Wendys as International Fast Food Chain - Case Study Example

Introduction Wendy’s, founded in 1969, is an international fast food chain with its head office in Ohio, USA. The chain s is the ranked the third largest in US after McDonald’s and Burger King having more than 6700 stores1. It has employed a total of 246,000 employees and has a revenue base of 2,439 billion USD (2006). Wendy’s is mainly present in the US and its presence in the rest of the world is almost negligible when compared to its competitors Wendy’s has been facing tough competition from the competitors namely McDonalds and Burger King and has been forced to close down several business in Hong Kong and Hungary.. The main reason for this failure has been lower cost and better service provided by the competitors. The US market is taking a new turn with the consumers now being more weight conscious and the potential obesity fast food causes which is now lowering the overall demand of fast food and costing the national economy $117 billion annually (Flegal et al. 2005, pp. 1861-7). Situation analysis PEST Political/legal The laws and regulation of the US are very stringent and firms have to adhere to the laws or else face grave consequences. Quality, human resource, precision, production, hygiene have their own set of rules and regulations with timely checks to ensure all firms are following the standards set. For the fast food industry however, the laws are becoming more stringent and strict because of the rising obesity issue and more laws are expected to be introduced (Schlosser 2004). Several fast food chains have faced lawsuits concerning the obesity issue which has raised concerns amongst doctors and nutritionists at a national level. This is because an obese nation will have more illnesses and a shorter lifespan (Flegal et al. 2005, pp. 1865). . Social/cultural Cook at culture of eating fast food in the US where both women and men work and have no time to home. Plus the younger generation prefers eating fast food as it saves time and is also affordable and tasty. Fast food has become a culture and has become ingrained into the life system of an American (Gelder). From the school going children to a working adult, all prefer eating on-the-go meals as it saves time and suits their fast paced lifestyles. Fast food chains have meals for all ages especially children who are the main target and thus these children have grown with these fast food brands like McDonalds and have become brand loyal customers as adults. Also, fats food chains have become hangout junctions for teenagers who not only eat here but also work here for extra income (Dev et al. 2005). Technological The US is one of the most technologically advanced countries in the world. The technological advancements in the industry have been tremendous. The integration of information technology into the management and operational level has greatly improved the efficiency. According to Dev et al. (2005), the internet, telecommunication and machinery have enabled swift coordination between the supply chain, management, operations etc and have enabled a well coordinated and organized system of production. The market has very updated production procedures have become very mechanical and precise. Every form has to be technologically updated and well equipped in order to survive in the competitive environment. Technology has become the corner stone evolving new and better modes of production and management are being continuously introduced and survival lies in timely up gradation. Technology has also enabled the expansion of restaurants to different countries. Also, human resource can now be hired different parts of the world making it more competitive for firms in the industries to hire trained personnel. Economic According to Gelder, economically the US is a developed region. The revenue from the fast food industry is tremendous. The investment rate is high there is easy availability of skilled labor but the labor cost is high. However, the economy is suffering from a credit crunch which may have a long-term effect of depression in the region. Also, the average income has decreased compared to the past years indicating shrinkage of purchasing power of people and thus a possible change in the lifestyle. This will influence their habits including the eating habits in an attempt to curtail costs and thus the fast food industry may suffer (Barney, 1991, pp. 99-120). Porter Factor conditions The US has a good infrastructure and has a readily available skilled labor. The raw materials are readily available and the region poses a lot of investment and expansion opportunities (Porter, 1985, pp. 1-30). Demand conditions As Schlosser (2004) says, the overall demand for fast food is very high in the US. The whole eating pattern has evolved over the years and people now prefer easy to get food over home cooked meals. Wendy has a high demand for its products especially chicken and beef burgers2. The desserts are also demanded a lot as there is a wide range of dessert assortments. The consumers like the aura and the over all ambiance of the restaurant (Barney, 1991, pp. 99-120). Competitors The main competitors of Wendy’s are McDonald’s and Burger King. McDonald’s has a variety of products catering to all age brackets especially children. They have a variety of beef, chicken and pork variety and have very competitive prices. They have excellent