NANDOS Final Strategic Mgt Report

STRATEGIC MANAGEMENT

TERM REPORT

ON

STRATEGIC MANAGEMENT

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Submitted By

Section: B

Submitted To

Submitted On

April 21, 2008

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ACKNOWLEDGEMENTS

First and foremost, we would like to thank Allah for His help and granting us the ability to undertake this subject. It is by His Will that we have been able to complete our term report.

We would like to pay immense gratitude to our parents for their continuous support and encouragement in all that we have done.

Also, we would thank Mr. Javaid Ahmed for assigning this task to us, which has enlightened us further in the field of Strategic Management.

Last but not least, we would also like to thank Ms. Samar Fatima Mirza (Marketing Manager) of Nando’s for giving us her precious time and providing us with valuable information regarding the company.

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LETTER OF AUTHORIZATION

April 21, 2008

Dear Reader,

We are students of Strategic Management at IoBM and have been authorized by Mr. Javaid Ahmed to prepare a term report on “Strategic Management at Nandos Pakistan”, which is to be submitted on April 21, 2008.

The preparation of this term report required us to perform a thorough analysis of the restaurant services industry.

Sincerely,

Group Members

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LETTER OF TRANSMITTAL

April 21, 2008

Mr. Javaid AhmedHead of Management and HRD DepartmentInstitute of Business Management, Karachi.

Respected Sir,

This is the term report on “Strategic Management at Nando’s Pakistan”.

This report consists of the macro-environmental analysis and industry attractiveness, the company and competitor analysis, micro-environmental analysis and internal company resources, strategic analysis and recommendations and strategic implementation.

The report has been completed after the perpetual hard work, determination and devotion of past 4 months.

If you have any additional questions, we would be pleased to answer them.

Thanking you.

Sincerely,

Group Members

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EXECUTIVE SUMMARY

This report covers the Strategic Management Practices at Nando’s Pakistan. The first part of the report talks about Porter’s five forces and the PEST analysis to find out the attractiveness of the food industry. The food industry is reasonably unattractive as there are already various restaurants and café’s in major cities of Pakistan. In this part the EFE is also calculated and it is found out that Nando’s total weighted score is below industry average. In the second part the company and competitor analysis is carried out through CPM and it is found out that Nando’s is doing better in few areas than its competitors and relatively bad in others. The third part discusses the micro-environmental analysis. In this part the core competencies of Nando’s are discussed and value chain analysis and strategic cost management process is carried out. Also, in this part the IFE is calculated and is found out that Nando’s is doing above average in it. In the fourth part, strategic analysis and recommendations are given in which the generic strategy of Nando’s is stated which is Focused Differentiation Strategy. Also, in this part the input/matching/output model is discussed where through various matrices a number of strategies are recommended. The three main strategies that Nando’s can pursue are: Market Development, Product Development and Backward Integration. The last and the most important part is of strategy implementation in which the components of strategy implementation are employed and recommended to the board as to what the company will need to do to implement a new strategy or fine tune its existing strategy. Apart from that it is also recommended to the board the balance business scorecard as a strategic performance evaluation process distinct from the traditional financial, marketing and HR evaluation methods. In the end a diagnostic survey of primary and secondary management practices is also carried out and recommendations are given on the basis of making 4 + 2 work for Nando’s.

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TABLE OF CONTENTS

1. COMPANY INTRODUCTION AND HISTORY...........................................................................8

1.1 VISION STATEMENT..............................................................................................................121.1.1 Nando’s Vision Statement................................................................................................121.1.2 Recommended Vision Statement......................................................................................12

1.2 MISSION STATEMENT............................................................................................................121.2.1 Nando’s Mission Statement.............................................................................................121.2.2 Recommended Mission Statement....................................................................................12

2. MACRO-ENVIRONMENTAL ANALYSIS AND INDUSTRY ATTRACTIVENESS........14

2.1 PORTER’S FIVE FORCES........................................................................................................142.2 OVERALL MACRO-ENVIRONMENTAL PEST FACTORS...........................................................212.3 KEY DRIVING FORCES AFFECTING THE INDUSTRY...............................................................222.4 EXTERNAL FACTOR EVALUATION (EFE)..............................................................................23

3. COMPANY AND COMPETITOR ANALYSIS.......................................................................25

3.1 COMPETITIVE PROFILE MATRIX (CPM)................................................................................25

4. MICRO-ENVIRONMENTAL ANALYSIS AND INTERNAL COMPANY RESOURCES26

4.1 CORE COMPETENCIES............................................................................................................264.2 VALUE CHAIN.......................................................................................................................274.3 STRATEGIC COST MANAGEMENT PROCESS..........................................................................304.4 INTERNAL FACTOR EVALUATION (IFE)................................................................................33

5. STRATEGIC ANALYSIS AND RECOMMENDATIONS......................................................34

5.1 GENERIC STRATEGY..............................................................................................................345.2 INPUT/MATCHING/DECISION MODEL....................................................................................36

5.2.1 TOWS...............................................................................................................................365.2.2 SPACE Matrix..................................................................................................................385.2.3 Internal External (IE) Matrix..........................................................................................395.2.4 Grand Strategy Matrix.....................................................................................................395.2.5 Matrix Analysis and SWOT Summary.............................................................................405.2.6 QSPM...............................................................................................................................40

6. STRATEGY IMPLEMENTATION...........................................................................................43

6.1 COMPONENTS OF STRATEGY IMPLEMENTATION...................................................................436.2 BALANCE BUSINESS SCORECARD.........................................................................................46

7. DIAGNOSTIC SURVEY OF PRIMARY AND SECONDARY MANAGEMENT PRACTICES.........................................................................................................................................49

8. MAKING 4 + 2 WORK FOR NANDO’S..................................................................................52

9. References.....................................................................................................................................54

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Strategic Management

1. Company Introduction and History

Nando's believes in their flame-grilled Peri-Peri Chicken, they believe it's the best in the world.

Nando's Chicken, a miracle of life: Nando's Peri-Peri Flame-Grilled Chicken is a miracle but it didn't fall out of the sky,

no, no, this 8th wonder of the world has much more of a story behind it. A story that dates back centuries, to a time when brave men and women (it's true there were women explorers they just never got the credit they deserved) set out from Europe to explore new worlds and to discover new sea routes to lands of promise. These explorers were not afraid to live…

Exploring life: These famous Portuguese explorers were trying to establish a route to the East where it was rumored that gold could be found (read on and you will learn that they discovered a treasure that

would prove to be far more valuable than gold). The explorers realized that they would never make it around the tip of Africa all the way to the East without a stop-over to replenish and rest for their long journey ahead. They came across a spectacular landing spot in a Southern African country now known as Mozambique. It was there that they established a port. The rich and fertile lands of this sub-tropical region enticed many explorers and their families to settle far from the cold climes of a congested Europe. The Portuguese settlement began to flourish and life soon revolved around early evening feasts, with good food, good wine and lots of laughter, all in celebration of their new-found home.

This legend dates back to the 14th Century, and like all legends, each narrator adds his own flavor. In Barcelos, a small town in Portugal, a passing pilgrim was wrongly accused of theft, for which the penalty was death. Feeling threatened in a foreign village, he only had his faith to call upon. He appealed to "Our

Lady" and St. James (the patron Saint of protection) that justice be done. The pilgrim found his way to the Judge who was to decide his fate. The judge was about to commence eating a roast cockerel for his dinner. The pilgrim pleaded, "IF I AM INNOCENT, MAY THAT COCKEREL GET UP AND CROW!" The cockerel at once got up and crowed heartily. The pilgrim was released and went on his way. The cockerel has, to this day, been the symbol of faith, justice and good luck . At Nando's our policy is based on those principles and our flavor, service and quality is legendary. We have faith in our product and will do you justice with a meal to delight you and the friends who have the good luck to be entertained by you.

Institute of Business Management Page 11 of 57


Discovering PERI-PERI, the spice of life: The Portuguese explorers came into contact with African people who introduced them to a little treasure called the African Bird's Eye Chilli. Whether this fiery little chilli was indigenous to Africa or introduced was not certain, but it is certain that the rich and fertile climates were perfect for the Bird's Eye chilli to grow with

wild abandon. The African people called this fiery little chilli, Pili-Pili. The explorers tried in vain to pronounce Pili-Pili but ended up with their own version called Peri-Peri and to this day the Bird's Eye Chilli is still known as Peri-Peri. The settlers immediately experi-perimented with Peri-Peri in their cooking and because much of life revolved around food Peri-Peri became an integral part of their lives.

Peri-Peri gives life to cooking: You can imagine the delight of the culinary-adventurous Portuguese mama's, who were already in heaven with their fresh vegetable gardens and the abundance of wild meat, when they discovered the secret powers of Peri-Peri and its effects on their cooking. Peri-Peri added flavor and fire to all their food making them feel alive. The women were also delighted with the effect that Peri-Peri had on the libidos of their men and it was no wonder that they were constantly smiling. The settlers were amazed that something so small could be so satisfying.

