SWOT Analysis of Arbys Restaurant Group - Case Study Example

SWOT ANALYSIS As an innovation strategy, different food companies that have penetrated the market, have come up with new products that attract a certain percentage of the population hence creating a form of loyalty to the product they offer. Arby’s restaurant Group, Inc. is one of the companies that has adopted the strategy and as a result, they have come up with new food products meant to fill a niche that has been created by other companies who have penetrated the fast food industry. Arby’s restaurant Group, Inc. is a privately held company which was started in July 23rd in the year 1964. The first restaurant to be opened that bared the Arby’s restaurant Group, Inc. name was seen in Boardman, Ohio. To date, there have been several changes in the company resulting from the expansion of the company into other states and the diversification of the products offered to the customers. The founders of the companies were Forrest and Leroy Raffel, who sought to tap into the fast food industry and eradicate the monotonicity in the industry which tended to classify hamburgers as the only fast food products. In general, the quest for innovation and addition of other fast food products guaranteed the success of the company which led to the company establishing itself as a worthy competitor in the fast food industry. The company’s diverse products such as the quality meat products and sandwiches have had a positive impact in the industry drawing the interests of many prospective customers. Other attributes such as the organization culture have influenced the positive existence of the company. According to Arby’s Ip Holder Trust (2014), the company ensures that it offers a work environment which is graced by respect and innovation. Other company attributes which encourage the input of other stakeholders in the company have had a positive influence on the customers creating a good image which has changed the perception around other companies. The company has managed to create loyalty with its customers which has also influenced the display of goodwill from other stakeholders in the food industry. The company gives opportunities to everyone who is willing to engage with the company and as a result, the company has broadened its geographical area, infiltrating states which have proven to be impenetrable to other franchises. The company’s strategies are mainly geared towards cost cutting which have generally had an overall impact on the expenses incurred by the company. To support the above assertion (Lafontaine, 1995) states that the company encourages private investors to open franchises which in turn increase the number of locations owned by the company. The company’s management team is dynamic and also inclusive of both genders. The company’s Chief Executive Officer is Mr. Paul Brown who previously held the position of the President of Brands and Commercial Services and Executive Vice president at the Hilton Worldwide Holdings Inc. His tenure at the company lasted from November 13th 2008 to November 1st 2012. Mr. George M. Condos is the President and Chief Operating officer of the company and has been serving in the company since January 5th 2012. He previously served as the President of Friendly Ice Cream Corp before his entry in the company since January 8th 2007. Mr. John Dasis is the third in the management and he serves as the Chief Financial Officer, Arby’s Restaurant Group, Inc. Mr. Dasis started his carrier with the company and has risen in ranks to his present position since his entry into the company in 1986 as the corporate controller. Mr. Rob Lynch is the Chief Marketing Officer and Brand President since October 1st 2013. Before his hiring he previously served as the Vice President of Brand Marketing at Taco Bell. Ms. Karen Shalledy is the Senior Vice President of Franchise Services, and like Mr. Dasis, she rose up the ranks from an accounting supervisor to her present position. She has been working with the company for the past 27 years. (BloombergBusinessWeek, 2014) FINANCIAL INFORMATION: 2009 2010 2011 2012 2013 Total Revenue 3.6billion 3.2billion 3.391 3.2billion 3.3billion Domestic 2.4billion 1.3billion 1.26billion 1.4billion 2.32billion International 1.1billion 0.9billion 1.13billion 0.8billion 0.98billion Intl as % of Total 42.3% 40.9% 47.2% 36.4% 29.7% Total Net Income 12,978,354 13,745,336 13,940.000 13,062,607 14,878,327 Intl as % of Total (If reported) 21% 24% 21% 24% 21% In order to respond to the recession experienced during the 2008-2009 financial calendar, Arby’s restaurant Group adopted a number of strategies meant to reduce the expenses. According to (Egan, 2014), during the recession period, major markets including the United States market were hugely affected. Therefore, the trend meant that the company’s sales reduced considerably which strained the resources of the company. According to a report tabled in 2010 detailing the effects of the global recession, it emerged that demand was highly affected and as a result many companies were unable to cater for the numerous expenses they had previously catered for before the recession. Arby’s restaurant Group on the other hand resulted to closing down part of its numerous franchise locations which tended to strain the company’s resources in terms of financial demands and labor utilization. Most companies in the period resulted to closing down subsidiaries that did not meet a considerable percentage of the total franchise’s revenues. Arby’s restaurant Group changed its marketing strategy from what was previously a product oriented approach to a customer oriented approach which promised more sales. It is notable that due to the recession, Arby’s stopped running as an individual business after the merger with Wendy’s. The deal cost a total of $2.3 billion, with the overhaul conducted by Nelson Peltz. The merger meant that both companies shared the losses equally and as a result the overall losses incurred were generally minimal compared to the period when the company ran as a single business. Employees were also distributed between the locations which balanced the overall costs incurred by a single business location. The strategy meant that the Wendy/Arby’s merger resulted to a decrease in the total losses incurred collectively inclusive of the expenses accounted for. In North America, the sales in the Wendy/Arby’s group Inc. locations reduced considerably by 8.5%. Due to this trend, the company resulted to