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Din Tai Fung The Art Of The Dumpling Case Solution
DTF uses a status quo strategy. This can be understood by the fact that the company has not paid much attention to global expansion despite receiving an increasing number of partnership requests. Instead, it keeps expanding in Taiwan by opening nine outlets so far and planning to open on the tenth one. The business can be seen to be following a risk-averse approach. DFT experienced strong sales growth and higher profitability over the past years. Its strong brand name established, which resulted in long waiting queues of customers for dining.
Following questions are answered in this case study solution
Conduct a situational analysis of the firm entering into a USA city New York.
How can DTF expand so fast? What are their mode of expansion? Understand the formula / methods and apply it for entering New York City.
Provide 2 expansion method and justify it.
Analysis of their resources, capabilities, technology-savvy to go overseas expansion. What quality control they have?
Draw the business level strategy (DTF is Status-Quo Strategy) used by the firm.
Criticize Suitability & Sustainability based on Strength, Weakness, & Competitive position.
Based on Barlett & Ghosal, analyse & determine the firms internalization strategy.
Quote & justify any 3 pressure for Global integration & any 3 Local responsiveness.
Case Analysis for Din Tai Fung The Art Of The Dumpling
1. Conduct a situational analysis of the firm entering into a USA city New York.
i. PESTEL Analysis
Political stability is high. However, uncertainty has risen under Trump’s presidency due to deteriorating relations with Iran and other countries.
New York contributes a significant portion to the GDP of the US economy. It experienced an average inflation rate of 2.22. Hence, the cost of doing business is high, but it gets offset by profitability.
The influx of tourists is high in the city. Also, it is the most populous city of New York with more than 8 million people residing in the city, which also adds up to the increased demand.
The technological influence is high in the city due to a number of IT firms that have sprung up. Also, as it is a commercial hub, any new technology is the first to be introduced, changing the competitive landscape.
Air pollution is significant in New York. The New York City department of sanitation and department of environmental protection are regulatory bodies that monitor and impose fines if the regulations are breached.
A few legal requirements need to comply before a new business can start operating in New York City. Hence, these might add up to increased costs and be time-consuming.
ii. SWOT & TOWS
2. How can DTF expand so fast? What are their mode of expansion? Understand the formula/methods and apply it for entering New York City.
DTF was able to expand fast by entertaining partnership requests from businesses in different countries. It selected partners that shared the same philosophy as DTF and ensured uniform service quality. Furthermore, the local chefs in the overseas branches were required at the head office for personal training, and a team of local staff would be sent to train the overseas staff to ensure standardized business philosophy. To enter New York City, DTF can send the servers and cooking staff to New York to ensure smooth cultural interaction and learn the ways of the locals and integrate them with the current practices. This would eliminate any cultural ambiguity.
3. Provide 2 expansion method and justify it.
The two expansion methods that the company can use to enter New York include franchising or through a joint venture. Franchising would secure it a royalty fee and also allow Din Tai Fung to have control over the franchisee business. Hence, it would be able to determine the source of supply and have a centralized kitchen and procurement department to ensure quality isn't being compromised. Furthermore, it would be able to control the servers and the chefs by providing them with regular trainings on dealing customers.
Hence, the cost of expansion would be low, and the business will be able to have a stand in the New York market quickly. This approach is also consistent with the Ansoff matrix in which DTF will engage in product development by offering existing Chinese food offering to the American customers. Once the market is developed, DTF can move to diversification depending on the customer needs by introducing new cuisines that would attract the average American customer.
Joint Venture can be considered as another option for expansion. By joint venture, DTF will have direct control over the business operations as losses and profits will be shared by both the venture parties. Furthermore, the joint venture would allow DTF to learn insights about the New York market and the culture of the people. Since the market would be new, local culture knowledge would be essential to devise the marketing strategy and the way to deal and manage customer satisfaction. It should also be noted that New York has a diverse set of customers due to tourism and immigration, hence joint venture would allow Din Tai Fung to get cultural exposure and at the same time secure its financial investment. The insight could then be used by the business to leverage across its entire global chain to achieve synergies in terms of customer satisfaction.
4. Analysis of their resources, capabilities, technology-savvy to go overseas expansion. What quality control they have?
To ensure efficient supply chain and ordering of materials that get finished in the kitchen, the company has launched order management system in which the branches submitted their order request to the central kitchen which would then put forward the list to the procurement department. Furthermore, its indoor positioning system of staff can also be seen an advancement towards improving the customer service quality. The technological system of the business is quite effective in managing the HR needs by managing the shift scheduling and work hours of staff which is consistent with their business philosophy and which drives its staff motivation and gets reflected in better customer service.
Furthermore, the point of sale meal order system is a useful tool to record the customer preferences and serving time to ensure quality. The case for overseas expansion of DTF can be justified, as it has the required resources and capabilities that would be required to operate in a new market. This is because customer satisfaction is of pivotal importance when opening a new business in a new area. DTF has all the necessary resources to ensure that it provides a quality dining experience to its customers and at the same time, ensure the high quality of its food served.
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