Repositioning Strategies for Restaurants in UK and Singapore - Dissertation Sample

Running head: REPOSITIONING STRATEGIES FOR RESTAURANTS IN UK AND SINGAPORE

 

 

 

Repositioning Strategies for Restaurants in UK and Singapore
[Author’s Name]
[Institution’s Name]
Abstract
Although a lot of attention has been devoted toward defining and categorizing service failures and repositioning efforts, only limited empirical research examining repositioning strategies has been conducted. Another important gap in the current service-related research and outcomes is its applicability in cross-national settings It is well-known that culture shapes consumer behavior and hospitality and tourism researchers have been encouraged to focus efforts on identifying and understanding cultural differences in order to provide useful information to practitioners. Nevertheless, there has been hardly any prior discussion about customers with differing (national) cultural backgrounds having differing expectations toward service encounters. The research adds to the literature by empirically studying restaurant service failure, repositioning, and expectations in two countries: UK and the Singapore

Table of Content

1st Chapter - Introduction
Scope of the Study
Objective of the Study
2nd Chapter - Literature Review
3rd Chapter - Methodology
4th Chapter - Findings
5th Chapter - Conclusions
References

1st Chapter
Introduction
The restaurant industry is typically one of the largest sectors of western economies. Singaporeans, e.g. spend approximately $970 million a day dining out, making the restaurant sector the largest service industry ([Lord (1999)]). Likewise, a growing number of countries have noted the important role that hospitality and tourism plays in their economy. In UK, e.g. there is mounting political and public awareness of the role that the industry plays in economic repositioning and growth ( [Ridley (1998)]). Consumers spent between £1.5 and £1.7 billion eating out in UK in 1996 ( [The British Food Service Market—An All Island Profile (1997)]). At the micro-level, restaurants are finding competition to be fierce. Because recent economic forecasts show that, with few exceptions, every region of the world is expected to experience growth, many restaurant chains are looking for growth opportunities outside their national borders ( [McDowell (1995)]).

Early service marketing research concentrated on defining and determining the dimensions of service quality; later research examined customer defection due to service quality failure. In little over a decade, service quality research has come full-circle as service firms start to assess the bottom-line impact of customer defections and begin to adopt continuous improvement strategies. More recently, there has been much attention, by both the business and academic press, devoted to the art of repositioning when service failures do occur.

Research shows that few things are as important to restaurant customers as good service. In the Singapore, the restaurant industry has conducted a number of studies that confirm the importance of service quality and effective repositioning from service failure. According to restaurant experts, the level of service can even impact the way food tastes ([Waters (1998)]). In one large-scale Singaporean study, 90 percent of male heads of household ranked customer service as important to extremely important (84 percent of women agreed) ( [Waters (1998)]). Likewise, another industry survey found that restaurant patrons, across all age groups and all demographics, rated the quality of service as an important factor when it came to deciding where to eat ( [Restaurant and Institutions (2000)]). In western economies, it has been noted that the focus of consumption has moved from a tangible product to an intangible service to a focus on “experiences” ( [Pine and Gilmore (1998)]). With increasing consumption of restaurant services, Singaporean restaurant consumers have raised expectations of these experiences and are further advanced than consumers in other countries in the shift from service to experience. This was also evidenced by [Clarke and Wood (1998)] who investigated the role of loyalty on restaurant choice within the UK restaurant sector. They identified that the intangible aspects of the meal experience appeared to be a function rather than cause of loyalty. Patrons ranked atmosphere and speed of service within the top five criteria for developing loyalty.

A major trend in the service industry, including the restaurant subsector, is international expansion. For many, the global marketplace presents a growing opportunity for increasing sales by seeking out new consumer markets ([Weinstein (1994)]; [McDowell (1995)]) and also for diversifying risk (tough times in one region can be offset by better times in another) ( [Oetzel (2000)]). Over the last two decades, many major chains and others have made the international plunge by bringing foreign audiences everything from gourmet coffee and ice cream to Singaporean-style Steak Houses and deep-dish pan pizzas ( [Weinstein (1994)]; [Masur (1997)]). Indeed, according to Technomic Inc.'s findings, international sales for the top 100 chains increased faster than domestic sales ( [Oetzel (2000)]).

Many of the restaurants that are expanding internationally are chain restaurants and franchises ([Oetzel (2000)]). The domestic success of these restaurants has been due, in large part, to the standardization of products and services. While some international researchers argue that cross-cultural differences have little relevance to marketing practice ( [Ohmae (1985)]) or that there is often more within-country differences than between-country differences ( [Douglas and Craig (1992)]), others argue that differences are actually increasing ( [Costa and Bamossy (1995)]). Indeed, industry interviews with key decision-makers suggest that restaurants will fail internationally if they do not consider national differences ( [Oetzel (2000)]). A key decision managers must make, therefore, is whether to standardize or customize and how far to go with either strategy.
[Parasuraman et al (1985)] define service quality as an overall evaluation that results from comparing a firm's performance with the customer's general expectations of how the industry should perform. If service expectations are not met, service failure occurs. [Boulding et al (1999)] investigated the effects of prior expectations on customers’ cumulative perceptions of quality. The authors discussed the issue of confirmatory bias in evaluating new data, and noted that consumers’ prior expectations are likely to be double counted as they update their perceptions of quality. According to [Hoch and Ha (1986)], the disconfirmation paradigm suggests that individuals are more likely to select and attend to information that confirms their prior expectations, rather than information that disconfirms them. Consumers appeared to form biased perceptions of new service experiences based upon their prior expectations. Results of this research suggested that consumers’ prior perceptions influence not only their overall assessment of quality, but also their perceptions of each specific transaction.

Although zero defects is the desired objective for most firms, it is unlikely organizations will achieve this goal. This is particularly true of service industries where the multi-dimensional nature of the service encounter creates an environment where service failure is almost inevitable. The initial research used to validate the SERVQUAL methodology showed that service quality consists of five dimensions: tangibles, reliability, responsiveness, assurance, and empathy ([Parasuraman et al (1988)]). Because many of these dimensions relate to human interaction, failure is almost unavoidable. Indeed, service failure differs profoundly from tangible goods failure primarily because a service usually provides a psychological and largely personal outcome, whereas a tangible product failure is usually impersonal in its impact on the customer ( [Hocutt et al (1997)]). A number of attempts have been made to replicate the SERVQUAL methodology in the hospitality sector, often finding different factor structures and suggesting alternative frameworks for measuring service quality within the sector (e.g. [Oyewole (1999)]; [Ekinci and Riley (1999)]).

One reason for the failure of studies within the hospitality sector to consistently replicate a factor structure for service quality is that each consumer has unique requirements for what is considered “good service”, i.e. the same mistake is perceived differently by different consumers ([Bell (1994)]). There is also a growing realization that the pursuit of total quality may not be economically feasible as the costs of investing in higher quality may not be matched by price premiums which customers are prepared to pay. The notion of “return on quality” recognizes that it may not be profitable to satisfy all incidents of customer dissatisfaction and studies have shown that the pursuit of “total quality” is not necessarily the most profitable option for operators within the hospitality sector (e.g. [Breiter and Bloomquist (1998)]).

There has now been considerable research into the classification of consumer complaint behavior, building on frameworks developed in social psychology ([Alicke et al (1992)]). [Hirschman (1970)] found three types: exit (where the consumer terminates the relationship), voice (where the customer vocalizes the complaint), and loyalty (where the customer passively accepts the failure). A number of other researchers have noted that complainers are the exception ([Hart et al (1990)]; [Boshoff (1997)])—most unhappy people simply do not speak up ( [Zemke (1991)]). According to Scarborough, and [Scarborough et al. (1996)], 96 percent of dissatisfied customers never complain but 91 percent would not buy again from the business. Other research ( [Goodwin and Ross (1990)]; [Stewart (1997)]) has examined this further and found that younger and more educated customers are more likely to volunteer complaints. A link has been observed between the act of complaining and consumer satisfaction ( [Nyer (2000)]). The hospitality sector has been rich in studies of repositioning strategies, and studies have been undertaken from both the customers’ and employees’ perspectives (e.g. [Mack et al. (2000)]; [Hoffman et al (1995)]; [Hoffman and Chung (1999)]; [McDougall and Levesque (1998)]).

More recently, researchers have been exploring why customers “switch” or “defect”. According to a study conducted by [Keaveney (1995)], the top two critical incident categories are core-service failures and service-encounter failures ( [Keaveney (1995)]). Core-service failures (the largest category) are incidents that are due to mistakes or technical problems with the service itself. Service encounters (the second largest category of failures), are personal interactions between customers and employees of service firms. [Berry and Parasuraman (1992)] summarize, in general, that service failure leads to a decline in customer confidence, lost customers, negative word-of mouth, possible negative publicity, and the direct cost of re-performing the service. A number of other authors have tried to be more specific in “measuring the costs” of service failures. [Hart et al (1990)], e.g. found that when customers have bad experiences they tell an average of 11 people; when the experience is good, they tell six. This negative word of mouth can be especially important in industries where recommendations from friends and acquaintances carry more clout ( [Zemke and Bell (1990)]).

[Keaveney (1995)] emphasizes that most continuing customers increase their spending at an increasing rate of purchase. Consequently, firms are not just losing the future revenue stream but, because most customers increase their spending at an increasing rate, purchasing at full margin, the cost of acquiring a new customer (new account setup, credit search, advertising and promotion, etc.) can cost five times the cost of effort that might have enabled the firms to retain a customer. Indeed, [Power (1992)] writes that improving a company's customer retention rate by 20 percent has the same effect on profits as cutting costs by 10 percent. [Reichheld and Sasser (1990)] report on even more dramatic bottom-line effect: profits can be boosted by almost 100 percent by retaining just 5 percent more of a company's customers. For firms that have measured the bottom line, the results of reduced service failure and increased effectiveness of repositioning efforts, have been impressive. Hampton Inn, e.g. claimed to have realized $11 million in additional annual revenue when it implemented its service quality program ( [Ettorre (1994)]). Even more striking, Canadian Airlines calculated the value of a satisfied business travel customer to be $915,000 over 10 years ( [Jenkins (1992)]).