service and have a global presence. According to Flegal et al. (2005), McDonald’s has been recently facing issues of obesity and has been targeted for being responsible for obesity amongst the younger generation. This has reduced the demand amongst the consumers and has spelt trouble for the firm in the US. Burger King is the next big competitor primarily dealing in beef products. They too are doing well and give direct competition to Wendy (Schlosser 2004). Suppliers The suppliers of Wendy are mostly local and the supplying industry is very well developed3. The raw material of products including beef, chicken, cheese, buns, packaging etc all come from reliable suppliers and are very cost effective. However, they only supply regionally and supplying for them becomes difficult for far off areas (Dev et al. 2005). Wendy’s has healthy relations with its suppliers and has a systematic supply chain system. The suppliers are reliable enough to supply in large quantities within a short deadline and supply quality goods. The suppliers of beef however give Wendy a reliable rate but the rates of competitors are more economical than that of Wendy (Porter, 1985, pp. 1-30). Consumers The consumers of Wendy range from pre teens to 40 plus. The average consumer belongs to a fast paced life who could be a student or a working individual who can spare only a few minutes for his meal. Some consumers have become addicted to the burgers over time and are brand loyal and typically visit at least 3-4 times a week. Consumers usually prefer the beef burgers over the chicken and are avid meat lovers. Prospective consumers are highly influenced by their peers and are willing to try out new products when they have been recommended to try out Wendy. Also, consumers like to order take away and have it delivered at home or work (Porter, 1985, pp. 5-27). STP framework Segmentation The market is broadly segmented into children, teenagers and working adults. There are other segments belonging to cultural sects like Asians who like spicy food and people who are diet conscious. Target Market The target market for Wendy should be focused. Typically the focus should be on teenagers who are school going within the age limit of 10-16. Both male and female in this category should be targeted. The next segment to focus on is the working people segment. This target market includes consumers belonging to a tough working schedule who don’t have the time to dine in restaurants which consume time. They also like to “order in” their meals. The age bracket for this market is typically 22 -33 years old. This market has grown up with the fast food trend and has fast food ingrained into their system. The target market should also include children from age 2 to 9 are special meals should be designed for them. This target market is exposed to media and at the same time will cajole their families to also to dine with them. Wendy’s should also have meal alternative for Hindus and Muslims who have religious constraints about certain meats. Regional marketing should be conducted for ethnic groups living in certain areas who have preferences for spicy food etc. special meals should be designed for these different target markets (Cooper, 1986, pp. 71-85). Promotion Since all the target markets described above are exposed to similar forms of media, the promotion of the brand is mostly via television, radio and print media. There is special focus on specific channels like music channels and children’s channels. Road shows and below the line activities are also conducted which serve as important tools of promotion. P’s of Maketing Product Wendy’s caters to the masses at large but does not have as much of product variation as McDonald’s. There are 2 sorts of chicken burgers, 3 different sorts of beef and pork burgers with one sort of chicken nuggets. There is only one meal for children and no toy is provided with the children’s meal. At one time, 5 types of deals are offered to the customer where as McDonald’s offers at least 7 at one time. The salad bar in all outlets attracts customers as competition doesn’t have salad bars in all outlets. The products are light to eat and are not drenched with fat and oil (Schlosser 2004). Price The prices of Wendy’s are a little higher than that of McDonalds and Burger King. This is because the competition can avail economies of scale as they have expansive businesses spread over the globe. Since the industry is very competitive in prices, even a small difference can make the firm lose business(Guiltinan et al. 1996). Place Currently Wendy’s has 6,700 outlets and is situated in key business areas4. Wendy’s is well spread in the US however, it doesn’t have global presence. The overall ambiance of Wendy’s restaurants is friendly and welcoming. Trendy music and delicious aroma make the aura upbeat and attractive for consumers. The overall space of the restaurants is bigger than that of competitors and at one time it can accommodate a larger crowd. Packaging The packaging of the products is simple yet clean and gives a very neat and attractive look to the product. The packaging is especially designed to keep the products fresh and warm for a longer time. Mostly paper is used keeping the environmental concerns in mind. People The overall staff of Wendy is divided into two sections -one at the restaurants and the other at the managerial level. The human resource in the