarding the food deliveries that
have been on trend since the pandemic started. In this study, it is evident that fast
food restaurants have less negative impact on the pandemic since they have been
doing food deliveries. As a result, with or without pandemic, they can still survive
and maintain sustainability.
In the article published by Lucas (2020) named Pandemic forces a reckoning for
restaurants coping with capacity limits and new consumer habits, stating a bigger
picture of most businesses gave great rebound despite the pandemic for
survivability through cheaper deals, fast service, and drive-thru lanes. Agarwal &
Dahm, (2015), study of the importance of business plans in the success of the
business is also related with this paper. In relation to this, the study of Noone &
Maier, (2015) is also relevant to the present study which stated that implementing
Porter's five forces may enhance the competitiveness of the business.
The study of Mohammad Movahed (2018) is also relevant to the present study. In
his theory of quality competition, he stated that an increase in quality will create a
53
more competitive market. Biscegliay, Cellini, and Grillix (2018) found that firms are
increasing their quality so that they can attract customers. In price and quality
competition according to Chioveanu (2012) high quality means high prices and low
quality equals low prices. Meanwhile, the study of Kotler et al. (2011) cited in the
study of Haghighi et al (2012), customers prefers to have something unique in the
restaurants. As product uniqueness being associated with quality, having these
characteristics will most likely prevent customers from switching products. This
study has a relationship to the current study since product uniqueness and quality
is associated with competitive rivalry which is one of the variables being used in
this study.
The study of Janghyeon et al (2011) also relates the current study through their
variables. The study of Madeira et al (2020) discusses the Impact of the Pandemic
Crisis on the Restaurant business which is relevant to the present study, it focuses
on the strategy needed in this time of the pandemic. Similarly, the research
conducted by de Brito (2019) highlighted the significance of analyzing the
environment to effectively manage the competitive forces for restaurants in the
competitive environment.
As stated in Micro and Small Restaurants in Nairobi’s Strategic Response to their
Competitive Environment by Muriuki (2013), strategic responses were developed
into action to the competitive forces experienced by the restaurants in Kenya which
circulate within the supplier power, buyer power, and new entrants.
54
In connection with this, Haghighi et al. (2012) in their study Evaluation of factors
affecting customer loyalty in the restaurant industry, customer loyalty has become
one of the significant factors in maximizing profitability along with customer
satisfaction.
Whereas, the research published by Heo (2013) showed characteristics for which
it will contribute more in the maximization of profits of the firms such as through
capacity
management,
time
management,
menu
management,
price
management, and customer perception management. In relation to this, the study
of (Rosalin et al., 2016) is also relevant to the present study. The researcher
recommends that loyalty may provide a competitive advantage.
The study of Kankam-Kwarteng, Osman, & Acheampong (2020) also relates the
current study since the researchers examined the relationship between
differentiation strategies, competitive intensity and restaurant performance which
is subclassified under competitive rivalry of Five Forces which may help create a
competitive advantage within the industry. Houqiang Wu and Zaoxuan Xu (2013),
analyzes how companies respond to competition in an industry, Porter’s five forces
were highlighted and had a great influence on the companies’ profitability as stated
in the study. These five forces help each company to gain a competitive advantage
among others.
55
Chapter III
Methodology
This chapter presents the research methodology that was utilized by the
proponents. It includes design, research procedures, data analysis, and the
assumption for the gathered data.
Research Design
In order to identify, define and assess the competitive forces of restaurants
in Batangas: basis for maximizing profitability, descriptive research was utilized in
this study. This research design was chosen because it seeks to characterize a
population, circumstance, or phenomenon accurately and systematically. A
descriptive research method is also a good option when the aim of the study is to
find out about characteristics, frequencies, trends, and categories (McCombes,
2019).
The researchers adopted this method because it is an appropriate method
and would greatly contribute to a better understanding and easy interpretation of
data.
Respondents of the Study
The respondents of the study are the selected restaurant owners/managers
in Batangas, specifically Batangas City, Lipa City, Tanauan, and Sto. Tomas, as
they are the person who truly knows everything about the business and they are
the best respondents who the researchers think can answer the questionnaires.
56
The researchers chose restaurants specifically cafes, family-style restaurants, fine
dining, and fast-food restaurants as the respondents of the study. The researchers
chose these restaurants mentioned because they have the most type of restaurant
in Batangas.
The researcher sent an email to the office of Department of Trade and
Industry (DTI) in Batangas City branch to ask for the copy of the list of restaurants
in Batangas City. However, the researcher wasn't able to get the copy of the list,
fortunately the other group of researchers from BSA are able to get that list and
even though the researchers are shy to ask for the list they still humbly ask them
for the copy of the said list.
The researchers didn't have the exact numbers of the restaurant as they
used convenience sampling for a convenient source of data and for the safety of
everyone as the researchers are not allowed to go outside and do an actual survey
due to this pandemic. The list that the researchers obtained is only in Batangas
City where almost half of the list are unreachable, the researchers assumed that
those restaurants are already closed due to the pandemic or busy with their
operation. The researchers messaged hundreds of restaurants but received only
80 responses that should be 100, as the others didn't even see their message and
ignore it and the others are too busy to answer the questionnaires. The
researchers encountered many difficulties in obtaining those respondents, their
main channel that used to deliver the questionnaires was the messenger but
unfortunately after sending a few links they got banned from the fb thinking that
57
they were sending spam messages. After the hard work, the researchers are still
lucky to obtain 80 respondents despite all the obstacles that they encountered.
Data Gathering Instrument
The researchers used a survey questionnaire as the primary data gathering
instrument in assessing the competitive forces of restaurants in Batangas
specifically in Batangas City, Lipa City, Tanauan, and Sto. Tomas. The
researchers used a research-made
questionnaire,
this instrument
was
disseminated to the respondents by messaging them on email, contact numbers
and messenger through their Facebook pages. The data gathering procedure will
be done through an online survey particularly google forms.
The questionnaire sheets consist of two parts. The first part will be for
respondents’ profiles in terms of the form of business organization, number of
employees, number of years in operation, and type of restaurant. The second part
of the questionnaire consists of the variables used in conducting the research. The
researchers presented the first draft of the questionnaire to the research adviser
to seek comments and suggestions. The questionnaire was improved and
presented to panelists, grammarian, statisticians, faculty experts, and Department
Dean for further checking and validation of its content and format. Then, a dry run
was conducted online through messaging the Facebook pages of the restaurants
or emailing them to test its reliability and determine if it is anchored with the
objectives of the study. During the dry run, 16 respondents answered the
questionnaire using convenience sampling in Lipa City.
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Consecutively, the results were properly tallied, tabulated, and submitted to
the statistician through email for interpretation. The reliability test of the dry run
passed with the result of .901. It was determined that the questionnaires are
reliable and ready for dissemination to the respondents in the actual survey.
The scoring of the questionnaires will use a four-scale Likert instrument as
shown in table 1 and a checklist to assure the manageability of the data collected.
The respondents will check only their corresponding answers to the items in the
questionnaires.
Table 1
Likert-type Scale
Scale
Range
Verbal Interpretation
4
3.50 - 4.00
Strongly Agree
3
2.50 - 3.49
Agree
2
1.50 - 2.49
Disagree
1
1.00 - 1.49
Strongly Disagree
Data Gathering Procedure
The researchers used secondary data mainly books, journals, theses and
dissertations, and other reliable electronic preferences to explain the variables of
competitive forces of restaurants in terms of competitive rivalry, supplier power,
59
buyer power, the threat of substitution, and the threat of new entrants in Batangas
which could be a basis for maximizing profitability.
Prior to that, the researchers acquired information about SMEs in the
Batangas City area through the generosity of other researchers who had access
to the same data. They sorted restaurants from the Q1 2021 list and conducted a
dry run to determine whether the survey's methodology will result in a possible
pandemic effect on the subject by utilizing Porter's Five Forces and determining
their relevance to profit maximization. There were 200 restaurants on the list, but
the majority of them were already closed when the list was compiled, and some
were newcomers to the business, rendering them irrelevant to the study. As a
result of these conditions, the researchers requested that the city be reconsidered
to include other important cities in Batangas in order for an interpretation to be
successful and useful. This request was authorized and considered, notably Lipa
City, Tanauan, and Sto. Tomas.