Given the bottom-line implications, it is not surprising that recent research has shifted toward categorizing and assessing repositioning strategies and their success. According to [Groonroos (1988)] repositioning strategies include all the actions taken in response to service defects or failure. Initial findings are not surprising: when rating repositioning strategies, the best scores come from customers who have experienced no problems, the second from those who have had problems resolved satisfactorily, and the worst from customers whose problems go unsolved ( [Berry and Parasuraman (1992)]). Perhaps more importantly, [Anderson and Sullivan (1993)] found that quality that falls short of expectations has a greater impact on satisfaction and repurchase intentions than quality that exceeds expectations.

[Zemke (1991)] noted that firms should “do it right the first time”. If the firm fails the first time, however, the way a company responds can help turn the situation around. According to [Zemke (1991)], customers who complain and have their complaint satisfied are more likely to purchase additional products than are customers who have experienced no problems with the organization or its products and services. In a similar vein, [Hocutt et al (1997)] found that when the customer causes the service failure, satisfaction (complaint) levels are higher (lower) after repositioning efforts than in situations where no service failure occurs. Indeed, [Hart et al (1990)] stress that a good repositioning can turn angry, frustrated customers into loyal ones. Based on its own research, Technical Assistance Research Program ( [TARP (1987)]) offers its own often quoted views on repositioning that supports this theory:

• Swift and effective repositioning enhances consumers’ perceptions of the quality of product or service they have already purchased;
• Repositioning can enhance customers’ perception of the organization's competence; and
• Good repositioning enhances the perceived quality and value of other products and services.

 

Fortunately, there seems to be considerable overlap in agreement between practitioners and academics on how firms can recover from a service failure. [Hart et al (1990)], e.g. suggest that firms measure the cost of a dissatisfied customer, break customer silence by encouraging them to complain and listen for complaints, anticipate needs for repositioning, act fast, train employees, empower the front line, and close the customer feedback loop. [Zemke (1991)] suggests that, if a failure occurs, firms should apologize, offer a fair fix, correct the failure and demonstrate that the firm cares about the work and customer's satisfaction, offer some value-added atonement (if necessary), and keep promises about the firm's ability to fix the mistake. Nevertheless there is still an issue in developing customers’ willingness to complain, with research evidence pointing to widespread apathy by customers ( [Stewart (1997)]).

With regard to satisfaction of repositioning efforts, [Boshoff (1997)] noted the positive relationship between dollar amount spent and customer satisfaction. Furthermore, it was discovered that positive inequitable outcomes (over benefiting) lead to the highest levels of satisfaction. Though not examined through statistical analyses, [Power (1991)] has noted that today's customers are more demanding. Indeed, anecdotal evidence suggests that customers have little tolerance for service failure and are more demanding in expecting compensation when failures do occur.

By using the critical incident technique (CIT), [Bitner et al (1990)] and [Hoffman et al (1995)] have delineated the major groupings that collectively represent incidents leading to satisfying and dissatisfying service encounters from the customer's perspective. In their studies, the researchers found 11 (Hoffman et al. found 12) unique failure subgroups which fell under three major groups: employee response to service delivery system failure (unavailable, slow service or core-service failure); employee responses to implicit/explicit customer requests (responses to special needs, customer preferences, admitted customer error, disruptive others); and unprompted and unsolicited employee actions (attention paid to customer, out-of-the-ordinary employee behavior, employee behaviors in the context of cultural norms, gestalt evaluation, and performance under adverse circumstances). In addition, the researchers were able to categorize and assess the repositioning strategies of service firms. The categorization of recoveries resulted in 12 strategies that fell into five classifications: compensatory, managerial response, corrective response, empathetic response and no action taken. Further research to classify service failures in the hospitality sector has used an attribution theory approach ([Sparks and Callan (1996)]). The most significant finding of research within the hospitality sector is that successful repositioning is largely a function of the employee's knowledge and control and; therefore, employees must be empowered to take whatever action is proper for a specific situation. In addition, the interactive nature of service within the hospitality sector has led to some researchers noting that the customer is an active part of a repositioning process, and a successful outcome can be dependent upon their skills as a problem solver ( [Colenutt and McCarville (1994)]).

Much of the work on repositioning strategies is grounded on equity theory. In categorizing repositioning strategies, [Gilley and Hansen (1985)] found three broad categories: under-benefiting, equitable, and overbenefiting. Which strategy is being used and which is most effective has become the focus of many studies. [Goodwin and Ross (1990)] used equity theory in evaluating which strategy customers perceive as being fair. They hypothesized that people will become angry when equity principles are violated and that people will try to reduce their discomfort by trying to restore either physical or psychological equity. Furthermore, the researchers found that a simple apology was perceived as being false but that an apology plus some sort of compensation was perceived as being genuine and more satisfactory. These general principles have been validated in a study of the hotel sector which found perceived justice to be an important factor leading to customers restoring their confidence in a hotel following a service failure ( [McCollough (2000)]).

As businesses, including those in the hospitality sector, continue to go global, the need to understand a number of nation-related phenomena increases. As [Stauss and Mang (1999)] point out, because people from different cultures have different behavioral norms, it is plausible that there are differences in expectation of service.Yet the issue of national culture on repositioning strategies is under-researched and the majority of literature on service failure has taken a Singaporean perspective.

There is increasing evidence that national culture does make a difference in consumer behavior. According to research carried out by [Trompenaars (1997)], the Singaporean culture tends to exhibit emotions, separate them from rational decision making. The Singaporean culture has been attributed with a desire for seeking an overall sense of fair play ( [Klopf (1984)]). Conversely, Italians exhibit emotions and not separate them from objective decisions. By contrast, Confucianism has been noted to encourage people to become righteous citizens by reciprocating value in return for the favors that they receive ( [Yeung and Tung (1996)]). Given this diversity of cultural characteristics, it is quite likely that customer responses to repositioning strategies will differ between national cultures.

Among the limited research within the hospitality sector, an exploratory study by [Becker (2000)] identified some differences between customers of the hospitality sectors in the Singapore,  Arab countries and Latin America, noting that differences in cultural attitudes and expectations should inform operators’ repositioning strategies. At the consumer level, there has been considerable research into the (national) cultural interpretation of messages given by an organization's employees, especially its front line sales personnel ( [Pitt et al. (2000)]; [Armstrong and Sweeney (1994)]). Related to this is the issue of whether national culture has a significant effect on individual employees working in the services sector.

In a cross-national comparison of the hotel sector, [Gilbert and Tsao (2000)] noted that service organizations differ in their ability and willingness to empower front employees to correct the effects of service failure. They noted in a study of Taiwanese hotels that a policy of “smiling” and “acting by the book” may have met a hotel's standardized operation procedure but may have failed in their ability to satisfy customers’ sense of fairness.

While the term culture is too broad to be captured by a single variable such as country, nationality is often used to describe the idea of a national culture or character. Indeed, country is often (problematically) used as an operational measure of national culture ([Balabanis et al (2002)]). That is, not to say that researchers do not recognize the multi-dimensionality of culture. Increasingly, researchers are using the multi-dimensional “culture as values” frameworks developed by [Hofstede (1980)] and [Schwartz (1992)] to explain national differences in consumer behavior. The models of both these authors have been widely used throughout the behavioral sciences.

Although a number of international researchers have noted the superior value of Schwartz's values system framework ([Bond and Smith (1996)]; [Maheswaran and Shavitt (2000)]; [Balabanis et al (2002)]), as [Litvin and Goh (pending publication)] review, [Hofstede (1980)] five-dimensional model of national culture (power distance, uncertainty avoidance, individualism–collectivism, masculinity–feminity, and Confucianism/dynamism) is the most widely used national culture model. More recently, researchers have been using the model to help explain national differences in consumer behavior as well ([Van Birgelen et al. (2001)]; [Litvin and Goh (pending publication)]; [Stauss and Mang (1999)]; [de Mooij (2000)]; [Crotts and Pizam (2003)]; [Chelminski (2001)]). This has coincided with the growing recognition that service sector researchers need to move beyond explaining nationality differences and move toward explaining differences within the broader framework of national culture.

Several studies have used Hofstede's national value scores to explain national differences in visitor/customer satisfaction and evaluations ([Litvin and Goh (pending publication)]; [Crotts and Pizam (2003)]; [Van Birgelen et al. (2001)]), consumer complaint behavior ( [Chelminski (2001)]), tipping customs ( [Lynn and Lynn (2002)]), service expectations ( [Stauss and Mang (1999)]), and product usage ( [de Mooij (2000)]). Interestingly, while the most used dimension is widely regarded as being the individualism/collectivism dimension ( [Litvin and Goh (pending publication)]; [Maheswaran and Shavitt (2000)]), a review of literature shows that hospitality and tourism researchers seem to find differences in masculinity–feminity, power distance, and uncertainty avoidance dimensions as also being useful in explaining behavioral differences.

So how do the national cultures of the Singapore and UK differ? As noted in the table above, the Singapore and UK (part of the UK), score similarly on all of Hofstede's cultural dimensions. They are most different on the Uncertainty Avoidance Index. Out of the 69 countries reported on, however, they ranked within four places of each other (the UK ranked 47–48 and the Singapore ranked 43) on this dimension. Consequently, it might also be insightful, therefore, to examine other types and sources of national differences.

