Question

INSTRUCTIONS

You will be performing an analysis of McDonald’s, Wendy’s or Burger King. Place the name on the line below. Using online and/or library resources, including Web sites on the fast food industry and your company’s Web site and annual report, fill out the following External Environment Worksheet for that company:

External Environment Worksheet    - _____________________________

MACROENVIRONMENT

Laws and regulations (5 Points)

What are some key laws and regulations under which this company and the fast food industry must operate?

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The economy (5 Points)

How does the state of the economy influence the sales of this company’s products?

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Technology (5 Points)

What new technologies strongly affect the company you have selected?

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Demographics (5 Points)

What changes in the population might affect the company’s customer base?

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Social Issues (5 Points)

What changes in society affect the market for your company’s food products?

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ORGANIZATION COMPETITIVE ENVIRONMENT

Suppliers (3 Points)

How does your company’s relationship with suppliers affect its profitability? Provide specifics related to the company.

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Competitors (3 Points)

What companies compete with the firm you have selected? Do they compete on price, on quality, or on other factors? Explain.

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New Entrants (3 Points)

Are new competitors to the company likely? possible? Give examples.

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Substitutes and Complements (3 Points)

Is there a threat of substitutes for the fast food industry’s existing products? Are there complementary products that suggest an opportunity for collaboration?

Substitutes:_________________________________________________________________________________________________________________________________________________________________________Complements:_______________________________________________________________________________________________________________________________________________________________________

Customers (3 Points)

What characteristics of the company’s customer base influence the company’s competitiveness?

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DISCUSSION QUESTIONS

1. What has the company done to adapt to its environment? (See At the boundaries, at the core Pg. 55-56.)

(5 Points)

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2. How does the company attempt to influence its environment? (See independent/cooperative strategies Pg. 57-58) (5 Points)     __________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________

Answer 1

What are some key laws and regulations under which this company and the fast food industry must operate?

There are many varying laws and regulations that Wendy’s is required to follow. One of which is the Federal Trade Commission’s laws regarding establish different franchise locations. The FTC requires Wendy’s to make extensive discloser to potential franchisees before the execution of a franchisee agreement. Wendy’s and its franchisees must comply with federal Fair Labor and Standards Act and the Americans with Disabilities Act. The ADA regulations require that all public accommodations and commercial facilities meet the federal requirements related to access and use by disabled persons. Two of the most important regulations that Wendy’s is required to maintain are the laws set forth by the Food and Drug Administration and the US Department of Agriculture. Both the FDA and USDA govern the manufacturing, packaging, distribution, and sale of all food and packaging products.

How does the state of the economy influence the sales of this company’s products?

The potential economic distributions could lead to higher unemployment. As the unemployment rate raises and the income of a global or national population decreases, the quick-service industry is viewed as a luxury purchase leading to a decline in sales as the consumer modifies their purchase behavior. Overall profitability could also be impacted in areas with multiple franchisee locations leading to a saturated market.

What new technologies strongly affect the company you have selected?

Wendy’s is reliant upon new technological advances that provide efficient supply chain management, point of sale, and various other procedures. As a quick-service restaurant, Wendy’s needs to maintain the newest technology that helps maintain an efficient and expedient customer order from start to finish. Should any of the technology experience service interruptions, failure, or experience fraudulent manipulation; delays in overall profitability would be affected and customer satisfaction would decrease. The ability to use the internet as a marketing tool offers a wide variety of platforms to engage consumers. Activity on the internet can come with risks, Wendy’s must guard their customer information from cyber threats that could lead to the release of protected information   

What changes in the population might affect the company’s customer base?

Each franchisee’s success is impacted by it’s location. One location that was successful twenty years ago may not be as successful in present day. This is in part to the population of the location. Population affects each franchisee location in different way such as when a location has a low population, they could have a low exposure resulting in poor sales. High populations result in increased exposure and increased competition. Geodemographics is one-way Wendy’s could decide for the placement of each location in a large population.

What changes in society affect the market for your company’s food products?

Societal shifts regarding the quick-service restaurant industry can positively or negatively impact Wendy’s. Consumers opinions and concern for antibiotic free food has lead Wendy’s to respond positively by raising antibiotic free meat and using sustainable farming practices. Consumer confidence grows, and Wendy’s can maintain a lead position in the quick-service restaurant industry. Any events involving Wendy’s, or its franchisees reported in the media, whether positive or negative; can significantly impact society’s opinion of the company.   