The researchers distributed google forms to conduct an online survey. Due
to the respondents' convenience in responding to the questionnaire and the fact
that it is pandemic, the researchers were not permitted to conduct the actual survey
physically. The researchers gathered respondents and compiled a list by searching
Facebook for restaurants in Batangas City, Lipa City, Tanauan, and Sto. Tomas.
The researchers began by creating an excel file that had the names of restaurants,
their locations, their styles, a business URL, an email, a contact number, and any
notes or status of the communication. These specifically targeted restaurants and
assisted researchers in contacting them via phone calls, text messages, email, and
60
social media channels. Some restaurants were unable to respond to the survey
due to their busy schedules regardless of the scenario, while others were short on
personnel, forcing them to focus on their operation more and keeping them fully
occupied every day. A few restaurants were completely unresponsive. Despite
this, the researchers acquired eighty (80) responses that were apparently one
hundred (100) responses.
Statistical Treatment of Data
Following the collection of data from respondents, the study will employ
descriptive and inferential statistics to determine these quantitative data.
Frequency and Percentage. This measures the profile of respondents in
terms of the form of the business organization up to the location which is highly
important in determining the different sizes of restaurants.
The Mean.This will help the researchers analyze how the respondents
assess the competitive forces of their restaurants, determined by various factors,
including the financial situation, the organization of the management team, and the
ability to take risks, and in terms of competitive rivalry, supplier power, buyer
power, the threat of substitution, and the threat of new entrants. Several metrics
indicate whether or not an organization can change.
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Chapter IV
PRESENTATION, ANALYSIS, AND INTERPRETATION OF DATA
This chapter consists of the presentation, analysis, and interpretation of necessary
data acquired from the study. The researchers exhibited the results in each table,
followed by the analysis and interpretation.
1.
Profile of the selected restaurants
This part of the study shows the profile of the selected restaurants in the four key
cities in Batangas. It includes the form of business organization, number of
employees, number of years in operation, and type of restaurant.
1.1 Form of Business Organization
Table 2 shows the frequency distribution of the respondents in terms of the Form
of Business Organization.
Table 2
Distribution of selected Restaurants in terms of Form of Business
Organization
Forms of Business Organization
Frequency
Percentage (%)
Sole Proprietorship
59
73.8
Partnership
8
10.0
Corporation
12
15.0
Limited Liability Corporation
1
1.3
TOTAL
80
100
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Table 2 shows that the majority of the respondents are Sole Proprietorship with
the highest frequency of 59 or 73.8 percent, followed by the corporation with the
frequency of 12 or 15 percent. Lastly, the one frequency covers the limited liability
corporation. This implies that most of the restaurants in Batangas are operated by
a sole proprietorship.
The factors why many restaurants are in a sole proprietorship is because
according to the CFI Education Inc. (2021), it has several advantages despite its
simplicity. First, it is easy to establish and inexpensive compared to other forms of
business organization. The process requires little paperwork and minimum to no
fees. Second, it complies with a few regulatory requirements unlike corporations,
wherein each reporting period, a financial statement is needed to be prepared.
Lastly, in a sole proprietorship, the owner is taxed only once and there is no income
tax to the entity itself.
1.2 Number of Employees
Table 3
Distribution of Selected Restaurants in terms of Number of Employees
Number of Employees
Frequency
Percentage %
1-9 employees
64
80.0
10-99 employees
14
17.5
100-199 employees
0
0
200 and above
2
2.5
TOTAL
80
100.0
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As shown in Table 3, is the distribution of selected restaurants in terms of the
number of employees, whereas the majority of the respondents (80%) said that
they employ 1–9 employees in their restaurants. The next figure (17.5%) showed
10-99 employees, way higher than the majority. And only two (2.5%) answered
200 or above employees, as per the actual survey. The results have shown that
most restaurants have only 1–9 employees.
Several factors contributing to the outcome of the survey, as well as restaurants'
having few employees in their workspace, especially during the pandemic, suggest
the reason for establishing a workforce in small groups. As shown in the
International Journal of Advanced Engineering, Management and Science
(IJAEMS) (Vigilia, A. et al, 2021), given the massive impact of the COVID-19
pandemic on the industry, restaurants must increase their employee protection
with market preservation as their top priority to continuously navigate business
operations. Hence, this implies the proper monitoring of employees through safety
health protocols inside their restaurants and ensuring habits of hygiene controls
such as regular handwashing, glove changes, and keeping hands away from their
faces. If an employee gets a cough or any other virus-related symptom, it may be
appropriate to send them home. Within two weeks, an infected person might
spread the virus to all staff, forcing a business to close (SGS Philippines, Inc.,
2021). This highly concerns the restaurants that is why most of them reinforce
fewer employees than the others to effectively equate profitability and safety.
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1.3 Number of Years in Operation
Table 4 shows the frequency distribution of the respondents in terms of
the Number of Years in Operation.
Table 4
Distribution of selected Restaurants in terms of Number of Years in
Operation
Number of Years in Operations
Frequency
Percentage %
1-5 years
54
67.5
6-10 years
10
12.5
10-15 years
3
3.8
15 years and above
13
16.3
TOTAL
80
100
Table 4 shows that the majority of Restaurants operating in Batangas are from
year one to five years in the operation with the highest frequency of 54 or 67.5
percent. Followed by 15 years and above in the operation with a frequency of 13
or 16.3 percent. There were also 10 restaurants of about 12.5 percent who had
been operating for 6-10 years, while only 3 restaurants or 3.8 percent out of 80
restaurants had been operating for 10-15 years. It can be inferred from the table
that most of the restaurants are in their early year of operation.
Staying in the operation means that the restaurant business can survive and can
adapt to any situation. Being in the operation means that the restaurant belongs to
the stronger business who beats the weaker ones. As stated in the study of Chen
65
(2014), the survival rate of the restaurant business was quite low. That is why who
remains means they are the stronger ones. As we can see on the table, most
restaurants had been in operation in their early years while only few restaurants
remained or survived in the long run of operation. In the study of Adam Ozimek
(2017), he stated that the claim of American express commercials that 90% of
restaurants failed in the first year was false. According to his study, only 17% of
restaurants close in the first year, not 90% which is a lower failure rate than the
other service providing businesses of 19%. It is stated also in his study that closing
restaurants is not necessarily an unsuccessful one. It can be where restaurants
were doing well, but family or health problems forced a closure. It can also be in
terms of location that wasn't successful but the building was sold for another use
or perhaps the owners were making money but decided that they wanted to do
something else. There are many factors why restaurants closed so we can't jump
into conclusion that a business actually failed.
1.4 Type of Restaurant
Table 4 shows the frequency distribution of the respondents in terms of the Type
of Restaurants.
Table 5
Distribution of Selected Restaurants in terms of Type of Restaurants
Type of Restaurants
Frequency
Percentage %
Cafe
18
22.5
Family Style
28
35.0
66
Fine Dining
16
20.0
Fast Food
18
22.5
TOTAL
80
100.0
As shown in Table 5 above, the distribution of selected restaurants in terms of the
type of restaurants is shown. Many (35%) of the restaurants are family-style, which
are designed for Filipinos to have different and exquisite preferences in the setting
and better quality of service and food. Both (22.5%) cafes and fast-food
restaurants gathered the next highest number of respondents among others, as
people even in the middle-class to lower-class can avail and purchase food and
services. Few (20%) of the respondents classified themselves as fine dining
restaurants wherein formal and more exclusive services were offered to
customers. Most restaurants from the survey answered "family style" as their
classification.
There are various family-style restaurants around the cities where the researchers
have conducted their survey, which is mostly the reason why, despite their
differences from other types of restaurants in service and food offered, they are
one of the most well-known kinds and can be seen in places where there are many
households. As specified by Mealey, L. (2018), what makes a restaurant familystyle is the moderately priced menu, table service, and full bar that is usually
separate from the dining room. This style benefits the customers more in that the
atmosphere of the dining room makes them control what they eat. Finally, trendy
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restaurants around the country are embracing family-style dining as an alternative
to the tiny plates that have been popular for the past several years.
2.