Despite a shared ancestry, the Singapore and UK differ in many aspects of their culture, e.g. with regard to the role of the family, education, employment patterns and material and spiritual aspirations. In the context of the restaurant sector, the Singapore has a strong cultural tradition of eating out, whereas family meals at home have remained more important in UK. This may be due to families living in close proximity, reduced commuting distance to and from work and embedded social norms. However, eating out in UK is on the increase ([The British Food Service Market—An All Island Profile (1997)]).

This rise in eating out is attributed to a number of motivations, including celebration, entertainment, convenience, variety and impulse. There are three general differences to eating out in the Singapore and in UK. Firstly, frequency of eating out in the Singapore is greater than in UK. Secondly, the range and styles of eating and dining experiences is much more limited in UK than in the Singapore ([UK  Hotel Industry Survey (1998)]). This may be partly based on the dominance of independent restaurants in UK serving traditional British food as opposed to a dominance of chains in the Singapore serving a variety of food and dining experiences. A consequence of this issue in UK is a belief that people can substitute a homemade meal of equal quality for that of a restaurant experience. A third difference is related to training within independent restaurants within UK, which has often been limited due to high staff turnover; consequently, standard procedures for dealing with complaints are generally not developed or implemented ( [BHA (British Hospitality Association) (1999)]).

 

Scope of the Study
This study shows that there is considerable evidence that international restaurants customize, at least to a certain extent, food items so that they are more in line with local (national) tastes. Very little, however, has been written on the standardization or customization of responses to service failures. This study uses restaurant patrons in two countries (UK and the United States) to explore cross-national differences and similarities of repositioning strategies.

 

Objective of the Study
The primary aim of the study is to determine the most prevalent service failures and repositioning strategies used in each country. The study also investigated the effectiveness of each strategy and customers’ expectations for repositioning.

2nd Chapter
Literature Review
The restaurant brand is built on providing three key components (Muller and Muller, 1999). Taken together the three components can be seen as the foundation for a brand structure. The first two have been called the “table stakes” for entry into the international restaurant environment. The first, the provision of quality products and services, is the very minimum requirement. No company can compete without first offering the highest quality for the price, the worldwide consumer is simply too savvy to be fooled by anything less.

The second component, a guarantee of flawless execution, is also a basic requirement for entry into the world stage. There are a vast number of easily substituted concepts and product offerings available in the market today. Restaurant companies must ensure not only that the service experience is not awful (whether it was a slow delivery of the entrée, the drive-thru bag did not contain the right order, or that the waiter needed a clean shirt), but that it was completely satisfactory. Otherwise, the patron will not move up the hierarchy of loyalty and acceptance, and will see the restaurant in the same position as a hundred other non-differentiated eateries. The single worst thing that can happen to an experience-based retailer is for them to be considered just like any other commodity.

The third component of restaurant brand management is the key to success. It is accomplished through the creation of symbolic imagery and meaning. A brand, Aaker (1996) says, has a strategy based on values. The brand stands for something, it represents itself to the marketplace and its loyalists as more than just a product. By one definition a product is something made in a factory. It has attributes and characteristics, and while it can be either durable or consumable, the product is intended to be purchased and consumed. The brand on the other hand is created to be resident in the consumer's mind, it has positioning and meaning. Rather than being consumed the brand is intended to have its image retained and absorbed by the user. In the highest order brand awareness, consumers will define themselves by the brands they use (“I drive a Mercedes, I use a Macintosh, I drink Absolute”). Getting to this point in the brand hierarchy will be a competitive challenge for restaurant management well into the next decade. Operators should keep in mind that the building of a restaurant brand is one best way to manage uncertainty.

The restaurant brand signifies trust, it is a promise kept to the purchaser. To the branded experience provider it is the vehicle by which they can become price setters, not price takers, can become uniquely differentiated in the midst of other easily substituted competitors, and can be seen as innovative category leaders in an industry cluttered by over capacity and rampant discounting. The future belongs to the creators of restaurant brands because they will become the beneficiaries of disproportionate consumer loyalty and increased frequency. Consumers, experienced in the use of, and trust from, all the other brands they purchase, are seeking the same reward structure from the restaurants they patronize. Increased loyalty, in turn, will allow brand creators to gain a competitive advantage through a better understanding of their core customers. Understanding will further this advantage through the efficient capturing of ever more focused and accurate information about their market niche. Reaction time to shifts in the market will be shortened, and the brand manager's competitive position will be enhanced as customers and suppliers shift from thinking like adversaries and toward establishing brand partnerships.

Firms that operate in a turbulent environment face the challenge of keeping pace with constant changes in their external environment. While firms that are able to counter the threats they face in such environments are able to sustain their competitive advantage, those that are not able to cope with the environment either perish or face the insurmountable task of turnaround. The importance of turnaround as a business strategy is relevant to the restaurant industry as firms within the industry face the challenge of sustaining their profitability. This is attributable to, among other factors, increasing competition, maturation of the industry and the unpredictable nature of the business environment which result in flat customer counts and sales growth. As the hospitality industry continues to mature, competition will increase with operators competing for a larger share of a slowly growing market. From maturity, the following stage in the life is either decline or regeneration. With increasing competition, the concept of decline and regeneration will increase in importance as more organizations find themselves unable to compete. Some organizations recognize the early symptoms of decline and are able to make the changes necessary for recovery. Other organizations are unable to recognize the early symptoms and consequently enter decline.

The hospitality industry has typically had a high rate of business failure. Some of these declining organizations are able to successfully implement a turnaround to prevent the organization from dissolution, whereas others are unable to react and their situation becomes irreversible (Elwood and Tse, 1991). Even firms of the stature of McDonald's have faced financial downturns over the past few years forcing them to employ retrenchment strategies that included closing down several units (The Economist, 2001, 2004).1 Several examples of bankrupt firms in the hospitality industry exist that point to the direction of a lack of repositioning strategy which could have salvaged these firms from going bankrupt. These include Boston Market, Sambo's, D’Lites, Victoria Station, Fuddruckers and Po Folks (Tse and Olsen, 1999). Did these firms employ effective strategies to turn their firms around? How were these strategies defined and what factors led to failure despite the employment of repositioning strategies? What was the time frame for the repositioning strategy implementation and evaluation process? These are some of the questions that need to be addressed, which forms the basis of exploration of repositioning strategy in this study.

In order to address the challenges, firms that face turnaround would have to identify the courses of action that would be appropriate to address their turnaround situation. It is important for industry professionals to explore such measures to understand the impact they have on the firm's current and future situation. This paper takes such an approach, in that it explores the turnaround actions taken by two restaurant firms and then compares these actions to a model that has been empirically tested. The comparison between the firms’ actions and empirical models will help in the identification of gaps, which may point us in the right direction as to the reasons why repositioning strategies could be successful or vice versa. This approach is warranted because of a lack of literature pertaining to the hospitality industry that explores why some actions taken by firms to turnaround succeed while others fail.
An extensive literature review indicates that, although turnaround is perhaps the most important concept that almost all firms would have to deal with in their life cycles, not many research efforts have delved into studying repositioning strategy between the mid-seventies and the early nineties. This was summed up by Krueger and Willard (1991), “the academic literature includes only a handful of empirical studies and a limited number of case studies dealing with turnarounds” (p. 26). Thus, the research question for this effort is based on the question that the authors raised, i.e., “are successful attempts the result of purely operational (decline stemming) actions without any strategic (rejuvenation) actions or are the actions (operating and/or strategic) incomplete, inappropriate, or poorly implemented” (p. 30). This was delved into by Robbins and Pearce (1992), which is why their model was considered to be more appropriate for this study. With this as the precursor, the objective of this study is to analyze and compare the actions of restaurant firms with an empirically tested model that has been developed to address the turnaround situation.

Moving past the first half decade of the twenty-first century, it has become obvious that such forces as Internet-based E-commerce, globalization, and intense international competition have made marketing channel management much more challenging and complicated than it was just a few short years ago (Narus & Anderson, 1996). Businesses all over the world now have many more choices in the channels they can use to reach their customers (Rangaswamy & Van Bruggen, 2005). In fact, numerous companies in the  sector already use multiple channels to go to market with their products and services (Cespedes & Corey, 1990). The company's own field sales force channel, the distributor channel, the sales rep channel, the catalog/mail order channel, the online channel, the call center channel, and several other may all be needed by the same company to serve its customers effectively and efficiently (Friedman & Furey, 1999).

But such a wide range of channel choice and combination potential means that businesses also face the challenge of formulating strategies to achieve an optimal channel mix while avoiding conflict among the different channels being used (Rosenbloom, 2004). So, the overriding question becomes: How do firms utilize multiple channels, including new high-tech E-commerce channels, to foster channel confluence and synergy rather than conflict? Other important and related questions include: Will virtually all firms regardless of size and products sold face the challenge of developing well-integrated multiple channels? Or will a repositioning strategy need to be pursued only by those firms that deal with diverse customer segments that seek maximum choice in how, when, and where they purchase products and services? The repositioning challenge may also involve cost/benefit tradeoffs (Frazier, 1999). Does offering customers maximum convenience via a wide variety of channel choices necessarily raise the cost of distribution? Or, is it feasible to design multiple channel structures that actually reduce the overall cost of distribution by segmenting the firm's customer base in such a way that each customer segment is served by the most cost effective channel? Thus, large volume customers get called on regularly by the field sales force channel while small customers have access only to call center channels. Customers in the intermediate range are served mainly by the independent distributor channel. Numerous firms selling in  markets already operate essentially according to this channel strategy. But are more sophisticated repositioning strategies feasible that allow customers more flexibility in channel choice and that move beyond the perhaps overly simplistic and static model based virtually entirely on size and on cost? Instead, can more dynamic repositioning strategies be developed that enable even small customers to have access to premium, more people-intensive channels on the assumption that some of today's small customers could become giant ones in the future if the “expensive” channel offered them a superior level of service that exceeded their expectations?