Peri-Peri Chicken and Gold: About 413 years and 2 days after the explorers had discovered Peri-Peri, the unique Mozambican-Portuguese style of Peri-Peri chicken made its way to Johannesburg, South Africa. Gold was the reason many people rushed to Johannesburg around the 1900's in search of riches. Many Mozambique-Portuguese settlers moved to Johannesburg, the city of gold, to cash in on the frenzy. They soon realised that digging for gold

was hard work and feeding hungry miners was a much better business. They set up informal restaurants that served their famous style Peri-Peri chicken. In a small suburb called Rosettenville, south of Johannesburg one such restaurant was created. It was called Chickenland. Nando's is born: In 1987 two great friends, Robert and Fernando, fell in love with Peri-Peri Flame Grilled Chicken. They knew that the world had not tasted anything like it. They made the owner of Chickenland an offer he couldn't refuse, changed the name to Nando's (short for Fernando's) and by the end of 1987 the first Nando's was born in the humble suburb of Rosettenville, Johannesburg, South Africa. Next stop was the rest of the world...

The Nando's Barcelos Cockerel: A symbol of life. Robert and Fernando immediately set off on a journey, carrying with them the Nando's flame that would spread the Fire and Passion of Nando's to all corners of the globe.



It was no coincidence that they chose the Barcelos Cockerel as their symbol to identify Nando's around the world. They too, like the Portuguese explorers of yesteryear, believed in the legend of the Barcelos Cockerel and its association with faith, justice and good luck. But it was not just good luck that helped them share Nando's with the world, it was hard, rewarding work and the good people they met along the way that made it all possible (not forgetting the exceptional Peri-Peri Chicken that everyone loved).

Experi-perience Nando's, Experi-perience Life: From the outset, Nando's would offer customers a unique Nando's life Experience that was not only about chicken. Nando's would be about experiencing great times around the table, laughing and living to eat. It would be about having fun and never taking life too seriously. This experience would be backed up with a Nando's promise of quality. The Nando’s Escudo was created as the universal mark of Nando's quality. The Nando's Barcelos Cockerel can now be found in over 30 countries. Throughout the world Nando's believes in delivering the Nando's Experience albeit in different languages and different surroundings. And today the Nando's flame burns bright. The journey continues…

It's the people that make the chicken: Nando's would never be just about chicken and it would never be just about the two friends who started it. The entrepreneurial

spirit of Nando's soon attracted other people with fire in their bellies. They embraced the same values of pride, passion, courage and integrity spreading the fire and developing a culture unique to Nando's. Through these people the Nando's entrepreneurial spirit has become universal, proudly feeding the souls and appetites of people hungry for life. These Nando's people are known as Nandocas. They create the Nando's culture. They make our chicken what it is.

The Nandocas (Nando's people): Nando’s feel so strongly about their people that they have decided to share with people what makes their Nandocas so special: True Nandocas make life happen. They, like the 15th Century Portuguese Explorers, believe in faith, justice and good luck, always believing that if you can dream, it you can do it. They have a sense of pride in everything they do. Nandocas are team players but are not afraid to be individuals. Nandocas are interested in the solution not the problem. They are true to themselves, they have fun, and they love the sound of laughter. They work with the community to make a difference in people’s lives. They strive to make each customer experience a magical one and they continually search for adventure. But most importantly Nandocas love eating Nando's Peri-Peri Chicken more than life itself.

A Slice of Life: Allowing Nando's to flourish in each country means embracing cultures of the world. One of the best ways to capture these cultures is having an



open-minded marketing philosophy. From the start Nando's have pursued a highly effective marketing strategy which accounts for our phenomenal growth since 1987, (our aim was to change the way the world thought about chicken). We knew our chicken was unique, that our restaurants were different and that the Nando's experience was magical, so it followed that our advertising should have a fun and irreverent personality that showed the funnier side of life.

Walk into any one of our restaurants around the world and you will know you are in a Nando's, not because they all look the same - they all have their own unique characteristics and design - but because the promise of the Nando's Experience is universal. You will find the same warm friendly service, delicious chicken, and a relaxed informal atmosphere from New Zealand to Canada and in between. In our restaurants, we encourage noise, we encourage people to use their hands when eating and we encourage family gatherings in the spirit of the good old days. Our motto is that children should be heard and seen eating. Our only table manner request is that people smile and enjoy themselves. Nando's restaurants are known as Casa's, which means "home" in Portuguese. The best way to explain our open style of informal restaurants is through the wonderful saying "Mi Casa so casa - My home is your home". It is our belief that a Nando's feast should be enjoyed in a relaxed environment where the pressures of daily life are left behind. Nando's restaurants are home to the people who work in them and to our customers. Our doors are always open to anyone who wants to taste the Nando's Experience. We have Casa's on five continents around the world and it's our aim and our duty to introduce Nando's to as many people as possible. We believe the world will be a better place if everyone has a local Nando's Casa to visit from time to time.

Nando's is the cackle of the land. Nando's started offering peri-peri casual dining on the 7th May 2001 in Karachi. Succulent flame grilled chicken in lemon and herb, medium, hot and extra hot soon became everyone's favorite - for the taste as well as the experience. For the yuppies and business professionals, it is the place to be and to be seen for lunch.

Just walk into any Nando's and enjoy the light heartedness of our comfy and warm environment. You can take the peri-peri experience home with you with our take-away service as well.



1.1 Vision Statement

1.1.1 Nando’s Vision Statement

'Our vision is to create a successful global brand that can rival the really big brands of the world'

1.1.2 Recommended Vision Statement

1.2 Mission Statement

1.2.1 Nando’s Mission Statement

‘Devoted to people with an appetite for life, people who love to laugh and live to eat. At Nando's we believe in our flame-grilled Peri-Peri Chicken, we believe it's the best in the world. Taste the unique flavor and fire of our Peri-Peri chicken and we are sure you will agree’

1.2.2 Recommended Mission Statement

A mission statement is often the most visible and public part of the strategic management process, it is important that it includes all of these essential components:

1. Customers2. Products or services3. Markets4. Technology5. Concern for survival, growth and profitability6. Philosophy7. Self-concept8. Concern for public image9. Concern for employees


‘Our vision is to be the first choice in grilled food restaurant business

around the globe.’


Nando’s mission statement consisted of only 2 components namely: customers and products and services. Therefore the recommended mission statement can be as follows:


‘Nando’s is devoted to providing its customers appetite for life, who love to laugh and live to eat. At Nando's we believe in our flame-grilled Peri-Peri Chicken, we believe it's the best in the world. We aim to be the most successful grilled food restaurant in the world at delivering the best customer experience in markets we serve and to do so, Nando’s will meet its customer expectations through highest quality food prepared with leading technology and by hiring and retaining personnel with exceptional capabilities. We believe in offering quality and value to our customers and grow in such a way that creates profitability and value for shareholders and structure the society in such a way so as to improve the quality of life of the whole community. Our distinctive competence is our open style of informal restaurants, through the wonderful saying "Mi Casa so casa - My home is your home.’


2. Macro-environmental Analysis and Industry Attractiveness

2.1 Porter’s Five Forces

Applying Porter’s five forces Template to the Restaurant Industry allows us to analyze the attractiveness in terms of profitability of the industry.

A THREAT OF NEW ENTRANTS

YE

S

(+)~

NO

(–)

Do large firms have a cost or performance advantage in your segment of the industry?Are there any proprietary product differences in your industry?

Are there any established brand identities in your industry?

Do your customers incur any significant costs in switching suppliers?

Is a lot of capital needed to enter your industry?

Is serviceable used equipment expensive?

Does the newcomer to your industry face difficulty in accessing distribution channels?

Does experience help you to continuously lower costs?

Does the newcomer have any problems in obtaining the necessary skilled people, materials or supplies?Does your product or service have any proprietary features that give you lower costs?Are there any licenses, insurance or qualifications that are difficulty to obtain?Can the newcomer expect strong retaliation on entering the market?


LOW HIGH


Interpretation

Threat of Entrants are High and unfavorable in the industry. This is a real threat in a place like Pakistan where the food industry views constantly changing patterns in demand. Due to its consumer base, that is always on the look-out for new and changed places to eat. Every now and then, a new café or a restaurant opens up, out of which only a few are able to successfully survive in the long run. On Zamzama alone, there are about 20 known restaurants and cafés. Therefore, Nandos must concentrate its efforts on Differentiation Strategy, as that is key to survival in the Pakistani food industry (especially, in the major cities of Pakistan).

PEST Forces that affect Threat of Entrants

PoliticalThis can have two extreme effects on threat of new entrants. If the government brings out higher restaurant license cost and increased taxes and/or implements strict health and safety regulations along with more documentation procedures, this will increase the barriers to entry. However, if the government does the opposite by decreasing license cost and taxes or has a lenient approach to health and safety procedures, the threat of new entrants will be high. EconomicDue to the rising income disparity and the adverse economic conditions, the number of unemployed is increasing due to which the labor cost will decrease, and the up-class restaurants will be more in demand as the rich are getting richer. Thus, the threat of entrants is high because of increased profit margins in such ventures. In case of improvement in the economy, more people could afford to go out to restaurants which give more opportunities for new restaurants to come up.

SocialThe current social trend is in favor of eating out especially at expensive restaurants, thereby, increasing their demand and also owning such eat-outs is now very socially appealing thus, increasing the threat of new entrants.

Technological The rise in innovative technology has made management of restaurants very easy and the new sophisticated software now enable restaurants to run with less number of employees, thereby, reducing the labor cost. Thus, this factor increases the threat of new entrants.



B BARGAINING POWER OF BUYERS

YE

S

(+)~

NO

(–)

Are there a large number of buyers relative to the number of firms in the business?Do you have a large number of customers, each with relatively small purchases?Does the customer face any significant costs in switching suppliers?

Does the buyer need a lot of important information?

Is the buyer aware of the need for additional information?

Is there anything that prevents your customer from taking your function in-house?

Your customers are not highly sensitive to price.