Competitive Forces of Restaurants
This part of the study shows the competitive forces of selected restaurants in the
four key cities in Batangas specifically in Batangas City, Lipa City, Tanauan City,
and Sto. Tomas. It includes Competitive Rivalry, Supplier Power, Buyer Power,
Threat of Substitution, and Threat of New Entrants.
2.1 Competitive Rivalry
Table 6 shows the assessment of the competitive forces of selected restaurants in
terms of Competitive Rivalry.
Table 6
Competitive Forces of Restaurants in Batangas in terms of Competitive
Rivalry
Item
Mean
Interpretation
1. Has a large number of competitors
3.54
Strongly Agree
2. Has strong influence on the customers
3.58
Strongly Agree
3. Is competent that makes it hard for customers to switch
from other restaurants.
3.23
Agree
4. Has a unique product that makes it hard for customers
to switch from other restaurants.
3.44
Agree
5. Is a clear leader in the market
3.18
Agree
6. Offers a low price for its product
3.41
Agree
7. Is growing so fast in the industry
3.15
Agree
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8. Focuses more on the profitability and quality of the
product
3.60
Strongly Agree
9. Values its customers and listens to their opinions for the
benefit of the business.
3.85
Strongly Agree
10. Are flexible and can manage to survive in any
situation.
3.53
Strongly Agree
11. Always manages to be on the top of the market
3.34
Agree
3.44
Agree
COMPOSITE MEAN
As shown in Table 6, a competitive rivalry as one of the competitive forces
unveils how each restaurant, based on the composite mean of 3.44, competitive
rivalry is moderately evident in restaurants, therefore, affects their profit
maximization. However, the majority of the restaurants strongly agree, with a mean
of 3.85, to the indication that their business values their customers and listens to
their opinion for the benefit of the business likewise. It was then followed by the
competitiveness of restaurants as they focus more on the profitability and quality
of the product, with a mean of 3.60 (strongly agree).
Accordingly, Chua, B. et al., (2020) noted in their study that in relation to
restaurants giving value to customers’ perceptions and suggestions towards the
business, it will build a brand reputation for itself. This is interconnected to
developing customer loyalty as they earn their trust. Brand reputation is a
composite of a brand's reliability, admiration, benevolence, respect, and
confidence. It is a gauge of a company's fundamental quality of its product or
service offerings to customers. A well-known reputation makes it easier for
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customers to prefer one brand over another psychologically. A reputable brand
instils psychological assurance in the customer about the brand's quality, hence
establishing customer trust. With this, a restaurant can gain a higher competitive
advantage among others if it aims for reputation through customer valuation and
reputation management.
The lowest factor of competitive rivalry on how it influences the restaurants
in maximizing their profitability is their rivals growing so fast in the industry, with a
mean of 3.15. The next low factor distinguishes that a competition where a clear
leader in the market, with a mean of 3.18, does not strongly impact the competitive
rivalry to increase the restaurants’ profitability. This was supported by the interview
made to Bugia (owner of Mimi & Bros and Bean and Yolk) and Templo (owner of
pizza place Gino’s, Tyler’s Cafe, Cello’s Doughnuts, and Mitchell’s Backyard
Brewery) at Rappler (Arnaldo, S. 2021) which was about the sales: slow but not
steady. By mid-2020, Bugia's sales had fallen to 30% of their pre-pandemic levels.
Things began to improve at the end of 2020, during the general community
quarantine (GCQ). "Businesses remain precarious, and income is essentially
unpredictable," Bugia stated. Banana Pancake Trail's overall sales are still "less
than 50%," compared to its pre-pandemic levels of 90% dine-in and 10% delivery.
However, now that the economy is reopening, it has recovered somewhat. Sales
are now around 60-70% of pre-COVID, according to Bugia. Bugia: "Now that the
economy is opening up again, at least it's bounced back a little bit". "It has been a
year since the lockdown began, and the situation has not stabilized. Certainly,
sales have not returned to pre-COVID levels. When I say a little bit,' I mean just
70
enough to survive. Enough to appropriately compensate our people," Bugia stated.
Additionally, Templo stated that the majority of malls granted rent discounts, which
significantly reduced his costs for Gino's Shangri-La and Serendra locations.
In addition, Bisnar, M (2021) stated in her article entitled, Seeking
reassurance: How the restaurant industry can recover, the impact of Covid-19 on
informal and upscale dining may be long-lasting. Due to the cessation of business
lunches at high-end restaurants, restaurants that rely on them are now struggling
to
generate
revenue.
Additionally,
several
businesses
reduced
client
entertainment spending this year, opting for at-home arrangements. This raises
the question of whether these establishments will continue to thrive once business
contacts resume normalcy.
2.2 Supplier Power
Table 7 shows the assessment of the competitive forces of selected
restaurants in terms of Supplier Power.
Table 7
Competitive Forces of Restaurants in Batangas in terms of Supplier Power
Item
Mean
Interpretation
1. See the suppliers as significant stakeholders of the
sector and play a crucial role in its restructuring and future
evolution.
3.50
Strongly Agree
2. Believes that labor exerts a lot of pressure on its
profitability.
3.44
Agree
3. Is the major customer of its suppliers.
3.14
Agree
71
4. Is not the only market of its suppliers.
3.14
Agree
5. Prefer sticking to specific suppliers because the
switching costs from one supplier to another are high.
3.25
Agree
6. Believes that the market is dominated by a few large
suppliers who dictate prices and volumes supplied.
3.16
Agree
7. Source the materials and other inputs from specific
suppliers due to lack of substitutes (there exist monopoly
suppliers).
3.01
Agree
8. Can manufacture some inputs in-house other than
buying from suppliers.
2.99
Agree
9. See the suppliers be influential in the determination of
the quality and price of the final products being offered to
customers.
3.35
Agree
10. Are able to obtain discounts from suppliers as
opposed to other businesses.
3.29
Agree
3.23
Agree
COMPOSITE MEAN
Table 7 reveals the mean score of the assessment of the competitive forces of
restaurants in terms of Supplier Power. A composite mean score of 3.23 indicates
that most of the respondents had agreed that the supplier power is moderately
evident in the restaurant industry. The table also showed that the majority of the
respondents agreed that suppliers are significant stakeholders of the sector and
play a crucial role in its restructuring and future evolution meaning that suppliers
are an important part of the business and also are influential in determination of
the quality and price of the final products being offered to customers with a mean
score of 3.50 and 3.35, respectively. According to Jonathan Davies (2021), there
are several benefits associated with supplier relationship management. It can
72
reduce costs, a restaurant can strive for cost savings over a long period of time by
cooperating with a trusted supplier. This will also reduce other problems such as
quality issues, delays, availability problems. It can also minimize price volatility
because the supplier gives its consumer a fixed price in exchange for expanding
contract terms. In the study of Emrah ONDER and Nihan KABADAYI (2015), the
main purpose of the supply chain is to build good relationships between chain
members to serve customers accurately. Therefore, definitive operation levels
between supply chain members determine the quality of the final product/service
in a supply chain. In relation to the study, finding a supplier isn't just about finding
who offers the lowest price but who offers good quality products, who delivers on
time, and the accuracy of the product. That is why it is important that a restaurant
owner establishes a good relationship with the supplier because a long-term
relationship means that both parties have trusted each other therefore
misunderstanding will be prevented and issues will not be a problem. In addition
to this, establishing a satisfactory relationship with suppliers will also make the
business gain long-term savings which are generally preferable to short-term
savings.
Table 7 also shows that respondents are least agreed that restaurants source the
materials and other inputs from specific suppliers due to lack of substitutes (there
exist monopoly suppliers) with a score mean of 3.01. This result indicates that
customers are loyal to their supplier that even though they have choices they stay
with their specific supplier. According to the study of (Ronade 2012), there are
three most important causes of customers being loyal to one company. First, if the
73
products and services are considered under customer's preferences. The second
is if the products and services are considered under customers' value. Lastly, if the
customer's experiences, perceptions, and beliefs about the company as well as
about its products and services are highly valued. These are the things that need
to be considered in order to gain loyal customers. Findings also reveal that
respondents have least agreed that restaurants can manufacture some inputs inhouse other than buying from suppliers with a score mean of 2.99. It indicates that
buying inputs is way better than making them and also it is way more beneficial to
the business. According to the article in Greenlight (2017), suppliers provide a
company with the services it uses in providing goods and service to its customers.