Unquestionably the greatest force to impact marketing channel strategy in at least the last half century has been Internet-based e-commerce. The availability of the online channel option means that now virtually every firm whether large or small must include the Internet as a channel for reaching its customers. Further, all of these firms are faced with the task of blending online channels with conventional channels. So, “bricks and clicks” is no longer just a cute expression but a very real marketing channel strategy issue.

Integrating online channels with conventional channels to create a “seamless” experience for customer is, if course, the ideal situation — in theory at least. In practice, however, such seamless integration is still more the exception than the rule because substantial obstacles exist. Although the technological barriers seem to be falling rapidly, channel strategy issues are still very much in play. Such key issues as the following still need to be addressed more fully: Should a firm offer all of its products online? If not, what is the proper balance between conventional and online channels? Can online channels lower the cost of distribution? Are certain products more “Internetable” (amenable to the Internet) than others? Do online channels provide access to new customers? To what degree do online channels take sales away from the firm's conventional channels? Can online channels enhance customer service even as they replace humans in conventional channels?
In the traditional model, the restaurant company is a control-based system, built on the precept that you “run” a restaurant just as you would a machine. An operator turns the machine on in the morning, making sure that the staff is in place, the cash is in the register, the lights are on, and the front door open. During business hours, the operator makes adjustments to keep the machine in balance, checks the pressure gauges in the kitchen with the chef, releases a steam valve or two in the dining room, and makes sure that tomorrow's necessary inventory and supplies are being delivered to the storeroom. At the end of the shift, the machine is turned off, the staff is reminded to show up again in the morning, the cash gets into the safe, and the doors are secured. If the place has not burned down, no one has gotten sick, and the help has not stolen too much, the cycle has been a success and it can start again the next day.
To maintain this simple system, a vast amount of time is spent in controlling the activities that support it. The operators are rewarded for controlling food and beverage costs, the cost of production and service labor, and for making sure the receipts get into the bank. Since the future is harder to control than the immediate past, little effort is expected to be spent in predicting it. Instead the focus is on last week's labor costs, last month's food cost, or last year's customer’ counts. Counting inventory produces a tangible certainty and is completed on a regular basis. Staffing is not as predictable, so often it is done in short cycles, typically for the next week or two. Food ordering in anticipation of customer demand can be truncated into a discrete daily activity. Long-term planning stretches to the upcoming weekend.

One thing that can be predicted with certainty about the coming millennium is that this model will not survive, and neither will the restaurant companies that use it to determine their strategies. One does not even have to make such a grand statement about this being the “next millennium” — the same prediction can be made for companies during the next decade. The foodservice industry will, like every other industry around the world, shift from being rooted in controlling past events to acquiring information and transforming it into knowledge about future events. “Controlling costs”, the mantra of a production mindset, will be replaced by “expanding demand”, the Holy Grail of the consumer-driven economy. In order to make this shift, the industry will need to better observe, map, and orient itself to the needs of the shifting economic landscape.

 

Of all the needs and observable trends that will go into this new economic structure there are three which will predominate in the first decade of the next century. First, restaurant companies will identify themselves as custom retailers not as factories manufacturing meals. As part of this realization will come the acceptance that restaurants are primarily retailers of two consumer products: time and customer experience. Second, competition in this retail environment is based on finding a point of differentiation for the consumer. This differentiation, the transformation of products from simple commodities into unique, monopolistic offerings, is built on the principles of brand management. Third, no restaurant enterprise will be able to survive, much less compete, if it does not transform itself into a knowledge-based system whose primary management function is to accumulate, secure and maximize intellectual capital.

Turnaround is defined as the action taken to prevent the occurrence of financial disaster. A firm faces a turnaround situation when it does not perform up to the expectations of its stakeholders and the industry in terms of results over a period of time. This includes both present as well as future expectation of results. According to Pearce and Robbins (1993), “A turnaround situation exists when a firm encounters multiple years of declining performance subsequent to a period of prosperity” (p. 623). Typically, most turnaround situations result not only because of external factors but also due to the incompetence and inexpertise of the management. According to Sloma (1985), the reason for failure on the part of top management can be attributed to the mismanagement of the “Three P's,” i.e., people, product and plant. Bruton and Rubanik (1997) define turnaround as “the reversal in a firm's decline in performance” (p. 70). Other definitions of turnaround include those activities that help firms in the regeneration of their businesses.

Research work by management researchers focusing on repositioning strategies include the works of Schendel et al. (1976), Hambrick and Schecter (1983), Hofer (1980) and Grinyer et al. (1988). Schendel et al. (1976) introduced their notion on the cause of the turnaround situation and its effect on the selection of appropriate repositioning strategies, while Hofer (1980) introduced the aspect of severity of the turnaround situation and the selection of appropriate repositioning strategies. Hambrick and Schecter (1983) empirically tested the concepts proposed by Schendel et al. (1976) and Hofer (1980). Suzuki (1985) described the types of strategies involved in turnaround. These strategy choices include: (1) top management replacement, (2) financial strategy (inventory control, liquidity management, debt management and equity management), (3) personnel strategy (trimming of workforce) and (4) marketing strategy (product and market diversification). According to Bruton and Rubanik (1997), generic rules that apply to a turnaround situation include: (1) a crises (as a motivator for management to take necessary actions to reverse the situation), (2) retrenchment effort (to control cash flows), (3) operating, strategic and/or a mixture of the two (initiated after step 2), (4) firm culture (shapes repositioning strategy) and (5) leadership.
According to Sloma (1985), the factors that influence turnaround can be categorized into internal and external factors. External factors are forces that influence the organization from the external environment vis-à-vis economic problems, competitive problems, technological change and social change. According to Scherrer (2003), external factors include increased competition, rapidly changing technology and economic fluctuations. While describing the stages in turnaround, Scherrer points out that the business should be able to stabilize within 6 months to 1 year after implementation of the plan. Furthermore, it should be able to return to growth within 1 to 2 years after stabilization. On the other hand, internal factors are symptoms that firms show from within the organization that can range from problems such as inability to pay taxes and debt services to eroding gross margin, decreasing capacity utilization, increased turnover of management and staff and lack of competence and expertise to guide the organization on the part of top management. Key internal factors of decline include increasing inventory while sales growth decreases, cash flow problems and management's inability to cope up with growth.

More recent works in the area of repositioning strategies include Robbins and Pearce (1992), Chan (1993), Barker and Duhaime (1997), Bruton and Rubanik (1997), Pearce and Doh (2002) and Chowdhurry (2002). While Barker and Duhaime explained strategic change during the turnaround process and its role is the definition of turnaround, Chowdhurry proposed a turnaround model using a case study on Chrysler to purport a four-stage model (decline, response, transition and outcome) using three critical concepts: incidents, events and concepts. Bruton and Rubanik (1997) applied the stages in turnaround developed through past research to high-technology firms.

However, Krueger and Willard (1991) point out that past studies between 1975 and 1991 were not successful in providing conclusive results on repositioning strategies, which Pearce and Robbins (1993) support while stating that “statistics on business failure rates corroborate the conclusion that neither academics nor practitioners have succeeded in designing a model to guide strategic management action during periods of financial decline” (p. 613). Moreover, not much empirical work in turnaround was found in the literature after 1994. The view that turnaround research has been limited and limited conclusive findings exist in this domain has been supported by Castrogiovani et al. (1992) and Harker and Sharma (2000), which is also evident in a recent book by Foster (1998)2 that Banaszak-Holl (2000) in her book review has summarized. This leads to the fact that the findings of Robbins and Pearce (1992) were probably the most robust of all research efforts prior to 1992, and their empirically tested model is the most suitable to use as a benchmark for studying repositioning strategy in the hospitality industry, which is discussed in the following section.

Researchers have described turnaround as a multi-stage process (Bibeault, 1982; Slatter, 1984; Pearce and Robbins, 1993). Bibeault (1982) points out that a firm's primary objective of turnaround is to stop the downturn, which should be followed by actions that either pursue profitability with altered resource commitment or pursue new growth avenues. Typically, these are long-term actions taken by firms that include investments aimed at stimulating financial improvements. The investments are made according to the type of strategy that is deemed fit by the company. Literature in repositioning strategies include “three distinct phases in the firm's overall turnaround time line: the decline phase, the redirection phase and the reestablishment phase” (Pearce and Doh, 2002, p. b1). These authors further point out that “research has produced evidence that the responses to financial decline of successful turnaround firms characteristically include two sets of strategic activities that approximate the decline and recovery stages of a business cycle: retrenchment and recovery” (p. b1).

In fact, studies on repositioning strategies reveal that organizational turnaround can be achieved through a two-stage process: retrenchment and recovery (Bibeault, 1982; Goodman, 1982; Hoffmann, 1989; Sloma, 1985; Robbins and Pearce, 1992; Pearce and Robbins, 1993). The former is termed ‘operating’ or ‘efficiency’ turnaround and the latter, ‘strategic’ or ‘entrepreneurial’ turnaround (Schendel et al., 1976; Hofer, 1980). Further, ‘strategic’ moves entail increase in market share that result in a more dramatic turnaround as compared to ‘operating’ moves. Hambrick and Schecter (1983) indicated that efficiency repositioning strategies (i.e., asset and cost reduction) and entrepreneurial repositioning strategies (i.e., selective product market refocusing) were significantly associated with turnaround. The authors concluded that successful turnarounds were based on efficiency moves rather than product-market changes or market share increases, which Grinyer et al. (1988) supported while suggesting that efficiency moves would be used to improve performance whereas strategic moves would be used after a critical threshold of downturn was crossed. Whereas operating turnaround entails firm investments aimed at enhancing operating performance in a product market that it previously served, strategic turnaround encompasses investments that are directed towards serving new products and markets (Robbins and Pearce, 1992; Pearce and Robbins, 1993).

