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 Opportunities 1. Globalization 2. Mergers/Acqusitions 3. Mass Customization 4. Boutique Stores 20 15 10 5 3 2 1 1 .6 .3 .1 .05 Importance Weight (Percentage) Performance Rating (1-4) Weighted Score (% X Rating)

Threats
1. Health Concerns
2. Government Action 3. Commoditization 4. Regional/Boutique Stores

20
15 10 5

1
2 4 2

.2
.3 .4 .1

Total

100%

2.05

Competitive Factors Framework

Critical Success Factors Importance Weight McDonalds Wendys Burger King Yum Brands

Rtg.
Opportunities

Score

Rtg.

Score

Rtg.

Score

Rtg.

Score

1. Globalization

20%

.08

.04

.04

.06

2. Mergers/Acquisitions
3. Mass Customization 4. Boutique Stores

15%
10% 5%

2
1 2

.03
.1 .1

2
1 1

.03
.1 .05

2
1 1

.03
.1 .05

3
1 1

.45
.1 .05

Threats

1. Health Concerns

20% 15%

3 1

.6 .15

2 1

.4 .15

2 1

.4 .15

2 1

.4 .15

2. Government Action

3. Commoditazation

10%
5% 100%

4
1

.4
.05 2.5

4
1

.4
.05 1.85

4
2

.4
.1 1.9

4
1

.4
.05 2.2

4. Regional/ Boutique Stores Total

Value Chain Analysis

The Value Chain
Firm Infrastructure Human Recourses 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 Food, paper goods, real estate, cooking equipment, energy, eRestaraunt services & inventory applications Food creation, cooking, maintenance, cleanliness and hygiene controls, communications infrastructure and training Financing, legal support, general management, accounting, quality control Recruiting, training, development

Back kitchen monitors, order timing, better equipment for drive through, remote call center for drive-thru ordering Restaurant supplies, computer services, waste disposal and POS operations

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 Storage of raw materials, inspection

Advertising- Radio, TV, newspaper & internet

Replacement parts for equipment, service contractors

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

What is the Key Component?

Operations? Outbound Logistics?

The Value Net

Competitors
McDonalds

Suppliers
Meat Suppliers

Burger King YUM Brands

Customers

(-)
Veggie Suppliers

(-) WENDYS

Customers eating at fast food restaraunts

Families

Restaurant Supplies Distributors

(+)
Complementors

(+)

Companies

Equipment Manufacturers

Coca Cola Nestle Hinez Hasbro Movie Studios Government Regulators

Value Analysis
Suppliers Meat Suppliers Veggie Suppliers Restaurant Supplies Distributors Equipment Manufacturers Competitors McDonalds Customers Customers eating at fast food restaurants Families Companies

Burger King YUM Brands

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 POWER

RIVALRY

CUSTOMER POWER

COMPLEMENTOR POWER

Forces: Threat of New Competitors

SUBSTITUTES DRIVER
Number, Quality, Availability- Wendys clearly has many substitutes in its industry Price-PerformanceWendys 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.

NEW ENTRANTS RATING DRIVER

Scale Capital required- This is clearly an important factor, as Wendys needs to maintain strong economies of scale. Efficiency production and cost reduction are crucial for Wendys competitive strategy. Technology, Patents- This is another vital factor for Wendys as Wendys food preparation is unique from other competitors Customer loyalty, brandingCustomer loyalty will help Wendys retain a customer base and fend off competition. Raw Materials- Wendys needs to secure the most cost-effective raw materials in order to maintain efficiencies and remain competitive. Market Saturation- This factor may serve Wendys well as the market for fast food is clearly saturated, thereby increasing the barriers to entry.

RATING

Forces: Suppliers, Rivalry

SUPPLIERS DRIVER RATING Number, Size, Concentration- Plenty of suppliers. Wendys has plenty of options to switch from one supplier to another Raw materials differentiation- This may be important for Wendys as the differentiation of supplies may help Wendys maintain a differentiated product line. DRIVER
Number of CompetitorsWendys has formidable competition Equality- Wendys 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 Wendys as Yum brands (Pizza Hut) and McDonalds (Boston Market) continue their M & A activities *UPDATE*- Wendys has merged with Arbys .