management is very well skilled and experienced. They are well coordinated and work in teams and have managed the business well so far. The other portion of the employees is in the restaurant and they are the ones who are direct contact with the customers (Menon, 1992, pp. 53-71) . SWOT analysis Strengths Products Wendy’s has an established brand name in the local market. The brand is well recognized for its delicious products and meals. The brand has an overall good image and is known for its ambiance and tasteful products. Human resource The human resource especially in the higher management is highly skilled and experienced. They turnaround is low and the employees are happy with the firm and therefore they work with dedication. Technology Wendy is highly advanced in technology. There are sophisticated software for supplies, consumer data, management, employees, etc and thus the operations are swift and timely. Technology has been integrated at all levels which enhances the overall productivity and image (Gelder). Desserts There is a wide variety of desserts along with the main menu which attracts consumers with a sweet tooth. The dessert range adds to the main menu bringing in more consumers and making some brand loyal. No other competitor has such a wide range of desserts as Wendy’s does. Weaknesses Prices The prices of the products are a little higher than the competition which deters some consumers who are price conscious. Bad market analysis Previously Wendy’s has had businesses closing down in some countries due to the predominant presence of competitors. Also, the market analysis had not been conducted properly and thus there was failure. Staff According to Barney (1991), the staff at the restaurant level is not as friendly as the competitor’s. This has lately been bad for the business as customers complain of unfriendly and rude staff who does not make valuable suggestions to customers. The staff has become slow in service and long cues of customers are sometimes seen in some outlets. Little range of meals and children There is very little variety of products for children. There are no special products for them and thus people with children do not prefer coming here as the children are not entertained even though the children form a huge market for the products. McDonald’s recognizes that and targets children very well (Gelder). . Opportunities Global markets Wendy’s has a huge opportunity open to there is potential for global expansion. There is a ready market in most countries and the opportunities need to be exploited. Overtake the competition Since competition has been targeted for causing obesity, their market has lowered overall which poses an opportunity for Wendy’s to firm its grounds and establish itself against the competition (Schlosser 2004). Threats Decreasing market The overall market for fast food seems to be decreasing in the long-term future. This is already affecting the demand which has lowered in the American market. Changing demand The consumers would in the future drift away fro the fast foods and opt for healthier options which s expected to bring the fast food business down(Menon, 1992, pp. 58-68) . Strategies The competitors of Wendy are very strong and established and they are making it difficult for the firm to explore new markets. Wendy’s has to do something different in order to sustain in such a competing environment and the firm cannot afford to close down its branches like it did earlier. Coupled with that, the fast food industry seems to be in trouble primarily because of the obesity issue and the core competitor McDonald’s has been made the target of lawsuits and blame which give Wendy a chance to take over the market share of McDonalds (Flegal et al. 2005, pp. 1861-7). . One more strategy that Wendy’s should employ is that it should focus on niche marketing. With globalization, people from different cultures, tastes and preferences have come together. For example, the Asians like more spicy foods so Wendy’s could have a few products to cater this niche. This will enable Wendy’s to gain markets steadily (Dev et al. 2005). This can be achieved by introducing a new range of healthier food options and creating a niche for this food in the existing fast food market. This can be achieved by involving nutritionists and doctors to formulate a meal that’s healthier than any other existing fast food in the market (Gelder). Wendy’s has a launch its new range of products with a new healthier image involving new promotional tactics and building a new image. Such a diversion will enable Wendy’s to sustain the changing trend of the market demand for healthier products in the US. At the same time Wendy’s can enter markets in which the competition has not entered with full force like China and India. Also, exploring new markets will enable Wendy’s to avail the economies of scale and bring its costs down. At the same time new suppliers should be located and better prices for supplies should be negotiated (Barney, 1991, pp. 99-120). In the existing markets, Wendy’s has to improve its services which have been receiving complaints. This can be done by vigorous training of the restaurant staff and incorporating technology to assess the performance of the employees and their training. Wendy’s also has to focus on the products it offers to children which is a market that Wendy’s has failed to give attention to. There should be