Operation Management in Hard Rock Cafe

39 years has passed, which creates a fascinating history for one of 100 greatest brand in the world – Hard Rock Cafe. Since its establishment in 1971, Hard Rock Cafe has expanded in over 51 countries with 133 Hard Rock Cafes and 15 Hotels / Casinos. The great success relies on many many factors but the core one we can not deny is its changing strategy. Hard Rock Cafe took a shift of serving, from serving food with entertainment to serving food with experience. Based on its direction, its operation strategy is defined to providing experience.

Regarding to 10 operation management strategy decisions like Design of Goods and Services, Managing Quality, Process strategy, Location Strategies, Human Resources, Supply Chain Management, Inventory Management, Scheduling and Maintenance, in the long road of development, Hard Rock Cafe has obtained respected achievements in all fields. The world recoginses its reputation and most of us heartly admize it.

I myself can not ignore the stories of Hard Rock Cafe eventhough it has not opened in HaNoi where I am living. The story of its changing strategy from times, the story: of its living museum, of its greatest brands, of its employees….step by step take me to the places of Hard Rock Cafe. Sometimes the place is too far and sometimes the place is too near me. It is that those places and stories there help me get different views of Hard Rock Cafe.

Based on my knowledge, understanding and research that I am having now, I take some good points and some not good points to give my own views of Hard Rock Cafe. There will be opposite “points” that is viewed in the concept of analyzing one operation management decision not only in theory but also in reality.

The following operation management decisions take my interests and my thoughts.

The design of Goods and Services.

The outstanding point of designing goods and services in Hard Rock Cafe is DIFFERENTATION. According to Anthony Henry (Understanding Strategic Management – 2008), “A differentiation strategy is based on an organization producing products or services which are perceived by customers as unique or different”, Hard Rock Cafe has built “Living museums of Rock” experienced by its customers who are in love of Rock. One cafe with its “differentiation” mainly is that Rock’s collection including customes, instruments, piece of music, CDs, souvernirs of the greatest artists like Eric Clapton, Bruce Springsteen & The E Street Band, Pearl Jam, Neil Young, John Lennon, Jimi Hendrix….That living museums are always updated and becoming more and more fascinating to customers with its memorabilia (more than 70, 000 pieces) from the hottest musical artists of the last 50 years.

Besides its differentiation, it is recognized that Hard Rock Cafe is a typical symbol of Product concept method – a new tool of marketing. Hard Rock Cafe is a combination of experiences, styles, entertainment, awareness of sharing and memories. All “products” mentioned above are defined in specific, which creates unforgettable experience for its customers. Hard Rock Cafe’s customers, in fact it is so hard to call them “customers” as they are members in Hard Rock family, create the style for Hard Rock. Once they come to Hard Rock, a truly deep impression would leave on them.

“Love all – Serve all” – A guilding service philosophy creates a special place where you or anyone would be respected, regardless of age, sex or class. The place where all express their love for music – one international language. The language which gives us more understanding and narrows the gap among strangers. Not only love for music but also love for humans, love for serving humans. In service industry, Hard Rock Cafe created the “high connection point” between its employees and its customers.

Lay out strategy

Before discussing Lay out strategy of Hard Rock Cafe, we should look at some pictures of Hard Rock Shop in Ho Chi Minh City.

http://rockpassion.vn/files/2009/12/Rock-Shop.JPG

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Phối cảnh cá»a Hard Rock Tp.Hồ Chí Minh (Scence of Hard Rock Cafe HCM)

“About 48% of a typical cafe’s sales are from merchandise” – quoted in Page 83 – Principles of Operations Management – 2008 by Jay Heizer and Barry Render, this number has shown the success of Hard Rock shops.

It has changed its strategy from times, which adapts to the movements of the global. The world has witnessed great achievement of Wal – Mart, McDonald’s, HSBC….in retail field. Here it gained 48% of revenue through merchandise, which reveals the growth of retail in Hard Rock.

What creates the success? One part of the answer you will find in Layout Strategy of Hard Rock Cafe.