blaming the competitors due to the strategies that they adopted after the end of the global recession. In the company’s defense, competitors had also resulted to adopting promotions to market their products a strategy that Wendy/Arby’s group Inc. did not adopt due to the effects of the recession. The company resulted to adopting retaliatory approaches to combat the effects of promotion and discounting presented by their competitors. The first strategy saw the company introduce a new cutting edge beef sandwich which was the only product in the fast food market. The new innovation was followed by the introduction of new products mainly used as complementary products which improved the quality of the previously existing products. As a result, demand shifted and as illustrated above the company made considerable profits in the first quarter of 2011. The company relied on the preferences of the customers to increase the total demand anticipated by the company. Instead of competing in reference to the new pricing criteria, the company resolved to edge out competition resulting from commodities produced by competitors and therefore adopted originality which captured many customers’ curiosity. In general, in relation to the merger, it was trivial that the company was open to change a strategy which enabled the company to regain its position in the industry. 4-QUADRANT SWOT Strengths •Roast Beef as a one of a kind fast food option Unique Product Offering •Healthier options in the Market Fresh sandwich line •Offers quality food fast and friendly service •Numerous resources •Economies of scale Weaknesses •High Product Cost •Slow customer order fulfillment •Lack of Value Priced Menu •Numerous losses •poor presence in the online platform Opportunities •Coupons •In-store specials •Value Menu •Limited time only special sandwiches •Product innovations Threats •Competition is a single threat •Government policies •Wages •Personnel •Currency fluctuations Strengths • Unique Product Offering- Arby’s range of products as illustrated above vary. The company has been serving meat crafted on sandwiches a culture which has established the company as a market leader in the United States and Canada. Some of the products they offer include the Arby’s medium roast beef sandwich and the beef-n-Cheddar sandwich, products which have remained in themenu of the company. Unlike other companies, the company has specialized in the same product for more than 50 years which has increased the confidence and reliability on the products they offer by current and prospective customers. In 2006, the company became the first fast food franchise to announce that they did not use artificial additives in their products. •Healthier options in the Market Fresh sandwich line-as illustrated above, the company in 2006 announced that the production of all their products did not involve the use of artificial additives. In relation to the above assertion, it is trivial that the company offers healthier products in relation to what competitors in the same market provide. The company provides numerous options for its customers in reference to their individual needs and preferences. The menu offered is diverse and it is considerate of vegetarians by offering drinks and desserts. •Offers quality food fast and friendly service-As illustrated by the company in the company’s website, the company is based on the virtues of respect and quality delivery. In relation to the company’s agenda, the company does not discriminate, a quality that is expressed in the hiring policy of the company. In reference to some reviews posted online and its classification as a leading company in major markets, it is evident that the company offers the best services in the fast food industry. •Numerous resources- The resources that the Arby’s company has at its disposal are numerous. The above assertion can be verified by the fact that the company managed to stay relevant in the market after the global recession. The company has a total of about 3,688 restaurants in the United States and Canada. Some of the outlets which are corporate owned have cutting edge Pinnacle designs with cathedral ceilings which illustrates the company’s muscle in investment. In relation to the overall revenue generated, the company generates revenues in excess of 3 billion. (Jakle, 1999) •Economies of scale-Economies of scale are those factors which accrue a firm after an increase in its size. Arby’s company as illustrated above is a big company with about 3,688 restaurants. According to (Gagnier, 2000), human needs are habitual and therefore the first purchase of any Arby’s product creates demand necessitated by the large numbers of outlets. Weaknesses •High Product Cost- Due to the nature of the products provided by Arby’s company, the overall cost incurred in their production is relatively high which forces the company to increase individual product prices to cater for the high production cost. •Slow customer order fulfillment-As illustrated above, the production of the company’s products is uniquely and carefully executed. With the growing demand in Arby’s products, the company at times has been unable to cater for the large number of customers due to the complexity of the product’s production process. •Lack of Value Priced Menu-Unlike other fast food companies, Arby’s restaurants have been unable to reduce the value of their products due to the high cost of production incurred. As a result, some customers who would have preferred to consume Arby’s products are prevented from doing so by the high prices. •Numerous losses – During the financial year 2008-2009, the company suffered losses amounting to $417.3 million. In the stock markets, Arby’s share value dropped by 1.6%. •Poor presence in the online platform-The online market in the present world of communication and advertising through social media has emerged as a vital avenue. Arby’s company has been left behind, a factor which has proven detrimental towards the improvement of sales. In order to keep up with other companies the company should come up with interactive platforms where delivery and online purchase can be made to ease the number of customers who wait for the company’s products in the restaurants, a strategy which can reduce customer frustration. Opportunities •Coupons-as a strategy to increase the number of customers who frequent the restaurants, the company ought to offer customers coupons which can be redeemed for discounts or individual products. The trend has