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Unit 34: Operation Management
Operations management is defined as the activity of managing the resources which are devoted to the production and delivery of products and services (Slack 2007).
As said on their own websitePret A Mangerprovides:” Good tasting natural food, excellent service and convenience”. Sandwiches, salads, soups and other fast food we buy in one of their shops are exactly prepared in the kitchen of the shop. From this point, Pret has something in common with McDonald’s or KFC—their shops all have their own kitchens. However, having a kitchen probably is the only similarity; Pret is quite different not only in the products and services but also in its organization and strategy.What make Pret A Manger different form other fast food retailers? It is the better products and services. The customers need not just to be served and supplied, but, furthermore, to be satisfied and pleasured. Therefore, operation management is extremely important to the company in order for them to maintain the high quality products and customer satisfaction.
There are three basic functions at Pret – a Manger:
People often associate the concept of operations with manufacturing alone, but the processes that transform a set of inputs into outputs are also integral to service industries. To compete successfully, organisations need to understand their markets and how they can best serve customers’ needs, which in turn depends on how they organise the delivery of their services. So it’s essential to structure employees’. Operations management is mainly concerned with how resources are used to produce goods or services. Depending on the nature of the organisation, the transformed resources could be materials, information or even customers.
Pret A Manger believes that the secret of success is to focus continually on quality not only in food but in every aspect of its operations. The firm goes to some length to ensure that all its produce is fresh and free of additives. Every shop receives ingredients first thing every morning and food is prepared throughout the day on the premises. Pret A Manger relies heavily on its people, too: the quality of its customer service compared with that of other fast-food outlets allows it to charge premium prices.It is evident from these examples that the firms’ operations are similar in that they transform input resources into output products and services, but they do differ in a number of dimensions – namely: volume, variety, variation in demand and visibility.
“Pret A Manger believes the secret of success is to focus on quality not only in food but in every aspect of operations” (B Perry, Organisational Management and Information Systems CIMA Official Learning System (2008 edition), CIMA
It is evident that the firm operations are that they transform input resources into output products and services, but they do differ in a number of dimensions – namely: volume, variety, variation in demand and visibility. (www.cimaglobal.com)
As Richard Harpham, Head of Strategy at Pret A Manger states: “With the current economic uncertainty, there is perhaps no better a time than now to be embracing the benefits of non-monetary motivation. If times get tougher on the
High Street, and revenues start to fall, the first thing that companies will need to cut is their bonus pool. Perhaps therefore, the companies best placed to weather the storm will be those that have commanded staff loyalty and passion in rather more effective ways.”
PESTEL analysis stands for political, economic, social, technological, environment and legal analysis and describe a framework of macro environmental used in the environmental scanning component of strategic management.
· Regional integration such as European Union which is now 27 countries and is likely to increase is a political aspect that affect business environment. Thus customers from part of these countries will have easy access to visit the United Kingdom and having a taste of Pret A Manger’s product. Also give opportunity to the company to do business in any of the European Union countries with ease.
· The reduction of interest rate to the lowest ever has helped Pret out of the recession and consumer confidence.
· With United Kingdom budget for 2013 out, the general election coming up and the country in serious debt, there is uncertainty what the future holds with politicians different set of policies. Already there are increases in duty of some products consumer can hardly do without. And also with plans to increase tax for debt recovery, customers’ confidence will be low spending their money due to uncertainty of the country’s future and will affect Pret whose target are office workers and affluent customers.
· Price of petrol hitting the record high this year will affect both Pret A manger in the transportation of raw materials and its customers cutting back on spending.
· Stable oil price has created a stable business environment. Brent oil now trade at 85 US Dollars with an increase or decrease of 0.5 approximately a day. This steady price will help Pret A Manger in forecasting top management decisions as long as other factors remain constant.
· The recent devaluation of Pound Sterling (£1) against the US Dollar ($1.5) means, Pret spend more money trading globally, compared to when the Pound Sterling (£1) much stronger than the US Dollar ($2). This will affect their annual profits or is likely to lead to unethical trading as they look for the cheapest sources to get their raw materials.