It stated that without a solid relationship with its suppliers, a company can not offer
its own customers a consistently high quality product or service. According to this
article, adapting a more strategic approach with key suppliers can have immense
long-term benefits for companies. In relation to this, a report from management
consultancy Efficio Consulting (2013) showed that there are very few companies
that are enhancing supplier relationships, despite the fact that it's not easy to find
reliable suppliers. In addition to this, the article also stated that look at suppliers
more than just someone who supplies goods and/or services. They must be your
allies because the kind of relationship that customer and supplier have can
influence the success of the business.
2.3 Buyer Power
Table 8 shows the assessment of the competitive forces of selected restaurants in
terms of Buyer Power.
74
Table 8
Competitive Forces of Restaurants in Batangas in terms of Buyer Power
Items
Mean
Interpretation
are designed for a specific customer target group.
3.01
Agree
2.
experiences change in customers’ demands from
time to time.
3.39
Agree
3.
believe the power of the customers (large or
small) influences the prices that are charged for
restaurant products and services.
3.38
Agree
4.
considers the concentration of customers in a
particular geographical area when expanding its
operations.
3.49
Agree
5.
prefers Word-of-Mouth as a source of information
as it is the most effective in reaching out to customers
and deeply influencing other potential customers.
3.44
Agree
6.
prefers Print Media such as flyers, newspapers,
etc. as a source of information since these are the most
effective in reaching out to customers and deeply
influence other potential customers.
3.08
Agree
7.
prefers Electric Media such as TV Commercials,
Social Media posts, and other online advertisements as
a source of information since these are the most
effective in reaching out to customers and deeply
influence other potential customers.
3.58
Strongly Agree
8.
ensures that the customers are well informed
about the products and services being offered in the
market.
3.70
Strongly Agree
9.
finds it difficult for the customers to switch from its
products to the competitor’s products.
3.11
Agree
10.
offers standard products and services and
differentials are considered low.
3.25
Agree
1.
75
COMPOSITE MEAN
3.34
Agree
Table 8 presents the mean score of the assessment of the competitive forces of
restaurants in terms of buyer power. It can be seen on the table that the
respondents agreed that buyer power is moderately evident, hence, affecting the
profit maximization of the industry, with a composite mean of 3.34. The majority of
the restaurant owners strongly agreed that restaurant owners should ensure that
customers know the products and/or services that their business offers in the
industry with a mean of 3.70. Customers can be reached through social media and
other online platforms. Approximately 3.6 billion people are using social media
worldwide, and in 2025, it is projected to increase to almost 4.41 billion people.
Social media has been an integral part of internet usage in our everyday lives
(Statistica Research Department, 2021). With the statistics given, social media
could be a great platform for every restaurant owner to promote their businesses
and attract potential customers.
Table 8 also shows that the respondents considered the electronic media, such as
TV commercials, social media posts, and other online advertisement materials, the
most effective in reaching out to customers, and it has had a great influence in
attracting customers with a 3.58 mean. According to Vinerean et al. (2013), the
internet enables businesses to reach a wider customer base. Social media,
especially social networking sites, provide a virtual space for customers to interact
and communicate through the internet, which might be an important factor in
76
customer socialization. Getting a wider audience through boosting and promoting
online businesses greatly impacts the brand image of a restaurant business.
Meanwhile, the respondents least agreed with the statement that the restaurant
business is designed for the specific customer target group, with a mean of 3.01.
The respondents also least preferred print media, such as flyers, newspapers, etc.,
to be used as a source of information in attracting customers, with a mean of 3.08.
This implies that the restaurant owners focus on a large group, not solely focusing
on a specific group of customers like their age and location. In the same way, the
respondents preferred electric media compared to print media since the latter
would cost them more. Print media is a tangible medium wherein it requires more
effort to produce than the former. This was supported by Quinn (2017). According
to the researcher, many people seemed to prefer reading the news from
applications on their phones because it is convenient to read. In the past years,
many print media companies have diversified from the traditional printing of news
to posting it on digital platforms such as Facebook, Twitter, Instagram, and other
websites. In particular, millennials seemed to use more digital media than reading
printed materials. This means that the world is evolving today because of the
pandemic, and the electric media seemed to be more favored because of its
convenience.
As stated in the study of Panghulan (2021), customers are one of the significant
stakeholders in restaurants. They have a significant influence on the success of a
business. Restaurant owners should pay attention to the factors that will satisfy
their customers, not only the brand image of the restaurants but also the prices
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and quality of the products and services being offered. Through this, the restaurant
can gain a competitive advantage since customers have a great influence on the
image of the business within the industry.
2.4 Threat of Substitution
Table 9 shows the assessment of the competitive forces of selected restaurants
in terms of the Threat of Substitution.
Table 9
Competitive Forces of Restaurants in Batangas in terms of Threat of
Substitution
Items
Mean
Interpretation
1. Has limited potential returns now due to substitutes that
places a ceiling on the prices it can profitably charge.
2.85
Agree
2. Has been replaced by homemade foods that
significantly affected the demand since the pandemic
started.
2.59
Agree
3. Becomes low on profit due to the grocery stores and
supermarket chains’ budget-friendly and personalized
meals.
2.84
Agree
4. Gains fewer customers because of the substitutes, such
as grocery stores and supermarket chains, with their
accessibility and ready-to-eat recipes.
2.55
Agree
5. Has substitutes that inhibit product or service
differentiation amongst customers.
2.81
Agree
6. Has a high customer loyalty rate.
3.56
Strongly Agree
7. Competes with substitutes that are easily available and
where new ones are emerging.
3.08
Agree
8. Operates with customers high switching costs when
choosing another service or restaurant.
2.79
Agree
78
9. Sees the substitutes as those that are attractively priced
and have better performance offers.
2.86
Agree
10. Has producers that are less profitable than that of its
substitutes’.
2.76
Agree
2.87
Agree
COMPOSITE MEAN
Table 9 presents the Mean score of the assessment of the competitive forces of
restaurants in terms of Threats of Substitution. A composite mean score of 2.87
indicates that the majority of the restaurant owners had agreed that threats of
substitution is moderately evident in the selected restaurants in Batangas. The
majority of the respondents strongly agreed that they had a high customer loyalty
rate and can compete with substitutes that are easily available and where new
ones are emerging with the mean score of 3.56 and 3.08, respectively. Therefore
they are not that threatened by the substitutions. Customer satisfaction has a very
important role in the business because dissatisfied customers tend to switch with
another restaurant and might as well ruin the restaurant’s reputation with the other
customers. This is supported by the study of Nurnajihah Rosli, Syafiqah MD Nayan
(2020) that customer satisfaction is important to the business organization
because it is the leading indicator of consumer repurchase intentions and loyalty.
It can also keep the company brand ahead of competitors and also can be a help
to the growth of the business because people tend to pay more for better customer
retention. According to him, satisfied customers can be a sign that the business is
running successfully. Therefore, restaurants must prioritize customer satisfaction
79
to gain profit and a good reputation so that customers will trust them and will be
loyal to them so that the business will not be threatened by substitution.
Findings also reveal that respondents are least agreed that restaurants get fewer
customers because of the substitutes, such as grocery stores and supermarket
chains, with their accessibility and ready-to-eat recipes. These items score a
weighted mean of 2.55. Restaurant owners are also least agreed that they had
producers that are less profitable than that of its substitutes with a score mean of
2.76. In accordance with the findings, it indicates that restaurants had many loyal
customers and that substitutes aren't threatening them as well as restaurants are
still profitable. According to (Ouedraogo and Koffi, 2018), there is intensive
competition in the restaurant industry. Owners must focus on innovative ideas to
attract new customers and to retain current customers because it helps to improve
existing products and services and create satisfaction among customers.
Competition is everywhere, it is not something that one business can avoid, that is
why the stronger ones remain and the weaker ones are eliminated. According to
Agaba (2020), customer satisfaction is being overlooked in the food and drink
industry. Every business needs a lot of customers, every single day they should
attract new loyal customers and it is only possible when customers receive a very
satisfying service. The results obtained from this study showed that customer
satisfaction is always involved. Satisfaction is affected (negatively or positively) by
food quality, price, ambiance, service quality. Therefore all of this should be
balanced because this is the way to make customers fully satisfied and that it has
a great effect on the profitability of the business. In order to have a loyal customer
80
and increase profitability, customer satisfaction should be prioritized and be put
first. It is believed that a company can generate success if it provides superior
value to its customers than its competitors (Kiani et al., 2019).
