Komala Final report

EXECUTIVE SUMMARYIntroductionThe project paper submitted is aimed at doing a critical analysis of the international marketing plan for Komala‟s which is a franchise for a successful Indian vegetarian restaurant which was set up in Singapore.Komala‟s franchise to Keells - a successful conglomerate covering a wide spectrum of businesses, lead to the initial marketing plan done by Keells to introduce Komala‟s to Sri Lanka. The marketing plan had been done more or less on an abstract basis rather than a systematic plan of the different areas of concern that a fully-fledged marketing plan should have encompassed.Marketing Plan OverviewThe key issue that can be inferred from the plan is the over confidence of Keells based on its success with Pizza Hut. The survey and the marketing planning carried out by Keells for the implementation and set up of the restaurant is more in line with a question and answer scenario of the key elements of the marketing context. Even though the main areas have been covered, the depth of investigation and research seem very limited.Initially to start off with, Keells had carried out a purchasing power analysis and this has been based on the average meal price of potential competition. Taste and preferences too have been done to evaluate the flavour preferred by the locals. In addition, a location preference too has been decided to reach the potential target market. Finally an estimation of the cost of labour has been done.Few of the key weaknesses observed in the marketing plan are,∙Inadequate depth of research and analysis into the project.∙Neither is there an indication of what the proposed set-up cost would be to Keells nor is there any reference to the franchise fee payable to Komala‟s.∙Non appreciation of the target market and its needs and wants.Targeting all and sundry in fast food market rather than the idea of …share of purse‟ and the need to market to the like minded people who would frequent KFC, McDonald‟s, Pizza Hut etc.If Keells had done their homework right, it would have found out that the competition was not from the target segment of customers that it was going for as proposed in the plan. The full supply chain had not been given due emphasis, which lead to very vague and loose marketing plan. Given that the business is in the food industry means, there has to be special emphasis on the quality of the food served as well as the service standard. This has not been addressed at all in the marketing plan.In conclusion, the marketing plan is more of a free wheeling investment plan to just pick- up a brand name and set-up an operation without any justification or a proper feasibility study being carried out. Had the company spent some time to plan and analyse, it would have seen the company deteriorate over the years in comparison to set business plan targets. Without such plans, it did not have any sort of a benchmark to correct itself against, and in the absence, the only option it had was to do a trial and error method for correction which obviously did not workout as the company had to eventually close down its operations in Sri Lanka. Further, continuous losses arose due to poor response from the target market, reasons for same arising from bad quality of food to poor service standards and a variety of other issues detailed in the paper.PART 01INTRODUCTION TO THE CASE STUDYBACKGROUND OF THE KOMALA’S GROUP1The founders of Komala's are from a family of Restaurateurs who have been in the restaurant business for more than half a century. The restaurant has built up a high reputation for its quality, value-for-money authentic Indian food, as well as its commitment to cleanliness and hygiene. It is the commitment to such values that earned Komala 's popularity with the Indians, Malays, Chinese and tourists throughout its 50-year history in Singapore. Komala's, dining concepts were –fast food self-serving concept offering traditional Indian vegetarian food in a western setting.The vision of the founders is “To make quality Indian food readily available inte rnationally at affordable prices”.Food chains mostly created in the west usually do not cater to the taste of those who prefer Asian cuisine. This was the premise on which Komala‟s was founded to give Asians an option of enjoying an Indian meal with the added benefits of fast food deliveries. The existence of huge overseas Indian communities in major cities world-wide, also provided a ready market for Komala's Restaurants which can make available to them home-cooked quality meals without paying overly inflated prices. The target customers for Komala's Restaurants are teenagers, young adults, families (all races), tourists and Indians. These were the core competencies for Komala‟s. As there is a good demand for authentic Indian food in the Asian region and other western countries such as UK and USA by expatriate Indians and non Indians, it was a natural choice to expand this concept in other countries namely, India, Malaysia, Oman, Sri Lanka and Thailand.A decision was made to expand regionally and internationally by franchising the concept.Komala's Restaurant‟s service benchmark is to ensure that an order is freshly cooked and served to the customer within 3 minutes from the time an order is placed. This is made1Information from Komala‟s web site /mainfiles/AboutUs.htm suitablypossible through the use of a well-designed operations system and clear specifications of tasks for every crew in the workflow.