How does your company’s relationship with suppliers affect its profitability? Provide specifics related to the company.

Wendy’s must maintain an efficient supply chain management to avoid overstock/understock of all necessary products. Wendy’s and its franchisees are members of Quality Supply Chain Co-op, Inc. Quality Supply Chain Co-Op, Inc. is an independent cooperative that works with leading suppliers to provide products and services. QSCC supply chain management facilitates the continuity of supply and provides consolidated purchasing efficiencies while monitoring and seeking to minimize possible obsolete inventory throughout the Wendy’s supply chain in the United States and Canada.

What companies compete with the firm you have selected? Do they compete on price, on quality, or on other factors? Explain.

Wendy’s is in constant competition with other quick-service restaurants. The quick-service industry is highly competitive and includes well-established competitors like McDonald’s and Burger King. They primarily compete through quality, variety, convenience, price, and value perception of food products. Wendy’s stands out amongst the quick-service industry through the use of it’s fresh, never frozen meat and their Image Activiation Program. The Image Activation program includes innovation exterior and interior design as well as emphasizing on the selection and performance of restaurant employees teaching them to provide friendly customer service while engaging the customers.

Are new competitors to the company likely? possible? Give examples.

Wendy’s is in constant competition with other quick-service industries such as locally-owned restaurants. They compete against new companies including delis, in-store cafes offered at major grocery store chains as well as convenience stores. Wendy’s must compete not only with the quick-service food industry demands, but also the demand of the consumer as societal trends shifts. Mail home delivery services are offering consumers the convenience of fresh food with recipe included encouraging healthier food options.

Is there a threat of substitutes for the fast food industry’s existing products? Are there complementary products that suggest an opportunity for collaboration?

Substitutes: Wendy’s threat of substitute products can arise from the competition of grocery mail home delivery services such as Blue Apron, Green Chef and more. Substitutes can also occur in other quick-service restaurant industries represented through increased value meal options or better-quality ingredients.

Complements: Wendy’s can utilize new forms of quick-service meal delivery through the use of applications like GrubHub. GrubHub still offers even more convenience to the consumer by allowing the consumer to stay home and have the meal delivered to them. This would help Wendy’s compete against new mail home delivery companies like Blue Apron.

What characteristics of the company’s customer base influence the company’s competitiveness?

Wendy’s customer base influences the company’s competitiveness through the demand for low cost options. As the economy continues to recover from the 2008 recession, consumers are beginning the feel confident in their purchase decisions however, consumers of the quick-service industry understand the importance of making their dollar go far and thus demand lower cost options. Wendy’s must constantly adapt its menu selections to the changing needs of it’s customer base, besides keeping low cost options, Wendy’s recognizes the need to offer a variety of food options that can appeal to the societal changes in diet.   

1. What has the company done to adapt to its environment? (See At the boundaries, at the core Pg. 55-56.)

Wendy’s understands that is must allow flexibility to it’s franchisees as Wendy’s cannot maintain authoritative control over all locations. They must decentralize decision making power to lower level employees. Franchisee owners then allow decision making power to be distributed to managers underneath them as well, noting they are following the appropriate culture and values put in place by the organization. Wendy’s chooses to adapt to it’s environment by listening the needs and desires of it’s customer base. They maintain flexibility as they create new menu items, prices, and change processes that may help run the overall company as well as each individual location.

2. How does the company attempt to influence its environment? (See independent/cooperative strategies Pg. 57-58) (5 Points)    

Wendy’s can influence its environment through the competitive aggression and public relations. The marketing slogan that Wendy’s burger is fresh and never frozen has been one method they use to gain a competitive edge against larger scale quick-service restaurant chains. They also can utilize that slogan when promoting their burgers through social media campaigns and advertising which appeals to the health-conscious consumer. Wendy’s use of the Quality Supply Chain Co-op is another example of how they influence their environment. Utilizing the QSCC allows Wendy’s the opportunity to negotiate a better supply chain management that will supply inventory in an efficient and timely manner, thus lowering cost to the company and consumer.