2.5 Threat of New Entrants
Table 10 shows the assessment of the competitive forces of selected restaurants
in terms of the Threat of New Entrants.
Table 10
Competitive Forces of Restaurants in Batangas in terms of Threat of New
Entrants
Items
Mean
Interpretation
1.
has utilities and machines that are used in
serving the food and are working incapacity.
3.18
Agree
2.
differs from any other restaurants with its
food and service being served and delivered.
3.34
Agree
3.
has menu prices that are affordable and of
quality.
3.65
Strongly Agree
4.
has a high customer loyalty rate.
3.59
Strongly Agree
5.
has high start-up costs.
2.94
Agree
6.
has unique assets needed to run the
business
3.38
Agree
7.
undergoes a critical process or procedure
to conduct a start-up.
3.13
Agree
8.
sets high standards in obtaining customers
for new competitors.
3.38
Agree
9.
sets high standards in acquiring or
obtaining needed inputs for new competitors to
compete efficiently.
3.35
Agree
81
10.
needs a license if it plans to open a new
branch.
3.53
Strongly Agree
COMPOSITE MEAN
3.34
Agree
The composite mean showed that the respondents agreed that the Threat of New
Entrants is moderately evident and influences the restaurants with a composite
mean of 3.34. Most of the respondents offer menu prices that are affordable and
of quality and have a high customer loyalty rate with a mean of 3.65 and 3.59,
respectively. This indicates that due to the high competition in the restaurant
industry, owners have been paying attention to the prices and quality to prevent
customers from switching to new same businesses. Whereas, having a high startup cost and undergoing a critical process or procedure to conduct a start-up ranked
last having a mean of 2.94 and 3.13, respectively.
To support the claim, the study of Panghulan (2021) stated that product
differentiation has been relatively low because all restaurants are offering the
highest quality product and services. Start-up costs are relatively low, also. One
factor is the franchise component of the industry new business obtains ownership
which lowers the initial cost of a start-up. Another factor is that most of the
restaurant owners are engaged with Sole Proprietorship which has low capital
requirements and is easier to conduct. Despite having high competition in the
restaurant industry and a weak product differentiation, most of the respondents
have a high loyalty rate from their customers. As cited in the study of Diab et al
(2016), customer satisfaction is considered as one of the significant factors of
82
customer loyalty. In the industry, it is found that satisfied customers are more loyal
to the restaurant compared to those with less level of satisfaction. The customers
who are satisfied with the service and products being provided are more likely to
revisit the restaurant and more likely to recommend the restaurant to other
potential customers.
3.
Comparison of assessment of the Competitive Forces of the selected
restaurants
This part of the study shows the comparison of the competitive forces of selected
restaurants in Batangas on the profile of the respondents. It includes Competitive
Rivalry, Supplier Power, Buyer Power, Threat of Substitution, and Threat of New
Entrants.
Table 11
Comparison of the Competitive Forces of Restaurants in terms of Form of
Business Operations
Forms of Business Organization
Competitiv
e Rivalry
Supplier
Power
Mean
VI
Mean
VI
Mean
Sole
Proprietorship
3.428
4
A
3.200
0
A
Partnership
3.431
8
A
3.312
5
Corporation
3.568
2
SA
3.316
7
Variables
Buyer
Power
Threat of
Substitutio
n
Threat of
New
Entrants
VI
Mean
VI
Mean
VI
3.296
6
A
2.811
9
A
3.3136
A
A
3.487
5
A
3.037
5
A
3.3375
A
A
3.491
7
A
3.050
0
A
3.5250 SA
83
Limited
Liability
Company
2.909
1
A
3.000
0
A
3.000
0
A
2.700
0
A
3.0000
Legend:
VI – Verbal Interpretation
SA – Strongly Agree
A – Agree
Table 11 shows the difference in the respondents’ assessment of competitive
forces in terms of forms of business operation. The findings presented that in terms
of competitive rivalry, corporations resulted to have the highest degree of rivalry
among the other forms of business organization. It means that the rivalry is highly
evident in the restaurant business owned by a corporation. Meanwhile, rivalry is
moderately evident and garnered a lowest weighted mean in the limited liability
company.
The supplier power is moderately evident among all forms of business organization
however, sole proprietorship resulted to have the highest weighted average while
limited liability got the lowest with a mean of 3.2000 and 3.0000 respectively.
The table also revealed that buyer power is also moderately evident among all
forms of business. It was also revealed that corporation got the highest mean of
3.4917 and limited liability ranked as lowest with 3.0000 mean.
Corporation still ranked the highest in terms of threat of substitution while limited
liability ranked as lowest. The threat of substitution is moderately evident in the
four mentioned forms of business organization.
A
84
Lastly, the threat of new entrants has been highly evident in restaurants owned by
a corporation with a weighted mean of 3.5250 while it is moderately evident in
limited liability company with a mean of 3.0000.
Overall, the limited liability company revealed to be consistent in ranking as the
lowest in the five forces. This may be due to the number of respondents who
participated to the survey under the said profile. Meanwhile, corporation almost
garnered the highest weighted mean in the five forces. The reason for the
significant consistency of a corporation strongly agreeing that those competitive
forces are the basis for maximizing profitability is about its continuous lifespan,
separate legal existence, ability to acquire capital, transferability, taxation and
other legal affairs, that makes it competitive and able to maximize its profit with
abundant factors and capabilities to pursue unlike other form of business
operations like limited liability company having been the lowest but did not disagree
in all forces.
Table 12
Comparison of the Competitive Forces of Restaurants in terms of Number
of Employees
Number of Employees
Variables
1-9
employees
Competitiv
e Rivalry
Supplier
Power
Buyer
Power
Threat of
Substitutio
n
Threat of
New
Entrants
Mean
VI
Mean
VI
Mean
VI
Mean
VI
Mean
VI
3.4219
A
3.201
6
A
3.325
0
A
2.807
8
A
3.301
6
A
85
10-99
employees
3.4610
A
3.228
6
A
3.321
4
A
3.050
0
A
3.442
9
A
100-199
employees
0
n/
a
0
n/
a
0
n/
a
0
n/a
0
n/
a
200 and
above
employees
4.0000
A
4.000
0
A
4.000
0
A
4.000
0
A
4.000
0
A
Legend:
VI – Verbal Interpretation
A – Agree
Table 12 shows the difference in the respondents’ assessment of competitive
forces in terms of number of employees. The findings revealed that in terms of
competitive rivalry, restaurants who employed 200 and above resulted to have the
highest degree of rivalry among the other forms of business organization while
having 1-9 employees ranked as the lowest.
The supplier power is moderately evident among all number of employees
however, restaurants with 200 and above employees resulted to have the highest
weighted average while those who have 1-9 employees got the lowest with a mean
of 4.0000 and 3.2016 respectively.
The table also revealed that buyer power is also moderately evident among all
number of employees. It was also revealed that those restaurant business who
employed 200 and above got the highest mean of 4.0000 and having 10-99
employees as lowest with 3.000 mean.
86
Restaurants who have 200 and above employees still ranked the highest in terms
of threat of substitution while with 1-9 employees ranked as lowest. The threat of
substitution is moderately evident in the four mentioned number of employees.
Lastly, the threat of new entrants has been moderately evident in restaurants who
have 200 and above employees with a weighted mean of 4.0000 while it is also
moderately evident in 1-9 employees but with a lowest mean of 3.3016.
In conclusion, under all factors that are compared to competitive forces competitive rivalry, supplier power, buyer power, the threat of substitution, and the
threat of new entrants, restaurants with 200 employees and above consistently
ranked the highest weighted average. In contrast, restaurants with 1-99 employees
have the largest count (64) of respondents, and those with 200 and above
employees have the lowest count (2) of respondents.