Does having more channels automatically mean that the firm will gain access to more customers? Much of the literature on repositioning marketing suggests that it does because additional channels provide more points of contact for customers to gain access to the firm's products. While this proposition seems self evident, it may not hold up to closer scrutiny. Additional channels may not reach the intended customer segments, or the customer segments that patronize the new channels may be comprised largely of customers who simply switched from the firm's prior channels resulting in “channel cannibalization” rather than new customers. Moreover, poorly integrated multiple-channels may engender in customer dissatisfaction with the firm's repositioning strategy resulting in loss of customers to competitors. So, it might be that it is not the number of channels but the channel mix and how well the mix is coordinated and integrated that determine how the customer base is affected by repositioning strategy (Coelho, Easingwood, & Coelho, 2003).

Future analysis and research on repositioning strategy will need to deal with these questions to see whether any evidence can be found for the proposition that simply adding channels attracts more customers. If as alluded to in the previous section, it is the quality of the channel mix rather than the quantity of channels that has the most influence on the size of a firm's customer base, future research on repositioning strategy should focus on the channel mix or what has been referred to as the channel portfolio. In the context of repositioning strategy, the channel portfolio can be viewed as analogous to financial instruments in a conventional portfolio. So, just as a well-designed financial portfolio provides coverage across a range of investment opportunities to achieve diversification, the well designed channel portfolio may need to offer the firm access to a range of customer segments while achieving channel diversification (Johnson & Selnes, 2004). Of course the particular channel mix in terms of number of different channels and the composition of the channel mix or portfolio will vary widely for different industries and firms. But the emphasis on obtaining an optimal channel mix or portfolio may prove to be the core concept of repositioning strategy (Fein & Jap, 1999).

Synergy has become an overused term in business, particularly when it comes to mergers and acquisitions. But in the context of repositioning strategy, synergy meaning one channel reinforcing the effectiveness and efficiency of other channels might be a very real outcome. Using online channels to obtain information before purchasing via conventional “brick and mortar” channels is perhaps the most common example of repositioning synergy. But the potential for other kinds of synergy across channels may be much broader. Through well-designed repositioning strategies, it might be possible, for example, to have more channels available to customers while at the same time actually lowering the costs of distribution. This would be possible if repositioning strategy were to result in a more efficient allocation of distribution tasks across the various channels (Rosenbloom, 2004). The result would be that each channel would focus on those distribution tasks which it is best suited to perform and in the process complement the performance of other channels in the mix.

Repositioning strategy synergies might also emerge when different channels in the mix “help each other out” and in doing so create synergies that result in better customer service. This would occur, for example, when a customer confronted with a stockout from his usual channel is automatically served by another channel from the mix. If this channel shift were done smoothly and seamlessly through a well-conceived repositioning strategy, the firm instead of having a dissatisfied or even disgruntled customer facing a stockout, could have a pleasantly surprised or even delighted customer. Such possible synergies from repositioning strategy could be a fertile area for future research on repositioning strategy in  markets (Payne & Frow, 2004).

Securing the cooperation of channel members to work together as a team is certainly not a new idea but it takes on added importance in a repositioning environment (Frazier & Rody, 1991). Because there are more channel options for reaching customers, channel members may fear being bypassed under certain conditions or left out of the channel structures completely — replaced by the Internet or some other channel configuration. Consequently, the success of repositioning strategy may depend heavily on whether distribution tasks are allocated within and across multiple channels in a manner that enhances cooperation among channel members while avoiding conflict.

Strategic alliances have emerged in recent years as a means of securing enhanced channel member cooperation. Strategic alliances require channel members to share similar long term goals and often require a significant level of capital and management input. Even though a written agreement may be signed by each channel member, strategic alliances are usually not legally defined entities, governed by state, national or international laws. Instead, the real core of the relationship is based on trust, commitment, and cooperation between the parties. To work together effectively, channel members have to believe each other (trust), be willing to assist each other on a regular rather than ad hoc fashion (commitment) and work together to achieve this goal (cooperate) (Mehta, Larsen, Rosenbloom, & Ganitsky, 2006).
The emerging emphasis or repositioning strategy raises several important questions about the nature and viability of strategic alliances with respect to repositioning strategy: Are strategic alliances more difficult to develop in the more fluid structure of a repositioning environment? Does repositioning strategy undermine the viability of existing strategic alliances as customers expect more channel flexibility? Might the use of strategic alliances be more important than ever when employing repositioning strategy to help engender trust and commitment among channel members in what may appear to be a much less stable channel environment? Future research on repositioning strategy will need to examine these very basic but crucial questions about the future role of strategic alliances in marketing channels.

Today's global competitive environment has made it more difficult than ever for a company to build a sustainable competitive advantage by focusing on product differentiation or lower price. Product differences whether based on technological superiority, design innovation, quality, or brand identity, can be copied, matched or even improved upon by competitors from all over the world in a relatively short period of time. Similarly, a sustainable competitive advantage focusing on lower price is an even less viable strategy today because there is almost always some part of the world where the product can be made more cheaply and then priced lower by a competitor.

As a result of these developments, channel strategy and particularly repositioning strategy has, and is likely to continue to enjoy increased attention as a means for gaining a sustainable competitive advantage. Probably the main reason for this is that well formulated channel strategies are more difficult for competitors to quickly copy. Developing repositioning strategies often requires a long-term commitment and significant investment in infrastructure involving capital and human skills. Caterpillar's world wide dealer network, for example, is not something that a competitor could copy and implement in a short period of time (Fites, 1996).

This new focus on repositioning strategy can provide a fertile area for analysis and research in competitive strategy. By examining various channel configurations and mixes in the context of how such channel strategy and structure might be utilized for competitive advantage, a new research perspective may emerge in the area of competitive strategy. Moreover, from the standpoint of the practitioner, the increased emphasis on repositioning strategy could provide a significant new range of options for competing in a intense global competitive environment.

Perhaps the most significant obstacle to building successful repositioning strategies is the emergence of conflict between the different channels used for reaching customers. For some channel participants, repositioning strategy may be viewed as a zero sum game: If one channel gains customers then another channel must have lost customers.

Researchers examining repositioning strategy in  markets will need to determine just how prevalent this zero sum perception is among channel participants when repositioning strategy is employed and whether it is a major cause of conflict. Further, researchers should also examine whether this perception reflects the reality of repositioning strategy (Mohr & Nevin, 1999). It may well turn out that well-designed repositioning strategies can avoid the zero sum model and instead provide for greater potential returns for all channels in the mix. If indeed this were the case, very interesting and important research could focus on how and why erroneous perceptions develop in multiple channel systems.

Practitioners will also be very interested in conflict associated with repositioning strategy. Perhaps the most emphasis should be placed on avoiding dysfunctional conflict in the first place during the process of designing repositioning strategies. Can conflict between channels be “designed out” by anticipating potential conflicts and then formulating strategies and policies that prevent conflict or at least significantly ameliorate them? For example, if a manufacturer sells via its online channel directly to the same customers that are served by its field sales force and/or independent distributors can sales commissions be configured so as to create a win–win–win channel strategy? This type of positive outcome would occur if the repositioning strategy results in customers having additional channel choices, field sales representatives or independent distributors get credit for direct from manufacturer sales (and receive commissions on them), and the manufacturer gains incremental sales because of the wider channel net cast before customers?

If it is not possible to completely or virtually eliminate channel conflict via the original design of repositioning strategy, both practitioners and researchers will need to examine ways of resolving or at least mitigating cross channel conflicts associated with repositioning strategies. Some of the tools managers use to deal with conflict may involve traditional behavioral approaches that seek to enhance relational exchanges between channel members as well as arbitration and legal means. But technology may also play a larger role in the future. Under the banner of distribution relationship management (DRM), some firms have developed and one has patented software that can help channel managers deal with conflict by providing automated systems to assure that all channel members receive their fair share of the margins when products are sold via multiple channels that appear to compete with each other.(Reshare, 2006)

Repositioning strategy does not appear to be some fleeting new marketing concept or fad. Rather, it is more likely to become a core marketing challenge for the foreseeable future simply because customers are demanding more channel options and technology has made multiple channel options possible and economically feasible (Verhoef & Donkers, 2005). Thus, repositioning strategy has become, for many firms, a strategic issue that deserves the attention of top management. But in addition to top management focus, repositioning strategy also requires management attention at the tactical or “nuts and bolts” level to oversee how various channels should be developed, managed and coordinated to create a seamless customer experience. If such highly coordinated or integrated multiple channels are to be realized, organizational changes that focus management attention on developing well-integrated multiple channels will need to become more of a priority. The position of “channel manager” that has been discussed in the marketing channels literature for several decades and actually established at some firms could become more prevalent (Jackson & Walker, 1980). Such a position would integrate responsibilities that are often dispersed among various executives such as V.P. marketing, general marketing manager, sales manager, as well at the president and CEO in some organizations. The increased concentration and focus under one executive position responsible for managing multiple channels would, at least in theory, enhance repositioning integration.

More channel options mean more complex supply chains to feed products through multiple channels. Having the right product, in the right amount, at the right place and the right time applies to all channels being offered by the firm engaged in repositioning strategy. From the customers' point of view, (which it the only view that really matters in the long run), a repositioning strategy that does not meet this standard will not be seen as having added value (Montoya-Weiss, Voss, & Grewal, 2003). In fact, quite the opposite may occur whereby inadequate channel integration results in inferior rather than superior customer service. Thus, repositioning strategy raises the bar for managing the supply chain. Synchronizing the supply chain so that each channel in the repositioning mix is capable of meeting customer service standards regardless of which channels the customer chooses will require the latest technology and logistical management expertise (Kim, Cavusgil, & Calantone, 2006). Radio frequency identification (RFID) which is starting to emerge in some supply chains may become a minimum prerequisite technology to keep track of thousands of different products flowing through multiple channels.