· Pret A Manger claims their products are Fairtrade and Rainforest Alliance Certified, which encompasses ecosystem conservation, wildlife conservation, fair treatment and good conditions for workers, soil and water conservation, integrated pest management and integrated management of waste. This shows social responsibility and ethical trading on their part, but was compromised last year when they import salmon from Chile when there were closer places like Norway and Scotland. Also had to change to tuna fish caught with by fishing vessels with pole and line, rather than purse seine fishing which causes wastage of rare species going extinct according to environmentalist. This means Pret care a lot about their environment.
· Work mobility and working under pressure seems to force people to out to eat and drink rather than cook at home for themselves. All though the recent credit crunch affect customers by making their own food or eat at a cheaper shop. But now that we are leaving the recession, customer will go back to their normal habit of eating out and increasing their sales
· The diversity of the UK population showed the following, white 92.1%. mixed race 1.2%, Indian 1.8%, Pakistan 1.3%, Black Africans 1.5%, Chinese 0.4% etc. The diverse population has different taste and preferences which will affect the consumer base of Pret because they specialize on the narrow but profitable segment of the market, mostly sandwiches.
· Technology has helped Pret A Manger to be more environmental friendly. The company uses electric vans for deliveries and wind energy for generating power.
· With smart phones been the in thing now, Pret can introduction an application on phones, where customers can order their fresh food at any point in time and also creating awareness to potential customers.
· Technology also helps to design and manufacture modern coffee making machines, saving time and human capital.
“Those companies that are driving every last nickel out of operational cost at the expense of their employees’ and customers’ humanity may win in the short term but will lose in the long term. No one will want to work there and no one will want to buy there. It all becomes one big transaction.” (Roy A. Barnes, former SVP, Customer Experience and Development).
Organisations fail to recognise the interplay between efficiency – i.e. cost reduction – and operational excellence. In challenging economic conditions there is a tendency to focus improvement initiatives primarily, and sometimes exclusively, on improvements in efficiency.
However, increased operational efficiency can frequently damage the customer experience.(www.corvennetworks.com)
For example: If Pret A Manger decided to use a supply chain, this may affect their product quality, which will ultimately affect their customer satisfaction and their profit.
In an organisation there are 5 performance objectives: quality, speed, dependability, flexibility and cost. These objectives cant than be broken down into order- winning, order- qualifying and less- important factors. Order winning factors are:
“Those thinks which directly and significantly contribute to winning business” (Slack et. Al. 1995 p.72)
So they are essentially what the business does that places it above its competition in the customers’ eyes. Order qualifying factors on the other hand are:
“Those aspects of competiveness where the operation’s performance has to be above a particular level just to be considered by the customer” (Slack et. Al. 1995 p.72)
So order qualifying factors are merely what a customer expects at the very minimum form a company of this kind. Finally less important factors are: “Neither order winning or qualifying. They do not influence the customer in any significant way.”(Slack et. Al. 1995 p.72)
Therefore, all other factors that do not fall under order- winning or order- qualifying factors are less – important factors.
Quality is paramount to Pret a Menger. Quality to the organisation means offering nice looking and tasting food and coffee to the public. The sources coffee from 4 counties ( Ethiopia, Sumatra, Costa Rica and Brazil) to try to offer what it calls: “in “coffee speak” Pret’s blend possesses a rusty texture crema of very good quality” ( www.pret.com)
They take the quality of their coffee very seriously, once a packet of coffeis opened it is used within 14 days (then it is disposed or if not used) to ensure that they are using only the freshest coffee. They also do not use chemicals and additives in their food, with food deliverd in fresh daily. Pret advertise in store the fact that their food and coffee are fresh, with such things as a strip below the pricing pf coffee, telling you when the coffee they are currently using in store was roasted. As a result quality is an order- winning factor for Pret. They use their high quality to try to attract customers to them, and away from their competition.
Speed across the entire coffee shop industry is of large importance to many customers, wuth a large portion of customers wanting to do to the shop, buy a coffee and then be out of the shop within few minutes. For the organisation, speed id not as high on their priorities as quality, however they must still give it high priority otherwise they will lose customers. Speed in Pret a Manger can be seen not only in how long it takes for a customer to purchase something, but also in how they get their coffee from where it is grown, to their shops. As they have a strict 14 days deadline to use the coffee they must transport it with utmost speed or risk wasting that coffee. In the customer eyes speed is an order- qualifying factor, it is something Pret a Manger must do as coffee shop of a similar nature ( Starbucks, Café Nero etc.) are expected it of them also.
