Product Diversification in the Restaurant Industry as a Competitive Advantage

Product Diversification in the Restaurant Industry as a Competitive Advantage

José G. G. Vargas-Hernández (University of Guadalajara, Mexico), Rogelio Rivera-Fernández (University of Guadalajara, Mexico) and Juan Luis Martínez-Padilla (University of Guadalajara, Mexico)
Copyright: © 2018 |Pages: 13
DOI: 10.4018/978-1-5225-5772-2.ch007

Abstract

In this chapter, product diversification is analyzed in the restaurant industry. The restaurant industry is competitive and companies are constantly on the move, seeking competitive advantage. The result is that product diversification gives companies a competitive advantage.
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Introduction

The restaurant industry in Mexico is one of the most important economic sectors because it creates a large number of jobs and provides a significant percentage of GDP in Mexico.

Figure 1.

Gross domestic product of food and beverage preparation services

Source: Economic census 2000, 2001, 2009, 2010 INEGI

The restaurant industry is in constant movement. Competitors are going in and out of the market structure in perfect competition, since it has no barriers to entry and exit the market. The industry consists of many companies, although in different forms and with varying quality in their products.

To speak of the restaurant industry is to speak of a wide range of entities, from an establishment of “gorditas” to the most elegant and distinguished restaurant, which cover a niche in the market while they compete within this industry. It must be noted that the economic condition or situation of Mexican society will play an important role in delimiting the market.

Casa Fuerte is a Mexican food restaurant located in the center of Tlaquepaque, Jalisco. The study of the restaurant market, competing for a niche market, is aimed at people of the middle economic strata and higher, where prices are not very high, but not very accessible to the general population. It is an independent restaurant, meaning it does not belong to a chain, and it has been on the market for more than 20 years. During that time, it has won a great reputation and has positioned itself as one of Tlaquepaque's best restaurants, for its quality and service.

The purpose of this paper is to analyze the evolution of the Casa Fuerte Restaurant and understand how it has come to its current position, where product diversification is a great tool to have competitive advantage with its direct competition. Following the Theory Based on Resources and Capabilities, Industry Theory, and the Theory of Institutions as a framework, the restaurant has been designed while facing the challenges that arose along the way. Its management strategy and use of resources has helped them obtain an important niche market.

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Theoretical Framework

To analyze the evolution of firms, it is necessary to consider the Theory of Industry, the Theory Based on Resources and Capabilities, and the Theory of Institutions, where the strengths and skills that businesses need in order to compete with its direct and indirect competitors are determined. The use of resources and capabilities of the company are very important for meeting the challenges as they come, given that institutions play an essential role in the development of the company by designing the rules of the game in the industry, as well as the use given to their resources.

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