Value Chain Analysis Service Marketing and Sales Outbound Logistics Operations Inbound Logistics Customer call center for complaints, service cards, communications Advertising, brand marketing, cupons, store decoration, new item creation, media promotions Order processing, drive through window, shipping Food creation, cooking, maintenance, cleanliness and hygiene controls, communications infrastructure and training Storage of raw materials, inspection Replacement parts for equipment, service contractors Advertising- Radio, TV, newspaper & internet Restaurant supplies, computer services, waste disposal and POS operations Food, paper goods, real estate, cooking equipment, energy, eRestaraunt services & inventory applications Transportation, local sourcing for fresh vegetables and salads, site maintenance contractors, restaurant supplies Procurement Service manuals, training videos, customer feedback systems Market research, new product introduction, sales & forecasting systems Back kitchen monitors, order timing, better equipment for drive through, remote call center for drive-thru ordering Design of terminals, design of procedures, quality control procedures, wireless thermostat monitoring & control, card payment terminals Design of ordering/scheduling software, potential JIT delivery system for goods Technology Development Recruiting, training, development Human Recourses Financing, legal support, general management, accounting, quality control Firm Infrastructure The Value Chain
What is the Key Component?
The Value Net WENDYS Suppliers Meat Suppliers Veggie Suppliers Restaurant Supplies Distributors Equipment Manufacturers Customers Customers eating at fast food restaraunts Families Companies Complementors Coca Cola Nestle Hinez Hasbro Movie Studios Government Regulators Competitors McDonald’s Burger King YUM Brands (-) (-) (+) (+)
Value Analysis Company Key Activities: Outbound Logistics Business Design Elements: Brands/ Customer Selection Suppliers Meat Suppliers Veggie Suppliers Restaurant Supplies Distributors Equipment Manufacturers Complementors Coca Cola Nestle Hinez Hasbro Movie Studios Government Regulators Competitors McDonald’s Burger King YUM Brands Customers Customers eating at fast food restaurants Families Companies
Forces SUBSTITUTES RIVALRY SUPPLIER POWER COMPLEMENTOR POWER CUSTOMER POWER NEW ENTRANTS THREAT OF NEW COMPETITORS
Forces: Threat of New Competitors RATING
Scale Capital required- This is clearly an important factor, as Wendy’s needs to maintain strong economies of scale. Efficiency production and cost reduction are crucial for Wendy’s competitive strategy.
Technology, Patents- This is another vital factor for Wendy’s as Wendy’s food preparation is unique from other competitors
Customer loyalty, branding- Customer loyalty will help Wendy’s retain a customer base and fend off competition.
Raw Materials- Wendy’s needs to secure the most cost-effective raw materials in order to maintain efficiencies and remain competitive.
Market Saturation- This factor may serve Wendy’s well as the market for fast food is clearly saturated, thereby increasing the barriers to entry.
Number, Quality, Availability- Wendy’s clearly has many substitutes in it’s industry
Price-Performance- Wendy’s 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 SUBSTITUTES
Forces: Suppliers, Rivalry RATING
Number of Competitors- Wendy’s has formidable competition
Equality- Wendy’s 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 Wendy’s as Yum brands (Pizza Hut) and McDonald’s (Boston Market) continue their M & A activities *UPDATE*- Wendy’s has merged with Arby’s .
Number, Size, Concentration- Plenty of suppliers. Wendy’s has plenty of options to switch from one supplier to another
Raw materials differentiation- This may be important for Wendy’s as the differentiation of supplies may help Wendy’s maintain a differentiated product line.
Forces: Customer, Complementor Power RATING
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, Wendy’s needs to always maintain a certain level of differentiation to avoid increases complementor power.
National Diversity- A nationally diverse market makes it difficult for Wendy’s to maintain a uniform strategy. It will need to adopt different strategies to help compete with regional and local fast food chains.
Number, size, concentration- Customer concentration in a certain market segment will increase competitive pressures on Wendy’s.
Information- Customers are always smart shoppers, they always know what they are looking for. They are also well aware of pricing differences.
Differentiation- Wendy’s needs to differentiate its products to accommodate customers’ different tastes and preferences.
Customer Loyalty- This is crucial for Wendy’s as customer retention via differentiated product lines and competitive pricing will boost Wendy’s market position
Customer Value Rating 3% 1.03 = 55% x 1.01 + 45% x 1.05 Yum Brands -13% 0.87 = 55% X 0.85 + 45% x .90 Burger King 3% 1.03 = 55% x 1.07 + 45% x .99 McDonalds 14% 1.14 = 55% x 1.14 + 45% x 1.13 Wendy’s (Disadvantage) (wtd ave) Weight Ratio Weight Ratio Firm % Advantage Rating Quality Price Satisfaction Customer Value
Political & Socio-Cultural Trends
Player Mapping Analysis
Issue Mapping Analysis
Issue Saliency Analysis
Player Mapping Analysis
Life Cycle Analysis
Trajectory Mapping Analysis
Integration-Responsiveness Grid Analysis
International Evolution Analysis
Economic & Demographic Trends
Industry & Alliance Evolution Analyses
Strategic Inflection Point Analysis
Company Suppliers Competitors Complementors Customers
Profit Zone Analysis
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 Wendy’s 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
Single people under age 34
families with dependent children
working people under tight budget
Customer Selection Case Dimension
Profit Zone Analysis, continued
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
Value Capture Case Dimension
Profit Zone Analysis, continued
Offer fresh, high quality ingredients for hamburgers
Utmost customer service and satisfaction
Increased efficiency and operational excellence
Innovation Leadership with respect to hamburgers
Control of costs & Improving Operational efficiencies
Product development lead
Environmental and social responsibility
Strategic Levers Case Dimension 14X 7 .60 28% 9% Wendy’s 20X 7 .76 30% 12% Yum Brands 23X 8 .65 36% 14% Burger King 30X 9 .68 40% 18% McDonald’s Market Value/ Sales Strategic Lever Rating Asset Effeciency Profit Growth Return on Sales Business Design Outcomes
Stable industry, clear boundaries
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)
Potential use of internet for order-ahead (JIT delivery)
Increasingly sophisticated SCM software to cut costs
Otherwise technology is relatively stable (Specific Stage)
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 Company- Offers corporate social performance and political activities Suppliers (Policy Makers) FDA Congress Customers (Social Actors) Activists Community Groups (Political) Complementors Pro-Business Legislators Lobyists (Political) Competitors LA Government Supersize Me (-) (-) (+) (+) Corporate Political Advantage Process Social Legitimacy Process
Political & S/C Trends, Cont.
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 Regional/ Boutique stores Inter/Intra group mergers Government Action (Los Angeles) More upscale “boutique” stores Consumer concerns about nutritional data Mass Customization Commoditization Global Expansion