Alibudbud, Charlene

Ambrosio, Stephanie
Goe, Faye
Gonzales, Jazmine
Santos, Alexandria

Russian Restaurant with Japanese Cuisine Makes

Foreign Markets Selection:
The Case of Two Sticks

March 10, 2015

AGRIMAN
XC1

1. A problem on the expansion strategy of the company

a. Two Sticks is a company which grew by developing a casual dining chain.

In the year 2008, the twelve Two Sticks restaurants served over four
thousand guests everyday with an average bill of $15. Aside from being
marketed as a "non-Japanese restaurant with Japanese cuisine," they
appealed to customers because of their unusual atmosphere and original
advertising campaign.
b. How can two sticks maintain the same level of service quality during its
five year expansion?
c. Best case scenario: The different restaurants would develop their own
service standards which would enable them to serve their customers
better than if they followed the original service quality that the company
had with their first branch.
Likely case scenario: Each branch will have its unique approach to their
specific process.
Worst case scenario: The process of each branch is not aligned.
Restaurants would lose the unusual atmosphere which made the first
branch a success.

2. The group came up with alternatives on how to solve the problem.

a. The company should integrate all management systems of each branch.
Advantages:
- Service quality will be standardized and there will be a consistency
- reduce duplication and therefore costs
- balance conflicting objectives
Disadvantages:
-

The unique approach of each branch can be diminished or eliminated

The prices and quality of the product per different branch will have to
be uniform thus they will lose some profit
The service differentiation will be removed

b. The company can continue creating branches with different target

markets
Advantages:
- No need for them to come up with a standardized manual since they
have been putting up branches with different approaches thus they are
used to it already.
- They do not have to adjust since they have different approach per
branch.
- Product and service differentiation will serve as their competitive
advantage
Disadvantages:
-

There will be no consistency in the process as a whole company

One branch may be favored by the wrong target market

The branding might get a confusion since not all branch uses one
name

3. What should the organization do?

The problem of the company is for the future expansion within five years.
They want to make sure that the future branches would be as profitable as
the branches which are already established for years.
a. The group has decided that the company should go with the second
alternative that we presented for the following factors:
- The sales of each branch depend on the market they are targeting.
- Valuableit is of value to consumers.
- Rareit is not commonplace or easily obtained.
- Inimitableit cannot be easily imitated or copied by competitors.
b. The company should just continue with how they establish their branches,
different from each other and with separate approaches. Because at one
point, the company was known to have this kind of line of attack when
establishing new branches.
c. The company has been establishing branches with different approach. We
chose this alternative because we perceive that the branches in the future
will just do well as fine as the established branches already. Also, doing
the other alternative is costly since a lot of things must be done such as
trainings and research development.
d. This should be done within the time span of five years in completion. The
profit and target market will be depending on the target market of each
branch. The management of the company perceives that the profit should
be doubled annually by the time this is fully implemented. The cost would
also be different from each other because of the product and service
differentiation of the company which are some of their competitive
advantage.
4. How should the organization go about achieving the recommendation?
a. Expansion planning includes: location, investment costs and small interest
return. Series of meetings were done by the management of the company
as part of the expansion.
b. Real estate agents will be in charge to find a possible location for the
future branches. Business people from countries to which they want to
expand will be held liable on possible cooperation. The recruitment
agencies for the employees while the law firms are there to support the
operations within the countries selected for expansion.
c. The cost for expansion in your local area would average to 100,000 USD.
But since the company is planning to expand on different countries, the
cost would be higher.

d. Before looking to lease commercial space from a landlord, check with the
building department of the town or municipality where you want to set up
your restaurant, to see whether the location in which you are interested is
zoned for restaurants. As well, make sure to check out available parking,
and municipal parking regulations with both the landlord and the
appropriate building department. Lastly, be sure to find out whether you
will require a building permit, and the length of time the building
department usually takes to issue a permit. This would take up a week or
two, depending on how fast the local municipality does the processing of
legal documents.
Because most current commercial leases are 'net' leases, you can expect
to pay rent at an agreed per square foot price, plus TMI (municipal taxes;
maintenance and insurance) which represents your proportionate share of
all of the landlord's operating expenses. In addition, most commercial
leases require the tenant to arrange for and pay the premium for
comprehensive property and casualty insurance. In virtually all
commercial leases, any construction work such as partitioning, flooring,
and fixturing that the tenant wants to complete has to be approved in
advance by the landlord. And some landlords may insist upon an approved
contractor doing this work, or upon their architect/consultant approving
the work. The time frame for this whole process would take up at least five
months and again, it depends on how fast the people work to make this
happen.
Overall, the whole time frame would take up 6 months to 1 year at the
very least.
e. When looking for a space for lease, it would be quite difficult if the area is
crowded since you cannot just put up your business anywhere you like.
You have minimal choices and options. For the case of this company, the
building and business permit would be easy to do since the company has
already established branches in other countries and so far, no law suits
has been filed against them. The construction would only lead to failure if
it was done with mediocrity.
f. The possible coordination issue we see would have to be when one of the
interesting parties would back out of the agreement.
g. Regardless of the specifics, it is absolutely vital that you have a
commercial lease reviewed by your lawyer to ensure that you understand
your obligations, and that you are leaving enough time to do all of the
things that must be done before the restaurant is ready to open.

References: http://www.referenceforbusiness.com/management/BunComp/Competitive-Advantage.html#ixzz3TwTE5Rn1

http://www.thecqi.org/Knowledge-Hub/Resources/Factsheets/Integratedmanagement-systems/
https://www.franchisehelp.com/industry-reports/fast-food-industry-report/
http://www.cnmag.ca/issue-12/421-business-tips-for-newcomers-on-openingrestaurants-n06