Feasibility Analysis Report on Mr. Chip Fast-Food Company

This feasibility report addresses the issues of cost, effectiveness and ease of implementation of a new business strategy for Mr. Chip, a fast food company in Canada, to grow its business and attract more customers.

Running head: REPORT
Feasibility Analysis Report on the Fast-Food Company, Mr. Chip
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Executive summary
Mr. Chip, a fast food company in Canada, has been facing a challenge from the fast
food giant McDonald’s as the number of customers is decreasing rapidly. Lack of
product variants, poor quality in taste and freshness and higher price are the main
reasons for its declining market share. This feasibility report addresses the issues of
cost, effectiveness and ease of implementation of a new business strategy, which must
be undertaken by the company to grow its business.
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Table of Contents
1.0 Introduction..................................................................................................................3
2.0 Discussion...................................................................................................................3
2.1 Potential business strategy for improving company profile.....................................3
2.2 Cost analysis............................................................................................................4
2.3 Effectiveness............................................................................................................6
2.4 Ease of implementation...........................................................................................6
3.0 Conclusion...................................................................................................................7
References.........................................................................................................................8
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1.0 Introduction
Mr. Chip, a fast food company in Canada is undergoing challenges of losing the
customers to McDonald’s. The impact is quite significant for the survival as well as
growth of Mr. Chip. Thus, in the perspective of the Head of the company, it is essential
to carry out an analysis of a business strategy that could help the company to overcome
this challenge. This feasibility report aims to provide an overview about the business
strategy for Mr. Chip to enhance the company profile and attract more customers by
highlighting the cost aspect, effectiveness and ease of implementation of the strategy.
The report will commence with the potential business strategy for Mr. Chip, followed by
the financial analysis, effectiveness of the strengths and weakness of the company and
ease of implementation in terms of resources and capabilities of Mr. Chip.
2.0 Discussion
2.1 Potential business strategy for improving company profile
McDonald’s is one of the largest fast food companies in the world. The company
generated almost 7.67 billion USD revenue only in the USA in 2018, while in the
international market, it generated 7.6 billion USD (Statista 2019). As comparison to
McDonald’s, Mr. Chip is a Canadian company, operating within Canada only. It has
been able to draw a significant share in the market by providing fast food that catered to
the local tastes and preferences as per the culture of the Canadians. However, Mr. Chip
is losing the market share due to poor quality of products with a higher price and lack of
product varieties. Thus, as the market share of Mr. Chip is declining, the company
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should adopt a new business strategy. As stated by Belton (2017), there are four major
types of business strategies that can be adopted by a company to enhance its profile
and attract more consumers, namely, cost leadership, differentiation, cost focus and
differentiation focus.
Figure 1: Porter's Generic Strategies
(Source: Belton 2017)
In this case, Mr. Chip should be adopting the business strategies of low cost
leadership and differentiation leadership. Under the differentiation strategy, the
company will develop new types or variants of fast food products, different in taste and
type than those offered by McDonald’s, and under the low cost leadership strategy, it
will offer the products at a price lower than that in McDonald’s. This will help the
company to attract new customers as well as retain the existing customers.
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2.2 Cost analysis
Mr. Chip is losing its number of customers to its rival, McDonald’s, due to lack of
product variety, poor quality and higher price, hence, the new businesses strategies
must address the key factors to enhance the company profile. The above mentioned
factors incur cost. The company has been in operation since 2010 and hence it already
has an established cost set up with fixed overhead cost, variable production cost, and
operational cost for maintaining the employees, marketing and depreciation for the
equipment. As Mr. Chip is adopting the strategy of product differentiation, it will incur
more cost for developing new fast food items, and marketing activities. It will also
require hiring new employees and training them, which also incurs a substantial cost.
However, the company must invest in innovation and new fast food item
development, and take appropriate marketing activities, such as, discount pricing,
happy hours, etc. to reach out to the target market. Along with product differentiation,
the company will adopt the low cost leadership strategy, to compete with McDonald’s.