Each Hard Rock Cafe has its own Rock shop designed in Retail layout – an approach that addresses flow, allocates space and responds to customer behavior” – quoted in Page 83 – Principles of Operations Management – 2008 by Jay Heizer and Barry Render. Looking at some pictures above, you can see that one small space display numerous of items like hats, T-shirts, shoes, gifts, pictures…that attract customers. Customers not only are fascinated by items in the shop but also are impressed by the light, the color Black and Red. The combination between Black and Red or the symbol of luxury and attraction calls for “purchasing action” of customers.

Quality Management

Hard Rock Cafe establishes its quality standards and takes controls to meet these standards. We will look at some points of quality management in Hard Rock Cafe.

Responding to customers’ needs, taste and expectations, Hard Rock Cafe menus are continuously upgraded and service has been changed. To assess the quality of food and service, it regularly conducts surveys. In the survey, scoring method is used to classify the quality. If the evaluating score of food and service is not up to 7, it will fails. In my opinion, quality management following the method shows strictness, clearness and fair.

Hard Rock Cafe also takes advantages of technology to ensure the quality of products and services. Chris Tomasso – Vice President of Hard Rock updates monthly Microsoft Project. In a real case, to ensure the performance of the rock concert on time, Chris Tomasso gave customers “anticipated surprise”. The helicopter was used to take the band in, which overcome an unexpected traffic jam. It was the back-up plan that Microsoft Project had put Chris Tomasso’s ideas into reality. Moreover, techniques and software support Hard Rock ‘s managers to maintain efficient schedule, to estimate budget performance, to estimate time service, to daily forecast sales, to allocate workforce and to give bonus….All the things have been done in professional way to meet the standard of the quality management.

Regarding to quality management, whenever and wherever, Hard Rock Cafe opens a new cafe, all of us take opportunity to enjoy live musical performances. In opening celebrations in Las Vegas and in Ho Chi Minh City, the shows of Chris Cornell and DMC respectively created “a high energy atmosphere” and overspread the excitement not only for rock lovers but also for the youth, for the people working in entertainment industry. Through it, we deeply understand how great and strong Hard Rock is.

Human Resources

In a company, especially in a big corporate like Hard Rock Cafe, there is a lot of tasks for Human Resources Department. Besides the job of recruitment, maintaining, training, creating career development and personal growth, the challenging task Human Resources takes is to providing a nice working environment for employees. According to Hard Rock careers, “This place is revolutionary…Why? Because you can be who you are – because who you are defines you”, the employees are highly respected. Beyond on my understanding, Hard Rock Cafe is creating a working environment in which each of us takes opportunity to prove ourselves and to promote our career path. It is so wise to do that, to attract job-seekers and to create a competitive advantage for Hard Rock Cafe.

In October 2010, according to BBC News dated on 13 October 2010 “50 jobs at risk as Cardiff Hard Rock Cafe closes”. If I were one employee of Hard Rock Cafe Cardiff, clearly, I would be in an unexpected situation as “it has closed suddenly as staff prepared to celebrate its seventh birthday”. One question here is that whether Hard Rock Cafe’s employees in Cardiff location are trully informed timely or not? Some employees may find another jobs, some employees may transfer to other Hard Rock cafe in London, Dublin, Edinburgh, Manchester, some employees may be unemployeed. I myself wonder the real case would get any support from Human Resources of Hard Rock Cafe.

Furthermore, in Human Resource strategy of Hard Rock, “outstanding pay and benefits are a start” quoted in “Principles of Operations Management – 2008 of Jay Heizer and Barry Render – Page 445”, is an attracting invitation to employees. Honestly, you and I try our best to work for high income, and it is the same for the others or for the employees of Hard Rock.

However, in one article posted on BBC News “Hard Rock wages ‘below minimum’ by Martin Shankleman – Business correspondent” dated on 18 July, 2008, we should seriously consider Human Resources Strategy and its implementation. In this article, the unnamed waiter of Hard Rock said “It’s an abuse of customers – they are being misled in that they believe they are giving a tip when they are subsiding the actual wage”. One question raises in my mind, in fact, there is a big gap between “outstanding pay” and “the wage”?

In the article mentioned above, “It’s almost insulting, no wonder people leave” said the waiter. In my understanding, “people leave” it means the employees of Hard Rock had given up their jobs. The reason for them to leave is unreasonable pay? I wonder where the point of outstanding pay is. If I read one article in one book, If I saw only things written on Hard Rock website, I would take only one side of the coin or I would see one thing in one direction without arguments, without feedback, without consideration.