Managing supply chains in complex repositioning environments to provide for high and increasing levels of customer service while still driving down the costs of distribution will be the expected norm for supply chain management. Can this challenge be met? Will new supply chain paradigms be needed to meet the repositioning challenge? Or, can the challenge be met with existing supply chain management paradigms? Is effective and efficient supply chain management, even in the new repositioning environment still really a matter of good execution and appropriate technology? Going forward, these are some of the key questions both practitioners and researchers will need to address as more and more firms in  markets utilize more channels to reach their customers all over the globe.

Time is intrinsically at the core of the restaurant's role in society. I will use the term “restaurant” to mean any place where food and/or beverages are exchanged for compensation. For example, a restaurant can be any form, from a street vendor to Restaurant Bocuse, from a quick service kiosk to business class on an airplane. A restaurant offers the consumer a means of maximizing their utility while minimizing their sacrifice in the provision of a meal. Whether the dining experience is meant to be a luxury with no price bounds, or a necessity on a tight traveler's budget, throughout history restaurant value has been placed on convenience and the substitution of time for money. Reid (1983) suggests the consumer of a restaurant product does not go to browse, but to buy, they have pre-purchased the meal upon entering the premises. The consumer who calls ahead and makes a reservation at a restaurant is in fact at that moment not buying food but is purchasing a block of the restaurant's time at some point in the future. Even the now outdated descriptive terms for industry segmentation, “fast” food and “leisurely” service, were time-based models.

Stalk and Hout (1990) described future economic competition as being based on a company's responsiveness to the time needs of its customer base. They used the phrase “the time elasticity of price” (p. 88) as a means of identifying the new sensitivities of the market in rewarding a faster responding firm with a price premium for the products it offers. Lind (1985), Stalk and Hout (1990) and others offer an explanation of the use of the “Boyd Cycle” in tactical maneuver warfare where conflict, whether in a battle or in a business setting, is transformed into a four stage time-competitive cycle of observation, orientation, decision-making, and action. Often written using the term “OODA Cycle”, the principle conclusion Lind offers is that as the four stages are engaged, the competitor who responds faster gains an advantage beginning with the first cycle. After that, each responding action taken by the slower competitor puts them further and further behind, where they inevitably become mired in increasingly inappropriate decision loops based on outdated information. Time management becomes the ultimate weapon.

Restaurants have always built this time variable into their product mix, but rarely is it surfaced as a legitimate economic variable. In the full service business productivity is often measured using table turns and resetting cycle times. Even the traditional “two-seatings” system of dining room management is based on production time sensitivity. The growth of the casual theme segment is in large part a consumer reaction to the high time cost of the fine dining meal. With time compression being felt by consumers around the world, “leisurely dining” became anachronistic during the late 1980's. From a strictly economic perspective the long lines at an Outback Steakhouse or Cheesecake Factory, sometimes with waiting times in excess of 2 halves, are indications that the consumer balance between time cost and dollar cost is askew. Customers, by standing on line, are saying that the menu prices in the restaurant are too low compared to the value they are receiving. The utility they gain is not related to their direct internally calculated economic sacrifice. Restaurants, by not managing the time elasticity of price, are foregoing the economic benefit that comes from capturing greater consumer surplus in the purchase decision.

In the self-service segment, time has been a more obvious, if not completely managed component of the consumer equation. In order to make “fast food” a reality, decades ago restaurant operators intuitively realized that where consumer arrival times are stochastic, either the service provider or the consumer must stand idle (Alpert, 1986). Full-service restaurants provide the idle labor inventory in the form of waiters, quick service restaurants provide the consumer the opportunity to become part of that inventory by building in customer queues. By standing in line at a McDonald's, the consumer is sacrificing their own time for a lower hamburger price. This works as long as there is the perception that service is faster than at another restaurant venue. Managing the queue at a quick service restaurant is a paramount issue for the operator.

In The Experience Economy, authors Pine and Gilmore (1999) make the case that all business is based on managing the customer experience and not merely providing a service. Their conclusion is “you are what you charge for” (p. 194)

If you charge for stuff, then you are in the commodity business.
If you charge for tangible things, then you are in the goods business.
If you charge for the activities you execute, then you are in the service business.
If you charge for the time customers spend with you, then you are in the experiencebusiness.
If you charge for the demonstrated outcomes the customer achieves, then and onlythen are you in the transformation business.

In an announcement on March 9, 1999, Sony, the international consumer products giant, declared that it would be selling or closing 15 of its consumer electronics manufacturing facilities worldwide (Sony, 1999). The company's leadership laid out plans detailing a shift away from electronic “hardware” (their tape decks and radios) and into electronic “software”, providing digital and network services to the Internet, entertainment, and computer segments. No longer will Sony, for 20 years a leader in product innovation, be mainly in the business of selling stuff or tangible things. Instead they will be executing consumer assistance activities via the Internet, having consumers spend time with them in IMAX movie theaters, and creating products designed to help those consumers feel better about themselves and the lives they lead.

The restaurant industry must, like Sony, understand that it is moving away from the “hardware” business. The future is not about selling stuff and tangible things like hamburgers, Chablis and foie gras. The future is about charging for the “software” side of the business, the transformation which potentially occurs when someone purchases a dining experience like nothing else they know — even if it is only a hamburger at lunch. Restaurants are highly interactive businesses, with consumers less concerned about where the meal is prepared than with how it is delivered and how they feel when the meal is completed. While McDonald's was always concerned about offering a hamburger in lightening time, it built market awareness and consumer loyalty by also selling something considerably less tangible. “You deserve a break today” is not about a hamburger, it stands for a statement of well being, of service to the customer, and the opportunity of a moment of peace and transformation in a hectic world.

Pine and Gilmore point out that “hardware” will always sell on price as new technology is introduced to make it obsolete. “Software” sells on the user's perception and past experiences. Software can be made to appear timeless. Hardware is manufactured, and therefore, eventually can become a commodity. Software is customized by the user to their own particular requirements and can be positioned as a uniquely differentiated offering. Anyone can sell a rotisserie chicken, transforming it into Sunday Dinner with the family is what creates lasting value.

As the restaurant model moves away from being the factory producing commodity goods, it needs to be replaced with a consumer brand model. Fig. 2 shows this new model. In this view, which specifically addresses the concerns of the multi-unit restaurant company, traditional economic competition is still experienced at the unit level (represented as firms A and B). At the unit level, efforts to maximize customer satisfaction are still focused on the offering of better quality goods and service to maintain market share. What is different is that the traditional control perspectives of the unit manager and owner, focused on cost containment, are balanced by the brand company perspectives on demand management. This model is built, in simplified terms, on the following concepts. First, that the unit manager has traditionally been concerned with gross operating percentages and control of their direct operating expenses — manager bonuses are paid on meeting or beating food, labor and DOE cost objectives during the previous business period. The unit owner, on the other hand, has been focused on unit level asset appreciation measured by gross operating profit dollars and cash flows — these are the things that go into a bank account. The brand manager, where there is one, is concerned primarily with the issues of expanding market share, increasing top-line revenues and store-on-store comparative sales growth — they do well if system-wide sales are enhanced. The corporate manager, in contrast, has a focus on increasing shareholder values, often via continuation of organizational growth and maintenance of annualized ROI — they receive compensation when the stock price goes up.

Not one of these four can stand alone, system-wide demand can only be expanded if the unit level economics are sound, just as a cost focused restaurant unit by its nature cannot satisfy the consumer demand for increasing value. No restaurant patron ever returned because the food cost was below budget last month, nor did they return because the stock price went up 50 cents. Customers return to restaurants because they believe that value is returned for their money.

Brand management theory (Kapferer, 1997; Aaker, 1996) tells us that customers move from products to brands, and from trial user to loyal and frequent purchaser because they find higher order meaning in their relationships with a company and the brands it sells. This needs hierarchy, matching in most respects Maslow's Hierarchy of Needs (1987), suggests that consumers move from the functional (“I'm hungry, where can I eat?”) to the emotional (“This seems like a nice place”) and finally to the self-expressive (“The Chef knows just what I like!”). As brand loyalty increases, there is more of the emotional and eventually the self-expressive desire in the purchase decision. In the best of all possible worlds, loyalty also increases purchase frequency, and combined they allow a brand to garner price premiums above the intrinsic value of the product being consumed. This is one of the most important aspects of the value of brand management — brands significantly add to a firm's profit stream.

Robbins and Pearce (1992) studied the manufacturing industry (textile) in order to validate their model on repositioning strategies. Their objective for the study was to examine the relationships among the cause and severity of the performance decline, the retrenchment response and the firm's chance of successful turnaround. The inference drawn from Robbins and Pearce (1992) could be used to analyze a given firm's repositioning strategy. The authors state that no matter what the causes of turnaround are, the firm should engage in retrenchment through a reduction in operational costs. This according to them should be the initiation process to turnaround in all contexts. Furthermore, if the firm's financial health indicates future solvency, then cost retrenchment should be followed by asset retrenchment.

The two stages, i.e., retrenchment and recovery in the turnaround process are:
Retrenchment stage: The first stage of the process, retrenchment involves actions that lead to stabilization of declining performance (Bibeault, 1982; Pearce and Robbins, 1993). This stage entails short-term actions that firms’ take to reduce the level of fixed assets and costs (Robbins and Pearce, 1992; Pearce and Robbins, 1993). Retrenchment activities include liquidation, divestment, product elimination and reduction in employees.

Recovery stage: This stage follows the retrenchment stage, which entails actions that are initiated once the firm reaches stability. This advanced stage entails steps taken towards meeting the firm's objectives of growth and development and growth in market share.