Your product is unique to some degree or has accepted branding.

Your customers’ businesses are profitable.

You provide incentives to the decision makers.

Interpretation

The bargaining power of buyer is low in the industry firstly because their product is a commodity item and consumers have no choice but to continue consumption, as it is also a form of entertainment in our country. This makes the industry more attractive and profitable and the PEST forces such as increasing population is an appealing opportunity, however, the economic situation of the country brings along adverse effects on the industry. Nandos should therefore, bank on the rising income disparity.

PEST forces that affect Bargaining Power of Buyers

Political


LOW HIGH


This political factor has no direct affect on the bargaining power of buyers.

EconomicThe increasing population reduces the power of buyers. Even though the adverse economic situation of Pakistan is reducing the consumer base, it is still not making much impact on the bargaining power of buyers.

SocialThe trend is moving towards eating at restaurants, which is increasing the base of consumers, thus, reducing their bargaining power.

Technological The advancement in technology makes it possible for the buyer to gather all the information quickly and make informed decisions. Thus, this is increasing the bargaining power of buyers.

C THREAT OF SUBSTITUTES

YE

S

(+)~

NO

(–)

Substitutes have performance limitations that do not completely offset their lowest price. Or, their performance is not justified by their higher price.

The customer will incur costs in switching to a substitute.

Your customer has no real substitute.

Your customer is not likely to substitute.

Interpretation

The threat of substitutes is medium to low, as this industry does not have any real substitutes, because restaurants offer unique experiences along with their basic product i.e. food items. In Pakistan, eating out is a form of entertainment and people generally like going to specific restaurants and cafés because of their splendid experience in the past including ambience and food. Nandos should therefore concentrate their efforts on upgrading their restaurant ambience and the taste offered by them.


LOW HIGH


PEST forces that affect Threat of Substitutes

There aren’t many substitutes of the restaurant industry. However, decrease in the purchasing power of the people could lessen their visits to the restaurants thereby increasing the threat of substitutes. If better substitutes are provided to people such as more variety in the ready-to-cook foods could increase the threat of substitutes.

D BARGAINING POWER OF SUPPLIERSYES

(+)~

NO

(–)My inputs (materials, labor, supplies, services, etc.) are standard rather than unique or differentiated

I can switch between suppliers quickly and cheaply.

My suppliers would find it difficult to enter my business or my customers would find it difficult to perform my function in-house.

I can substitute inputs readily.

I have many potential suppliers.

My business is important to my suppliers.

My cost of purchases has no significant influence on my overall costs.

Interpretation

Bargaining power of suppliers is high because the inputs are not easily substituted, keeping in mind only those companies in the industries that are rather cautious about their inputs as poor quality inputs can cause them a hefty amount of business. Also, the inputs are usually of a perishable nature, thus, stock-ups are not possible, that is why reliability of suppliers is very important. Therefore, these companies usually have one or two major supplier of main inputs, who can provide good quality inputs in a timely manner. This is an unattractive aspect of this industry, that’s why; Nandos should integrate backward by probably farming their chicken, in order to eliminate this power of suppliers.


LOW HIGH


PEST forces that affect Bargaining Power of Suppliers

PoliticalIf the government grants subsidies to other chicken suppliers so that they are able to produce at the same level and with same quality as KnN, then the supplier power will reduce. If the government establishes quality standards for using hygienic meat products, the supplier power would go very high since there is only one major chicken supplier.

EconomicThe current economic situation of the country will reduce large scale companies such as KnN; thus, the supplier power will increase. Also our poultry industry is “going down”. This will further increase the power of suppliers.

SocialThis factor will not affect the input of food industry.

TechnologicalTechnology has made it possible to manage the poultry industry, thus enabling more suppliers to come in. therefore, the power of suppliers will reduce.

E DETERMINANTS OF RIVALRY AMONG EXISTING COMPETITIONYES

(+)~

NO

(–)

The industry is growing rapidly.

The industry is not cyclical with intermittent overcapacity.

The fixed costs of the business are a relatively low portion of total costs.There are significant product differences and brand identities between the competitors.

The competitors are diversified rather than specialized.

It would not be hard to get out of this business because there are no specialized skills and facilities or long-term contract commitments, etc.My customers would incur significant costs in switching to a competitor.My product is complex and requires a detailed understanding on the part of my customer.

My competitors are all of approximately the same size as I am.


LOW HIGH


Interpretation

The rivalry amongst the existing firms is moderate to high as each tries to outdo the other by offering cost-effective deals to the consumers especially during Ramadan. With the increasing rate with which these eat-outs are opening, the market share for each of them is deteriorating. Thus, each is rigorously competing against the rest. In such situation, it is usually the restaurants with small operations such as Nandos that suffer. Nandos should therefore, try to combat this issue by increasing their operation via market penetration or market development.

PEST forces that affect Rivalry among existing competition

PoliticalIf the government grants subsidies to local competitors to match the international chains, the rivalry will increase.

EconomicThe fake economic growth has increased the availability of funds; therefore the competitors can match international chains now. Thus, the rivalry will increase.

SocialThis factor will not affect the input of the Restaurant Industry.

TechnologicalTechnology has made it possible for competitors to affectively reduce cost, thereby, enabling to match each other and copy the others competitive advantage. This will increase the rivalry between competitors.

OVERALL INDUSTRY RATING

Favorable ModerateUn-

favorableImplications

Threat of new entrants 3 2 7Threat of new entrants is highUnfavorable

Bargaining power of buyers

5 1 4Bargaining power of buyers is LowFavorable

Threat of substitutes 2 1 1Threat of substitutes is Medium to LowSomewhat Favorable

Bargaining power of suppliers

1 0 6Bargaining power of suppliers is highUnfavorable

Intensity of rivalry 4 0 5



among competitorsIntensity or rivalry is Moderately HighUnfavorable

Total 15 4 23 Reasonably Unattractive

InterpretationOverall, it is an unfavorable industry as the major cities of Pakistan are swamped with many restaurants and cafes. Nevertheless, the industry position can be exploited to ones advantage, if strategically smart decisions are taken. For Nandos, the recommendations include:

Constantly innovate and bring in more competitive advantage that are unmatchable, in order to reduce the threat of new entrants.

Backward integration to reduce the power of suppliers. More effective differentiation to reduce the rivalry between Nandos and

competitors.

2.2 Overall Macro-Environmental Pest Factors

Political Factors: The political factors that mainly affect Nandos concern how the government relates to health issues concerning food items being served or brings out new regulations regarding the restaurant business. For Instance: when Bird Flu occurred in Pakistan, if the government would have asked for ban on chicken items or some strict regulations on the chicken items being served, then it would have highly affected Nandos as well. Government regulations regarding franchises or international chain of restaurants would affect Nandos in relations to itself or in dealing with its competitors.

Economic Factors: Pakistan is a developing country and the majority of the population has low purchasing power. Nandos caters to that niche of the Pakistani society that has a relatively higher purchasing power than the majority of the nation. Any economic instability or economic recession would decrease the power of a lot of consumers, decreasing the niche segment that Nandos caters to. Thus economic power does affect Nandos as people tend to spend less on eating out at relatively expensive places when they have a tighter budget. If the economy develops and more people have the purchasing power, then more people would be able to visit restaurants like Nandos.

Social Factors: The trend of eating out has been carrying on in Pakistan since a very longtime. Pakistani people have always loved eating out. It is even the main source of entertainment in Pakistan. Earlier on families would go and eat out, but since the past few years, this trend increased even further in teenagers, young adults and with corporate people. Nowadays, if we visit any restaurant such as Nandos, we get to see a diverse crowd that includes teenagers, families, couples and even corporate



businessmen. Thus eating out is becoming an increasingly important social trend which works positively for places like Nandos.Technological Factors: The restaurant business works well where the management handles the service well. To be quicker and more efficient in processing and then serving the orders, restaurants need to have better technology. To keep records of day-to-business, better technology is essentially important. Cooking also requires better equipments to work faster and better. Nandos has the essential equipment to make all of its flame-grilled items which even works towards providing healthier items by not making deep-fried products.

2.3 Key Driving Forces Affecting the Industry

The Internet and new E-Commerce opportunities

The Internet can revolutionize the entire restaurant industry by including the aspects of ordering food online. In this way consumers could be provided with more convenience and be more informed about the menus.

Increasing globalization of the industry

Global chains of restaurants such as fast food joints like KFC and Mc Donald’s have existed since a very long time now. The aspect of a global chain leaves a positive impression on the minds of the people since they tend to believe that the product is of quality and hygiene. More and more restaurants are following this trend and opening up their chains in Pakistan. This does affect the restaurant industry on a whole. Nandos is also globally widespread but it hasn’t penetrated much in Pakistan as yet.

Product Innovation

Those restaurants that have had a unique menu or recipe have been able create a strong place in the industry. People have always wanted variety in Pakistan. Any new element or uniqueness in a restaurant’s menu could give it a competitive edge in the market. Nandos has banked on this opportunity by introducing an entirely new concept adopted from South Africa.

Technological Change

Advances in technology can dramatically transform the restaurant industry. Technological developments can competitively produce significant changes in the distribution channel and logistics and reduce the costs in the value chain.

Entry or Exit of major firms

Exit of major firms in the restaurant industry can lead to changes in market shares of all the companies that compete with such firms. Entry is relatively easy and keeps on leading to increased competition in this industry.



Changes in cost and efficiency

Decrease in cost can lead to significant changes in the profit margin of the business. However increasing costs can prove to be detrimental to the businesses in the industry.

