2Opportunities Global Expansion Mass customization Upscale “boutique” storesInter/intra-group mergers
3Threats Commoditization Consumer concerns about nutritional data Government action (Los Angeles)Regional/Boutique Stores
4External Factors Framework Critical Success FactorsImportance Weight(Percentage)Performance Rating(1-4)Weighted Score(% X Rating)Opportunities1. Globalization203.62. Mergers/Acqusitions152.33. Mass Customization101.14. Boutique Stores5.05Threats1. Health Concerns.22. Government Action3. Commoditization4.44. Regional/Boutique StoresTotal100%2.05
5Competitive Factors Framework Critical Success FactorsImportance WeightMcDonald’sWendy’sBurger KingYum BrandsRtg.ScoreOpportunities1. Globalization20%4.082.043.062. Mergers/Acquisitions15%.03.453. Mass Customization10%1.14. Boutique Stores5%.05Threats1. Health Concerns.6.42. Government Action.153. Commoditazation4. Regional/ Boutique StoresTotal100%2.51.851.92.2
6Recruiting, training, development Value Chain AnalysisThe Value ChainFirm InfrastructureFinancing, legal support, general management, accounting, quality controlHuman RecoursesRecruiting, training, developmentTechnology DevelopmentDesign of ordering/scheduling software, potential JIT delivery system for goodsDesign of terminals, design of procedures, quality control procedures, wireless thermostat monitoring & control, card payment terminalsBack kitchen monitors, order timing, better equipment for drive through, remote call center for drive-thru orderingMarket research, new product introduction, sales & forecasting systemsService manuals, training videos, customer feedback systemsProcurementTransportation, local sourcing for fresh vegetables and salads, site maintenance contractors, restaurant suppliesFood, paper goods, real estate, cooking equipment, energy, eRestaraunt services & inventory applicationsRestaurant supplies, computer services, waste disposal and POS operationsAdvertising- Radio, TV, newspaper & internetReplacement parts for equipment, service contractorsStorage of raw materials, inspectionFood creation, cooking, maintenance, cleanliness and hygiene controls, communications infrastructure and trainingOrder processing, drive through window, shippingAdvertising, brand marketing, cupons, store decoration, new item creation, media promotionsCustomer call center for complaints, service cards, communicationsInbound LogisticsOperationsOutbound LogisticsMarketing and SalesService
7What is the Key Component? Operations?Outbound Logistics?
8The Value Net (-) (-) WENDYS (+) (+) Competitors Suppliers Customers McDonald’sBurger KingYUM BrandsSuppliersMeat SuppliersVeggie SuppliersRestaurant Supplies DistributorsEquipment ManufacturersCustomersCustomers eating at fast food restarauntsFamiliesCompanies(-)(-)WENDYS(+)(+)ComplementorsCoca ColaNestleHinezHasbroMovie StudiosGovernment Regulators
9Business Design Elements: Value AnalysisCompetitorsMcDonald’sBurger KingYUM BrandsSuppliersMeat SuppliersVeggie SuppliersRestaurant Supplies DistributorsEquipment ManufacturersCustomersCustomers eating at fast food restaurantsFamiliesCompaniesCompanyKey Activities:Outbound LogisticsBusiness Design Elements:Brands/ Customer SelectionComplementorsCoca ColaNestleHinezHasbroMovie StudiosGovernment Regulators
10THREAT OF NEW COMPETITORS ForcesTHREAT OF NEW COMPETITORSSUBSTITUTESNEW ENTRANTSRIVALRYSUPPLIER POWERCUSTOMER POWERCOMPLEMENTOR POWER
11Forces: Threat of New Competitors SUBSTITUTESNEW ENTRANTSDRIVERNumber, Quality, Availability- Wendy’s clearly has many substitutes in it’s industryPrice-Performance- Wendy’s must be aware of competitor prices in order to stay competitiveSwitching Costs- This refers to costs associated with switching suppliers. As the only difference is the amount of gas necessary to drive to the restaurant, and all competitors have many locations, this is effectively zero.RATINGScale Capital required- This is clearly an important factor, as Wendy’s needs to maintain strong economies of scale. Efficiency production and cost reduction are crucial for Wendy’s competitive strategy.Technology, Patents- This is another vital factor for Wendy’s as Wendy’s food preparation is unique from other competitorsCustomer loyalty, branding- Customer loyalty will help Wendy’s retain a customer base and fend off competition.Raw Materials- Wendy’s needs to secure the most cost-effective raw materials in order to maintain efficiencies and remain competitive.Market Saturation- This factor may serve Wendy’s well as the market for fast food is clearly saturated, thereby increasing the barriers to entry.
12Forces: Suppliers, Rivalry DRIVERNumber, Size, Concentration- Plenty of suppliers. Wendy’s has plenty of options to switch from one supplier to anotherRaw materials differentiation- This may be important for Wendy’s as the differentiation of supplies may help Wendy’s maintain a differentiated product line.RATINGNumber of Competitors- Wendy’s has formidable competitionEquality- Wendy’s tends to share certain similarities to other fast food chains, thereby increasing competitive pressuresDemand, pricing- High pricing pressures to remain competitive as well as high market demand.M & A activities- This is crucial for Wendy’s as Yum brands (Pizza Hut) and McDonald’s (Boston Market) continue their M & A activities *UPDATE*- Wendy’s has merged with Arby’s .
