What should the F&B sector do?

In a downturn, the F&B sector instinctively wants to cut costs. But experts advise against the obvious measures. We examine the arguments.

Source: The Straits Times, 13/5/9, p.B18
Headline: Don't swallow big discounts, F&B sector told
Writer: Linette Lai

Quote1
When a slowdown hits, F&B operators tend to react by trimming staff, reducing the quality of ingredients to save costs, and offering discounts to attract customers. But experts stressed that although these solutions seem to work in the short run, they are detrimental to the business over time. ...

Comment1
The conclusion is that these are the wrong measures to take. But why?

Quote2
"I think that drastic discounts are a vicious circle," said Mr Ang Kiam Meng, president of the Restaurant Association of Singapore. "When you don't have the discount any longer, your business will not be good again. ... If everyone decides to do this, the whole market decides to do this, we will sink deeper and deeper and there will be no turning back." Mr Ang added that he felt retrenchment was a big blow to the workers involved, and decreasing quality would simply affect a firm's reputation. ...

Comment2
The argument is teleological, that is, an appeal to consequences. They are:

1. If (discounts), then (no turning back)
2. If (retrenchment), then (blow to workers)
3. If (cut quality), then (damage reputation)

Unstated, but clearly intended, the three measures also have the benefit of saving costs.

Considering all the consequences, the harms outweigh the benefits. Therefore, the three measures should not be used.

Quote3
Mr Cheong Hai Poh, president of the Food and Beverage Managers' Association, felt that innovation was the key: "The most unique and challenging question ... is, 'How do you innovate?' Innovation will make your company stand out from the rest." Mr Ang felt that it was important to improve the quality of food and service, especially now as "it is an opportunity to increase customer loyalty".

Comment3
Having rejected some measures, we now turn to recommending some other measures. Again, the argument is teleological. Here are the consequences:

4. If (innovate), then (stand out)
5. If (improve quality), then (increase loyalty)

An unstated but clearly possible consequence of these measures is that costs will be incurred. Will the benefits outweigh the harm?


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