Regulatory influences and government policy changes

Regulatory influences or policy changes such as increased quality and hygiene standards can drive up costs of firms but would lead to better and safer food items.

Changing societal concerns, attitudes and lifestyles

Emerging social issues and changing attitudes and lifestyles can be powerful driving forces of industry change. The trend of eating out has been increasing consistently in Pakistan giving more opportunities for new companies to come with more and more variety for the public.

2.4 External Factor Evaluation (EFE)

Key External FactorsWeigh

t Rating

Weighted

Score

Opportunities Market Potential - growing market for fast casual 0.17 2 0.34

People's need for variety in the food and entertainmnt sector 0.10 3 0.3Rising Demand for Home delivery and Takeout 0.08 3 0.24E-commerce 0.02 1 0.02People's preference for red meat 0.06 1 0.06People's attraction towards promotional offers 0.08 2 0.16

Increasing trends for business/corporate lunches and dinners 0.05 3 0.15

Threats Economic Problems in the country 0.09 2 0.18Bird Flu Threat 0.03 3 0.09Political Problems in the country 0.02 2 0.04Growing market for cafes in Pakistan 0.06 2 0.12Availability of nandos table sauces in the market 0.03 2 0.06Only one chicken supplier (KnNs) 0.08 2 0.16



Huge variety of Restaurants, fastfood places 0.12 2 0.24Changing tastes of people 0.01 2 0.02

Total 1.00 2.18

Analysis:

Nandos, Pakistan’s total weighted score is rather disappointing considering their global background. Currently their total weighted score of 2.18 is about 20% less than the industry average of 2.5. They are not exploiting the opportunities in the food industry to their advantage neither are they combating the threats well. The most major opportunity staring them in the face is the rising market potential which has the highest weighted score of 0.34, as the trend in Pakistan is moving towards fast-casuals. To handle this opportunity they must open up new outlets to cater to the untapped vicinities. Another opportunity that has a high score of 0.3 is the peoples need for variety. The strategy for such an opportunity would be to add varieties like fancy beverages (e.g. cocktails and mocktails), sea-food and meat in their menu (available at Nandos outlets in other countries of the world). Of the threats, that needs their immediate attention is the rate with which new restaurants that “Pop-up”. To counter this Nandos must concentrate on increasing its efforts on rightly implementing their Focused Differentiation Strategy. They should further enhance their brand image to capture more loyal customers. Another threat which has a relatively high weighted score is the economic problems of Pakistan; the way this can be overcome is by establishing subsidiaries under another name. The third biggest threat with a weighted score of 0.16 is that they have only one reliable supplier; they can definitely counter this via backward integration that would include farming their own chicken.



3. Company and Competitor Analysis

3.1 Competitive Profile Matrix (CPM)

Key Success factors NANDO’S BBQ Tonite Roasters GunSmoke

Weight Rating Weighted Score

Rating Weighted Score



Market Share 0.15 1 0.15 3 0.45 2 0.3 1 0.15Local Expansion 0.12 2 0.24 1 0.12 2 0.24 2 0.24Price Competitiveness 0.10 3 0.3 4 0.4 2 0.2 2 0.2Management 0.06 3 0.18 4 0.24 2 0.12 2 0.12Financial Position 0.10 2 0.2 4 0.4 3 0.3 2 0.2Advertising 0.05 2 0.1 1 0.05 2 0.1 1 0.05Technology 0.08 4 0.32 3 0.24 2 0.16 3 0.24Customer Loyalty 0.06 2 0.12 3 0.18 3 0.18 1 0.06Product Quality & hygiene 0.20 4 0.8 4 0.8 3 0.6 2 0.4Employee Productivity 0.08 2 0.16 3 0.24 3 0.24 2 0.16Total 1.00 2.57 3.12 2.44 1.82

Analysis:

Nandos is currently being outperformed by its competitor Bar B Que Tonite, which is 17.6% ahead of it. Nandos is “slacking off” in its market share, which is one of the most important critical success factors here as compared to competitors Bar B Que Tonite and Roasters. In Local expansion, Nandos is doing the same as its competitors Roasters, GunSmoke, while Bar B Que Tonite is behind them. Although, Nandos has more outlets than the other three companies, it is point of Concern as Nandos is a global chain while the other three are local companies of a third world country. Therefore, this implies that Nandos is not capitalizing on its global strength to expand in the Pakistani market unlike MacDonald’s and KFC. Attention should be given to the price competitive and financial position as Nandos is being out done by Bar B Que tonite in the former, while in the latter, Nandos is behind both Bar B Que Tonite and Roasters. Nevertheless, Nandos is doing outstandingly well as far as Product Quality and Hygiene is concerned, their rating on this CSF stems from the strict policy on quality and hygiene of Nandos chain that Nandos Pakistan has to follow. Nandos Pakistan also has leverage in technology over its competitors due to global backing that it enjoys; however, technology does not play such an important part in the food industry as evident by its weight. To improve their competitive position, they should definitely consider opening up outlets in other major cities of Pakistan,



introducing more varieties in their menu, work on their pricing strategy and definitely bank on their global position to get a better financial advantage.

4. Micro-Environmental Analysis and Internal Company Resources

4.1 Core Competencies

A competitively important activity that a company performs better than other competitively important activities is termed as core competence. Whereas, distinctive competence is something a company does well relative to competitors. Nando’s believe in maintaining its core competencies in three main areas, that is:

1. Peri Peri Sauces

The Nando’s true and original recipe of Portuguese sauces has mounted to be its biggest strength all over the globe. The secrets of Peri Peri has always created an edge for Nando’s and added value to the over all menu of Nando’s.

2. Strong Myth and Culture

The overall theme of Nando’s is very unique and dipped in the ancient Portuguese culture. Nando’s revolves around a particular theme of cherished life, full of fun, romance flavors, captive advertisement and enriching moods spills.

The embarked history and inherited myth of Nando’s gives it a strong believes in its values being delivered through its food.

3. Distinctive Experience

Nando's offer its customers a unique Nando's life experience that is not only about chicken. Nando's is about experiencing great times around the table, laughing and living to eat. It is about having fun and never taking life too seriously. This experience is backed up with a Nando's promise of quality. If you walk into any one of Nando’s restaurants around the world, you will know you are in a Nando's, not because they all look the same, they all have their own unique characteristics and design, but because the promise of the Nando's Experience is universal. You will find the same warm friendly service, delicious chicken, and a relaxed informal atmosphere. In its restaurants, Nando’s encourage noise; encourage people to use their hands when eating and also encourage family gatherings in the spirit of the good old days.



4.2 Value Chain

1. Import of supply:

The main ingredients used at Nando’s are chicken, fries, ketchup, spices and sauces. The chicken is supplied to them by K&N, the ketchup by Knorr, the fries by McKainz, and ofcourse the essence of the recipe is the sauce imported from South Africa.

2. Operations:

The unique Nando's method of preparing Peri-Peri Chicken ensures you can eat Nando's knowing you are taking care of your body as well as satisfying your need for taste. They use nothing but the best A-grade chickens, which are then trimmed of fat and marinated for 24 hours in their secret Peri-Peri recipe. Never deep-fried, they are grilled to perfection, on a naked, open flame. During the grilling process the chickens are continually basted in your choice of lemon and herb, medium Peri-Peri, hot Peri-Peri, or if you are very brave, extra hot Peri-Peri, allowing the natural flavor and fire to bring out the best in our chickens. The finished product needs to be tasted, to be believed.

3. Delivery:


Peri-Peri Sauces from South Africa

Chicken from KnN’s

Ketchup from Knorr

Fries from McKainz

Warehouse in PakistanRestaurant/Retail Outlet Store

Kitchen

Take-Away

Dine-in

Home Delivery

Customer


Since its introduction in Pakistan, Nando’s has sold its food directly to final users using the zero level channels.

The success of Nando's Peri-Peri chicken inspired them to bottle up the Nando's passion. They realized that people might only want to eat Nando's Chicken five out of seven days a week. For the other two they would need to give them the opportunity to use Nando's Peri-Peri in their own homes. This inspired a range of, now-famous Peri-Peri Sauces, Marinades, Cooking Sauces and Perinaises, enabling people to take the flavor and fire of Peri-Peri home. When they were not eating Nando's Chicken, they were free to unleash the passion and excitement of Nando's Peri-Peri in their own kitchens. Their sauces became so popular they decided to make

4. Service:

While the rest of the restaurants in the world may call them waiters, Nando’s call them servers, because waiters make you wait and servers serve you. The servers at Nando’s make extra attraction and retention efforts. Nando's would never be just about chicken and it would never be just about the two friends who started it. The Nando's entrepreneurial spirit has become universal, proudly feeding the souls and appetites of people hungry for life. These Nando's people are known as Nandocas. They create the Nando's culture. They make the chicken what it is. Nandocas are team players but are not afraid to be individuals. Nandocas are interested in the solution not the problem. They are true to themselves, they have fun, and they love the sound of laughter. They work with the community to make a difference in peoples lives. They strive to make each customer experience a magical one and they continually search for adventure. But most importantly Nandocas love eating Nando's Peri-Peri Chicken more than life itself.

5. Administration:

Nando’s is working as a contractual vertical marketing system (VMS). A contractual VMS consists of independent firms at different levels of production and distribution integrating their programs on a contractual basis to obtain more economies or sales impact. With a VMS, the possibility of conflicts between the marketing channels is low.

