This paper looks at the seven steps for analysing the strategic architecture of a chosen company; in this case the chosen company is Mitchells & Butlers plc (M & B's), which is a large pub operating chain based in the UK. The seven steps are as follows:
Identify the time-path of performance.
Identify those few resources at the heart of the business.
Identify the inflows and outflows causing the core resources to grow, develop, or decline.
Identify how flows of each resource depend upon existing levels of resources and other drivers.
Combine the resource dependencies from Step 4 into a strategic architecture of the business.
Be quantitative to see how the strategic architecture explains performance to date and into the future.
Revising policy to uprate performance.
These steps have been taken from Warren (2002), from chapter 6. The above steps have been examined and interpreted to make them relative to the analysis of the strategies of M & B's, as will now be demonstrated through the duration of the paper. Rather than look at each step individually, this paper instead looks at the core business resources separately and then incorporates the seven steps. This should then provide a clearer perception of the effectiveness of the strategic architecture within M & B's.
COMPANY BACKGROUND
M & B's is a long-established pub and pub restaurant chain operating around 2,000 properties, with its portfolio containing many different brands, including the likes of Scream Pubs, Harvester, Toby Carvery, Sizzling Pub Co., Ember Inns, O'Neill's, All Bar One and many more; also included in this portfolio are many historic and famous pubs including the Horseshoe Bar in Glasgow. The company uses this assortment of properties and brand names to target various market groups.
The company itself is focused on utilising all of its operating brands in order to concentrate "on long-term growth in the informal, value-for-money, eating and drinking-out markets" as stated on the strategy page of the M & B's website.
THE SEVEN-STEP PROCESS
The first step involves looking at the time-path of performance for M & B' s; looking at the website for the provided information, the company has placed emphasis on growth in the eating-out and drinking markets.
Identified resources (step 2) for Mitchells and Butlers plc are those of people (employees), customers and also property. These have been identified as the main core resources for a number of reasons, the first reason being that these are what the company has heavily based the strategies on. Also, paying due attention to Warren (2002), it can be seen that these resources have both tangible and intangible elements to them, and cover the demand and supply areas of the business. The fact that that the core resources are mainly tangible enable more accurate measures to be made, such as the number of employees who enter and leave the company, and the number of properties in the entire company and within each brand.
Property is a resource relevant to the strategies of M & B's as it makes up the portfolio of brands which make up the company. Property is used effectively by M & B's in order to create a diverse experience for customers, and to drive forward the sales targets of the company. STEP 3 - M & B's have been acquiring properties in key sites to fulfil company targets, and have slowly been selling off those which are not providing adequate returns. The company took the time to acquire pub restaurants in the early 2000's to allow for the growth of the eating-out area of the business. In 2006, M & B's purchased 239 pub restaurants from the Whitbread group, and gained a further 44 in 2008 in exchange for 21 Express by Holiday Inn properties. This was to allow for the full utilisation of all viable properties and sites.
The next step in this process is to identify what factors and drivers affect the flows of the property resource. Such things as the economic recession may have played a major role in the company selling off some of its properties which have proved to be slow revenue turners and those which carry high costs. Other drivers include those of successful site location, for example Lauders Bar is conveniently located in a prime city centre precinct, ideal for passing trade and also for theatre goers. Site location is a driver as when the company locates a good site with high potential, they will most likely purchase the property, hence the inflows. M & B's will definitely sell off those properties which they feel are in poor locations and are not performing well.
Step 5 basically merges steps 3 and 4; with respect to M & B's, this can be demonstrated through the importance of property management. It can be seen that factors within and also out-with the control of the company can impact on property as a resource. Figure 1 details some of the most important property movements within M & B's.
