Analyzing the Fast-Food Industry: A Case Study
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Presentation Transcript
The Importance of Studying Cases • Improve analytical ability through studying, analyzing, and discussing actual business scenarios • Develop the skills of logical thinking, searching for relevant information, analyzing and evaluation facts, and drawing conclusions
The Importance of Studying Cases (Cont) • A case is a description of an actual management situation • Paint a picture of the setting of a business decision • A case study is a written story that serves as the basis for a group discussion • A written case attempts to provide a synopsis of past events in the life of an organization
The Importance of Studying Cases (Cont) • A good case will place you in the position of facing a managerial challenge and preparing an action plan • Financial data • Statistical information about the employees and markets • Organizational structure • Technological information • Managerial information
The Importance of Studying Cases (Cont) • Provide hands-on practice in how to think inductively within the context of an actual situation • Combine theoretical concepts with real-life experience to provide practical decision-making experience
Case Analysis Outline • Issue • Environmental Analysis • Problems and opportunities • Alternatives • Recommendation
Competitor Analysis Outline • Description of the competitor company • Financial analysis issue • Stock/investment outlook • Potential/prospective for growth • Competitive structure • Role of research and development • Technological investment and analysis • Recommendation for the future
Industry Analysis Outline • Description of the industry • Financial analysis • Stock/investment outlook • Potential/prospective for growth • Competitive structure • Role of research and development • Technological investment and analysis • Recommendation for the future
Industry Analysis Outline (Cont) To complete the industry analysis, the following steps should be helpful • Identify the industry • Seek general industry information • Identify and search the industry’s trade and consumer magazines • Learn about the consumers of the product or service • Examine the patent and trademark situation in the industry
Industry Analysis Outline (Cont) • Determine the legal issues in the industry • Find information about specific companies in the industry • Define the type of competition in the industry • Examine the geography of the industry • Determine the impact of weather and climate on the industry • Examine the international market • Interview people from the industry • Fill in the gaps with information from information providers
Fast-Food Industry • Restaurant franchising(特許經營) • Provide sales and other support for an agreed period of time • Include name, decor, menu, management system, accounting system, information system • Supplies are ordered from pre-approved sources • During the 1970s and 1980s, 25% of restaurant outlets, 43% of industry sales • Ex. McDonald sells only Coca-Cola soft drinks
Fast-Food Industry (Cont) • Through franchising, a business can quickly grow and achieve higher market penetration than a single-owner business • The five-year survival rate for franchises is much higher than that of start-up businesses (85.7% vs. 23%)
Fast-Food Industry (Cont) • Start-up fees • Trade name, managerial training and support, royalties • McDonald’s $45,000 • Domino’s Pizza $1,000
Fast-Food Industry (Cont) • Additional initial outlays • Rent, inventory, equipment, insurance, licenses • Amount to 10 times the start-up fee • McDonald’s $500,000
Financial Analysis of Franchise Restaurants Industry • $800 billion industry • More than 8 million employees • 1/3 dollars spent on food services goes to franchise restaurants • 1.7% increase in revenues in 1996 • Industry growth (domestic units) decreased from 7.9% in 1994 to 5.9% in 1995
Financial Analysis of Franchise Restaurants Industry (Cont) • 14.6 % average profit levels in 1997 • Pizza and chicken chains grew faster than burger chains
Stock/Investment Outlook • Growth rate: 15% per year • Investment projections for the largest franchises are optimistic • Sales for Wendy’s and McDonald’s will increase by 17% and 14% • The national trend toward two-income households has been beneficial to the restaurant industry
Stock/Investment Outlook (Cont) • In 1996, 51.9% of all spending on food took place in restaurants, 48.1% in grocery stores • In 1972, only 38.2% in restaurants, but 61.8% in grocery stores
Potential for Growth of Franchise Industry • Growth in the entire franchise industry: from 41% to 50% of all retail sales • Sales are expected to reach $2.5 trillion by 2010
Potential for Growth of Franchise Industry (Cont) • Fast-food companies are searching for new areas for growth • Niche marketing in the US • Marketing toward children • Health-conscious and nutritionally balanced meals • Home meal replacement
Potential for Growth of Franchise Industry (Cont) • International development • McDonald’s, KFC, and Burger King in Asia and South America • Nontraditional operations • McDonald’s in Wal-Mart stores and gas stations • Value offerings • McDonald’s combo menu
Competitive Structure of the Franchise Industry • The largest 10 chains make up 15% of all units and account for 23% of all sales • McDonald’s remains the industry leader • More than $15.9 billion in sales • More than 11,000 units in the US