To conclude the comparison of competitive forces with number of employees, the
frequency of respondents is one major factor as 200 and above employees is
consistent with the mean of the competitive forces. Meanwhile, it is also evident
that a restaurant with fewer employees tends to be low in competitive rivalry,
supplier power, buyer power, threat of substitution, and threat of new entrants
having diverse effects to the restaurant itself either negative or positive. It is
frightening for the restaurant of 1-9 employees to have low competitive rivalry
because it indicates incompetent and lower position in the industry as well as
having low buying power and threat of new entrants while low in threat of
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substitution and supplier power means positive impact to the restaurants despite
of having 1-9 employees.
Table 13
Comparison of the Competitive Forces of Restaurants in terms of Number
of Years in Operations
Number of Years in Operation
Variables
Competitive
Rivalry
Supplier
Power
Buyer
Power
Threat of
Substitution
Threat of
New
Entrants
Mean
VI
Mean
VI
Mean
VI
Mean
VI
Mean
VI
1-5 Years
3.4209
A
3.211
A
3.3370
A
2.8185
A
3.3037
A
6-10
Years
3.6273
SA
3.2100
A
3.4400
A
2.8900
A
3.5000
SA
11-15
Years
3.4848
A
3.5333 SA 3.4333
A
3.2667
A
3.5667
SA
15 Years
and
Above
3.3846
A
3.2308
A
2.9692
A
3.3385
A
A
3.2615
Legend:
VI – Verbal Interpretation
SA – Strongly Agree
A – Agree
Table 13 shows the difference in the respondents’ assessment of competitive
forces in terms of the number of years in operation. The findings indicate that in
terms of Competitive Rivalry 6-10 years has the highest weighted mean, while 15
years and above has the lowest. It indicates that rivalry is highly evident in the
88
restaurants who is operating 6-10 years and moderately evident to those who is
operating 15 years and above
11-15 years reaches the highest weighted mean of 3.53 which explains that the
supplier power is highly evident. On the other hand, 6-10 years have the lowest
weighted mean of 3.21 which explains that the said force is moderately evident.
Those restaurants operating for 6-10 years ranked the highest weighted mean of
3.44 which indicates a moderate evidence of buyer power while 15 years and
above had the lowest weighted mean with a total of 3 26 and shows a moderate
evidence also.
In terms of Threat of Substitution, all of the given profiles shows a moderate
evidence as to the level of threats of the said force. 11-15 years has the highest
while 1-5 years has the lowest with the total weighted average of 3.27 and 2.82,
respectively.
Lastly, the Threat of New Entrants is highly evident to those restaurants operating
for 11-15 years with a highest weighted mean of 3 57 and moderately evident to
those who operates for 1-5 years with the lowest with the total weighted mean of
3.30.
It can be concluded that under all variables such as Competitive Rivalry, Supplier
Power, Buyer Power, Threat of Substitution and Threat of New Entrants, those
restaurants with eleven to fifteen years of operation ranked the highest weighted
average. There are 54 restaurants operating for one to five years while there are
only three restaurants operating for eleven to fifteen years. It can be inferred that
89
those restaurants that are new in the industry are afraid to fail and are more
focused on surviving, especially in times of pandemic. While those restaurants who
operated for eleven to fifteen years are more comfortable and are confident that
they can survive and adjust in any situation.
Table 14
Comparison of the Competitive Forces of Restaurants in terms of Type of
Restaurant
Type of Restaurant
Variables
Competitive
Rivalry
Supplier
Power
Buyer
Power
Threat of
Substitution
Threat of
New
Entrants
Mean
VI
Mean
VI
Mean
VI
Mean
VI
Mean
VI
Cafe
3.5354
SA 3.3222
A
3.4056
A
2.6667
A
3.3889
A
Family
Style
3.3506
A
3.1500
A
3.2679
A
2.8500
A
3.1607
A
Fine
Dining
3.3523
A
3.1062
A
3.2313
A
2.9437
A
3.3813
A
Fast Food
3.5758
SA 3.3556
A
3.4889
A
3.0333
A
3.5500
SA
Legend:
VI – Verbal Interpretation
SA – Strongly Agree
A – Agree
Table 14 shows the difference in the respondents’ assessment of competitive
forces in terms of the type of restaurant. The findings presented that in terms of
competitive rivalry, fast food restaurants resulted to have the highest weighted
average of 3.58 while family-style restaurants had the lowest weighted average of
3.35. It indicates that in fast food restaurants, competitive rivalry is highly evident
and in fine dining being the lowest is moderately evident.
90
In terms of supplier power, fast food restaurants ranked the highest, and fine dining
restaurants ranked the lowest with a weighted mean of 3.36 and 3.11, respectively.
In terms of buyer power, fast food restaurants ranked first having a weighted mean
of 3.49 while fine dining restaurants ranked last having a weighted mean of 3.23.
In terms of Threat of Substitution, fast food restaurants also got the highest rank,
and cafe restaurants got the lowest rank with a weighted average of 3.03 and 2.67,
respectively.
In terms of Threat of New Entrants, fast food restaurants ranked the highest with
a weighted mean of 3.55 indicating that the said threat is highly evident while
family-style restaurants ranked the lowest with a weighted mean of 3.16 indicating
that threat of new comers is moderately evident.
It can be concluded that under all variables, competitive rivalry, supplier power,
buyer power, the threat of substitution, and the threat of new entrants, fast food
restaurants consistently strongly agreed that those competitive forces are the basis
for maximizing profitability. In a fast growing market of fast food restaurants, having
an awareness of the five forces can help businesses understand the structure of
its industry and shape strategy that would help them be profitable and less
vulnerable to attack by the competitors. While family style restaurants seemed to
have the lowest mean on the competitive rivalry. This may be due to having a small
type of business compared to other types of restaurants. Fine Dining and cafes
restaurants see the supplier and buyer power, and threat of substitution as the
least basis for profit maximization, respectively. There are 28 family-style
91
restaurants and it is the highest in terms of quantity and fine dining restaurants got
the lowest having a quantity of 18 among those restaurants mentioned.
4. Proposed Program to maximize the profitability of restaurants in
Batangas
92
93
94
THE RESTAURANT SYMPOSIUM
ROADMAP TO INDUSTRY PROFITABILITY
Objectives
●
Provides in-depth knowledge about Porter’s Five Forces and how it affects
the profitability of a restaurant business.
●
Helps
each
restaurant
owner/manager
to
establish
harmonious
relationships and build a strong connection to support each other through sharing
of strategies and some coping mechanisms during a pandemic
●
Restaurant owners/managers will gain awareness and know what to
improve or what to change in their strategies on profit maximization
Description
The researchers’ proposed program regards the concerns of this study:
competitive rivalry, supplier power, buyer power, the threat of substitution, and the
threat of new entrants of the restaurants mainly cafes, family-styles, fine dining,
and fast-foods. This was based on the analysis of survey questionnaires to
enhance the findings of the research.
With the ultimate goal of creating a competitive advantage in the restaurant
industry, a one-day symposium will be conducted which encourages participation
from restaurant managers and owners in Batangas City, Lipa City, Tanauan City,
and Sto. Tomas. Topics considered for the one-day symposium include analyzing
the restaurant industry and creating and sustaining superior performance. The
95
symposium will begin with a simple introduction of the program, followed by the
main topic which is Porter’s Five Forces, the testimony of some owners/managers
from different types of restaurant (Family Style, Café, Fine Dining, and Fast Food
restaurants), and public forum between the invited resource speakers and
attendees.
Settings
The Symposium: Roadmap to Industry Profitability is to happen on
March 19, 2022, from 7:00 in the morning until 4:00 in the afternoon at
Aquamarine Recreation Center, Lipa City, Batangas. This is participated by
restaurant owners/managers from Batangas City, Lipa City, Tanuan City, and
Sto. Tomas. There will be resource speakers that are prominent for this industry.