RIVALRY RATING

Forces: Customer, Complementor Power

CUSTOMER POWER DRIVER
Number, size, concentrationCustomer concentration in a certain market segment will increase competitive pressures on Wendys. Information- Customers are always smart shoppers, they always know what they are looking for. They are also well aware of pricing differences. Differentiation- Wendys needs to differentiate its products to accommodate customers different tastes and preferences. Customer Loyalty- This is crucial for Wendys as customer retention via differentiated product lines and competitive pricing will boost Wendys market position

COMPLEMENTOR POWER DRIVER

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, Wendys needs to always maintain a certain level of differentiation to avoid increases complementor power. National Diversity- A nationally diverse market makes it difficult for Wendys to maintain a uniform strategy. It will need to adopt different strategies to help compete with regional and local fast food chains.

RATING

RATING

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 Wendys Taste Quality of Food Location Speed of Service Kid-Friendly 30% 30% 5% 15% 20% 100% 6.66 6.66 1.9 5 6 Quality Performance Scores McDonalds 5 5 8.7 4.33 10 Burger King 4.66 4.66 3.2 3.66 8 Yum Brands 5.33 5.33 10 4 7

Price Profile
Price Attributes Importance Weights Price Performance Scores

Wendys
Meals Sandwiches Drinks Sides 30% 30% 20% 20% 100% 9.35 8.7 10 5.8

McDonalds
8.1 8 8.2 6.6

Burger King
7.7 7.6 7.8 5.5

Yum Brands
4 10 8.7 10

Value Map

Strategic Group Mapping Analysis

Customer Value Rating

Customer Value
Price Satisfaction Quality Rating % Advantage

Firm

Ratio

Weight

Ratio

Weight

(wtd ave)

(Disadvantage)

Wendys

1.13

45%

1.14

55%

1.14

14%

McDonalds

.99

45%

1.07

55%

1.03

3%

Burger King

.90

45%

0.85

55%

0.87

-13%

Yum Brands

1.05

45%

1.01

55%

1.03

3%

SCM Sophistication

SC Design

What Matters
Technological Trends Economic & Demographic Trends
Correlation Analysis Demographic Analysis

Player Mapping Analysis Life Cycle Analysis Battle Analysis Trajectory Mapping Analysis

Competition Trends
Industry & Alliance Evolution Analyses 4-Arenas Analysis Strategic Inflection Point Analysis

Competitors Suppliers Political & Socio-Cultural Trends

Player Mapping Analysis Issue Mapping Analysis Issue Saliency Analysis

Company Complementors

Customers

International Trends
IntegrationResponsiveness Grid Analysis International Evolution Analysis

Profit Zone Analysis

Dimension Customer Selection Single people under age 34 families with dependent children working people under tight budget students Customers willingness to pay 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 Wendys 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 Case Value Capture

Profit Zone Analysis, continued

Dimension Value Capture
Case

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

Profit Zone Analysis, continued

Dimension Strategic Levers Case Innovation Leadership with respect to hamburgers Control of costs & Improving Operational efficiencies Customer relationships Product development lead Quality leadership Environmental and social responsibility Offer fresh, high quality ingredients for hamburgers Utmost customer service and satisfaction Increased efficiency and operational excellence

Scope

Business Design Outcomes

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

McDonalds Burger King Yum Brands Wendys

18% 14% 12% 9%

40% 36% 30% 28%

.68 .65 .76 .60

9 8 7 7

30X 23X 20X 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
(Policy Makers)

LA Government

Supersize Me

Customers
(Social Actors)

FDA

(-) Company(+)
Offers corporate social performance and political activities

(-)

Activists Community Groups

Congress

(+)

Corporate Political Advantage Process

(Political)
Complementors
Pro-Business Legislators Lobyists

Social Legitimacy 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