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MBAD 271-Strategic Management

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1 MBAD 271-Strategic Management

2 Opportunities Global Expansion Mass customization
Upscale “boutique” stores Inter/intra-group mergers

3 Threats Commoditization Consumer concerns about nutritional data
Government action (Los Angeles) Regional/Boutique Stores

4 External Factors Framework
Critical Success Factors Importance Weight (Percentage) Performance Rating (1-4) Weighted Score (% X Rating) Opportunities 1. Globalization 20 3 .6 2. Mergers/Acqusitions 15 2 .3 3. Mass Customization 10 1 .1 4. Boutique Stores 5 .05 Threats 1. Health Concerns .2 2. Government Action 3. Commoditization 4 .4 4. Regional/Boutique Stores Total 100% 2.05

5 Competitive Factors Framework
Critical Success Factors Importance Weight McDonald’s Wendy’s Burger King Yum Brands Rtg. Score Opportunities 1. Globalization 20% 4 .08 2 .04 3 .06 2. Mergers/Acquisitions 15% .03 .45 3. Mass Customization 10% 1 .1 4. Boutique Stores 5% .05 Threats 1. Health Concerns .6 .4 2. Government Action .15 3. Commoditazation 4. Regional/ Boutique Stores Total 100% 2.5 1.85 1.9 2.2

6 Recruiting, training, development
Value Chain Analysis The Value Chain Firm Infrastructure Financing, legal support, general management, accounting, quality control Human Recourses Recruiting, training, development Technology Development Design of ordering/scheduling software, potential JIT delivery system for goods Design of terminals, design of procedures, quality control procedures, wireless thermostat monitoring & control, card payment terminals Back kitchen monitors, order timing, better equipment for drive through, remote call center for drive-thru ordering Market research, new product introduction, sales & forecasting systems Service manuals, training videos, customer feedback systems Procurement Transportation, local sourcing for fresh vegetables and salads, site maintenance contractors, restaurant supplies Food, paper goods, real estate, cooking equipment, energy, eRestaraunt services & inventory applications Restaurant supplies, computer services, waste disposal and POS operations Advertising- Radio, TV, newspaper & internet Replacement parts for equipment, service contractors Storage of raw materials, inspection Food creation, cooking, maintenance, cleanliness and hygiene controls, communications infrastructure and training Order processing, drive through window, shipping Advertising, brand marketing, cupons, store decoration, new item creation, media promotions Customer call center for complaints, service cards, communications Inbound Logistics Operations Outbound Logistics Marketing and Sales Service

7 What is the Key Component?
Operations? Outbound Logistics?

8 The Value Net (-) (-) WENDYS (+) (+) Competitors Suppliers Customers
McDonald’s Burger King YUM Brands Suppliers Meat Suppliers Veggie Suppliers Restaurant Supplies Distributors Equipment Manufacturers Customers Customers eating at fast food restaraunts Families Companies (-) (-) WENDYS (+) (+) Complementors Coca Cola Nestle Hinez Hasbro Movie Studios Government Regulators

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


11 Forces: Threat of New Competitors
SUBSTITUTES NEW ENTRANTS DRIVER Number, Quality, Availability- Wendy’s clearly has many substitutes in it’s industry Price-Performance- Wendy’s must be aware of competitor prices in order to stay competitive Switching 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. RATING Scale 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 competitors Customer 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.

12 Forces: Suppliers, Rivalry
DRIVER Number, Size, Concentration- Plenty of suppliers. Wendy’s has plenty of options to switch from one supplier to another Raw materials differentiation- This may be important for Wendy’s as the differentiation of supplies may help Wendy’s maintain a differentiated product line. RATING Number of Competitors- Wendy’s has formidable competition Equality- Wendy’s tends to share certain similarities to other fast food chains, thereby increasing competitive pressures Demand, 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 .

13 Forces: Customer, Complementor Power
CUSTOMER POWER COMPLEMENTOR POWER DRIVER Number, 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 position RATING Saturation 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.

14 Forces: Our ratings 1: Rivalry 2: Customer Power 3: Substitutes
4: New Entrants 5: Supplier Power 6: Complementor Power

15 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 Location 5% 1.9 8.7 3.2 10 Speed of Service 15% 4.33 3.66 4 Kid-Friendly 20% 6 8 7 100% Price Profile Price Attributes Price Performance Scores Meals 9.35 8.1 7.7 Sandwiches 7.6 Drinks 8.2 7.8 Sides 5.8 6.6 5.5

16 Value Map

17 Strategic Group Mapping Analysis

18 Customer Value Rating Customer Value Price Satisfaction Quality Rating
% Advantage Firm Ratio Weight (wtd ave) (Disadvantage) Wendy’s 1.13 x 45% + 1.14 55% = 14% McDonalds .99 1.07 1.03 3% Burger King .90 0.85 X 0.87 -13% Yum Brands 1.05 1.01

19 SCM Sophistication

20 SC Design

21 Economic & Demographic Trends Political & Socio-Cultural Trends
What Matters Technological Trends Player Mapping Analysis Life Cycle Analysis Battle Analysis Trajectory Mapping Analysis Competition Trends Industry & Alliance Evolution Analyses 4-Arenas Analysis Strategic Inflection Point Analysis Economic & Demographic Trends Correlation Analysis Demographic Analysis Competitors Company Suppliers Customers Complementors International Trends Integration-Responsiveness Grid Analysis International Evolution Analysis Political & Socio-Cultural Trends Player Mapping Analysis Issue Mapping Analysis Issue Saliency Analysis

22 Profit Zone Analysis Dimension Case Customer Selection
Single people under age 34 families with dependent children working people under tight budget students Value Capture Customers’ willingness to pay Offer value menu to target the critical 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

23 Profit Zone Analysis, continued
Dimension Case Value Capture Decrease Input costs 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

24 Profit Zone Analysis, continued
Dimension Case Strategic Levers Innovation Leadership with respect to hamburgers 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 Rating Market Value/ 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 14X

25 Industry Evolution Maturity Stage Stable industry, clear boundaries
Vigorous competition Not much collaboration

26 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

27 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.

28 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)

29 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)

30 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)

31 Political & Socio-Cultural Trends
Competitors LA Government Supersize Me Suppliers (Policy Makers) FDA Congress Customers (Social Actors) Activists Community Groups (-) (-) Company- Offers corporate social performance and political activities (+) (+) Corporate Political Advantage Process (Political) Complementors Pro-Business Legislators Lobyists Social Legitimacy Process

32 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)

33 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

34 Threats and Opportunities, Redux
Global Expansion Commoditization Mass Customization Consumer concerns about nutritional data More upscale “boutique” stores Government Action (Los Angeles) Inter/Intra group mergers Regional/ Boutique stores

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