Topics to be discussed:
PATH 1: Why walking into restaurants is so important
1.1 The intensity of competition in the restaurant industry
1.2 The power of supplier power
1.3 The power of the buyer
1.4 The substitution affects the profitability of the restaurant business
1.5 How newcomers/new players affect the profitability of the restaurant
business
PATH 2: How to climb and sustain superior performance
96
2.1 The Business Profile
2.2 Single-Supplier Strategy
2.3 Getting Into Buyer’s Brain: Segmentation
2.4 Product Differentiation Strategy
2.5 Business Start-Up
PATH 3: Testimonies
3.1 from Family Style Restaurant Owner/Manager
3.2 from Cafe Restaurant Owner/Manager
3.3 from Fine Dining Restaurant Owner/Manager
3.4 from Fast-food Restaurant Owner/Manager
PROGRAMME
TIME
ACTIVITY
PERSONS INVOLVED
7:00 - 7:45 am
Registration
7:45 - 8:00 am
Invocation & Opening Remarks
8:00 - 8:05 am
Recognition of Attendees
8:05 - 8:15 am
Orientation about the Program
Flow
8:15 - 8:20 am
Introduction
Speakers
to
the
Restaurant
Owners/Managers
Resource
PATH 1: WHY WALKING INTO Antonio
“Tony
Boy”
97
8:20 - 9:05 am
9:05 - 9:15 am
9:15 - 10:00 am
RESTAURANTS
IS
SO Escalante
IMPORTANT?
(Antonio’s Group of
1.1 The intensity of competition in Restaurant, owner)
the restaurant industry
1.2 The power of supplier
1.3 The power of buyer
Intermission Number (Song)
Breaktime
Don Wilson
PATH 1: WHY WALKING INTO Fernando H. Baylosis
RESTAURANTS
IS
SO (F.
Baylosis
IMPORTANT?
Restaurant, owner)
1.4 The substitution affects the
profitability of the restaurant
business
1.5 How newcomers/new players
affect the profitability of the
restaurant business
10:00 - 10:30 am
SYMPOSIUM ACTIVITY
10:30 - 10:50 am
PUBLIC FORUM
10:50 - 10:55 am
Intermission Number (Dance)
10:55 - 11:05 am
Take-away Sharing
11:05 - 12:05 nn
Lunchtime
12:05 - 1:05 pm
PATH 2: HOW TO CLIMB AND
SUSTAIN
SUPERIOR
PERFORMANCE
2.1 The Business Profile
2.2 Single-Supplier Strategy
2.3 Getting Into Buyer’s Brain:
Segmentation
1:05 - 1:25 pm
SYMPOSIUM ACTIVITY
1:25 - 2:25 pm
PATH 2: HOW TO CLIMB AND Fernando H. Baylosis
SUSTAIN
SUPERIOR (F.
Baylosis
PERFORMANCE
Restaurant, owner)
Antonio “Tony Boy”
Escalante
(Antonio’s Group of
Restaurant, owner)
98
2.4 Product Differentiation Strategy
2.5 Business Start-Up
2:25 - 2:45 pm
PUBLIC FORUM
2:45 - 3:00 pm
Merienda Time
3:00 - 3:30 pm
PATH 3: TESTIMONIES
3.1 from Family Style Restaurant Fernando H. Baylosis
Owner/Manager
3.2
from
Cafe
Restaurant
Owner/Manager
3:30 - 4:00 pm
PATH 3: TESTIMONIES
3.3 from Fine Dining Restaurant Antonio Escalante
Owner/Manager
3.4 from Fast-Food Restaurant Maine Mendoza
Owner/Manager
4:00 - 4:05 pm
CLOSING REMARKS
BREAKDOWN OF EXPENSES
EXPENSES
QUANTITY
COST
AMOUNT
Activity & Souvenir Materials
Notebooks
80 pcs
80.00
P 6,400.00
Ballpens
80 pcs
30.00
2,400.00
Face masks (cloth)
80 pcs
20.00
1,600.00
Ecobag
80 pcs
120.00
9,600.00
Shirt
80 pcs
150.00
12,000.00
1,135.00
2,270.00
Token for Resource Speakers
Jack Daniel’s Black Label Tennessee
2
99
Honey (700ml)
Chivas Regal Scotch Whisky (700ml)
2
989.00
1,978.00
Wine glass
4
280.00
1,120.00
Venue
Aquamarine Recreational Center
10,000.00
Food & Catering Services
25,000.00
Host
5,000.00
Other Expenses
Contingency Fund
TOTAL ESTIMATED EXPENSES
1,000.00
P 78,368.00
100
Chapter V
SUMMARY, FINDINGS, CONCLUSIONS, AND RECOMMENDATIONS
This
chapter
presents
the
summary,
findings,
conclusions,
and
recommendations drawn from the results obtained in assessing the competitive
forces of restaurants in Batangas. The respondents are composed of selected
restaurant owners/managers from the four key cities in Batangas. Moreover,
recommendations were based on the findings and conclusions of the study.
Summary
The occurrence of the COVID-19 pandemic brought economic fallout most
especially in the restaurant industry, the crisis not only affected the restaurants but
also the consumers buying foods for their everyday hustle. Thus, the researchers'
objective was to identify the factors affecting the restaurants during their operations
at the surge of the pandemic and how they can survive while maximizing their profit
despite the economic conflict they have been experiencing. The objective of this
study was to evaluate restaurant profit maximization in terms of Porter's Five
Forces, which are used to analyze how well the food business, predominantly
restaurants in Lipa City, Batangas City, Tanauan City, and Sto. Tomas operate as
a means of survival throughout the pandemic.
The first objective was about the profile of respondents which are identified
through the form of business organization, number of employees, number of years
in operation, asset size, and location. The next objective was to consider the
competitive forces of restaurants in terms of the five forces namely, competitive
101
rivalry, supplier power, buyer power, threat of substitution, and threat of new
entrants. The third objective is about the comparison of the two attributes
contributing to the profitability of the restaurants through their profile and as to the
competitive forces of the industry. This comparison concluded a proposed program
through a one-day symposium as an output of the study.
In the process of data collection, convenience sampling was used in
selecting the respondents of the study since they will be selected based on their
availability. The questionnaire sheets consist of two parts. First part is for the
respondents profile while the second part of the questionnaire consists of the
variables used in conducting the research. Those were presented to the panelists,
grammarian, statisticians, faculty experts, and panel chairman. The statistical
treatment towards the data gathering were frequency and percentage for the
measurement of profile of respondents. The mean analyzed how respondents
assess their restaurants' competitive forces in terms of five forces, as determined
by a variety of factors, including financial situation, management team
organization, and ability to take risks, and in terms of competitive rivalry, supplier
power, buyer power, threat of substitution, and threat of new entrants.
Findings
From the analysis and interpretation, the researchers have come up with
important findings that were obtained from questionnaires disseminated to 340
restaurants with only 80 responses.
102
1.
Remarkably, the study revealed that in terms of forms of business
organization, the majority of the respondents engaged in a sole proprietorship
business having a frequency of 59 and a percentage of 73.8. This was followed by
corporations with a frequency of 12 and a percentage of 15.0; restaurants
engaging in a partnership with a frequency of 8 and a percentage of 10 and
restaurants engaging in limited liability corporations with a frequency of 1 and a
percentage of 1.3.
It also revealed that in terms of a number of employees, the majority of the
restaurants had 1-9 staff/employees with a frequency of 64 and a percentage of
80. This was followed by 10-99 employees with a frequency of 14 and a percentage
of 17.5 and restaurants who have 200 and above employees having a frequency
of 2 and a percentage of 2.5.
Moreover, it found out that in terms of a number of years in operation, the
majority of the respondents were operating 1-5 years having a frequency of 67.5.
This was followed by restaurants that are operating 15 years and above with a
frequency of 13 and a percentage of 16.3; 6-10 years with a frequency of 10 and
a percentage of 12.5 and 10-15 years having a frequency of 3 and a percentage
of 3.8.
Furthermore, it was revealed that in terms of the type of restaurants, most
of the respondents have a family-style restaurant having a frequency of 28 and a
percentage of 35. It was followed by cafes and fast-food restaurants with the same
103
frequency of 18 and a percentage of 22.5. Lastly is the fine dining restaurant with
a frequency of 16 and a percentage of 20.
2.
The assessment of the competitive forces of the restaurants in terms
of competitive rivalry shows the overall composite mean of 3.44. The respondents
value their customers and listen to their opinions for the benefit of the business
and it got the highest mean of 3.85 with a verbal interpretation of strongly agree.
On the other hand, the composite mean in terms of supplier power garnered 3.23.