6. Training:

Nando’s trains its employees not here in Pakistan but send them abroad to South Africa. The shift managers are usually the one who get the required training from there and then they give the servers on-job-training. They are taught and educated about the culture and the ‘Nando’s way of life’

While it is difficult to describe the intangible essence of Nando's, there is an Afrikaans (one of South Africa's official languages similar to Dutch) word called 'Gees', meaning spirit, (the g is pronounced with a frog-in-the-throat



effect) that is used by Nandocas to describe their 'go for it' attitude that drives everyone at Nando's.

4.3 Strategic Cost Management Process

Nandos is involved in the following activities:

1. Raw Material Supply

The secret Peri- Peri recipe has been adopted from South Africa. The import of the peri peri sauces is an integral part of the costs of the company. The Chicken supplier being KnNs also charges premium price for the high quality chicken that it provides to the company. Ketchup is supplied by Knorr and fries by Mckainz. Water is bottled water by Nestle and the Drinks contract is with Coca-Cola. Raw Material supply constitutes a major portion of their costs since they purchase from the Best Brands available. Any change in the prices of any of the suppliers affects their costs. Transportation costs for these raw materials also effects the purchases made. If the petrol prices increase it leads to an increase in the cost of the product.

2. Operations

They use the best A-grade chickens, which are then trimmed of fat and marinated for 24 hours at KnNs in their secret Peri-Peri recipe. Their marination activity is outsourced which saves them from the hassle of buying the chicken themselves and storing it before and during takes place. The chicken is never deep Fried but it is grilled on a naked open flame. This gives the aspect of a healthy product. During the grilling process the chickens are continually basted in the consumers’ choice of lemon and herb, mild Peri-Peri, hot Peri-Peri, or extra hot Peri-Peri. The costs associated with this process are of the equipment and the basting sauces. Nandos has been able to manage their operations costs effectively and efficiently.

3. Service and Delivery

Nandos waiters are known as servers. The costs of their salaries are not of very high portion as compared to the material and operation costs. However, Nandos does not compromise on compensating its employees. The servers at Nando’s make extra attraction and retention efforts for which they are rewarded. They are also trained to better serve the consumers. The shift managers are usually the ones who get the required training and then they give the servers on-job-training. They are taught and educated about the culture and the ‘Nando’s way of life’. The delievery system of Nandos is a new aspect introduced for the company. This delivery system led to extra costs of delivery boys, bikes etc. However the company is still not able to



generate as much revenue since they deliver only few items on the menu. To further enhance the delivery system Nandos would have to incur further costs to purchase better delivery equipment and be able to deliver more products on the menu. This would then help generate more revenue and offset the costs associated.

4. Administration

The administration system of Nandos works at a very restricted level where costs are concerned. In a country where electricity supply is very volatile not having backup systems could cause a lot of mismanagement. This problem is very much associated with Nandos as well since their systems are not up to date. Nandos has a very small administrative staff due to the small number of outlets in Pakistan. However if they plan to expand its operations then the company would need to invest in better management systems and skilled staff.

5. R and D

The R and D of Nando’s is not very strong in Pakistan. Product launches are not very frequent due to the low R and D budget. To capitalize on the strength of the Peri Peri recipe they need to introduce more products which require them to invest more in the research and development. The Restaurant needs to be innovative and novel in its approach. An adequate amount of budget should go to R&D, market researches and development of new tastes and deals based on theses researches. R & D require high cost but in the long run prove to be an integral part of the company in gaining a competitive advantage.

Nandos can raise its price further with the rise in perceived quality. Raised price will cover the rising cost, and high quality will justify high price. The profitability will still be maintained. The market that it caters to have an inelastic demand which is why even if a small raise in price takes place it would not affect Nandos on a large scale.



STRATEGIC GROUP MAP


Type Of Restaura

nts

Fast Food

Fast Casual

Fine Dining

Low Medium High

Overall Cost to the Consumers

Kfc, McDonalds, Pizza Hut

Cafes Gunsmoke

Roasters

BBQ Tonite

Arizona Grill, CK,5 Star restaurants


4.4 Internal Factor Evaluation (IFE)

Key Internal Factors Weight RatingWeighted

Score

Strengths Product - their Peri-Peri recipe 0.20 4 0.8Strong brand personality 0.07 3 0.21Ambience at the restaurant 0.05 3 0.15Customer Loyalty 0.02 3 0.06Marketing efforts towards the consumer base 0.05 3 0.15Strong Supplier/Distribution system 0.10 4 0.4Products have essential ingredients for a health life 0.01 2 0.02Strong Background from Africa present till today 0.01 3 0.03Selling Experience 0.04 4 0.16Strong food concept 0.02 3 0.06Strong Globalize Strategy - adaptive to culture 0.06 4 0.24Creative and unique Menu 0.02 4 0.08

WeaknessesLow Marketing Budget 0.08 2 0.16Stagnant Growth - Not penetrated 0.15 2 0.3Communication system within dept- not strong 0.04 2 0.08Weak Technological system in the Administration Department 0.04 1 0.04No Beverage Variety 0.04 2 0.08

Total 1.00 3.02

Analysis:

The total weighted score of 3.02 is 20.8% more than the average industry weighted score. The reason for such a phenomenal score is their PERI PERI recipe which is their main strength with the highest weight. Basting, marinating and table sauces are usually the most important ingredients and they are definitely quiet effectively banking on this strength. Their delicious basting and marinating sauces still remain a mystery to the rest of the world. Along with this, they are handling all their strengths really well with the exception of their healthy ingredients, which they are handling in an average way, although, it has a low weight considering the psyche of Pakistanis,



they can definitely improve their score by communicating the nutritional values of their ingredients. On the other hand, they are very poorly countering their weakness. Their main weakness is their stagnant growth with the highest weight and with only a sore of 2. There is no evidence, that they are willing to do anything about it as their outlets are still missing in the major cities of Pakistan, like Islamabad. They should definitely improve their growth rate and try to improve their marketing budget. This will definitely enhance their total weighted score. The strategies to improve the growth rate would include market development and product development via establishing more outlets and increasing the variety in their menu, respectively.

5. Strategic Analysis and Recommendations

5.1 Generic Strategy

Although, Nandos Pakistan claims to be following a Focused Differentiation Strategy, they haven’t really implemented it that well. Nandos Pakistan caters to that Niche market which requires a different taste and value and is prepared to pay the price for it. Their focus is entirely on the Upper Middle and Upper-Upper class. The strategies implemented by Nandos have not exactly catered specifically to this focused differentiation strategy.

The company needs to make effort in targeting and communicating their real value to its specific set of consumers.

Another contradiction in this strategy is that there is no outlet in Islamabad, Pakistan, where mostly the rich and the influential reside. Now is the time to really bank on the rising income disparity in the economy via increasing their prices. This will also attract more customers from upper-middle/high class, as it is quiet socially appealing for them to dine at expensive places.



Nevertheless, Nandos offers only chicken items; this is in line with their current strategy. They should really check their strategic approach or correct their focus.

Nandos should stick to its focused differentiation strategy. The following strategies have recommended for improving their strategic position:

Increase their prices to capture a larger share of their current target market. Open up outlet in the major cities of Pakistan like Islamabad and Faisalabad. Effectively communicate their niche marketing strategy to their target

audience to further emphasize what their brand actually stands for. Add value by offering an outstanding service which is unforgettable and

unmatchable.

5.2 Input/Matching/Decision Model

5.2.1 TOWS

Strengths ------- S

1. Product - Their Peri-peri recipe2. Strong brand personality3. Ambience at the restaurant4. Customer Loyalty5. Marketing efforts towards the consumer base6. Strong Supplier/Distribution system7. Products have essential ingredients for a health life8. Strong Background from Africa present till today9. Selling Experience10. Strong food concept11. Strong Globalised Strategy - adaptive to culture12. Creative and unique Menu

Weaknesses ------- W

1. Low Marketing Budget2. Stagnant Growth - Not penetrated3. Commmunication system within dept- not strong4. Weak Technological system in the Administration Department5. No Beverage/Soup Variety

Opportunities ------- O

1. Market Potential - growing market for fast casual2. People's need for variety in the food and entertainment sector3. Rising Demand for Home delivery and Takeout4. E-commerce5. People's preference for red meat 6. People's attraction towards promotional offers7. Increasing trends for business/corporate lunches and dinners

SO Strategies

1. (S1, O1 O2 O5 ) New product launches such as red meat and vegetable products2. (S1 S2 S6 S7 S8 S9 S10, O1) Open up Outlets in Existing and Other Cities such as Islamabad3. (S2 S5, O6 O7) Advertise their existing products more to attract consumers4. (S2 S5, O6 O7) Bring up promotional offers like coupons, deals, corporate discounts etc.5. (S1 S10, O3) Use the latest technology to Deliver further hot

WO Strategies

1. (W1 , O4) Create a website and use it as a medium of advertising2. (W2, O1) Penetrate into more cities of Pakistan3. (W5, O2) Introduce beverages and other food items to cater to the growing needs of the people



as well as cold items on the menu6. (S1 S2 S5 S7, O 4 O6) Create an Attractive and Interactive Website for the consumers of Pakistan

Threats ------- T

1. Economic Problems in the country2. Bird Flu Threat3. Political Problems in the country4. Growing market for cafes in Pakistan5. Availability of nandos table sauces in the market6. Only one chicken supplier (KnNs)7. Huge variety of Restaurants, fastfood places8. Changing tastes of people

ST Strategies

(S1 S10, T2) Launch red meat or sea-food products(S5, T4 T7) Use your advertising to attract consumers towards your restaurant (S1, T4 T7) Open up new outlets in Pakistan using you product advantage to be widespread and be well known. (S6, T6) Integrate backwards and maintain own chicken farm

WT Strategies

(W3,W4,T4 T7) Up date your internal technological systems to be at par with the other restaurants(W5, T7 T8) Introduce variety of Beverages to cater to the changing tastes of the people

Analysis:

The highlighted strategies are the best and most applicable to enhance the overall position of Nandos as they effectively handle the important strengths, weakness, opportunities and threats. Backed by their strengths (secret Peri-Peri recipe, outstanding global brand name) and opportunities (such as growing market for fast casual, people’s need for variety and red-meat) and with weakness (such as stagnant growth, low marketing budget) and threats (such as increased variety of restaurants, one chicken supplier and economic problems in the country) facing them, the highlighted strategies are the best and most applicable to enhance the overall position of Nandos.