∙Take away Service: Komala's members can place their take away orders via phone.∙Catering Services: They provide catering services for all occasions.∙They also provided home and office delivery service within Singapore.Refer Appendix 12for more background information on Komala‟s.BACKGROUND OF THE KEELLS GROUPKeells Restaurants (Pvt) Limited is a fully owned subsidiary of John Keells Holdings – a highly diversified blue chip conglomerate in Sri Lanka with more than 150 years history in tea estates, produce and stock broking, financial and non-financial services, hospitality, indenting, trading and manufacturing. Keells Restaurants holds the franchise for Pizza Hut in Sri Lanka since 1993.INTRODUCTIONWith a fair amount of Indian population Sri Lanka and as Indian food appeals to Sri Lankan palates, Keells thought it was an excellent decision to open-up an Indian food outlet in Sri Lanka to cater to this demand. There was also a vacuum in the market in providing authentic Indian food with the concept that Komala‟s professes about, hence, the decision to venture. Keels Restaurants commenced operations on 23rd February 2001 having obtained the franchise for Komala‟s.Komala‟s also wanted to venture into Sri Lanka due to its success in India and Malaysia and according to their vision. Sri Lanka was their 3rd country, which has similar tastes and preferences for Indian food.2PART 2THE FRANCHISE OPERATIONSTHE INTENTIONIn the backdrop of excellent business proposition, Keells conducted a preliminary market survey (refer Appendix 23) into the viability of franchising an Indian food outlet to successfully compete with the existing similar service providers. Keells has an excellent track record of fiercely competing in any field of business they venture into. The survey indicated that there is an approximately 2.9 million residents in and around Colombo and ideal location would be Colombo 3 and 4 zones which are accessible to their target market – up and middle income earners. The survey also indicated a rough estimate of 75,000 to 100,000 Indian Tamils although they were not the target market. However, there was a very good demand for Indian food, especially with South Indian origin.The service providers for the fast food market in Sri Lanka consist of Kentucky Fried Chicken, Tennessee Fried Chicken, McDonalds, Pizza Hut, Domino‟s, Deli France, Deli Market, various Chinese and western cuisine by various business houses, Rajabojun, Dinemor and Amarawathi (Indian food outlet) catering vegetarian and non vegetarian food and Shanmuga‟s, Shanthi Vihar, Mathurai, Greenlands and other various street corner restaurants catering exclusive vegetarian food with North and South Indian flavour.On the other hand, Komala‟s having tasted business success in Singapore having six outlets and in India with four outlets and a chef training school in Madras, had their 1st franchised outlet in August 2000 in K L - Malaysia, the 2nd franchised outlet in February 2001 was in Muscat – Oman, and Colombo - Sri Lanka was their 3rd franchised outlet which was opened in February 2001. Since then, Komala‟s has opened another franchised outlet in June 2002 in Bangkok - Thailand.3THE OPERATIONSWit h an initial capital of Rs. 25 million by Keells Restaurants, Komala‟s was opened at Union Place Colombo 02 right next to its Pizza Hut. Keells had to remit an initial franchise license fee of US$ 25,000- and thereafter monthly 4% of the turnover to Komala‟s as royalty and franchise. Keells targeted a monthly turnover of Rs. 105,000- based on their market survey, the initial capital outlay and the targeted gross profit of 65% excluding food and materials. The market competitors serving exclusive Indian vege tarian food, namely, Shanthi Vihar, Greenlands, Mathurai and Shanmuga‟s were achieving in average between Rs. 70,000- per day and Rs. 30,000- per day. Keells, with its image in the Sri Lankan business circles and its might, pitched the sales turnover in excess of Rs. 100,000- per day. This was also due to its success with the Pizza Hut operations at which, the average daily turnover was in excess of Rs. 225,000-. Keells also knew that KFC and McDonalds at the large outlets had an average