The products should be priced lower to attract customers of all ages and all income
groups. Apart from that, the new marketing activities, such as, new advertisements,
social media and digital media advertisements must also be incorporated into the new
cost structure. Moreover, the company also needs to conduct a market research to now
about the preferences of the target market regarding new products and that can help
the company to innovate its fast food products and launch new items (Nuttavuthisit and
Thøgersen 2017). Hence, adopting new business strategies will put on a pressure on
the cost structure of the company. However, the company is already facing losses due
to loss of customers. Thus, 1 year after the implementation of the strategies, the
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difference between revenue and the costs incurred must be evaluated to analyze the
feasibility of the business strategies.
2.3 Effectiveness
The effectiveness of the business strategies depend on the strengths and
weaknesses of the company (Grant 2016). The strengths of Mr. Chip lie in the mission
and vision of the company, which aims to provide the Canadians the best quality fast
food products that are traditional to their own cultures. Thus, all the fast food products
offered by MR. Chip have a connection with the Canadian history and culture in terms of
ingredients, look, taste, and names, which are quite different than the fast food provided
by McDonald’s. On the other hand, the weaknesses of the company are lack of varieties
and higher price. To match with the traditional food items, the company offers limited
variants of the items and due to exclusive recipes and ingredients; the price is slightly
higher than the average market price. There is also lack of innovation and quality
upgradation that has contributed in the shrink of market share. Thus, Mr. Chip will now
focus on innovation in product variants while maintaining its uniqueness that is,
integrating the Canadian history and culture into the new products and also on the
quality improvement by changing the supply of raw ingredients.
Thus, effectiveness in a business strategy can only be achieved by integrating
the strengths of the company into the business planning and operations and thereby
overcoming the weaknesses (Wheelen et al. 2017).
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2.4 Ease of implementation
The ease of implementation of business strategies is dependent on the resource
and capabilities of the company (Teece 2018). There are tangible and intangible
resources. While financial assets, ingredients, equipments, inventories, restaurant
locations, employees, supply equipments and technologies are tangible assets, the
reputation and goodwill of the company, brand equity, and customer loyalty are
intangible assets (Kurian and Muzumdar 2017). Adopting and implementing new
business strategies require change in the system and the resistance can come from the
employees, available capital, and the condition of the equipment and technology. On
the other hand, the product recipes in alignment with the culture and history of Canada,
convenient location and enthusiastic employees are the core competencies of the
company. Thus, it can be stated that, Mr. Chip will face moderate ease of
implementation of the business strategies. The resistance will come from the low
amount of profit and capital to implement the new business strategies of product
innovation and differentiation to conduct research and increase fast food varieties and
offer the products at a lower cost. This is a major factor for utilizing the core
competencies in the most effective manner.
3.0 Conclusion
From the above discussion, it can be concluded that, to compete with a market
giant like McDonald’s, Mr. Chip must offer new product varieties to the target market at
a lower cost. The company must utilize its strengths, that is, incorporating the Canadian
culture into its menu and recipes and offering a traditional feel into the fast foods and
through research, innovation and utilization of the capabilities of the employees and
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other resources to enhance the company profile in the most effective manner. It has a
moderate ease of implementation for the strategies and after a year, the evaluation
should be made to assess the success of the business strategies and their feasibility in
the growth of Mr. Chip.
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References
Belton, P., 2017. Competitive Strategy: Creating and Sustaining Superior Performance.
Macat Library.
Grant, R.M., 2016. Contemporary strategy analysis: Text and cases edition. John Wiley
& Sons.
Kurian, G. and Muzumdar, P.M., 2017. Restaurant formality and customer service
dimensions in the restaurant industry: an empirical study. Atlantic Marketing
Journal, 6(1), p.6.
Nuttavuthisit, K. and Thøgersen, J., 2017. The importance of consumer trust for the
emergence of a market for green products: The case of organic food. Journal of
Business Ethics, 140(2), pp.323-337.
Statista, 2019. McDonald's: revenue by region 2013-2018 | Statistic. [online] Statista.
Available at: https://www.statista.com/statistics/219453/revenue-of-the-mcdonalds-
corporation-by-geographic-region/ [Accessed 4 Mar. 2019].
Teece, D.J., 2018. Business models and dynamic capabilities. Long Range
Planning, 51(1), pp.40-49.
Wheelen, T.L., Hunger, J.D., Hoffman, A.N. and Bamford, C.E., 2017. Strategic
management and business policy (p. 55). Boston: pearson.
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