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MBAD 271-Strategic Management

Opportunities
Global Expansion

Mass customization

Upscale “boutique” stores

Inter/intra-group mergers
Threats
Commoditization

Consumer concerns about nutritional data

Government action (Los Angeles)

Regional/Boutique Stores
External Factors Framework
Critical Success Factors Importance Weight Performance Rating Weighted Score
(Percentage) (1-4) (% X Rating)
Opportunities

1. Globalization 20 3 .6

2. Mergers/Acqusitions 15 2 .3

3. Mass Customization 10 1 .1

4. Boutique Stores 5 1 .05

Threats
1. Health Concerns 20 1 .2

2. Government Action 15 2 .3

3. Commoditization 10 4 .4

4. Regional/Boutique Stores 5 2 .1

Total 100% 2.05


Competitive Factors Framework
Critical Success Importance McDonald’s Wendy’s Burger King Yum Brands
Factors Weight
Rtg. Score Rtg. Score Rtg. Score Rtg. Score

Opportunities

1. Globalization 20% 4 .08 2 .04 2 .04 3 .06

2. 15% 2 .03 2 .03 2 .03 3 .45


Mergers/Acquisitions

3. Mass 10% 1 .1 1 .1 1 .1 1 .1
Customization

4. Boutique Stores 5% 2 .1 1 .05 1 .05 1 .05

Threats

1. Health Concerns 20% 3 .6 2 .4 2 .4 2 .4

2. Government Action 15% 1 .15 1 .15 1 .15 1 .15

3. Commoditazation 10% 4 .4 4 .4 4 .4 4 .4

4. Regional/ Boutique 5% 1 .05 1 .05 2 .1 1 .05


Stores

Total 100% 2.5 1.85 1.9 2.2


Value Chain Analysis
The Value Chain
Financing, legal support, general management, accounting, quality control
Firm
Infrastructure

Recruiting, training, development


Human
Recourses

Design of Design of terminals, Back kitchen monitors, Market research, new Service manuals,
Technology ordering/scheduling design of procedures, order timing, better product introduction, training videos,
Development software, potential JIT
delivery system for
quality control
procedures, wireless
equipment for drive
through, remote call
sales & forecasting
systems
customer feedback
systems
goods thermostat monitoring & center for drive-thru
control, card payment ordering
terminals

Transportation, local Food, paper goods, real Restaurant supplies, Advertising- Radio, TV, Replacement parts for
Procurement sourcing for fresh estate, cooking computer services, newspaper & internet equipment, service
vegetables and salads, equipment, energy, waste disposal and contractors
site maintenance eRestaraunt services & POS operations
contractors, restaurant inventory applications
supplies

Storage of raw Food creation, cooking, Order processing, drive Advertising, brand Customer call center for
materials, inspection maintenance, through window, marketing, cupons, complaints, service
cleanliness and hygiene shipping store decoration, new cards, communications
controls, item creation, media
communications promotions
infrastructure and
training

Inbound Operations Outbound Marketing Service


Logistics Logistics and Sales
What is the Key Component?

Operations?
Outbound
Logistics?
The Value Net
Competitors
McDonald’s

Suppliers Burger King


YUM Brands Customers
Meat Suppliers
Customers
eating at fast
(-) (-) food restaraunts

Veggie Suppliers
WENDYS Families

Restaurant (+) (+) Companies


Supplies
Distributors

Complementors
Coca Cola
Equipment
Manufacturers Nestle
Hinez
Hasbro
Movie Studios
Government Regulators
Value Analysis
Competitors
McDonald’s
Suppliers Customers
Burger King
Meat Suppliers Customers eating at fast
YUM Brands food restaurants
Veggie Suppliers
Families
Restaurant Supplies
Distributors Companies
Equipment Manufacturers Company
Key Activities:
Outbound Logistics
Business Design
Elements:
Brands/ Customer
Selection

Complementors
Coca Cola
Nestle
Hinez
Hasbro
Movie Studios
Government Regulators
Forces
THREAT OF NEW COMPETITORS

SUBSTITUTES NEW ENTRANTS

SUPPLIER RIVALRY CUSTOMER


POWER POWER

COMPLEMENTOR
POWER
Forces: Threat of New Competitors
SUBSTITUTES NEW ENTRANTS

DRIVER RATING DRIVER RATING


Number, Quality, Scale Capital required- This is clearly
an important factor, as Wendy’s needs to
Availability- Wendy’s clearly maintain strong economies of scale.
has many substitutes in it’s Efficiency production and cost reduction
industry are crucial for Wendy’s competitive
strategy.
Price-Performance- Technology, Patents- This is another
Wendy’s must be aware of vital factor for Wendy’s as Wendy’s food
competitor prices in order to preparation is unique from other
competitors
stay competitive Customer loyalty, branding-
Switching Costs- This Customer loyalty will help Wendy’s retain
a customer base and fend off
refers to costs associated with competition.
switching suppliers. As the Raw Materials- Wendy’s needs to
only difference is the amount secure the most cost-effective raw
of gas necessary to drive to materials in order to maintain efficiencies
and remain competitive.
the restaurant, and all
Market Saturation- This factor may
competitors have many serve Wendy’s well as the market for fast
locations, this is effectively food is clearly saturated, thereby
zero. increasing the barriers to entry.
Forces: Suppliers, Rivalry
SUPPLIERS RIVALRY