In general, regarding to 4 operation management decisions (Product and Services Design, Lay out Strategy, Quality Management and Human Resources) I am taking in consideration, the different views are discussed and analyzed in some aspects. Some give us a perfect model of Hard Rock Cafe in operation management. That we highly respect and admire the achievement, the improvement and the innovation of the world leading Corporate. In the other side, we still see some not good points of Hard Rock. In fact, those points may be in argument, may be unresolved, which leads us researching and discovering in reality through our own “experience”. Only taking a real experience gives us the whole picture with light and shade, with color of black and white, with ideas and the real life.

HARD ROCK CAFE HANOI

16 Dec 2009 was one day marking the step of Hard Rock Cafe in VietNam, particularly in Ho Chi Minh City. Hard Rock Cafe Ho Chi Minh is run by Viet Thai International (VTI) – the owner of Highland Cafe. Based on its statement “The Best of Both Worlds”, VTI develops Hard Rock brand following VietNamese tradition. Based on the information I have got throung internet (www.toursvietnam.net), articles, Hard Rock Cafe is not populated. There are so many people asking for raising Hard Rock Cafe Ho Chi Minh’s quality standard. Customers there concern too much its price. The problems may face Hard Rock Cafe Ho Chi Minh in developing its business.

Those are some views of Hard Rock Cafe Ho Chi Minh. And what about the future of Hard Rock Cafe coming to HaNoi? The youth and rock lovers in HaNoi keep their ears to the ground as it is coming in HaNoi in 2011? What are waiting for Hard Rock Cafe HaNoi? What are the opportunities and challenges for it?

OPPORTUNITIES are regarded as an attractive call for Hard Rock Cafe expanding in HaNoi. Hard Rock Cafe will take opportunity to meet the demand of the young population in HaNoi. In 2010, according to General Statistic Office of VietNam, the population in HaNoi is 6.5 million and the number will increase to 7.7 million in 2015. Moreover, most of the population is in the age of working and average personal income is estimated up to USD 4,300 / year. All the numbers creates the great demand for entertainment in HaNoi today and tomorrow.

Another point we shoud not miss is that from times, HaNoi youth changes their lifestyle and consumer behavior. The night of 12th November witnessed the youth HaNoi “burn themselves” with rock. At the night, Tiger Translate Metropolis 2010 gave an impressive show to fan rock in HaNoi. It was a sleepless night of HaNoi youth. We can imagine how expectable and excited the youth welcome Hard Rock Cafe in HaNoi.

Due to young population of VietNam and particularly in HaNoi, Hard Rock Cafe may take the advantage of labor cost. The average personal income in HaNoi is around USD 2,000 – 2,500 / year, which is a big gap comparing to personal income in London or other cities. The income shows how cheap the labor is in HaNoi. Simply, Hard Rock Cafe can balance the cost – the benefit. Locally, in comparison with labor in Ho Chi Minh, labor cost in HaNoi is lower than in Ho Chi Minh. Regarding labor cost, HaNoi offers Hard Rock Cafe a very favorable condition.

According to Smart Travel Aisa – A travel magazine, HaNoi is voted one of 10 attractive tourist destinations in Asia. In 2010, HaNoi has welcomed 1.4 million tourists and the number will go up more, especially in the hope of the world’s economy recovery. During 39 years, Hard Rock Cafe’s winning strategy is to expand to “destination” cities. Hard Rock Cafe would not miss the chance of doing business in HaNoi – one “destination” cities in Aisa. In fact, HaNoi residents expect more new kinds of entertainment to attract domestic tourists from other provinces in the North of VietNam. Hard Rock Cafe will gain much benefit with new one in HaNoi from its foreign and domestic toursists.

In 2013, according to the report of PriceWaterhouseCoopers about the Prospect for Entertainment and Communications Industry, VietNam will achieve USD 2.3 billion of market value. The report estimate the growth of Entertainment and Communication Industry: 16.7% the highest level. The growth create chances for Hard Rock Cafe and service industry in VietNam. Based on its software and computered programs, it is not difficult for Hard Rock Cafe to estimate potential earnings.Both entertainment industry in VietNam and service of Hard Rock Cafe take benefits of each other and support themselves for development and growth.

