Internal analysis - Case Study Example

Internal analysis Internal Assessment The vision of the company is enhancing the perception people have about fast food through a mission of serving “food with integrity”. The company utilizes sustainable sourcing of farming practices in order to provide inputs for serving good quality food. The mission and the vision have served in attracting the investors while also maintaining the customer base; consequently, serving to strengthen the distinctive competencies. Adoption of farming methods that guarantees great taste, value and nutrition, make this resource valuable.

Exhibit 2 shows that the firm derives distinctive competencies from this since the resource is rare and most of the competitors have not ventured into it.As indicated in exhibit 2, marketing is valuable since the company has been able to cut down on its advertising spending through their strategies. The loyalty programs, used by the company, are common among the competing firms in the industry; hence putting the resource as a source competitive parity. The calculation shows that the company witnesses declining values for liquidity ratios and profitability ratios.

This signpost the pitiable margin of safety the company has in settling its debt; consequently, focusing a brighter which jolts potential investors. The price increment had detrimental effects on the company’s profitability and reputation (ability to attract customers and investors) as portrayed by the ratios in exhibit 3. The company’s greatest weakness is the increase in marketing cost and the undue increase in product prices that increases its operating expenses without a corresponding increment in revenues and equity as explicated by the ratios in exhibit 3.

Exhibit 2: VRIO analysisValue ChainActivitiesSpecific AttributesAlong the Value ChainVRIW/S/DC/SDCOCompetitive Implication:Likely to haveMarketing Loyalty brandsYesNoYesStrengthYesCompetitive ParityProduct innovation Increased menu prices YesNoYesStrength YesCompetitive advantage Financial resources Rapid revenue growthYesYesYesSustainable Distinctive CompetenceYesSustainable Competitive AdvantageSustainable Farming methodsYesYes NoDistinctive competenceYesCompetitive advantageindependently owned and operated distribution centres Local farms and use organic agricultureYesYesYes Sustainable distinctive competenceYesSustainable competitive advantage Sales Fast and reliable delivery Yes NoYesSustainable DistinctiveCompetenceTemporary competitive advantage Figure showing VRIO analysis of the companyThe value chain activities analyzed in VRIO table above show the ability of the company to take up on investment activities while also withstanding competition in the market.

Its act of increasing product prices affects its turnover and profitability. Price reduction and monitoring of its inventory level would help resolve the issue and attain a competitive advantage. Financial analysis Exhibit 3Financial Ratio AnalysisProfitability Ratio 20112010Return on sales15.45%15.68%Return on equity 20.58%22.07%Liquidity RatiosCurrent Ratio3.183.30Acid test(quick ratio)3.133.24Shareholders ratioReturn on assets24.6%25.66%Leverage RatioDebt to equity ratio36.50%38.3%Conclusion The company generates most of its profit from shareholders investments. The 1.49% decrease in ROE between 2010 and 2011 indicates that the company is striving to diversify its investment and revenue sources.

ROS declined by 0.23% between the period implying that its efficiency is plummeting and its ability to make profits is declining. Moreover, the decline in quick ratio values indicates that the company’s resource utilization is declining hence its compromising its ability to meet financial obligations as they fall due. This can be attributed to the increment in product prices and the company’s debilitated capability to compete in the industry. Despite the increase in income, the company is weakening and might soon be incapable of drawing investors and endure competition.

It needs to reconsider its financial policies and management approaches to gain strength.