daily turnover of Rs. 175,000- per day. Komala‟s assured to Keells a net profit of 12% of the turnover.Komala‟s initially provided 5 chefs to start-up and train for two months. Keells recruited rest of the staff locally. The concept adopted was self-service which was successful in Singapore and Keells assumed it was suitable for Sri Lanka too. The customers would place the order at the counter and select a suitable location in the restaurant to dine. The target was to provide freshly prepared meals within 3 minutes. However, as the sales did not pick up and as the customers did not favour in placing the order and later taking their seats for dining, the concept was changed to a conventional dining restaurant in April 2002 where stewards take the orders for meals.Komala‟s d esigned the layout for the kitchen and customer service areas (dining). Keells designed the colour, ambience and the rest of the facilities.The product range included both the north Indian and south Indian cuisine but predominantly south Indian as many Sri Lankans favoured such food variety. Product range was same as Singapore but suitably adopted for Sri Lankan palates by making it spicy. The Komala‟s style of preparation of food and the services were adopted from Singapore.Having analysed the competition, pricing was based on a 65% gross profit margin. Keells used above average entry pricing strategy for the most commonly ordered south Indian food varieties but applied a higher mark-up on food items that not sold by the competitors to keep the gross profit at 65%. However, the price was about 20% more compared to Shanthi Vihar – the market leader, whilst it was at same levels as Mathurai and about 25% less than Shanmuga‟s. Keells assumed that customers would pay this premium price for better quality food, service and facilities for a branded product “Komala‟s”.Keells planned to spend approximately 6% of the target turnover (Rs. 4 m) for advertising. Advertising was heavy on Television but Keells also used press and radio. They conducted sales promotions by way of meal deals, free drinks etc. which the competitors were not offering.As the sales volumes were not up to the expectations, after nine months of operations, Keells completely changed the menu (see Appendix 3 for the menu) to include Indian, S ri Lankan, Chinese and Western but all vegetarian food with a theme “Eat Differently”. Komala‟s was the first restaurant to introduce transcontinental menu in Sri Lanka. They also changed the style of service from self-service to that of a table service, as the customers did not favour standing in a queue to order their meals4. However, the franchise fee was based on total turnover. There was a slight improvement but that sales volume did not last. The turnover, at the first few months was Rs. 70,000- per day but after 15 months of operations; it reduced to Rs. 63,000- per day. The gross profit was less than 60% (excluding Food and materials) and the net profit was less than 5%.Although there was no political interference, during the launch of Komala‟s, S ri Lanka was still amidst civil war between the government and the LTTE. The general elections were round the corner. Keells was bit worried that the rebels would sabotage the outlets as it promotes Indian food. Keells had to sought refuge of the Sri Lankan security forces should such eventuality did occur. However, the new government was able to sign a MOU with the rebels in April 2002, which brought about an end to the hostilities. It is hard to say that there was political and economic stability at that time.4thPART 3THE ANALYSISTHE GLARING ISSUESThe objective of this report is to critically evaluate the marketing plan done by Keells group prior to the entry of the International franchise Komala‟s into Sri Lanka. The paper would assess the plan on two aspects, covering both the non-financial and financial fundamentals of international marketing. The key delivery of this report would be a review and recommendation of the International business plan.What can be inferred from the Part 2 of this report is that neither Keells nor Komala‟s carried out a market feasibility study and neither did they have a workable international marketing plan for Sri Lankan operations. The irony of the issue is the closure of the venture on 30th August 2002 due to non-appreciation of important factors in setting up such an operation and running it as a viable business opportunity. The market situational analysis carried out by Keells as per Appendix 2 is inadequate for a business enterprise of this nature where many uncalculated risks have been taken by both parties.When business was not flourishing as envisaged by Keells, they enlisted a research agency named, Key Research & Information Limited to carry out a Customer Perception Study in July/August 2002. However, it was too