been widely adopted by other companies. •In-store specials-to increase sales, the company ought to provide in store specials meant to encourage the customers to frequent the restaurants. Customers are always motivated by products which tend to create a form of relief in relation to the value they are associated to. For example, most customers would prefer to buy costly products in the event that they realize that the prices of the product they wish to acquire have been subsidized. Therefore, in the event that Arby’s began providing in-store specials, the customer would frequent the restaurant due to the overall importance attached to the product offered. •Value Menu-The Company ought to reduce the costs incurred to ensure that individual prices reflected on the menu are pocket friendly to all irrespective of the target population’s preferences. Most customers consider the price of individual products before evaluating the worth of the product in question. The company should therefore ensure that they strike a balance between the product value and the price of the product to ensure that the customers are encourages to purchase the products that they offer. •Limited time only special sandwiches-The Company ought to make changes in the production process and ensure that they provide products that are customer centered rather than putting all products under the same processes. As illustrated above, some customers are always hesitant to approach Arby’s restaurants due to the slow pace of the personnel and the long hours spent waiting for individual orders. •Product innovations-As illustrated above, in order for the company to cater for the diverse needs of all its customers, the company ought to be innovative and come up with products which are pocket friendly, easy to prepare and ensure they also retain the brand of the company. Threats •Competition is a single threat-Companies such as McDonalds, Subway and Taco Bell to name a few threatening the existence of Arby’s due to the discounts and promotions they offer which affect the continuity in the purchase of their fast food products. •Government policies-Discriminative government policies which increase the cost of production discourage customers from purchasing products since the cost incurred is transferred to the customers. •Wages-Due to the minimum wage bills which have been put in place in the United States of America, employers have been forced to cater for an increased budget in expenses. An increase in expenses reduces the total profits. •Currency fluctuations-A fluctuation in the value of a currency has a direct effect on the profits incurred by the company. In the event that the company acquires raw materials when the value of the currency is high and the value reduces when the company is selling the finished products, the price of the products is expected to be high to cater for the deficit incurred. •Personnel-Some companies do not have control over the quality of education that most employees are exposed to through their training processes and therefore companies succumb to the presence of employees who are not qualified, which affects service delivery and management. SUMMARY AND YOUR PREDICTIONS In the fourth quarter of the 2009-2010 financial calendar, Wendy/Arby’s chain of business posted a loss in the financial reports of the year. The company cited competition from other competitors which resulted to the change in preferences by the loyal customers. As indicated above, the global recession forced many companies out of the market due to the decreased demand and other market factors. Once the global recession dwindled, the existing companies resulted to adopting new strategies meant to revamp the company’s operations therefore changing the previously used organizational cultures. As Wendy/Arby’s company sought to increase its overall profits, other competing companies resulted to offering discounts and subsidies to customers which reduced the overall sales posted by Wendy/Arby’s. According to (Wendy’s International, 2011), the company has been making losses which tends to indicate that the company’s performance is expected to dwindle over the years. In 2008 the company units fell by 5.8%, by 8.2% in 2009 and 11.6% in 2010 (Private Company Financial Intelligence, 2014).Irrespective of the losses that have been incurred by the company, my predictions illustrate that the company will manage to make profits in the coming financial years. The company’s strength including the huge financial backing it possesses only reiterates the fact that the company cannot be written off. Wendy/Arby’s Group Inc. has been in existence for 50 years, a fact that illustrate the company’s abilities to handle various market complexities. According to (Yahoo Finance, 2014), the company has managed to retain average sales of 35% in the international market which reiterates the fact that the company can maintain its market share numbers irrespective of the losses it has made to date. Arby’s marketing strategies and economies of scale favor its existence in the market. References Arby’s Ip Holder Trust, (2014). Who we are and what we do. Atlanta. Print Bloomberg BusinessWeek, (2014). Company Overview of Arby’s Restaurant Group, Inc. McGraw Hill Financial. Print Bloomberg BusinessWeek, (2014). Company Overview: Key Executives. McGraw Hill Financial. Retrieved from http://investing.busineweek/research/stocks/private/snapshot.asp?privcapld=24225822. Internet Resource Egan, Matt. (2014). 2008:Worse than the Great Depression?CNN Money, retrieved from http://money.cnn.com/2014/08/27/news/economy/bernake-great-depression/. Internet Resource Gagnier, Regenia. (2000). The Insatiability of human wants: Economics and aesthetics in market society. Chicago: University of Chicago Press. Jakle, J. A., & Sculle, K.A. (1999). Fast food: Roadside restaurants in the automobile age. Baltimore, Md: Johns Hopkins University Press. Lafontaine, F & National Bureau of Economic Research. (1995). Pricing decisions in franchised chains. A look at the restaurant and fast food industry. Cambridge, MA: National Bureau of Economic Research. Private Company Financial Intelligence, (2014). Arby’s Restaurant Group, Inc.: Arby’sRestaurant Financials and Key Performance Indicators. Print Wendy’s International, (2011). Wendy’s/Arby’s Group Reports First Quarter 2011 Results. Dublin. Print Yahoo Finance, (2014). The Wendy’s Company: Income Statement. Retrieved from http://www.finance.yahoo.com/q/is?s=WEN. Internet Resource. Read More