The assessment shows that the respondents see the suppliers as significant
stakeholders of the sector and they play a crucial role in its restructuring and future
evolution with the highest mean of 3.50 with a verbal interpretation of strongly
agree. Meanwhile, the assessment of competitive forces in terms of buyer power
accumulated a composite mean of 3.34. The respondents strongly agreed they
ensure that the customers are well informed about the products and services being
offered in the market with the highest mean of 3.70. In terms of the threat of
substitution, the assessment obtained a 2.87 composite mean. Most of the
respondents strongly agreed that their business has a high customer loyalty rate
having a mean of 3.56. Moreover, the composite mean in terms of the threat of
new entrants obtained a 3.34 composite mean. The respondents agreed with the
assessment of competitive forces in terms of competitive rivalry, supplier power,
buyer power, the threat of substitution, and the threat of new entrants. It indicates
that the five forces influence the profitability and growth of the restaurants.
3.
The study indicated the comparison of the responses in the
respondents’ profiles. Based on the findings, it can be noted that in terms of
104
competitive rivalry, supplier power, buyer power, the threat of substitutes, and the
threat of new entrants, corporations garnered the highest mean of 3.57, 3.32, 3.49,
3.05, and 3.53 respectively. Whereas, limited liability companies got the lowest
mean of 2.91, 3.00, 3.00, 2.70, and 3.00 respectively.
In a comparison of the number of employees to the assessment of
competitive forces in terms of competitive rivalry and supplier power, restaurants
that have 200 and above employees obtained the highest mean of 4.00 of the
same while those restaurants that have 1-9 employees had the lowest mean of
3.42 and 3.20 respectively. In terms of buyer power, restaurants that have 200 and
above employees had the highest mean of 4 and those that have 10-99 employees
had the lowest mean of 3.32. Meanwhile, in terms of the threat of substitution and
threat of new entrants, restaurants that have 200 and above employees
consistently obtained the highest mean of 4 while those that have 1-9 employees
obtained the lowest mean of 2.81 and 3.30 respectively.
This study indicates the comparison of the respondents’ assessment of the
competitive forces in terms of the number of years in operation. Based on the
findings, it can be noted that in terms of competitive rivalry, restaurants that were
operating for 6-10 years obtained the highest mean of 3.63 while those that were
operating for 15 years above obtained the lowest mean of 3.38. While in terms of
supplier power, the restaurants that were operating for 11-15 years had the highest
mean of 3.53 and those that were operating for 6-10 years had the lowest mean
of 3.21. Moreover, in terms of buyer power, those restaurants that were operating
for 6-10 years garnered the highest mean of 3.44 while 15 years above garnered
105
the lowest mean of 3.26. On the other hand, in terms of the threat of substitution,
restaurants that were operating for 11-15 years obtained the highest mean of 3.26,
and those that operated 1-5 years obtained the lowest having a mean of 2.82. In
the threat of new entrants, those that are operating for 11-15 years had the highest
mean of 3.57 while those that are operating for 1-5 years obtained the lowest
having a mean of 3.30.
In the comparison of the type of restaurant regarding competitive rivalry, the
fast-food restaurants had the highest mean of 3.58 and the lowest mean equivalent
to 3.35 mean is the family-style restaurants. Regarding supplier and buyer power,
fast-food restaurants garnered the highest mean of 3.36 and 3.49 respectively
while fine-dining restaurants garnered the lowest mean of 3.11 and 3.23
respectively. On the other hand, in terms of the threat of substitution, those
restaurants that are engaged in fast-food obtained the highest mean of 3.03 while
those restaurants that are engaged in a cafe obtained the lowest mean of 2.67. In
terms of the threat of new entrants, the cafe restaurants obtained the highest mean
of 3.39 while family-style restaurants obtained the lowest mean of 3.16.
4.
The proposed program to maximize the profitability of the restaurant
in Batangas is a one-day symposium aiming to provide in-depth knowledge about
Porter’s Five Forces that would help the respondents improve their business, thus
creating a competitive advantage among the competitors in this time of pandemic.
The symposium will feature empirical or experiential-based presentations
prepared by the resource speakers who have developed skills and knowledge in
profit maximization through Porter’s Five Forces.
106
Conclusions
Based on the findings, the researchers formulated the following conclusions:
1.)
Most of the restaurants operating in selected cities of Batangas are
family-style and are operated by sole proprietorship with a total number of 1-9
employees from 1-5 years of operations.
2.)
Based on the results, the assessment of the competitive forces of the
restaurants in terms of competitive rivalry, supplier power, buyer power, the threat
of substitution, and threat of new entrants were interpreted as strongly agreed by
the restaurant's owner. For the reason that the five forces influence the profitability
and growth of the restaurants.
3.)
Based on findings when grouped according to profile, the selected
restaurants in the four key cities in Batangas which are operated by sole
proprietorship under family-style restaurants that were operating for 1-5 years and
had 1-99 employees had the highest weighted mean in comparison with the
respondents assessment for their competitive forces.
4.)
There is a proposed one-day symposium for restaurant owners and
managers in improving their strategies on profit maximization and creating a
competitive advantage over their competitors in this time of pandemic. The
researchers come up with a proposed program through a one-day symposium that
aims to provide a depth of knowledge about Porter's Five Forces and how it affects
the profitability of a restaurant business. This may help to improve the restaurant's
competitiveness among the industry.
107
Recommendations
In furtherance of the research, the researchers have found out the
recommended solutions that will be effective and efficient during the pandemic and
are expected to be advantageous in the next several years concerning profit
maximization and sustainability of the restaurants.
1.
It is highly recommended that restaurants first rework the three
components of the strategic management process such as environmental
scanning, strategy formulation and implementation, and evaluation and control.
The environment scanning will help them be considerate and aware of the trends
in the market during the current situation especially that they will further understand
and determine the internal and external factors closely connected to their business
(e.g SWOT analysis). With this, the products that will be made and served to the
consumers can be as unique as possible from its competitors.
2.
Managers are recommended to take greater action towards the
formulation and implementation of strategies as resulted from the reworked
environmental scanning. They will know how to capitalize the strengths and
opportunities valuable and sustainable for the business to continuously maximize
its profit and shareholders’ wealth. They are also recommended to minimize the
weaknesses and threats directly striking the business and preventing it towards
stability and success in the survival of the fittest during the pandemic.
3. It is highly recommended that restaurants still assess their performance
through customer evaluations, whether they be online or dine-ins. In relation to
108
that, the restaurants can easily distinguish the customers’ changing preferences
about the menus, service, and setting that are relevant for the competitive
advantage and develop customer’s positive feedback afterwards. As this will
increase the profitability and quality of the service that a restaurant is offering.
4.
Based on the observations, restaurants are recommended to adjust
their 4Ps: Product, Place, Promotion, and Pricing that are pertinent to the current
situation and are flexible to be adjusted in the next few years, considering the
various sub-factors affecting them. The product as the object of the business and
where best quality and quantity are best expected to continuously meet the primary
goal of business - to earn profit. The place or the location of the restaurant must
be evaluated if it is still competitive and recognizable than the others. It is likewise
vital to consider the promotion of the restaurants to communicate and advertise
the business and its products through the most used platforms – social media.
5. It is recommended to reconsider their expenses and minimize the costs.
The researchers suggest using different types of pricing, such as relative menu
pricing, penetration pricing, and competitive-based pricing. The first one
psychologically helps the customers to buy the product that is more costly than the
others, but they will become impulsive ordering the costly than the regular or
ordinary priced one, thus, resulting in more sales and higher profit. The second is
proven to be competent in setting up the prices of businesses as this brought the
sales upward mainly during “buy 1, take 1” promos and other kinds of sales
marketing. And the last, to establish a great position in the market is to gain
109
competitive prices not far from the market price but also not too close to new
entrants and existing ones.
6.
Lastly, it is quite important that restaurants choose the best suppliers
and assess whether they will maintain revenues and expenses, and next to
navigate the point where profit should start maximizing itself. The restaurant
owners/managers are also recommended to stick to single suppliers to enable
loyalty and intimate relationships and build harmonious partnerships.
7.
To the future owners and managers of restaurants, it is recommended
to establish a strong foundation through the cycle of strategic management for
sustainability and stability and consistently manage the costs while building great
connection with the customers through feedback and evaluation.
8. For the future researchers, it is recommended to pursue the techniques
used in determining the competitive advantage of the restaurants and comparing
them to the profile of the respondents and among its competitors.
110
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