Flexibility in Pret a Manger is not of high importance. In the case of sandwiches and other food that they sell, pre-packaged sandwiches (though made on site in most cases) have absolutely no flexibility; they are sold as is with no customisation available to the customers. This is true of the coffee also, though the customers may have the option of cocoa powder etc. dusted on top of their coffee. The company does not place much, if any importance on the flexibility of their products. They merely wish to sell things to the customer as quickly as possible with not very much interim messing around with the product. Each time the customer comes in they receive the same product, and we can link this to the dependability of the product. As a result, flexibility is a less important factor for Pret.
Cost is something that Pret a Manger takes very seriously, with high level of importance for them. They have cheaper prices than much of their nearest competition, though as they improve their coffee blend their prices are increasing, something they have to qualm about pointing about it on their website. “Improving our coffee does mean that it cost more but we think it’s worth it” (www.pret.com)
Cost is currently an order- winning factor for Pret a Manger, with prices lower than their competition they cannot fail to draw in more customers on this objective alone. However, if their prices continue to rise on order to maintain their profit then it will become an order- qualifying factor, with their prices too close to their competition.
About our company
Prêt A Manger Ltd. was founded in 1986 in London, United Kingdom and its key executives are Mr. Andrew Walker and Mr. Julian Metcalfe. The name ‘Prêt A Manger’ comes from French for "ready to eat". Prêt A Manger (later Prêt only) started with a £17,000 loan and now college friends who founded Prêt have global ambitions.
Prêt operates a bit like a café/restaurant and its success derives from its fresh philosophy. Most of the product are produced daily and throughout the day in the premises and those products that are not produced within the premises are prepared in different sites which operate in strict high standards that are exclusively designed for Prêt A Manger.
In 2007 there were over 150 branches in the UK, ten in New York and eight in Hong Kong with joint partnership going live in that year in Singapore. At present date, Prêt has been taken over by an international company known as Bridgepoint. At the moment Prêt is looking to expand its market in the USA. The company employs almost 4000 people and their last year’s revenue was £443m.
Company Mission Statement
Prêt a Manger mission statement can be found on every shop window. “Creating handmade, natural food, avoiding the obscure chemicals, additives and preservatives common too much of the 'prepared' and 'fast' food on the market today”.
The fact that the mission statement is open to the public effects the employees to strive for perfection and it is a reminder to the customer that Prêt a Manger is “passionate about food”.
Prêt’s philosophy is to sell fresh and healthy food every day and buy organic when possible. It does not use chemicals, additives and preservatives because it believes that natural fresh food tastes better and is also better for customer (online book). Prêt also offers food delivery services along with friendly, personalised and efficient customer service which can be both seen as augmented product.
Company Vision and Values -Prêt a manger’s 7Ps
There are various ‘products’ some name it components or levels that constitute a product offered by a company. These can be described as core product, actual product, augmented product and potential product. Prêt A Manger’s core product benefit is to fight off hunger and thirst. It offers sandwiches, baguettes, wraps, hot wraps, cakes and slices, pots and desserts, cold drinks, hot drinks, crisps, and bakery items, sushi, salads and soups. The attributes or an actual product is the brand and high quality nutrition food.
Coffee chains like Starbucks, Coffee Nero, Costa Coffee and many others transformed the cup of coffee into a lifestyle experience. Therefore they are able to charge premium prices. Customers are no longer paying for a cup of coffee or a tea; they are also paying for the comfort, nice view and pleasurable environment. However, Prêt’s added value is not based on hedonism, which is according to Jim Blythe, the cult of pleasure, but is based on nutritional value, health and freshness. Therefore Prêt’s higher prices can be explained through its philosophy of selling only fresh food and organic when possible.
Coffee is one of the most important products that Prêt a Manger provides to its customers. Although it is the most important part of the business, it is also the cheapest from all its competitors. Prêt has also simplified its drinks to only one size but giving their customers to have the choice of a double strength coffee or a regular strength. Prêt also gives more coffee per cup than its competitors while charging less. The company invests a lot into the coffee side of the business by giving their coffee makers (Baristas) extensive training about coffee and the whole process that goes into preparing a cup of coffee. Michael … , Prêt A Manger’s store manager says: “It may seem to others that it is just a cup of coffee but providing the perfect cup of coffee to the customer makes all the difference”. They also invest in machines that cost over £8,000 that are imported from Italy. These machines are maintained and monitored regularly to make sure the quality and standards stay within spec.
