Professional Documents
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Management 182
Capacity Utilization
Effective and efficient operations results in
lower burger or sandwich assembly costs, which
in turn results in higher profits margins
Capacity Utilization is important to spread high
fixed costs over greater number of products and
services produced
Dominant Economic
Characteristics
Profit Margin (1998-2002)
Moderate profit margins, 8.0 - 8.4%
Intense competition and price wars reduce profit
margins
Efficiency and cost reduction is key in sustained
profit margin
Competition Analysis
Competitive Analysis
Key findings
The fast food industry is very strong with many sellers
and customers. Many competitive forces effect the
already established companies, which keep the prices
down and the quality of food up. All of this will keep
the big players in the game and will make it very
difficult for the new entrants to come in and take over.
Driving Forces
Driving Forces
Food Service
Top Three Analysis
McDonalds (cont.)
Number of Restaurants
13,099
Number of Employees
1,500,000
Exchange
NYSE, CSE
Market Capitalization
37,918,000,000
Top Three Analysis
Burger King
(Part of Diageo Company)
Number of Restaurants
8,248
Number of Employees
360,000
Exchange
NYSE
Market Capitalization
43,789,000,000
Top Three Analysis
Taco Bell
(Part of Tricon Global Restaurants)
Number of Restaurants
6,444
Number of Employees
320,000
Exchange
NYSE
Market Capitalization
9,370,000,000
Competitor Analysis
Competitor Analysis
McDonalds
Growth
In 2001, McDonalds took actions to streamline operations in an effort to
realize sales growth through improved operations and customer service.
McDonalds plans to add up to 1,400 restaurants in 2002.
Geographic coverage
McDonald's serves 46 million people every day in about 30,000
restaurants in 121 countries.
Share of industry revenues
Market share: 34.7%
2001 Sales revenues: $14.87 billion
Competitor Analysis
Strategic Group Mapping
Burger King
Growth
In 2001, Burger King announced it is launching 14 new and improved
menu items.
Geographic coverage
Burger King currently operates 11,435 restaurants in 57 countries and
territories worldwide.
Share of industry revenues
Market share: 15.8%
2001 Sales revenues: $8.5 billion
Competitor Analysis
Strategic Group Mapping
Taco Bell
Growth
Taco Bell reported an increase in sales of 12% from the previous year in
December 2001.
Taco Bell dominated the Mexican QSR Sales with a 64% share as of year
end 2001.
Geographic coverage
Taco Bell operates 239 of its total 6,683 restaurants in 14 countries
worldwide.
Share of industry revenues
Market share: 9.6%
2001 Sales revenues: $4.8 billion
Competitor Analysis
Conclusions
McDonalds
Currently, McDonalds strategy is working well for them.
Being the market leader, they are under no pressure to
change the path they are currently on.
Burger King
Burger King has recently made some changes in
management and marketing that have hurt their operating
results.
Competitor Analysis
Competitors Next Moves
Taco Bell
In order to boost sales, Taco Bells parent company, Tricon
Global Restaurants, has been aggressively co-branding its
products.
Tricon Global consists of Taco Bell, KFC, Pizza Hut, and
has recently acquired Long John Silvers and A&W
Restaurants.
With the combined strength of the 5 companies, Tricon is
focusing its growth on international expansion.
Key Success Factors
Key Success Factors
The Key Success Factors of Fast-Food
Restaurant Industry are:
Convenient Locations
Clever Advertisement
Consistency
Food Quality
Food Innovation
Cost Control
Favorable Image & Good Reputation
Fast Services
Key Success Factors
Convenient Locations
Fast-food restaurants must be easily visible and
accessible for quick entry by the customers. An
establishment which is on the wrong side of the
street and does not take advantage of traffic flow
could be doomed to failure unless the unit is a well
established chain.
As competition gets tougher, the fast-food
restaurants strive to make their outlets more
convenient.
Key Success Factors
Convenient Locations
There are fast-food restaurants in shopping malls,
in hospitals, on military bases, and on college
campus, airports etc.
Some fast-food restaurants are operated in
convenience stores; therefore, they can be
accessed for quick entry by customers. For
example, McDonalds are operated in Wal-Mart.
Key Success Factors
Clever Advertisement
Advertising is an important element of the success
of fast-food restaurant industry. It can induce
customers to patronize the fast-food restaurant in
order to increase sales. For example:
The 1990 Super Bowl was a key advertisement
year for McDonald's. McDonalds promised to cut
prices of its bacon, lettuce, and tomato sandwiches
if the 49ers won or cut the price of the BigMac if
the Denver Bronco's won.
Key Success Factors
Clever Advertisement
Wendy's earned national recognition with their
"Where's the Beef?" campaign.
Burger King has used memorable campaign such
as Have it your way and We do it like youd do
it.
Key Success Factors
Consistency
Consistency of food is particularly important to
fast-food patrons. It is a quality that attracts many
customers.
According to National Restaurant Association,
92.2 % of the respondents strongly agreed or
agreed that they expect consistency from one visit
to the next when they patronize fast-food
restaurants. Therefore, the one of the key to a
successful franchise of fast-food restaurant chains
is to offer exactly the same product or service at
numerous locations.
Key Success Factors
Food Quality
Many fast-food restaurants enact stricter quality
control guidelines for their food. It is because
stricter quality control can ensure food safety.
For example, McDonalds keeps tight control over
its suppliers shipping frozen prepattied beef to its
restaurants and drawing strict specifications for its
potatoes.
Key Success Factors
Food Innovation
The fast-food restaurant industry requires a
product innovation capability because of the
changing tastes of consumers. In order to succeed
today, fast-food restaurants must cater the tastes of
consumers.
Many fast-food restaurants offers signature items,
and diversified menus in order to meet customers
needs. Many new products are always under
development in food lab kitchen for evaluation in
selected markets.
Key Success Factors
Food Innovation
For example, McDonalds menu is often enhanced
with promotional products to add variety on
limited time basis. The menus are constantly
examined around the world in the light of
changing customers taste, as well as local
customs. In U.S., customers now have more
choices in McDonalds, including Fruit N Yogurt
Parfaits, McSalad Shakers, and Breakfast Bagel
sandwiches.
Key Success Factors
Cost Control
Cost control is important to the success of fast-
food restaurants because their revenues are based
on smaller average checks compared to the
cafeterias, theme restaurants, and fine-dining
restaurants.
Low cost enables fast-food restaurants to make
higher profits and compete with rivals. For
example, minimum wage labor which has been
traditional routes this phase of fast-food restaurant
industry has taken to build up profit margins.
Key Success Factors
Favorable Image & Good Reputation
Fast-food restaurant which has a favorable image
and good reputation can bring confidence to the
customers.
For example, McDonalds is one of the most
powerful brands in the world. It has earned the
trust and confidence of people the world over
because of its favorable image and good
reputation. McDonalds is known as a great place
for kids and families; for convenient, hand-held
meals; for World Famous Fries and Big Macs; and
for outstanding value.
Key Success Factors
Fast Services
Accurate filling customer orders, and short
delivery times are important to satisfy customers
immediate needs of the fresh food.
Many fast-food restaurants have drive-thru service
because many people tend to be pressed for time.
Therefore, fast-food restaurants should continue
focus on improving the speed of drive-thru
service.
Key Success Factors
Fast Services
For example, McDonalds enhance the drive-thru
experience by serving two cars at a time. In some
locations, McDonalds are using double-lane
drive-thrus. In other locations, the employees of
McDonalds use remote order-taking devices to
take order for the drive-thru customers during
busy periods.
Industry Prospects and
Overall Attractiveness
Industry Prospects and Overall
Attractiveness