late in the day to analyse what went wrong, when they should have undertaken such a study before the venture got off the ground. Given the diverse ethnic background and the large presence of Indian community in the country the Keells assumed that a res taurant such as Komala‟s offering authentic Indian food would be a great success in Sri Lanka as was the case with Pizza Hut.OVERVIEW OF KOMALA’S AND KEELLS MARKETING PLANIn general, an overall picture of the industry and a somewhat detail cost of labour analysis have been carried out including the average wage of different calibre of staff and competitive environment and market potential on an overall basis. However, the depth and relevant mapping of competition seemed to have been skimmed through. Inaddition to this, there seems to be a lack of focus on which market segment the company was targeting to, which was apparent from its comparison of competition with a hawker street shop and the actual placement of the restaurant in a slightly up market environment.Even though a detail micro level analysis had been carried out to investigate the cost of labour, a proper forecasting and stemming from this a detailed marketing forecast is virtually non-existent.NON-FINANCIAL EVALUATIONThe non-financial aspects of the International Marketing plan are analysed under the various headings below as per our project proposal.Cultural AnalysisThe marketing plan does not address in depth the cultural aspects of the host country.Ideally a customer survey should have been carried out to investigate potential cultural preferences and also the various ethnic issues prevailing in Sri Lanka. Both parties assumed that Sri Lankan palates are same as Singaporean Indians or as Indians. Self Reference Criterion (SRC) had played a major role in their decision making. But distinctively, Sri Lankans are different. They like spicy food, which the Komala‟s food outlet mistakenly did not provide.There is evidence from the plan to show that the focus was more on a hawker shop or street corner restaurant which was having “good” business. However the clientele that came to Komala‟s to actually sit down and eat were the type of customers who were willing to pay a reasonable premium above the prices set by the competitors.Even though the food was excellent, the more affluent customers in the targeted segment of Komala‟s would buy mostly for take-away rather than dine in. The affluent class who actually wanted a sit down meal and be pampered by friendly and courteous staff who would greet their customers on arrival, seat them and help them make their choice from the menus available were disappointed of the clients who patronised the outlet, the method of ordering (self-service) and the prices which was set on par with non-vegetarian meals, when it was a known fact that vegetarian meals usual rank lower in price from the non-vegetarian meals anywhere in Sri Lanka.Although the concept was changed later from self-service to sit down and orderingthe meals, it did not appeal to the up and middle class clients whom the Keells was projecting.Keells in this regard underestimated the various desires of the Sri Lankan people and also their mindset as to how they want to eat and what they want to eat and also where they want to eat. This is another aspect of SRC.Virtually the entire population loves food of a spicy nature and even the Chinese food has been adapted to the Sri Lankan palate.Customer perceptionThe Customer Perception Study on Komala‟s (out of a sample of 200 persons, 111 who had visited vegetarian restaurants in the past 6 months)5 revealed the following main attributes in deciding a vegetarian restaurant to dine in.58.6% - Cleanliness49.5% - Good customer service45.0% - Appetising taste in food44.1% - Good quality food36.9% - Price of food25.2% - Easy access and parking24.3% - Value for moneyVariety of food, quick service, popularity of the restaurant, pleasant atmosphere, air-conditioning and open for 24-hours were the other attributes mentioned.The study also revealed that a major problem faced by the vegetarians when visitinga vegetarian restaurant is that their family members and/or friends, who are non-vegetarians, do not like to go to a pure vegetarian restaurant, hence, most of the vegetarians had to patronise non-vegetarian restaurants with their family members and/or friends and have a meal of their choice. Keells had not thought of this aspect5Source: Customer Perception Study on Komala‟s by Key Research & Information Limited (20th Augustwhen promoting their outlet and neither did they attract other non-vegetarian consumers.Keels should ideally have carried out a perceptual mapping of the competition and where it wanted to place it. A sample of the competition mentioned is given below for reference.QualityFig 1: Perceptual Map of vegetarian and