Note: All these strengths and weaknesses have been explained in the IFE matrix, while the opportunities and threats have been explained in the EFE matrix.



5.2.2 SPACE Matrix

INTERNAL STRATEGIC POSITION EXTERNAL STRATEGIC

POSITION Financial Strength Environmental Stability Return On investment 4 Technological Changes -2Leverage 3 Demand Variability -4Liquidity 2 Competitive Pressures -5

Working Capital 3Price Range of Competitive Products -3

Cash Flow 3 Economic Tension -2 Political aspect -1

Average score 3 Average Score -2.8

Competitive Advantage Industry Strength Customer Loyalty -2 Growth potential 5Techonlogical Know How -2 Profit Potential 4Capacity Utilization -2 Financial Stability 3Local Expansion -5 Technological know how 5Product Quality -2 Resource utilization 5Employee Retention -1 Capital intensity 3Cost Competitive -4

Average Score -2.57 Average Score 4.17

Y axisFinancial strength 3 +1 worst to + 6 best Y axis: Environmental stability -2.8 -1 best to –6 worst3+ (-2.8) = 0.2X axisIndustry strength 4.17 1 worst to 6 best X axis: Competitive advantage -2.57 -1 best to -6 worst4.17 + (-2.57) = 1.6



Analysis:Nandos currently falls in the aggressive quadrant of the space matrix. Upon further analysis, we find that their financial position is just average as not much revenue has been generated in Pakistan as yet. The environmental stability is slightly below average and considering the current situation in Pakistan, their political aspect and economic aspect are not very good. Competitive pressures are high. As far as, environmental stability is concerned, they should bank on the opportunities facing them to the maximum, while effectively countering their threats. On the x-axis, their competitive advantage is average for which they need to pay attention to their cost competitiveness. The local expansion factor has the worst score which can be overcome through expanding in other cities of Pakistan. Innovation and communication of its value is the key here to enhance their competitive advantage. However, the industry strength saves their day as this restaurant industry has a lot of growth potential. Provided that the company is in the right strategic direction, it will see profit margins very soon through association with this industry.

The following strategies can come in very handy to better their position:

Market Development: This can be achieved through opening of outlets in other cities of Pakistan, starting with the big cities and then moving on to other cities if feasible.

Product Development: Upgrading their services, adding more facilities at the outlets such as play area, adding new product variety in chicken or launching meat or sea-food products.


+6

+1

+5+4

+3

+2

-6

-5

-4

-3

-2

-1-6 -5 -4 -3 -2 -1 +1 +2 +3 +4 +5 +6

ES

IS

Conservative Aggressive

Defensive Competitive

FS

CA


Market Penetration: Opening more outlets in existing cities: Karachi or Lahore Backward and Horizontal Integration: Moving backward as well by owning

quality farms that enhance their strength of “Products have essential ingredients for a healthy life”. Horizontal integration could be achieved by merging with similar fast casual restaurants to better enhance their capabilities.

Diversification: Although, they are slightly diversifying by catering to the retail market via selling their table sauces at the retail stores. They can further diversify by getting involved in the entertainment industry, which is a rather lucrative industry, according to the current trends as there aren’t many entertainment outlets in Pakistan.

5.2.3 Internal External (IE) Matrix

Strong Average Weak 3.0 to 4.0 2.0 to 2.99 1.0 to 1.99 4.0 3.0 2.0

High3.0 to 4.0

3.0Medium

2.0 to 2.99

2.0Low

1.0 to 1.99

Analysis:In IE Matrix, Nandos with a strong internal position and a medium EFE score is now in the 4th quadrant. This quadrant is the “Grow and Build Quadrant” which suggests that Nandos needs to build and grow its current position.

The strategies in this quadrant include: Market Development which can be achieved via opening up in cities like

Islamabad. Market Penetration that could be done by opening up more outlets in

current cities being catered that is Karachi and Lahore. It could also be done by Nandos catering to lower end of the market under a different brand name.

Product development via variety to their menu and upgrading their service. Integration including Forward, Backward and Horizontal. In case of Nandos

only Backward and Horizontal Integration makes sense.


The EFE Total Weighted Scores

1.0

The IFE Total Weighted Scores

1.0


5.2.4 Grand Strategy Matrix

Analysis:

Nandos falls in quadrant 1 since it has a strong competitive position through its Peri Peri Recipe which no other restaurant offers and the restaurant industry is a fast growing market. Currently, Nandos needs are doing alright as compared to its competitors, the reason it is slacking of is that Nandos is not communicating the value to the consumers. To enhance their strategic outlook as per their position in the first quadrant, Nandos should concentrate on aggressively advertising to communicate the real value of the product to the consumer. It can also carry out market development by opening up outlets in other cities of the country. Secondly, they can penetrate the market by opening up subsidiaries to cater to the lower end of the market, under a different brand name. Another thing they can do is product development via enhancing their quality of service, add features to their chain of restaurants e.g. kids play area and/or add more variety in their current menu. Nandos can also integrate with their competitors (horizontal Integration) to reduce their competition and increase their consumer base. They definitely backward integrate by farming their chicken; this will also reduce their supplier’s power over them.


Quadrant IVQuadrant III

Quadrant IQuadrant II

Rapid Market Growth

Slow Market Growth

Strong Competitive

Position

Weak Competitive

Position


5.2.5 Matrix Analysis and SWOT Summary

Alternative Strategies IE SPACE GRAND COUNTForward Integration X X X 3Backward Integration X X X 3Horizontal Integration X X X 3Market Penetration X X X 3Market Development X X X 3Product Development X X X 3Concentric Diversification X X 2Conglomerate Diversification X 1Horizontal Diversification X 1Joint VentureRetrenchment DivestitureLiquidation

5.2.6 QSPM

Strategic Alternatives

PRODUCT DEVELOPMENT

New Product Launches

MARKET DEVELOPMENT

Open Outlets in New Geographic

Regions

BACKWARD INTEGRATION for meat products

Strengths Weight AS TAS AS TAS AS TASProduct - Their Peri-peri recipe 0.18 4 0.72 4 0.72 1 0.18Strong brand personality 0.07 4 0.28 4 0.28 2 0.14Ambience at the restaurant 0.08 4 0.32 3 0.24 1 0.08Customer Loyalty 0.02 3 0.06 2 0.04 1 0.02Marketing efforts towards the consumer base 0.05 2 0.1 3 0.15 1 0.05Strong Supplier/Distribution system 0.04 4 0.16 4 0.16 4 0.16Products have essential ingredients for a health life 0.01 3 0.03 3 0.03 4 0.04Strong Background from Africa present till today 0.02 - - -Selling Experience of many Decades 0.04 2 0.08 2 0.08 2 0.08Strong food concept 0.03 3 0.09 4 0.12 2 0.06Strong Globalised Strategy - adaptive to culture 0.05 2 0.1 3 0.15 2 0.1Creative and unique Menu 0.01 - - -

Weaknesses


Key Internal Factors


Low Marketing Budget 0.10 3 0.3 3 0.3 1 0.1Stagnant Growth - Not penetrated 0.15 2 0.3 4 0.6 1 0.15Communication system within dept- not strong 0.05 4 0.2 4 0.2 4 0.2Weak Technological system in the Administration Department 0.05 3 0.15 3 0.15 3 0.15No Beverage/Soup Variety 0.05 4 0.2 2 0.1 1 0.05 TOTAL 1.00 2.66 3.14 1.47

Key External FactorsOpportunities Market Potential - growing market for fast casual 0.15 3 0.45 4 0.6 3 0.45People's need for variety in the food and entertainment sector 0.10 4 0.4 3 0.3 2 0.2Rising Demand for Home delivery and Takeout 0.08 - - -E-commerce 0.03 - - -People's preference for meat 0.07 4 0.28 3 0.21 4 0.28People's attraction towards promotional offers 0.08 - - -Increasing trends for business/corporate lunches and dinners 0.05 - - - ThreatsEconomic Problems in the country 0.07 2 0.14 3 0.21 4 0.28Bird Flu Threat 0.03 4 0.12 2 0.06 4 0.12Political Problems in the country 0.02 - - -Growing market for cafes in Pakistan 0.06 3 0.18 4 0.24 1 0.06Availability of Nandos table sauces in the market 0.03 - - -Only one chicken supplier (KnNs) 0.08 1 0.08 1 0.08 4 0.32Huge variety of Restaurants, fastfood places 0.12 3 0.36 4 0.48 1 0.12Changing tastes of people 0.03 3 0.09 1 0.03 1 0.03 TOTAL 1.00 1.92 1.97 1.8 SUM TOTAL ATTRACTIVENESS SCORE 4.58 5.11 3.27

Analysis:

After strategically analyzing the alternatives, we find that the most attractive strategy is the second strategy that is Opening up of outlets in new geographic regions. The reason as to why such is the case is explained below.