Prêt has a very strong NSO (New shop openers team) who are always studying the market and analysing the competition to see where the best place to open the next branch would be. The company mainly targets office areas, tourist populated areas and airports. Prêt aims on opening 15-20 shops per year but at the moment it is slowing down its shop opening in the UK because of thecurrent economic situation.
Prêt always tries to wow its customers in many ways. For the past couple of years, Prêt has been focusing on the four seasons and Christmas being one of the most important seasons of the year. For every season, all the shops are decorated in reflection of the season. E.g. there will be product like sandwiches, salads, soups and fruits that gives the customer the right kind of satisfaction. For example during the summer the food is lighter, and during the winter the food is a little bit more fulfilling and thicker in some ingredients. In the Christmas season, the shops are decorated with Christmas stars and all shops are selling products like, Prêt Christmas lunch sandwiches, Mince pies, and etc. Two weeks to Christmas, Prêt has a tradition that it has been following for many years. Every branch will be giving away clementines (mandarins) to all its customers as a good will and as a thank you. The company also gives away £0.10 to charity from every Christmas related product that is sold in the company. Prêt uses seasonal displays such as basket liners, till toppers, good stuff booklets, special Christmas loyalty cards and other marketing materials.
‘Non-suits head office’ are promoted and developed from mostly within the company. Prêt provides professional trainings for its employees and prefers hard-working, enjoy good food and have sense of humour employees. Prêt has a specifically designed recruiting system for people who want to work in the shops. Candidates have to go to the main recruitment centre and be screened and interviewed. If successful, they will be sent to a branch where they will get to experience a day at Prêt working with majority of the team. At the end of the experience day, the team will have to answer specific question on the newcomer’s performance and adaptation.
Prêt operates a bit like a restaurant. Every branch has its own individual shop kitchen where Chefs prepare handmade sandwiches, salads and Prêt pots every day from scratch. There are no ‘sell by’ dates on fresh sandwiches andsalads. Cakes, bars, smoothies, snacks and sushi are made for Prêt to strict recipes and standards and deliver daily to shops. Anything left at the end of the day goes to charity and homeless.
This includes both practical aspects of the product and pleasure, that one feels from receiving the service. Surroundings in the restaurants, the food itself, the décor, the table lines, music and general atmosphere form the brand and are part of the service.
Prêt a Manger’s décor is simple and attractive. High ceilings, pale walls, dark chairs, light wooden tables. When the weather is good, some stores have an outdoors area with chairs, tables and parasols. High focus on customers and their satisfaction can be also seen through the passing benefit of recent VAT reduction of 2.5%, onto customers. Prêt reduced prices on all the affected products, instead of keeping the additional profit to itself.
Pret a Manger’s marketing strategy is sells high quality, nutritional food, on lower price. To achieve better consistency in marketing communication and reassuring that the customer understand what the brand stands for.
Prêt follows the standardisation approach. This is to offer one product, with one message using integrated marketing communication (Yeshin, 2006). However, standardise approach cannot be transformed into international marketing as easily as into national. Standardise approach suggests, that the Prêt’s products should be and taste exactly same in the UK, New York, Hong Kong and Singapore
From corporate social responsibility perspective, Prêt takes account of environmental issues such as waste management and food production and distribution. Prêt become one of the first hospitality operators to sign up to the Green 500 scheme, the London Development Agency. The aim of this organisation is to cut down their carbon output by 1.5 million tonnes a year by 2011. It also involves in imporing energy efficiency, waste management, water usage and transport plans. Prêt also supports the local charities by providing left over food at the end of the each day.
International marketing strategy
The international expansion is very important and part of the main objectives of the company. Prêt planned to expand its estate by 15% in terms of outlets number each year (Restaurant and Bars sector, 2006). Prêt chose to do its international marketing by selling parts of its shares, the company do not franchise. From theory, the overseas franchise arrangement may mean accompanying loss of control by switching to more agency-based strategy. For company such as Prêt, where quality and keeping the brand image is very important, contractual entry mode like franchising may be very risky. Moreover, Prêt needed more financial fund in order to fuel its rapid expansion. That is why it has considered the IPO (initial public opportunity) on the London Stock Exchange which could have raised £280 million. An IPO is considered when a company issues common stock or shares to the public for the first time, also referred to simply as a "publicoffering".