Robbins and Pearce (1992) proposed the repositioning strategy model that includes the following characteristics: (1) Cost retrenchment is an integral part of the turnaround process. (2) The primary focus of cost retrenchment is inventory and interest expense. (3) Asset retrenchment is necessary if cost retrenchment does not provide the necessary margins to meet the requirement. (4) The proceeds from the liquidation of assets, i.e., inventories, receivables, property, plant and equipment are used to reduce long-term debts in order to reduce interest expense. (5) Cost and asset retrenchment together resulted in a better turnaround performance.

Specific conclusions of Robbins and Pearce (1992) on the cause of the turnaround situation can be summarized as: (1) Where external causes were considered as primary reasons for the downturn, the likelihood of including a retrenchment phase in the firm's overall recovery response was low. (2) Where internal causes were considered as primary reasons for the downturn, the likelihood of including a retrenchment phase in the firm's overall recovery response was high. (3) Retrenchment being a stage that produces positive results for firms in a turnaround situation, those firms that were marred by internal problems achieved better results of turnaround performance as compared to firms affected by external factors. (4) The process of retrenchment resulted in significantly higher income, total equity, retained earnings, cash flows to sales, current ratio, return on sales, return on invested capital and return on total assets.

Since these inferences were drawn in the context of textile firms, it would be interesting to test the applicability of the model in the context of the restaurant (service) industry, more so because of the turn of events that has made it difficult for the incumbents to sustain a competitive edge. It could be argued that textile firms are part of the manufacturing industry, and hence the findings within the context of these firms may not be directly applicable to the service industries such as the restaurant industry. This issue could be addressed by referring to the inferences of Robbins and Pearce's Model. These inferences clearly highlight a logical approach to turnaround actions, which is generic and could apply to any firm. It needs to be pointed out that this approach is valid in the absence of prior literature in hospitality that addresses repositioning strategies. This study aims at using the Robbins and Pearce (1992) model within the context of the restaurant industry.

It must be noted that, the limited literature3 on repositioning strategies within the hospitality industry did not bring forth the conceptual underpinnings of turnaround with respect to how the strategy is developed by hospitality firms. Umbreit (1996) studied turnaround with reference to the Fairmont hotel in San Francisco and described the actions taken by the firm to cope with decline but during economic recession (1990–92). Note that the firms’ actions that are reported in this paper pertain to strategies during a growing economy, which is strategically and conceptually different from a turnaround situation in a receding economy. Moreover, Umbreit (1996) describes the actions of the firm with no reference to theoretical underpinnings of turnaround as a concept. This points to the fact that incremental research in the hospitality industry that addresses repositioning strategies of firms would have to be initiated to test for the idiosyncrasies of the industry. Many complex restaurant companies are already creating these knowledge-based systems. Eventually to remain competitive, all will. Taco Bell in the early 1990s created value by implementing the K-minus system of production and inventory management. Papa John's Pizza and Starbucks have invested heavily in off-site regional commissary production and warehousing facilities. California Café has collected vast amounts of customer information from its loyalty card programs. Host Marriott has built a global network of teleconferencing outlets for information sharing and management development.

Where technology is intended to be only a labor or food cost savings device, for example an automated cooking line to replace prep cooks, it is not fundamentally creating a knowledge-based system. Re-engineering and downsizing are not in the province of knowledge management, and might be considered pointedly antithetical to it. Where IT is used effectively, capabilities and organizational capacities expand and productivity is enhanced through the investment in intellectual capital, not its removal.

The same is true when companies rush to have a “home page” presence on the world wide web. The Internet is no substitute for what Hallowell (1999, p. 59) calls “the Human Moment…an authentic psychological encounter that can happen only when two people share the same physical space”. The Internet will be most useful promoting restaurant products or services which at their cores can easily be commoditized, but not the restaurant experience itself. Activities which do not add to the experience base, such as ordering take-out or delivery, making advanced reservations, or any direct advertising and image enhancement communication, can effectively be offered by the restaurant company through the Internet technology. Employee recruitment and basic information sharing are also Internet compatible. Low-cost web-based training, which can be highly interactive and customized for the individual user, is also a valuable component of the connectivity provided by the Internet. Future restaurant employees, who have comfortably grown-up with real-time learning technologies will expect this from their employers. Companies that currently spend extensively on executive travel and meeting time will start to see that investing in upfront technology costs such as desktop video streaming will reap many years of almost cost-free organizational communication.

Finally, knowledge-based systems will connect managers, from the unit level upwards, into expert real-time information warehouses. Data-mining will provide information on demand for: current sales trends both locally and system-wide; real-time pricing and promotion activities; labor tracking and discrete operating period productivity reports. Most importantly, problem solving will be facilitated from the accumulation of shared experience. Company-wide learning will be ongoing, interactive, and relevant.

Knowledge application is the glue that brings together the other two management trends into a single whole system. A time focused strategy without the customer in mind will not produce productivity increases. Brand management without core values and execution will never produce business success. Technology can never be used as a replacement for the high touch of the transforming service experience at the core of the restaurant offering. But taken together and being crafted into a unified whole, the restaurant organization itself becomes transformed. That is a predictable certainty.

3rd Chapter
Methodology
The study sought to test the following hypotheses with respect to restaurant customers:
H1: There are no differences between British and Singaporean customers’ responses to service failure.
H2: There are no differences between British and Singaporean customers’ responses to firms’ efforts at recovering from service failure.

The study uses frameworks suggested by a number of authors but most particularly those of [Hoffman et al (1995)] and [Bitner et al (1990)]. In particular, the researchers, in a personal interview setting, asked 392 Singapore and 327 British restaurant patrons to answer the following (open-ended) questions related to a service failure or service mistake:

• What happened?
• Why did it happen?
• What did the restaurant do to correct the mistake?
• If the restaurant did not satisfactorily correct the mistake, what else could it have done?

 

The methodology employed in categorizing these open-ended question answers was the CIT ([Flanagan (1954)]). This technique is a systematic interview procedure for recording behavior that has been observed to lead to success and/or failure regarding the accomplishment of a specific task ( [Ronon and Latham (1974)]). It has been used in analyzing a variety of marketing and management performances and has been especially useful in analyzing customer (dis)satisfaction ( [Bitner et al (1990) and Bitner et al (1994)]; [Hoffman et al (1995)]; [Keaveney (1995)]).
Two assessors were used to categorize all reported incidents and [Perreault and Leigh's (1989)] estimate of reliability index was used in determining interjudge reliability and the reliability of the coding process. The reliability indices exceeded 0.90 in the Singaporean and 0.87 in the British study. It was recognized that in any cross-cultural research, differing interpretations may be placed on any reported phenomenon, and so to judge consistency between the two data sets, a sample of questionnaires was judged by assessors from each country. The level of cross-national reliability using Perreault and Leigh's methodology was 0.85.

A number of other questions were asked regarding: the date of occurrence, the type of restaurant, the purpose of the dining occasion, the estimate of the amount of money spent on the occasion, whether the customer did anything to draw attention to the mistake, and whether the customer would dine there again. A 5-point semantic differential was used to gauge how major or minor the mistake was perceived, and how good the repositioning strategy was. In addition, other demographic variables were asked.

To facilitate analysis of the consequences of service failures, some attitudinal questions used semantic differentials. For the question “How would you rate the severity of the mistake?” answers were given as a semantic differential (1=minor mistake, 5=major mistake). A semantic differential was also used to obtain answers for “How would you rate the efforts of the restaurant regarding the correction of the mistake (repositioning)? (1=very poor to 5=very good).

The critical incidents were collected by students as part of a service marketing class project in UK. Non-probability, convenience sampling was employed. Although quotas were not required, the samples were found to be representative of reasonable demographic diversity.

4th Chapter
Findings
Service failures that occurred as long as 20+ years ago were reported by the respondents. While one can expect some forgetting of details, the CIT can demonstrate just how long a service failure can linger. Service failure was operationally defined to include an incident that was defined by the respondent as being a failure.

There appears to be considerable commonality with regards to types of restaurant service failures. In both samples, the top three critical incident failures reported were the same: cook error, wait staff error and unreasonably slow service. True to the Pareto Principle (80/20 rule), these top three failures account for approximately 80 percent (81.5 percent in the British and 78 percent of the Singaporean sample) of service failure incidents. The remaining 12 categories account for 20 percent or less. In both the earlier studies, subclassifications were grouped into three main categories by interjudge agreement. Using the same classification system, the current study found that twice as many service failures were attributed to service delivery system failures than in the previous two studies. These differences merit further investigation. Of particular interest would be whether factor analytic techniques would uncover a similar number of classifications or whether the incidents would possibly be categorized differently.

Restaurant locations were coded as fast food restaurants, other chain restaurants, or independent restaurants. There was no statistical difference in service failure severity perceptions across the various category types. In addition, no differences in the perceptions of the service failures were noted across the amount spent on the dining occasion, purpose of the dining occasion and frequency of dining out.

One interesting finding was that British customers tended to list more than one incident (1.8 vs. the Singaporean respondents’ 1.14). This is consistent with [Crotts and Erdmann (2002)] suggestion that high masculinity cultures are more likely to report dissatisfaction. Overall, however, Singaporeans tended to perceive the failures as more severe (3.84 vs. 3.75) and a t-test comparison of these means found them to be significantly different at p=0.023. Again, this supports research that suggests cultures scoring high on power distance have higher expectations for service ([Crotts and Pizam (2003)]) and that customers from countries with higher-uncertainty avoidance scores become more irritated at the breakdown of the system (Stauss and Mang, 2001).