13Forces: Customer, Complementor Power CUSTOMER POWERCOMPLEMENTOR POWERDRIVERNumber, size, concentration- Customer concentration in a certain market segment will increase competitive pressures on Wendy’s.Information- Customers are always smart shoppers, they always know what they are looking for. They are also well aware of pricing differences.Differentiation- Wendy’s needs to differentiate its products to accommodate customers’ different tastes and preferences.Customer Loyalty- This is crucial for Wendy’s as customer retention via differentiated product lines and competitive pricing will boost Wendy’s market positionRATINGSaturation of alliances- Many of the competitors have the same or similar alliances with the complementor (e.g. Coca Cola) or their rival (e.g. Pepsi). As it is relatively simple to obtain the product, the complementors have relatively little power in this respect.Centrality, equality- Contracts between fast food restaurants and complementors are relatively simple and commoditized. There is little power here.Scope differentiation- As complementor power rises, scope differentiation decreases. As such, Wendy’s needs to always maintain a certain level of differentiation to avoid increases complementor power.National Diversity- A nationally diverse market makes it difficult for Wendy’s to maintain a uniform strategy. It will need to adopt different strategies to help compete with regional and local fast food chains.
14Forces: Our ratings 1: Rivalry 2: Customer Power 3: Substitutes 4: New Entrants5: Supplier Power6: Complementor Power
15Quality/Price Profile Quality ProfileQuality AttributesImportance WeightsQuality Performance ScoresWendy’sMcDonald’sBurger KingYum BrandsTaste30%6.6654.665.33Quality of FoodLocation5%18.104.22.168Speed of Service15%4.333.664Kid-Friendly20%687100%Price ProfilePrice AttributesPrice Performance ScoresMeals9.358.17.7Sandwiches7.6Drinks8.27.8Sides22.214.171.124
22Profit Zone Analysis Dimension Case Customer Selection Single people under age 34families with dependent childrenworking people under tight budgetstudentsValue CaptureCustomers’ willingness to payOffer value menu to target the critical year-old customerEstablish 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 saladsFocus on hamburgers, a specialization Wendy’s holdsInnovate and introduce new productsInvolve more in local community events and charity workLower Operating costsOffer choice of premium and low cost menu choices in the menu to compensate for lower marginsElevate 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
23Profit Zone Analysis, continued DimensionCaseValue CaptureDecrease Input costsPush for green purchasing with eco-friendly suppliers whose products have reduced environmental impact in any part of their life cycleReduce water and energy consumption, automate transaction processing, lower product testing costs, legal and professional fees and bonus expensesConserve energy costs by using renewable sources such as wind, solar, hydroelectricRecycle of paper, cardboard, metal, and plasticUpgrade kitchen equipment and introduce new ovens to increase efficiency and lower operating costsEstablish buying alliances with preferred suppliers to consolidate purchasing and benefit from volume discountsIncrease the size of the pieGrow share of the premium hamburger marketRe-energize Wendy's Late Night business and capture afternoon and evening snack opportunitiesContinue 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 violationsUse complementor products to attract new businessGet into real estate opportunities as part of franchisee buildingLimit Direct CompetitionOffer store promotion discounts and launch ad campaigns to lure customers away from new local competitorsGet into exclusivity agreement with suppliers to gain competitive advantage
24Profit Zone Analysis, continued DimensionCaseStrategic LeversInnovation Leadership with respect to hamburgersControl of costs & Improving Operational efficienciesCustomer relationshipsProduct development leadQuality leadershipEnvironmental and social responsibilityScopeOffer fresh, high quality ingredients for hamburgersUtmost customer service and satisfactionIncreased efficiency and operational excellenceBusiness Design OutcomesReturn on SalesProfit GrowthAsset EffeciencyStrategic Lever RatingMarket Value/ SalesMcDonald’s18%40%.68930XBurger King14%36%.65823XYum Brands12%30%.76720XWendy’s9%28%.6014X
26Four Arenas AnalysisHypercompetition taking place vigorously across all four ArenasPrice/Perceived Quality has reached ultimate valueTiming/Know-how tends to take advantage of “first follower” status (lowers risk)Potential for Vertical Integration
27Four Arenas- Continued Strongholds-Oligopolistic bargain, strong barriers to entry, potential in non-core marketNo hesitation to throttle entrants (McDonalds/Chick-fil-A)Deep Pockets- Primarily reliant on driving out other firms, costs/scale used.
28Strategic 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)
29Technological TrendsPotential use of internet for order-ahead (JIT delivery)Increasingly sophisticated SCM software to cut costsOtherwise technology is relatively stable (Specific Stage)
30International TrendsKey Triggers- Domestic Market Saturation, Movement overseas of domestic customers, Sourcing opportunitiesIR-Grid Analysis- Group = International companies (Low Pressure for local responsiveness, Low Pressure for Global Integration)
31Political & Socio-Cultural Trends CompetitorsLA GovernmentSupersize MeSuppliers(Policy Makers)FDACongressCustomers(Social Actors)ActivistsCommunity Groups(-)(-)Company-Offers corporate social performance and political activities(+)(+)Corporate Political Advantage Process(Political)ComplementorsPro-Business LegislatorsLobyistsSocial Legitimacy Process
32Political & 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)
33Critical Success Factors 1) Pursue Vigorous Overseas Expansion2) Continue to pursue/market healthy fare3) Maintain market research w/r/t new menu items4) Maintain vigilance for merger/vertical integration possibilities
34Threats and Opportunities, Redux Global ExpansionCommoditizationMass CustomizationConsumer concerns about nutritional dataMore upscale “boutique” storesGovernment Action (Los Angeles)Inter/Intra group mergersRegional/ Boutique stores