non-vegetarian food outletsThe full clear circle denotes the actual vision that Keells wanted to position Komala‟s in the minds of the customer. However, the darker shaded circle denotes the actual position the company occupied due to the competition. This denotes the mismatch in vision or matching of the market. Due to this the company actually ended up positioned as depicted by the broken lightly shaded circle. Had proper mapping been done prior to entry into the market, Keells would have realised that the actual competition that it had was more with the non-vegetarian market and not what it was benchmarking itself with – the exclusive vegetarian market.Marketing Mix AnalysisLet‟s analyse marketing mix strategies adopted by Keells and its pros and c ons.Location (Place)The initial thoughts of the location were zone 3 and 4 of the city of Colombo, but it did not address the most appropriate location of the restaurant, targeting the specific location in line with the target market. However the plan also does not give enough emphasis as to how the restaurant should be placed whether the restaurant should be a stand-alone, if so at what environment or if it should be in a food court to attract additional attention etc. Be as it may, the food outlet was opened in Colombo zone 2 at Union Place right next to Pizza Hut! Parking was on the street without any designated parking area. Some patrons were parking at Pizza Hut car park.Further, the success of the venture would be reliant on the ambience of the restaurant. This aspect has not been captured in the planning process whatsoever. Some respondents in the study had mentioned that the outlet catered for affluent class and gave an impression of …high food prices‟. Some stated that Komala‟s was western. The plush interior had indicated that the food would be very expensive.Ideally Sri Lankans do not prefer staying in queues for meals, be it sit down meal or take-away. They expect a quick turnaround. The target market for Indian food generally would want to have take-away. These aspects have not been covered in the initial marketing plan done by Keells and was also highlighted at the perception survey, which indicates a take-away counter would have been ideal in Wellawatte (Colombo 6), Bambalapitiya (Colombo 4) and Kotahena (Colombo 13) where majority Tamils lives.Awareness Campaign (Promotion)Keells advertised on TV, radio and press emphasising vegetarian delight. After the change of menu, they used different hats to portray different menus of different countries at Komala‟s. The initial marketing plan absolutely did not mention about the promotion campaigns to be carried out. There were free drinks and meal deals as some sales promotional activities. There were no seasonal promotions, especially during Indian/Tamil festive time.The Customer Perception Study also revealed that more than 95% of the respondents have heard of KFC, McDonalds and Pizza Hut from the non-vegetarian sector and more than 68% knew of Shanthi Vihar. With aided awareness, 56.8% was able to recollect Komala‟s which was not a good sign. Reasons the respondents gave for visiting Komala‟s were easy to access, cleanliness, just to try out or were offered a meal by a friend. However, a very bad …word of mouth‟ had spread which had really a ffected Komala‟s positioning and image. Some of them were, poor quality of food, poor taste and poor service, very expensive, Indian meals in …not in an Indian atmosphere‟, insufficient food portions, food is served in a haphazard manner, inconsistent taste on different days, stale food is sometimes served and the food contained insects.Given the novel concept of an up market Indian Vegetarian restaurant, it is essential that adequate Top Of the Mind (TOM) recall marketing is carried out to ensure enticing non-vegetarians along with the vegetarians who were the original target. Given that the food industry had somewhat come to a saturation point with eating out reaching a near maturity stage on the product life cycle, it is essential the proper marketing is carried out to capture the …share of stomach‟ from the existing food retail outlets and users.Komala‟s did not have a …Unique Selling Proposition‟. They were catering to the same customer base that dines at Pizza Hut, KFC, McDonalds and Shanthi Vihar. People visited Komala‟s for a change but were not attracted by its food, customer service and other factors.The marketing plan should ideally have a planned TV, Press and Radio in addition to the other direct marketing campaigns to attract the required target market. To embark on this, adequate research is needed to find out the aspirations of the target audience to ensure that the right message is passed to the potential consumers e.g. vegetarians and non-vegetarians. Whilst attracting the health conscious segment the vegetarians, the