Competitive Structure of the Franchise Industry (Cont) • Mergers change the competitive structure of the industry • Wendy’s merged with Tim Horton’s in 1995 • Wendy’s purchased 40 and 35 restaurants in 1995 and 1996 respectively • Wendy’s also plans to purchase 37 Rax restaurants in 1996 • Wendy’s ended 1996 with 6,300 units
Competitive Structure of the Franchise Industry (Cont) • Boston Market focuses on home-style entrees, vegetables and salads • Boston Market with sales of $384 million in 1994, 150% increase over 1993 • From 217 units to 534 units • Over 1,000 units in 1998 • Bankrupt on October 5, 1998
Competitive Structure of the Franchise Industry (Cont) • A chief competitor to the franchise food industry is grocery stores • Target busy students and working parents by offering more prepared foods, deli counters, and eat-in dining areas
Technological Investment and Analysis in the Fast-Food Industry • Electronic systems track inventories and sales • More efficient operations • Transmit information easily • EDI, Internet, web site, telecommunication technology
Technological Investment and Analysis in the Fast-Food Industry (Cont) • The role of R&D is limited to the test marketing of new products and improvements in food taste, calories, and consistency • Cost, taste, texture, shelf life, fat content
Recommendations for the Future of the Fast-Food Industry • Many challenges during the first five years of 21st century • Sales will continue to lag in the US • Companies must focus on nontraditional and niche markets to increase market share • Delivery speed, customer service, mergers
Questions • What challenges and opportunities is the industry facing? • Does the industry face a change in government regulation? • How will technology impact the industry?
Why technology management? • Technology management is the ultimate battleground that will determine which companies and owners will be the winners and losers in the wealth creation game.
The Role of Technology • A key factor in defining competitive advantage in the modern business world • A pervasive factor of production in the future
The Role of Technology (Cont) • Intellectual property mostly relates to technology, not people • High tech industries • Advanced engineering, electronics, biological sciences, aerospace and aviation • Not high tech industries • Three major companies in the tire industry
The Role of Technology (Cont) • Managers’ attention over the past 50 years has been taken up with “people problems” • Technology management and innovation are becoming the ultimate battleground for leading companies • Xerox vs. Canon, Toyota vs. GM, Ford vs. Honda, IBM vs. Apple, Fuji vs. Kodak
The Role of Technology (Cont) • The adoption and implementation of technology can be thought of as one important aspect of innovation • Innovation • New products, new processes, new managerial approaches, and combinations of these three
The Role of Technology (Cont) • Technology should be considered with the following • How are technological issues recognized by senior management? As a black box? As an input to long-range planning? For meeting short-term objectives? • How explicit is the recognition of technology in each of these roles?
The Role of Technology (Cont) • How has management used technology to implement strategic objectives? • How is technology being monitored? • How are activities relevant to technology recognized and organized in the enterprise?
The Role of Technology (Cont) • Determine the success of any technology in industry • Functional performance • Acquisition costs • Ease of use characteristics • Operation costs • Reliability • Serviceability • Compatibility
The Role of Technology (Cont) • Another important concept in technology management is the emergence of dominant designs • IBM PC • Microsoft Windows operating systems for PCs
The Role of Technology in HP • The implementation of SMT at ASMC • ASMC adopted new SMT technology to replace old technology in manufacturing high quality ultrasound imaging products • From through-hole (TH) technology to SMT technology • Reductions in board size, improved system performance, labor savings
A General Manager’s Perspective on Managing Technology • The introduction of advanced technologies is more like changing from a car to a helicopter than changing from an old car to a newer model of car • Create new opportunities
Technology Forecasting • R&D management can be characterized into three phases • The first stage, 1950-1975, was input-oriented. • Setting up of many of modern R&D labs • Establishment of research teams and processes.
Technology Forecasting (Cont) • The second stage, 1975-1990, involved the decentralization of R&D. • Rigid coupling of business needs and development activities • Better project management, planning, and monitoring systems
Technology Forecasting (Cont) • In the third stage, R&D strategy is an integral and vital element of corporate strategy. • Balancing basic research and generic technologies with the needs of business units
Technology Forecasting (Cont) • The new forecasting paradigm for technology integrates it as a part of organizational intelligence.
The field of Technology Management • Technology strategy • Development of technological capability • Innovation management • Technological forecasting • Technology management, manufacturing strategy, and business competitiveness interfaces • Barriers to the adoption of technology • Technology and manufacturing flexibility • E-business, a rapidly developing field of new technology