Strategy 1:

A close competition of strategy 2, the reason why this strategy has received a lower total attractive score is that it is relatively less effective while countering the weakness of “stagnant growth” (which has a high weight of 0.15), also while handling the



opportunity of Market Potential - growing market for fast casual (has the highest weight of 0.15), along with combating the threat of Huge variety of Restaurants, fast food places (highest weight of 0.12), than STRATEGY#2. Therefore it lost out on the most important factors, along with losing on other relatively less important strengths, weakness, opportunities and threats.

Strategy 2:

This is the most effective strategy as evident by the total attractive score as their main weakness is the stagnant growth along with a very important opportunity of great market potential for fast casual restaurants. With threats such as growing cafes in Pakistan, it is must that Nandos aggressively opens up outlets so it is in the consumers’ face. This will definitely uplift the international chain image of Nandos if it opens up in cities like Islamabad and Faisalabad along with countering the threat of economic problems in Pakistan, as the rich, influential politicians, diplomats and industrialists reside in such cities. These cities also have better political conditions; thus, will give Nandos less economic loss due to strikes, riots, etc.

Strategy 3:

This strategy of backward integration received the worst score because on the most important strength of their peri-peri sauce, it has an attractive score of 1 i.e. it is not at all attractive relative to the other strategy, as it barely capitalizes on this particular element. The only strength that this strategy is more useful for is “Products have essential ingredients for a healthy life” than the alternatives is one with lowest weight due to its relative importance. Of the weakness, the other two are better at countering the weaknesses, while it is only better than opening new outlets in other geographical areas in the opportunity: “people’s preference for meat” which has a relatively low weight of 0.07. Nevertheless, it is better at combating two important threats, namely one major supplier of Nandos and the economic situation in the country than the other two alternatives, as this strategy will enable better supply management while facing these two threats.



6. Strategy Implementation

Implementing and executing strategy entails converting the organization’s strategic plan into action and then into results. Putting a strategy into place and getting the organization to execute it well call for different sets of managerial skills. Implementing strategy is primarily an operations driven activity revolving around the management people and business processes. Executing strategy is action-oriented, make-things-happen task that tests a manager’s ability to direct organizational change, motivate people, develop core competencies, build valuable organizational capabilities, achieve continuous improvement in business processes, create a strategy supportive corporate culture, and meet or beat performance targets.

Keeping our strategy of following focused differentiation, the most recommended strategy appeared is of market development through opening of various outlets in different geographical regions, can be implemented through following ways:

6.1 Components of Strategy Implementation

Nando’s should take into consideration the below discussed components in implementing the strategy;

1. Building an organization with Competencies, Capabilities and Resource strengths to carry out the strategy successfully:

Nandos expertise in Peri Peri sauces and for grilled Chicken serves as its strength that a company is fairly good at doing and that enhances its competitiveness. The goldilocks of unique advertising and symbolic representation of the myths add strong hold of the organizational expertise in translating its culture to its operational activities and in brand transformation. Nando’s has a wide worldwide distribution and supply chain network, through which Nando’s is capable of importing its main constituent of the recipe, that is its marinades, and also the chicken from its sole supplier KnNs’. The forwarded myths and strong culture of Nando’s is it’s another strong competency, the company can articulate at by translating the corporate culture into the administrating activities. The finest chicken from KnN’s and the imported high quality ingredients do not allow Nando’s to compromise at the quality dine, which can be used to strengthen the differentiation element for the Nando’s.

Although Nandos have pool of talented, fresh and young workforce, yet they lack energy and risk taking capabilities. Therefore, Nandos should provide proper training to it workforce consistent to its lively and energetic culture.

2. Developing Budgets to steer ample resources into those value chain activities critical to strategic success:

New strategies require significant budgets. Though being a global company the resources of Nando’s are not equally or substantially granted to the local



franchisees to develop and implement strategies bringing higher initial costs to the company. In order to implement new strategies such as product development and market development, Nandos needs to increase its budget. The market development strategy would subsequently increase their distribution costs and also the product development would mean buying sea food and meat which would additionally increase the supplier costs. Therefore, Nando’s will have to have efficient budget in hand so as to align their budget with strategy.

3. Establishing strategy supportive policies and procedures Nando’s need to stabilize its strategy in two important areas of concern, with respect to the recommended strategies of product development and market development. Firstly, Nando’s need to expand its budget for its marketing and promotional activities, by not just promoting few of it products at an interval basis to the set of products marketed to the masses. This shall also inculcate to drive from audio and print marketing to media advertisements. Moreover, Nando’s also needed to revise its policies regarding the internal communication of the organization. Despite of the limited number of workforce, Nando’s still experience communication gap and dispersed functional activities, not integrated properly.

4. Instituting best practices and pushing for continuous improvement in how value chain activities are performed

Nando’s can improve on its value chain activities by implementing the strategy of backward integration which would help Nando’s drive the costs out of the value chain. Nando’s can do so by initiating its own poultry farms in South Africa in this way Nando’s would not require to import the sauces and the marinades, infact they can directly import the chicken marinated in the Peri Peri sauces, under the specialized supervision of the Nando’s at South Africa. This shall in long run will cause the company to drive costs out of its value chain, and will led all the Nando’s global franchisee’s import chicken from one place.

5. Installing information, communication, E-commerce, and operating system that will enable company personnel to carry out their strategic roles day in and day out

Nando’s is weak at its internal administrative infrastructure, communication, and e-commerce also. Despite of being a global company, Nando’s weak infrastructure hurdles in the administrative role of the company and hinders in delivering the effective results within the internal environment. The communication gap also plays a worrying role by hindering a strong corporate integrity. Moreover, lack of technical upgradation and absence of local Nando’s website is another area of concern.

Nando’s can work over all these three basic factors to strengthen its day to day operations to achieve effectives and efficiency of work.



6. Tying Rewards and incentives to the achievement of performance objectives and good strategy execution

It is essentially important that the base of the rewards and incentives shall lie on the performance of the employees. An attractive and lucrative reward system not only motivates the employees towards optimum performance but also attract the talented workforce. The strategy thus requires the good workforce to implement it, and which requires fair reward system to attract and motivate employee for the achievement of performance.

7. Creating Strategy Supportive work environment and corporate culture

Nando’s passed on culture is very strong that depicts their beleives, values, and perceptions. The unique and energetic culture possessed by Nando’s gives it a unique strength which is hard to compete at. But this culture is limited more towards literate values and publications in Nando’s Pakistan than practically adopted and implied.

One very important aspect of instilling a cultural change is that it should be more than cosmetic, i.e. it has to be complemented by actions and real movement, and such actions must be indicative of the management’s commitment to new strategic initiatives and associated cultural changes. The easiest method is to engineer some quick successes that highlight the benefits of strategy-culture change, thus making enthusiasm for the changes contagious.

In order to finely execute the recommended strategy of product development and market development, Nando’s should hold its key strength of unique culture and the energy flowing from the Portuguese times, and translate them into the strong corporate culture, and lucrative environment to work at.

8. Exerting Strategic Leadership

Nando’s strategic leadership is only possible with a strategic mind on the top. Success of an organization depends upon the sailor who boats the voyage through strong values, accepted culture, risk-taking mind set, and vigorous moves to implement the documented plans that matches with the consistent and future customer needs, and creating a competitive edge.

In order to implement, the recommended strategy, Nando’s need to have a leader with more of the risk-taking and managing capabilities, open to experiences and positive to the challenges. Mangers needs to assimilate the best possible information, research work and study, to identify problems, provide conformity that the actions undertaken in the execution of the strategy are in the right direction and learn what obstacles lie in the path of good strategy execution and develop a basis for determining what can be done to remain competitive.

Since Nando’s have a small workforce operating Nando’s in Pakistan, the corporate culture should be flatter with functional group and a strong leadership of



CEO. It is the leader who creates power and force that constitutes strategy, so that it is implemented correctly and consistently across the organization.

6.2 Balance Business Scorecard

The balanced scorecard is a strategic planning and management system that helps everyone in an organization understand and work towards a shared vision. A completed scorecard system aligns the organization’s picture of the future (shared vision), with business strategy, desired employee behaviors, and day-to-day operations. Strategic performance measures are used to better inform decision-making and show progress toward desired results. The organization can then focus on the most important things that are needed to achieve its Vision and satisfy customers, stakeholders, and employees.

The Balance Scorecard is a strategic approach and performance measurement system that enables organizations to translate a company’s vision and strategy into implementation, working from four perspectives:

1. Financial Perspective: To succeed financially, how should we appear to our shareholders?

2. Customer Perspective: To achieve our vision, how should we appear to our customers?

3. Business Process Perspective: To satisfy our shareholders and customers, what business processes must we excel at?

4. Learning and Growth Perspective: To achieve our vision how will we sustain our ability to change and improve?

Each of these perspectives is evaluated through objectives, measures, targets and initiatives.