non-vegetarians could have also been attracted on a health conscious note, using …at least have one fibre meal a day for health reasons‟.The survival of any organisation would be vastly dependent on how well its existing and potential customers know of the organisation and its service offerings. Keells had taken a …shot gun‟ approach and did not address the target market resulting in a negative feedback from the market. It could be assumed here that, based on Keells success in Pizza Hut business, the company has taken a stance that the restaurant will be …self-marketed‟, as it was adjacent to its main Pizza Hut outlet. This could be a result of bad or no planning, as the target customers would not want to go to Komala‟s when Pizza Hut, which is more popular than Komala‟s is its neighbour.Here the self-marketing concept worked in the opposite. If the restaurant looks gloomy and not crowded as against the immediate next door which is much more brightly lit and crowded, people would be hesitant to go to the gloomy one.Popularity wise, Shanthi Vihar had scored high in the customer perception study stating that the food was spicy and appetising, good quality, easy access and reasonable price. Komala‟s was known for easy access, cleanliness and Indian food.Value Offer or solution (Product)Whilst the product, i.e. the menu and the way it is delivered, put out by Komala‟s was one which the vast majority of Indian food lovers would prefer to have, Komala‟s decided to compete wit h established hawker street food outlets, which had already earned their name for quality food at reasonable prices. The new Transcontinental menu offered a variety of vegetarian food ranging from pastas, sandwiches, traditional Indian favourites, fast foods and snacks including desserts and beverages such as flavoured teas, soft drinks, milk shakes, ice creams, sundaes traditional Indian drinks namely lassi, gulab jamuns and other all time favourites."Eat Different will not be just a base line but the bottom line of everything at Komala‟s" said Mr. Bandara, the Operations Manager. Delicious, wholesome, pure vegetarian food coupled with a new ambience and services are bound to make Eating Differently at Komala‟s a reality.6 With its unique concept that incorporates authentic Indian Cuisine, Komala‟s Restaurant is a pioneer in the local fast food industry and offers healthy, value-for-money, lip-smacking food. Even though the menu was changed to include other cuisine, it was not sufficiently made aware of to the public.6 Source: http://www.dailymirror.lk/inside/travel/020411.htmlThe product itself should be localised for the Sri Lankan palate, which is not addressed in the business plan. Given the significant population differential between India and Singapore, Komala‟s seems much more popular in Singapore rather than in India based on the restaurant distribution of 6 and 4 respectively. This could be the reason as to why they did not pay much attention to the localisation. Singaporeans do not like spicy food unlike the Indians and Sri Lankans. This does not seem to be appropriately addressed. In fact the real life situation was the very bland food which was virtually unacceptable to the Sri Lankan palate. This has been clearly revealed at the research carried out in August 2002. To quote …Taste of food is not spicy enou gh and do not taste Indian, whereas people like vegetarian meals to taste spicy.Therefore, the meals should be prepared in this manner.‟7Employees (People)People are an important part of a hospitality industry. Although Komala‟s Singapore provided chefs from India to train the locals, they could not carry out their task due to language barrier. The chefs couldn‟t speak much English and they were not good trainers either. Keells, being in the hospitality business for a very long time, should have known better that stewards and the staff play a vital role in the entire dining experience. To quote from the Customer Perception Study “No one to Greet customers. Serving staff takes long time to offer menu cards to customers.Sometimes they drop the menu on the table and go away. They do not wait near customers to assist them in selecting food. Even to order, customers have to either call out or gesture to a steward to take the order. Water is not served to the customers unless requested. Staff does not provide appropriate cutlery….”7Systems and Procedures (Processes)In a service industry, process – the way it is being delivered counts. It is the moment of truth. Komala‟s profess that the meals are freshly prepared and would be ready by3 minutes. Staff had been trained to be courteous and friendly, but somehow, theservice levels had deteriorated fast. This position too was revealed at the survey. 7Source: Customer Perception Study on Komala‟s by Key Research & Information Limited (20th August 2002)。