Prêt preferred to concentrate on other strategies like alliances with a successful partnership with the US leading fast food company MacDonald’s. Indeed the firm’s expansion has accelerated when McDonald’s bought a 33% stake in the group in 2001 and enabled it to penetrate the Asian market and increase its presence in New York. McDonald's has helped Prêt by providing contacts, a food distribution network and expertise in finding sites. By the meantime, it has increased Prêt’s reputation without stopping its own expansion into other countries and increasing its base in the United Kingdom. Prêt made a marketing strategy of opening about thirty new stores a year in the UK and in the world especially in the US to lock out their main competitor: Starbucks. This initiative may not guarantee all of Prêt’s success, but neither will it harm its reputation.
Today, MacDonald’s is no longer part of the business. The private equity firm Bridgepoint has agreed to acquire a majority stake in the company. Being taken over by a successful company as Bridgepoint has opened doors that would not have been dreamt of if the company stayed private. The company wants to take the opportunity of transforming Prêt from a domestic to an international business through controlled expansion of its already profitable but small US presence (Sibun, 2008).
Problems in Prêt’s international marketing strategy
Lack of marketing promotions and advertising
Marketing of goods through promotion and advertising is as important as ensuring better quality of goods and attending to employee needs. It is clear that Prêt has laid so little emphasis on the former and greater focus on the latter. In so doing the company faces stiff competition from its competitors and end up losing customers.
Lack of understanding cultures
The company failed to enter the third largest economic country: Japan. The reason for that was the lack of concrete market research to understand the culture’s difference. First the country is known for its strong culinary tastes and the UK for the lack of it. Therefore, the British company has not met the Japanese culinary expectation although they have a fondness for sandwiches.
Prêt’s international marketing strategy can be seen as ‘glocal’, mix of globalisation and adaptation. Prêt as many other companies realises the need of thinking local when entering international markets. This is crucial especially in food industry, where taste, food habits and cultures varies. Although Prêt is doing considerably well in terms of meeting needs and wants of local markets, there are some areas that need improvement. Prêt lacks attention when it comes to catering to all customers at all seasons nationally and internationally. Since Prêt serves lots of office people and also lots of tourists throughout the year there is a need to adapt their needs and preferences at all times.
What they are lacking on is the shortage of vegan sandwiches, ice makers for summer drinks, grills and microwaves and going further with their sustainability progress.
Having more vegan and some kosher, gluten and lactose free options willimprove sales and attract and cater for wider range of customers. Having more vegan, options will improve sales and will attract a wider range of customers.
Icemaker machine could play a huge role in the businesses as well. Every summer, the hot drinks sales go down and that because people prefer to drink cold drinks. Offering cold beverages as in iced coffee and teas plus providing the customers soft drinks with ice will boost the summer sales and further satisfy customers.
Effective operations management at Prêt A Manger cansignificantly contribute to the company success. This can be achieved by developing a culture within each store that takes pride in the products themselves, the way they are made and the way customers are served, by listening to customers so that customers’ reactions and comments can inform the design of new products and by not wasting materials through poor control, which would increase the cost of running the operation.
There are many quality management techniques that can be applied to improve operations in Pret a Manger.
1. Just In Time Concept
2. Total Quality Management
3. Kaizen Continuous Improvement Process
4. Six Sigma
B Perry, Organisational Management and Information Systems CIMA Official Learning System (2008 edition), CIMA Publishing, 2007)
Kiran Stacey. Pret A Manger steps up US expansion plans, Financial Times. London (UK): September 8, 2009. Page 19 Marketing Week. London: August 2, 2007 page 24.
Telegraph (2009) Investigation: How farm fishing boom in Chile threatens eco disaster. Available at http://www.telegraph.co.uk/news/worldnews/southamerica/chile/ 6426435 /Investigation-How-farm-fishing-boom-in-Chile-threatens-eco-disaster.html Telegraph (Oct. 2009).
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