Objectives Measures Targets InitiativesFinancial 1. To grow

revenues 2. To increase profits and ROI

1. Capturing more urban markets2. Financial RatiosAnd Trend analysis

1.Increasing revenues by 20% by the end of 20082.Increasing ROI by 15% by end of 2008

Opening outlets in Islamabad and Faisalabad along with opening more outlets in Karachi

Customer 1. Attract and retain more customers2.Stabilizing market for business executives3.Increase brand loyalty

1.Increased customer database2. Repeated customers

1. Increasing sales volume by 35% by end of 20082. Sales of brand loyalty cards by 10% by end 2008

1. Stabilizing delivery networks2.Introducing more variety based menu3. Introducing Brand Loyalty Cards

Internal 1. Backward Integration

1. Dealing with one supplier for sauces and chicken

1. Driving costs out by 40%

1. Initiating poultry farms in South Africa



Learning and Growth

1.Training and developing employees2.Accelerate R&D role3.Adopting dynamic, energetic and risk taking culture

1.Participation in Decision making2. Measuring demand for new products3. Extent of Global culture adoption

1.Pool of energetic and risk taking workforce2. Introducing new and improved products3. Cultural Transformation

1. Training of employees2. More product Research and Development3. Infusing global culture.

Financial Perspective

Nando’s foremost objective in terms of financial perspective is to increase its revenues and ROI. Since Nando’s target niche market of upper-middle and upper-upper class, the measurement of these financial objectives can be made through capturing new urban markets in Pakistan, such as in Islamabad and Faisalabad. Nando’s can open up their outlets in these cities and can develop their market in new geographical regions thus increasing revenues. Moreover, Nando’s can also expend its number of outlets in Karachi, especially in areas where it can find its potential market such as Zamzama, Boat Basin, Stadium Road, and Sharah-e-Faisal. Since a bigger proportion of revenue is generated from the business executives, opening outlets at corporate localities will benefit Nando’s with more revenues and thus increased ROI.Also since it shall take sometime for Nando’s to develop its market in Islamabad and Faisalabad, despite of expected substantial revenues, the new geographical regions may not be able to reap greater ROI for the company; and the targeted ROI from these regions shall remain comparatively low than the already operating outlets and new outlets in Karachi. Therefore, though we can target good revenues from the new geographical regions, the total contribution to ROI shall not be very attractive from these new regions for the next 7-8 months. The financial ratios and trend analysis can further measure the success of the objective attainment at the end of the operating year.

Customer Perspective

Since Nando’s is opting for market development, it can firmly constitute its objective of attracting and retaining customers with respect to the customer perspective. The majority of the customers walking into Nando’s are business executives coming for lunch. This grants a good market to Nando’s for stabilizing the market for the business executives through Nando’s Loyalty Cards.

Nando’s Loyalty CardsNando’s loyalty cards are the premium corporate discount cards, that allows 50 dines on a single card, valid for 6months at a discounted price. These cards can be bought by the organizations to use them as a short term reward or as a means or appreciation for the employee, and award them at their performance measurement. The minimum number of cards an organization can purchase shall range from 15-20. The organization shall pay for 20x 50 dines at one point of



time, thus increase in revenues for the company. This will give advance revenues for the company that is before a sale was actually made. This method is effective to increase the sales, attracting business executive, and creating more demand for the Nando’s Loyalty Cards.

Moreover, Nando’s can make its delivery network more effective and strong to meet the needs of the corporate and regular customers. Another initiative that can be taken to attract and retain customers is through more variety based menu. This will require Nando’s to introduce new products and beverages. The attainment of these objectives can be measured through increased customer database and repeated customers walking in the outlet.

Internal Perspective

Nando’s can exercise backward integration by initiating its own poultry operations through farming chickens in South Africa. Currently Nando’s is importing its Peri Peri and other main sauces from South Africa, and buying chicken from KnN’s, where these sauces are send to be marinated. This whole process of importing sauces, buying expensive chicken from KnN’s and paying extra for marinating that chicken costs a high amount to Nando’s , resulting diminishing profit margins. Moreover, the uncertain economic conditions of Pakistan regarding Bird Flu also have adverse affect over the sales of Nando’s. This can be rectified by importing chicken from Nando’s own farms under the hygienic processing, free from bird flu endangers. The chicken imported shall be already marinated into Peri Peri secretive sauces and Nando’s Pakistan can simply import the marinated chicken from South Africa, having vast cost reduction in supply chain process, and can refrigerate it at their respective outlets. The whole process can drive out the costs on an estimation of 40%.

Learning and Growth

Since the strategies proposed and the objectives undertaken revolves around the market and product development, Nando’s need to put great emphasis on the training and development of the employees in managing these objectives and to further training the new hired employees in accordance to the increasing operations in various regions. Moreover, the company needs to exert a dynamic, energetic and risk taking culture to encourage the workforce move vigorously in implementing the strategies and taking and managing calculated risks in market development process. Also since, Nando’s is recommended for product development, another objective of Nando’s shall be to accelerate the R&D activities in introducing new products, for a variety based menu. These objectives can be achieved through more product research and development, training employees and infusing global culture in Nando’s Pakistan. Nando’s shall also require to focus its targets such as generating a pool of energetic and risk taking workforce, introducing new and improved products and exercising cultural transformation.



7. Diagnostic Survey of Primary and Secondary Management Practices

STRATEGY Inferior Average Superior1 2 3 4 5

The company has a clearly articulated and widely understood strategy.The company has strong external antennae and quickly anticipates external shocks, emerging opportunities, and market downturns.The company has a very good understanding of its competitors and can anticipate competitor’s moves.The company is focused on extending/improving its core business or businesses and is committed to growing them aggressively.Subtotal of strategy score 9

EXECUTION Inferior Average Superior1 2 3 4 5

The company’s product’s and services consistently meet customer expectations.The company consistently improves employee productivity.The company’s programs and initiatives consistently achieve desired outcomes. The company’s IT systems enhance its ability to execute its value proposition.Subtotal of execution score 13

CULTURE Inferior Average Superior1 2 3 4 5

The company sets demanding performance standards for all of its employees.The company consistently raises the performance bar.The company’s culture is exciting, engaging and fun. The company has clear values that people in the company can abide by.Subtotal of culture score 13



ORGANIZATIONAL STRUCTURE Inferior Average Superior1 2 3 4 5

The company makes decision quickly.The company minimizes bureaucracy.The company’s business processes are simple.The company effectively cooperates across the organization.Subtotal of organizational structure score:

13

TALENT Inferior Average Superior1 2 3 4 5

The company has great “talent” and “bench strength” at each position.The company successfully develops talent.The company designs jobs that intrigue and challenge talented employees.The company‘s senior management is personally involved in recruiting and developing talent.Subtotal of talent score: 8

QUALITY OF CEO/BOARD LEADERSHIP

Inferior Average Superior

1 2 3 4 5The CEO is uncanny at spotting opportunities and problems before others.People at all levels of the organization feel connected to the CEO.The CEO matches words with actions (“walks the talk”).The company‘s board members know the business and have a significant stake in the success of the company.Subtotal of CEO/Board score: 13

INNOVATIVE CAPABILITY Inferior Average Superior1 2 3 4 5

The company is continually transforming or reshaping its industry.The company’s product’s, devices or innovations are better than those of its competitors.The company does not hesitate to cannibalize its existing business or



businesses.People who have new ideas are respected and enjoy high status in the company.Subtotal of CEO/Board score: 10

Total Score: 79



8. Making 4 + 2 Work for Nando’s

A list of behaviors that can support excellence in of the management practices are outlined below:

Primary Management Practices

1. Strategy

Nando’s customers want it to open up outlets in Islamabad and also in more locations in Karachi. Also, the customers want more variety in the menu. Therefore, Nando’s should build a strategy of market development and product development around what the customers really want. Similarly, Nando’s should also fine tune its strategy based on the changes that take place in the marketplace. Simply coming up with a new strategy doesn’t work; the strategy also needs to be communicated to customers and also to the employees within the organization. To do so, Nando’s should stay focused on its strategies.

2. Execution

The customers at Nando’s expect the same quality grilled food, fun and energetic environment and efficient service whenever they come to Nando’s anywhere in the world. To do so, Nando’s should put the decision making authority close to the front line employees so that they are better able to react to the changing market conditions. Nando’s should also improve its productivity at a rate that is roughly twice the twice the industry average.

3. Culture

Nando’s culture is an entrepreneurial culture which means that it should encourage energetic, dynamic and risk taking culture. The entrepreneurial spirit of Nando's can attract talented people. Therefore the people at Nando’s should embrace the same values of pride, passion, courage and integrity. In the same way, Nando’s should also empower its employees to make independent decisions so that they themselves are able to find ways to improve operations. Nando’s should continuously reward the high achievers within the organization and at the same time keep raising the performance bar, so that the employees keep on improving their performance. Rewards don’t necessarily mean financial rewards; they can also be psychological ones. Since Nando’s culture is an entrepreneurial culture, therefore, it should create a challenging and satisfying work environment. Also, Nando’s should create an environment where its people abide its core values.

4. Structure

The structure of the company should be such so that it reflects simplicity in which it’s easier to work in and with the organization. Nando’s can do so by promoting



cooperation and exchange of information across the whole company. This would further reduce bureaucracy.

Secondary Management Practices

5. Talent

Nando’s does have a lot of young employees. It can hold on to talented employees and develop them more by filling mid and high level jobs with outstanding talent. Also, creating and maintaining effective training and development programs, by designing jobs that challenge the best performers and keeping the senior management involved in the selection and development of people.

6. Innovation

Nando’s seriously needs to come up with more new and innovative products. Also, it should not hesitate to cannibalize existing products. Furthermore, Nando’s need to enhance all its operating processes.



9. References

1. www.nandos.com


http://www.nandos.com/

Documents

NANDOS Final Strategic Mgt Report