DRIVER RATING DRIVER RATING


Number, Size, Number of Competitors-
Wendy’s has formidable
Concentration- Plenty of competition
suppliers. Wendy’s has Equality- Wendy’s tends to share
plenty of options to switch certain similarities to other fast food
from one supplier to chains, thereby increasing
competitive pressures
another
Demand, pricing- High pricing
Raw materials pressures to remain competitive as
differentiation- This may well as high market demand.
be important for Wendy’s M & A activities- This is crucial
for Wendy’s as Yum brands (Pizza
as the differentiation of Hut) and McDonald’s (Boston
supplies may help Wendy’s Market) continue their M & A
maintain a differentiated activities *UPDATE*- Wendy’s has
product line. merged with Arby’s .
Forces: Customer, Complementor Power
CUSTOMER POWER COMPLEMENTOR POWER

DRIVER RATING DRIVER RATING


Number, size, concentration- Saturation of alliances- Many of the
Customer concentration in a competitors have the same or similar
alliances with the complementor (e.g.
certain market segment will
Coca Cola) or their rival (e.g. Pepsi). As
increase competitive pressures on it is relatively simple to obtain the
Wendy’s. product, the complementors have
Information- Customers are relatively little power in this respect.
always smart shoppers, they Centrality, equality- Contracts
always know what they are looking between fast food restaurants and
complementors are relatively simple and
for. They are also well aware of commoditized. There is little power here.
pricing differences.
Scope differentiation- As
Differentiation- Wendy’s needs complementor power rises, scope
to differentiate its products to differentiation decreases. As such,
accommodate customers’ different Wendy’s needs to always maintain a
tastes and preferences. certain level of differentiation to avoid
increases complementor power.
Customer Loyalty- This is National Diversity- A nationally diverse
crucial for Wendy’s as customer market makes it difficult for Wendy’s to
retention via differentiated product maintain a uniform strategy. It will need
lines and competitive pricing will to adopt different strategies to help
boost Wendy’s market position compete with regional and local fast food
chains.
Forces: Our ratings
1: Rivalry
2: Customer Power
3: Substitutes
4: New Entrants
5: Supplier Power
6: Complementor Power
Quality/Price Profile
Quality Profile
Quality Attributes Importance Weights Quality Performance Scores

Wendy’s McDonald’s Burger King Yum Brands

Taste 30% 6.66 5 4.66 5.33

Quality of Food 30% 6.66 5 4.66 5.33

Location 5% 1.9 8.7 3.2 10

Speed of Service 15% 5 4.33 3.66 4

Kid-Friendly 20% 6 10 8 7

100%

Price Profile
Price Attributes Importance Weights Price Performance Scores

Wendy’s McDonald’s Burger King Yum Brands

Meals 30% 9.35 8.1 7.7 4

Sandwiches 30% 8.7 8 7.6 10

Drinks 20% 10 8.2 7.8 8.7

Sides 20% 5.8 6.6 5.5 10

100%
Value Map
Strategic Group Mapping Analysis
Customer Value Rating
Customer Value

Price Satisfaction Quality Rating % Advantage

Firm Ratio Weight Ratio Weight (wtd ave) (Disadvantage)

Wendy’s 1.13 x 45% + 1.14 x 55% = 1.14 14%

McDonalds .99 x 45% + 1.07 x 55% = 1.03 3%

Burger King .90 x 45% + 0.85 X 55% = 0.87 -13%

Yum 1.05 x 45% + 1.01 x 55% = 1.03 3%


Brands
SCM Sophistication
SC Design
What Matters
Technological Trends
•Player Mapping Analysis
•Life Cycle Analysis
Competition
Economic &
•Battle Analysis Trends
Demographic
•Trajectory Mapping Analysis •Industry & Alliance
Trends Evolution Analyses
•Correlation Analysis •4-Arenas Analysis
•Demographic Analysis •Strategic Inflection
Point Analysis
Competitors

Suppliers Company Customers

Complementors
Political & International
Socio-Cultural Trends
Trends •Integration-
Responsiveness Grid
•Player Mapping Analysis Analysis
•Issue Mapping Analysis •International Evolution
Analysis
•Issue Saliency Analysis
Dimension
Profit Zone Analysis Case
Customer Single people under age 34
Selection families with dependent children
working people under tight budget
students
Value Customers’ willingness to pay
Capture Offer value menu to target the critical 18-34 year-old customer
Establish beverages as a "destination" as well as a meal accompaniment.
Introduce a "Total Customer Feedback System" for improved customer service.
Emphasizing its use of fresh meats and salads
Focus on hamburgers, a specialization Wendy’s holds
Innovate and introduce new products
Involve more in local community events and charity work
Lower Operating costs
Offer choice of premium and low cost menu choices in the menu to compensate for lower margins
Elevate the customer experience by improving the hiring and retention of Wendy's employees while
reducing turnover, improving training, and generating savings at the store level.
Improve the overall health of Wendy's system by re-franchising, as well as acquiring and re-imaging
franchise restaurants with potential for future re-franchising.
Adopt more ‘green’ practices to reduce costs
Profit Zone Analysis, continued
Dimension Case