Figure 1:
Date
Announcement
19 September 2008
Completion of acquisition of Whitbread pub restaurant sites in exchange for Lodges
31 July 2008
Mitchells & Butlers plc to acquire 44 pub restaurants from Whitbread PLC in exchange for 21 Express by Holiday Inn Lodges
31 July 2006
Completion of acquisition of Whitbread pub restaurant sites
21 July 2006
Acquisition of 239 pub restaurant sites from Whitbread PLC and update on return of funds
21 July 2006
Acquisition of 239 pub restaurant sites from Whitbread PLC and update on return of funds presentation slides
Source: www.mbplc.com
With respect to customers as an important core resource, there are inflows and outflows that may cause this resource to grow and / or decline as part of step 3. One of the main inflows that can also act as an outflow is that of expendable income; if potential and current customers have more money to spend, then they are more likely to eat and drink out. However, disposable income has recently being tighter as a result of the economic recession, causing the company to have to adapt its short-term strategies in order to keep sales up and shareholders satisfied.
The fourth step for the customer resource is the fact that customers may be driven by competitive rivalry. The main competitor perceived by M & B's to be the biggest threat is Wetherspoons. To deal with this, M & B's place heavy emphasis on offering value for money to its patrons, offering food and drink deals in an attempt to keep current custom and entice new business. This will ultimately affect the flows of customers for the company, as a successful strategy will produce inflows, whereas if the competitor has the competitive advantage then this is likely to take customers away from M & B's, which is an outflow. Figure 2 is used to showcase the ideal of value and efficiency for being a key driver for customers. M & B's have recently halted the offering of food table service in one of its key pubs, Lauders. This has unfortunately caused an outflow of customers from the pub, as a high number of food regulars are dissatisfied with having reduced staff contact. The company is very much focused on its pricing strategy, which is another driver for customer flows. This has aided greatly in creating a faster rate of customer turnover and allowed to the food side of the business to grow. Effective pricing strategies can encourage potential customers, regardless of income level, to start visiting the M & B's business in a variety of locations, rather than visiting a competitor.
Figure 2:
Value Channel
A chart showing the positioning of each channel within their markets and highlighting the key driver of visit (between price and quality), the alternatives available (between stay at home or other pubs or restaurants) and the service model between efficiency and full table service.
Source: www.mbplc.com
As part of step 5, combining the previous two steps appears to already have been done by M & B's. Looking closely at their strategies available on their webpage, it does portray the fact that the above issues have been considered by the company. Analysis of their financial statements show that though they are not quite as large as their main rival Wetherspoons, the company is still attracting a large volume of customers successfully.
As within any business, people make it work; employees are a key part of any hospitality business, and so they should be considered as a core resource. In the third step of the process, it can be shown that the hospitality sector in general has very high level of labour turnover. Inflows of staff occur during the high seasons such as summer and also Christmas, when businesses such as M & B's are most likely hitting their peak trading levels. Minimum wage conditions may mean that staff often leave to find better paid employment.
Step 4 for employees - in focus of food growth, M & B's have concentrated on improving the knowledge skills base of its food workers. Acting as a driver for improving the rates of labour turnover, the company has achieved this by focusing on the on-going training and development of its staff. An example was the creation of a kitchen skills academy in January 2009, indicating how serious the company is about looking after its employees. As a result of placing a lot of attention on staff and staff training, the company has actually been successful in increasing contribution per labour hour while serving larger volumes of food and drink with the use of less staff hours. Figure 3 demonstrates the importance of employees for driving forward the volume of customers in pubs on a unit and corporate scale.
Figure 3:
Value and volume
Value and Volume Cycle
Source: www.mbplc.com
Now, it is time to bring all the core resources back together to enable a better analysis to occur. In step 6, the performance indicators are found in easily on the company website; the investors section has proved to be the most informative and most factual section, and it does make a lot of common sense to use that as a starting point for measuring the resources.
NOTES FOR CONCLUSION
I have had to carefully consider as to what makes a resource; using the Warren (2002) book I have been able to follow the general rule of thumb in distinguishing what makes a core business resource.
Generally, the seven step process can be viewed as being very closely knit; on a personal note I feel that some of the steps are very similar causing a bit of repetition, but this may also be as a result of me not using further sources of information in order to clarify my understanding.
