Environmental Scanning: External Analysis

MODULE II: ENVIRONMENTAL SCANNING: EXTERNAL ANALYSIS

I. INDUSTRY ANALYSIS

A. Definition of the Industry

Definition:

The hotel and restaurant industry definition used in this study follows the Philippine Standard Industrial Classification (refer to Table 1). The industry is disaggregated into two sub-sectors: hotel and restaurant.

The hotel sub-sector includes the various lodging units of different sizes and standards located both in urban and rural communities.

Table 1. Hotel and Restaurant Industry Definition based on the PSIC

PSIC Code Description

98 Restaurants and Hotels

981 Restaurants, Cafes & Other Eating & Drinking Places

9810 Restaurants, Cafes & Other Eating & Drinking Places

98101 Restaurants and Cafes

98102 Refreshments and Ice Cream Stands, Kiosks & Counters

98103 Day and Night Clubs

98104 Cocktail Lounges and Bars Operation

982 Hotels, Motels & Other Lodging Places

9820 Hotels, Motels & Other Lodging Places

98201 Hotels and Motels

98202 Dormitories

98203 Pension Houses

Source: National Statistics Office

The restaurant sub-sector, on the other hand, includes places that serve food and drinks, be it self-service or full-service. This covers a range of services including fine dining specialty restaurants, fast food outlets, canteens, and food courts. Fine dining and specialty restaurants offer a wide variety of international cuisines. Meanwhile, so-called fast food restaurants usually operate in chains or as franchises, are heavily advertised, and offer limited menus-typically comprising of hamburgers, hotdogs, fried chicken, or pizza and their complements Ð'- likewise originated in the United States. Fast foods have the advantage of speed, convenience, and familiarity to diners who may eat in the restaurant or take their food home. In the Philippines, about 80% of the establishments in restaurant industry belong to the fast food sub-sector.

B. Industry Characteristics

Market Size

Annual Revenue as of December 2005 is Php 2,129,637,000.

Scope of Competitive Rivalry

Competition is fierce in the restaurant industry, particularly the fast food sub-sector. The market is large but consumers are price conscious and exhibit brand loyalty. With a wide range of restaurants and fast food

establishments to choose from, pricing schemes and marketing strategies

determine market shares. Market strategies of industry players, therefore,

aim to achieve two primary objectives: 1) hammer in "value-for-money"

concepts; and 2) create brand consciousness and loyalty.

Industry Life Cycle

Industry Growth Rate

MAJOR PLAYERS

Revenue (Php In 000s) 2003 2004 2005 Compounded Annual Growth Rate

Dunkin Donuts 893,754,000 901,730,000 978,102,000 0.030517527

Mr. Donut 659,076,000 698,182,000 765,023,000 0.050944218

GoNuts Donuts 720,000 121,439,000 209,164,000 5.622950067

Hot Loops they just started to operate 32,794,000 87,201,000 0.630660445

Country Style Donuts 78,934,000 89,687,000 90,147,000 0.045271371

Source: Securities and Exchange Commission

Number of Companies in the Industry

There are about 45,220 restaurant establishments in the Domestic economy catering to the dining requirements of a constantly expanding market. An estimated 80%, or more than 36,000 of these establishments