Value Decrease Input costs


Capture Push for green purchasing with eco-friendly suppliers whose products have reduced environmental
impact in any part of their life cycle
Reduce water and energy consumption, automate transaction processing, lower product testing costs,
legal and professional fees and bonus expenses
Conserve energy costs by using renewable sources such as wind, solar, hydroelectric
Recycle of paper, cardboard, metal, and plastic
Upgrade kitchen equipment and introduce new ovens to increase efficiency and lower operating costs
Establish buying alliances with preferred suppliers to consolidate purchasing and benefit from volume
discounts
Increase the size of the pie
Grow share of the premium hamburger market
Re-energize Wendy's Late Night business and capture afternoon and evening snack opportunities
Continue to leverage the Wendy's brand and optimize our facilities by offering a new day-part to
consumers who exhibit a demand for a better, high-quality breakfast.
Re-image restaurants by using a systematic capital reinvestment process and disciplined approach.
Launch marketing campaigns to create awareness about measures taken to address significant health
concerns to labor, environmental, and ethics violations
Use complementor products to attract new business
Get into real estate opportunities as part of franchisee building
Limit Direct Competition
Offer store promotion discounts and launch ad campaigns to lure customers away from new local
competitors
Get into exclusivity agreement with suppliers to gain competitive advantage
Profit Zone Analysis, continued
Dimension Case

Strategic Innovation Leadership with respect to hamburgers


Levers Control of costs & Improving Operational efficiencies
Customer relationships
Product development lead
Quality leadership
Environmental and social responsibility
Scope Offer fresh, high quality ingredients for hamburgers
Utmost customer service and satisfaction
Increased efficiency and operational excellence

Business Design Outcomes


Return on Sales Profit Growth Asset Effeciency Strategic Lever Market Value/
Rating Sales

McDonald’s 18% 40% .68 9 30X

Burger King 14% 36% .65 8 23X

Yum Brands 12% 30% .76 7 20X

Wendy’s 9% 28% .60 7 14X


Industry Evolution
Maturity Stage

– Stable industry, clear boundaries

– Vigorous competition

– Not much collaboration


Four Arenas Analysis

Hypercompetition taking place vigorously


across all four Arenas
Price/Perceived Quality has reached
ultimate value
Timing/Know-how tends to take advantage
of “first follower” status (lowers risk)
Potential for Vertical Integration
Four Arenas- Continued
Strongholds-Oligopolistic bargain, strong
barriers to entry, potential in non-core
market
No hesitation to throttle entrants
(McDonalds/Chick-fil-A)
Deep Pockets- Primarily reliant on driving
out other firms, costs/scale used.
Strategic Inflection Point Analysis
Potential strategic inflection points
regarding:
– Potential increase in customer concern for
better nutrition (change in substitutes)
– Race to gain market share/brand equity in
overseas markets (change in group rivalry)
– Potential need to lobby government to avoid
damaging legislation (change in
complementors)
Technological Trends
Potential use of internet for order-ahead
(JIT delivery)
Increasingly sophisticated SCM software
to cut costs
Otherwise technology is relatively stable
(Specific Stage)
International Trends
Key Triggers- Domestic Market Saturation,
Movement overseas of domestic
customers, Sourcing opportunities
IR-Grid Analysis- Group = International
companies (Low Pressure for local
responsiveness, Low Pressure for Global
Integration)
Political & Socio-Cultural Trends
(Political)
Competitors
Suppliers LA Government
(Policy Makers) Supersize Me Customers
(Social Actors)

(-) (-) Activists


FDA
Company-
Offers corporate Community Groups
social performance
Congress and political
activities
(+) (+)

Corporate (Political)
Social
Political Complementors
Legitimacy
Advantage Pro-Business Legislators
Lobyists Process
Process
Political & S/C Trends, Cont.
Salient/Probable issues:
– Potential for necessity of food labeling (FDA)
(Low Priority)

– Potential spread of Los Angeles ruling to other


cities/communities (Medium Priority)

– Increasing customer demand for healthier


food (High Priority)
Critical Success Factors
1) Pursue Vigorous Overseas Expansion

2) Continue to pursue/market healthy fare

3) Maintain market research w/r/t new menu


items

4) Maintain vigilance for merger/vertical


integration possibilities
Threats and Opportunities, Redux

Global Expansion Commoditization

Consumer concerns
Mass Customization about nutritional
data
More upscale Government Action
“boutique” stores (Los Angeles)
Inter/Intra group Regional/ Boutique
mergers stores

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