VietNam has strengths of exporting cafe, textile and agriculture foods. All the things create a strong supply chain for Hard Rock Cafe to choose. One of supply chain strategies Hard Rock Cafe may define is “negotiating with many suppliers” – quoted in Page 457 of Principles of Operations Management by Jay Heizer and Barry Render. Opening a new one in HaNoi, Hard Rock Cafe has in hand numerous of ingredient suppliers. It is so clear that Hard Rock Cafe takes a lot of advantages from them. Cheap and diversified ingredient is one advantage. Another is the long-term commitment of those suppliers because of fierce competition among them. One another is updating menus that satisfy customers’tastes and local culture.

Opportunities and challenges play as two sides of the coin. One side we should look at to take chances just in time for creating advantage of doing business. In business, we try to search for opportunities of increasing profit, opportunities of expanding market share, opportuinities of remaining our power, our position…Complying with them, challenges continuously occur and force us to be awared of and to overcome. What CHALLENGES are for Hard Rock Cafe with a new one in HaNoi?

There is a clear difference between culture of the North and the South, between personality of the Northerners and the Southerners, between life style in HaNoi and lifestyle in Ho Chi Minh. People in HaNoi is more conservative than those in Ho Chi Minh. For a new one, it takes a little longer time to accept, experience and like it. It can be said that conservativeness typifies personality of the Northerners. Because of conservativeness, the life style of HaNoi is not so exciting as it in Ho Chi Minh. Most of people enjoy their lives with family or in a small cafes without much noises. They lead a life in a less quiet and less exciting way than those in the South. From times, they have changed but the tradition have much influence on their changes.

The people in the North prefer saving money to spending it. Whenever earning money, their habit of putting money in savings becomes too popular. Unlike the people in the South, overspending is usually avoided. Due to low personally income, when taking any service, they put too much concern on the price. The price may limit their spending on entertainment. This challenge Hard Rock Cafe should take in consideration.

The price of real estate in HaNoi is evaluated too high eventhough comparing to Beijing, Shanghai, Tokyo, London…Location plays as vital factor of determining the success of one business, especially the business of Hard Rock Cafe – in which location is on the top of concern, research and investment. It is estimated that about 50% operating expenses belongs to location investment. The price of location in “destination cities” like HaNoi causes headache for investors. This challenge is facing Hard Rock Cafe for a long period as real estate market in HaNoi will be “hotter and hotter” when the economy recovers, when the finance activities flow strongly and smoothly.

From 2010, VietNam Food Administration focuses on the Safety goods. VietNam Food Administration gives Regulations for evaluating the quality of food. Firstly, the main product of Hard Rock Cafe is food and the food quality needs to meet international standards and vietnamese standards. The problem may arise if those standards are defined in different ways and evaluated based on different criteria. Secondly, for suppliers of Hard Rock Cafe in Viet Nam and in the world, what adjustment can be made not to violate the Regulations of VietNam Food Administration. Some suppliers may meet the requirements and adapt to the changes. Some may not meet the requirements and change their own kind of business or stop doing business. There will be a shortage of suppliers, which results in price increase. This challenge sometimes cause problems in quality management.

Doing business means searching and capturing opportunities timely. Besides it, facing challenges and overcoming them plays as motivating factor for growth and success. It is so important for us to take business opportunities in developing markets. HaNoi attracts investment due to its development, its undiscovered potential, especially in service and entertainment industry. If I were one of marketing managers taking the task of opening a new Hard Rock Cafe HaNoi, I would recommend one idea as follows.

Based on the theory of “Differing Marketing Tasks. Even if globally sold product varities are similar, the marketing task can vary geographically” quoted in Page 285 – Competitive Strategy 1998 by Michael E.Porter, I would carry out one promotional campaign called “Love Rock – Shop Rock”. Why do not I build a “connection music” network of High schools, Universities and Rock lover clubs in HaNoi? A greeting card valued one souvernir or one small gift of Rock Shop should be presented to the youth in HaNoi before the coming of Hard Rock Cafe. By this way, I would send one message to the youth, encourage them to change their consumer behaviors and excite themselves with Rock, shopping and gift. HaNoi is looking forward to welcoming a “high energy” of Hard Rock Cafe for tourists, the youth, rock lovers and for the people who have not know Hard Rock yet.