a variety of healthy meal options for the children with play areas for kids and a children friendly environment in the restaurants (Barney, 1991, pp. 99-120). This market analysis using PEST, Porter’s Diamond Model, SWOT and the P’s of marketing to assess the environment and deriving strategies for future direction is useful as now the firm has been able to reason out the why their business has taken a downward trend and why they are not able to survive in new markets. Also, internal problem areas have been identified and methods to improve them have been suggested. The firm now has a better understanding of the situation and what it needs to do to excel its competitors. Conclusion. According to Schlosser (2004), the market for fast food will decrease in the long run due to the issues that the nation is facing. Currently the competitors of Wendy’s are having a tough time facing lawsuits etc which seems to be a good time for Wendy to capture more market share. This can be achieved by introducing a new range of healthier food and repositioning itself as a healthier food option. Wendy’s should also explore new markets where the competition doesn’t have a strong hold on the market and should concentrate on catering to the niches of the market. There are internal problems also like bad services in restaurants which Wendy’s should improve with better training of employees. Focus should also b eon children which the firm doesn’t currently concentrate on. Wendy’s has to reemerge with a new image to be able to survive in such a competitive environment. Taking drastic measures within a short span of time is key to survival in such a technologically advanced, fast-paced market. References http://www.wendys.com/ Barney, J 1991, ‘Firm Resources and Sustained Competitive Advantage’, Journal of Management, vol.17, no. 1, pp. 99-120 Cooper, R and Kleinschmidt E.J 1986, ‘An Investigation into the New Product Process: Steps, Deficiencies, and Impact’,Journal of Product Innovation Management, vol. 3, no. 2, pp. 71-85 Dev, C & Don E. Schultz, D 2005, ‘Mix into the 21st Century’, Marketing Management vol.14, no.1. Flegal KM, Graubard B, Williamson, D and Gail, M 2005, ‘Excess deaths associated with underweight, overweight, and obesity’, Journal of the American Medical Association, vol.293, no.15, pp.1861–7. Gelder, S, ‘General strategies for global brands’. Accessed: 19 November 2007. Available:http://www.brandchannel.com/images/papers/GLOBALBRANDSTRATEGIES.pdfYou are viewing page 1 Guiltinan et al. 1996, ‘Marketing Management: Strategies and Programs’, McGraw Hill/Irwin 1996 Menon, A and Varadarajan, R 1992, ‘ A Model of Marketing Knowledge Use within Firms’, Journal of Marketing, vnl. 56, No. 4 , pp. 53-71 Porter, M 1985, ‘Competitive Advantage: Creating and sustaining superior Performance’, Free Press NY, Chapter 1, p.1-30 Schlosser, E 2004, ‘Fast Food Nation: The Dark Side of the All-American Meal’. News Service 2think. Accessed 18 November 2007. Available: http://www.2think.org/fastfood.shtml. SWOT Matrix Strengths Weaknesses Products Wendy’s has an established brand name in the local market. Human resource The human resource especially in the higher management is highly skilled Technology Wendy is highly advanced in technology. Desserts There is a wide variety of desserts Prices The prices of the products are a little higher Bad market analysis Previously Wendy’s has had businesses closing down Staff The staff at the restaurant level is not as friendly as the competitor’s. Little range of meals and children There is very little variety of products for children. Opportunities Threats Global markets Wendy’s has a huge opportunity open to there is potential for global expansion. Overtake the competition Since competition has been targeted for causing obesity, their market has lowered Decreasing market The overall market for fast food seems to be decreasing in the long-term future. Changing demand The consumers would in the future drift away from the fast foods and opt for healthier options TOWS MATRIX Strengths Weakness Products Wendy’s has an established brand name in the local market. Human resource The human resource especially in the higher management is highly skilled Technology Wendy is highly advanced in technology. Desserts There is a wide variety of desserts Prices The prices of the products are a little higher Bad market analysis Previously Wendy’s has had businesses closing down Staff The staff at the restaurant level is not as friendly as the competitor’s. Little range of meals and children There is very little variety of products for children. Opportunities SO strategies WO strategies Global markets Wendy’s has a huge opportunity open to there is potential for global expansion. Overtake the competition Since competition has been targeted for causing obesity, their market has lowered 1. introduce new products 2. use human resource for expansion 3. use technology for expansion into other markets 4. use dessert as competitive edge 1.Expand markets to avail economies of scale 2. through market analysis with the help of technology 3. train staff Threats ST strategies WT strategies Decreasing market The overall market for fast food seems to be decreasing in the long-term future. Changing demand The consumers would in the future drift away from the fast foods and opt for healthier options 1. focus on market niches 1.introduce healthier food options Read More