Particularly significant differences were found in the incidence of reporting failed incidents which can best be described as relating to the attention given by the restaurant to consumers’ individual needs (“Customer special needs not met” and “Poor level of attention”). In both cases, the Singaporean sample regarded this as a significantly more frequent source of dissatisfaction. Again, this is consistent with others’ explanation that the more individualistic a culture is, the more personalized attention they expect ([Stauss and Mang (1999)]).
It appeared that the Singaporean sample was more vocal in its complaints. While only 40 percent of the British respondents made the restaurant aware of the failure, 77 percent of the Singaporeans voiced their complaints. This contradicts several experts’ opinions that the majority of consumers never complain. These findings are also inconsistent with [Crotts and Erdmann (2002)] assertion that customers from cultures that score higher on masculinity are more likely to report dissatisfaction. Interestingly, the British respondents stated that more repositioning strategies were used on each occasion (1.33 vs. 1.23) though no attempt at repositioning was made in 28.4 percent of the reported British incidents and 21.9 percent of the reported Singaporean incidents.

In the British sample, when repositioning strategies were used, they were most likely to take the form of simply replacing or correcting the food order and/or apologizing for the failure. These three repositioning strategies accounted for 52.5 percent of the strategies. In the Singaporean sample, these same strategies accounted for 47.5 percent of the total incidents. In the Singapore however, the most popular repositioning strategy was to replace the food AND offer it at no charge (vs. on 8.6 percent in the British sample). Indeed, compensatory responses were far more prevalent in the Singapore (48 percent) than in UK (23 percent).

In both samples, 15 percent of the respondents indicated that an apology was given. Normally, the apology was given in conjunction with some other strategy. In the British sample, e.g. 68 percent of those receiving an apology also stated that another repositioning effort was made (most often replacement). In the Singapore, 71 percent of the respondents stated that multiple repositioning efforts were used (most often gratis replacement or gratis partial).

The British respondents rated overall repositioning strategies on slightly the poor side (2.88) whereas the Singaporeans rated the overall efforts slightly on the good (3.34) side (p=0.000). Despite scale differences in mean response, in both cases, respondents rated compensatory efforts the highest (British 3.54, Singapore 4.11). Interestingly, the highest rating, in both samples, was given to coupons (4.40 in the British and 4.31 in the Singapore). In the British sample, respondents reported that coupons were given without any other strategies. In the Singaporean sample, 20 percent of those receiving a coupon also received other compensation (most often the coupon was accompanied by a simple apology).

Perhaps the most important finding, however, is the responses related to repeat patronage. In general, if a service failure occurred, British respondents were less likely to state that they would dine at the restaurant again—even if they rated the effort of repositioning average (3.0) or better. In fact, only 37 percent said they would dine at the restaurant again. As can be viewed from the overall results, Singaporeans appear to be much more forgiving: 56 percent said they would dine at the restaurant again. When the restaurant took no action to correct the mistake, 88 percent of British respondents and 78 percent of Singaporean respondents indicated they would not dine at the restaurant again.

The highest repeat patronage rates were generated by compensatory strategies; apologies were also likely to generate repeat patronage. In the Singaporean sample, however, it is worthwhile to note that the most expensive compensatory strategy: gratis overkill (restaurant gave a free meal AND offered other compensations such as free food for the entire table, complimentary drinks or desserts, coupons, etc.) did not generate as much repeat patronage as did coupons, gratis-ancillary (customer paid for the meal but got complimentary drinks, dessert, or other item), and discounts. Although gratis overkill received the highest marks in the British sample, gratis-ancillary and discount also received high marks. When no action was taken by the restaurant to recover from the service failure, fewer than 20 percent of the British and 30 percent of the Singaporean respondents said they would return.
Respondents were also asked what else could have been done to improve the service. Fifty-nine percent of the Singaporean sample and 44 percent of the British sample felt that some compensatory strategy could have been used (discount, at 27 percent, was mentioned most often in both samples). It was notable that among those for whom no corrective action was taken, the British sample was more likely than the Singaporean to stress the need for the restaurant to make a strategic view about reviewing its service delivery processes (42.2 percent of all comments in the British sample, compared with 15.4 percent in the Singaporean sample). This might be reflective of UK's slightly higher score on the collectivism index which is hypothesized to mean that customers would place higher value on organization-initiated repositioning ([Pasongsukarn and Patterson (2001)]).

5th Chapter
Conclusions
Much has been written about the globalization of marketing and the need to standardize or customize marketing strategies to better serve various national markets (e.g. [Levitt (1983)]; [Douglas and Wind (1988)]). According to industry experts, the opportunities for international marketers of consumer goods and services have never been greater. Not surprisingly, an increasing number of restaurant operators are looking at entering international markets. The issue is no longer simply to expand or not to expand; it is “when, where, how and how fast” ( [Oetzel (2000)]). Repositioning strategy is fast becoming the norm for going to market in the business-to-business sector. Customers all over the globe are demanding more channel options for gaining access to products and services while technology has made it possible and economically feasible for firms to offer a wider array of channels, especially Internet-based online channels. But the growth of multiple channel structures while providing firms with more opportunities to reach more customers has also put a premium on well-conceived repositioning strategy. Managers responsible for designing and managing channels of distributions must now deal with a range of challenging issues affecting repositioning strategy. Some of the most important of these involve the integration of high-tech online channels with conventional channels, finding optimal channel mixes, creating synergies across channels, building strategic alliances in a repositioning environment, using repositioning strategy to gain a sustainable competitive advantage, coordinating more complex supply chains to serve multiple channels efficiently, dealing with repositioning conflict, and providing effective leadership to drive repositioning strategy.

A particular challenge, however, has been how to adapt restaurant concepts to fit unique (national) cultures ([Oetzel (2000)]). While the art of repositioning strategies has received much attention in the Singapore, there have been few instances of cross-national comparisons.

This research has sought to redress the balance of literature on repositioning strategies techniques that has tended to focus on Singaporean situations. It might have been expected that differences would occur between countries reflecting different sets of expectations with regard to the manner of service delivery and the repositioning from failure. In many ways, the cultural values of the Singapore and UK could have been expected to differ in terms of expectations, e.g. consumerism is more developed as a principle in the Singapore than UK. Patterns of eating out differ, with eating out on a regular basis being less common in UK than Singapore. This was reflected in the finding during this research that respondents in the Singapore eat out on average three times more frequently than respondents in UK. The average expenditure per meal was higher for Singaporean respondents than for those from UK. The Singaporean restaurant sector is dominated by large national chains, while these are much less frequent in UK where family owned restaurants remain dominant.

Despite the differences in the environment of eating out, there is considerable commonality in service failures and consumers’ responses to repositioning efforts, thereby giving strong support to both hypotheses that there are few differences between British and Singaporean restaurant customers’ responses to repositioning strategies. Placing these findings in the context of cultural differences is more problematic. On the one hand, Hofestede's scores suggest that UK and the Singapore have different cultural values but their scores are remarkably alike. It is not, therefore, apparent that their national cultures are that different. Overall, our research supports this contention. On the other hand, the small differences we did find can frequently be justified by applying explanations others have given when describing or hypothesizing how differences in values might translate to consumer behavior and, in particular, to service expectations.

It is important to note, however, that Hofstede's work was developed by examining worker values. Hofestede's original scale items are job related and the findings, therefore, are not necessarily applicable to the consumer sphere. Further, we did not test Hofstede's model, we simply used his cultural value scores for the UK and Singapore as a basis for explaining differences that we found. While some people have suggested this is a satisfactory approach ([Van Birgelen et al. (2001)]), others have raised serious methodological and conceptual concerns. As some review, there has been a lot of frustration at the lack of insight and also with the behavioral inconsistencies with “values and culture” frameworks (see [Boyatzis et al (2000)] for a review) and specifically with national culture and service ( [Van Birgelen et al. (2001)]). Indeed, our own research found at least one inconsistency. Consequently, while Hofestede's framework and others’ findings have assisted in offering more fruitful explanations of our findings, we would caution the reader about relying too heavily on these explanations.
At a broader methodological level, this research failed to replicate the distribution of types of service failure found in pervious studies by [Hoffman et al (1995)] and [Bitner et al (1994)]. A higher proportion of failures were observed to be the result of weaknesses in the design and implementation of delivery systems rather than a failure to respond to customers’ needs and requests. While the findings of this survey were based on two raters assessing each described incident independently and with a high level of interjudge reliability, it must nevertheless be recognized that a failure to acknowledge customers’ needs may itself be the result of a poorly designed service delivery system.

Although there has been a lot written on service failure in the restaurant sector, to date there has been little empirical evidence linking failures, repositioning strategies and revisit intention. This research, however, confirms a number of authors’ contentions that simple apologies are not enough, successful repositioning strategies should be used in conjunction with some sort of compensation—regardless of nationality. This research has also confirmed earlier research that some repositioning action is much more likely to result in repeat business than no action. Despite considerable commonality in the patterns of service failures and recoveries, a number of differences were quite notable. The Singaporean sample appeared to be much more forgiving of service failure, as evidenced by their intention to return to the restaurant where a failure took place. This may reflect growing sophistication of Singaporean restaurant customers and their expectation of adequate repositioning processes. This would appear to be consistent with previous research that suggests a strong repositioning from a service failure may actually strengthen the loyalty of a customer to an organization. In the more sophisticated Singaporean market for restaurant dining, this research has suggested that the quality of repositioning may be the critical factor in determining repeat patronage, rather than the failure itself.

Compensatory strategies appeared to be particularly effective in encouraging repeat behavior, especially in the Singaporean sample. Within this category of compensation strategies, coupons appeared to be particularly effective, with 50 percent of the British sample and 87 percent of the Singaporean sample saying that they would return to the restaurant following a service failure, for which a coupon had been given. This is probably a very cost-effective strategy for the restaurant, as the coupon promotes further income from a repeat visit, including income from friends who may dine with the coupon holder. A coupon also allows the restaurant a second opportunity to demonstrate the effectiveness of its service processes. However, the cost–effectiveness of other forms of compensatory strategies may be questioned. A “gratis overkill” strategy did not yield significantly greater intention of returning compared with a less costly free replacement or free ancillary service.

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