Strategic Management Assignment - Five Guys

Strategic Management

Executive Summary
This report discusses about Five Guys which is an American fast food restaurant which mainly
focuses on selling of hot dogs, French fries and hamburgers in various countries. Five Guys was
founded by Jerry and Janie Murrel in 1986. The key challenges that Five Guys has to face while
entering the in the Italian markets. This will discuss about the factors which exists in the
environment as a whole rather than in a particular segment or a region. To study the Macro
environmental factors Five Guys uses PESTLE analysis to determine the opportunities and
threats available in the macro environment of any organization. To study the micro
environmental factors of Five Guys uses Porters five forces to determine the number of forces
present in the Italian food markets. This report will also discuss about the Value chain analysis
that will provide a tool for Five Guys in identification of the activities within and around the firm
and these activities will also assess the organizations competitive strength. Food value chain will
provide Five Guys a sequence of activities in creating and building the value from the stage of
production to distribution through processing of food and beverages. In this Five Guys goes for
various competitive strategies to face the competition in Italy, but the best competitive strategy
that will help Five Guys to face and stay competitive is Porter's Generic Strategy. Porter's
generic strategies describes how would a company could achieve its competitive advantage
within a chosen market. Five Guys could use four generic strategies like cost leadership,
differentiation, cost focus, and differentiation focus to achieve its competitive advantage and face
the tough competition in Italian food market. This report will also shed light on the various
methods of expansion of Five Guy's business in Italy.

Table of Contents
INTRODUCTION...........................................................................................................................1
External Environmental Analysis:...................................................................................................1
Internal Environmental Analysis: ...................................................................................................3
Competitive Strategies.....................................................................................................................5
Strategic Directions: .......................................................................................................................7
CONCLUSION................................................................................................................................9
REFERENCES..............................................................................................................................10

INTRODUCTION
Five Guys is an American fast food restaurant which mainly focuses on selling of hot
dogs, French fries and hamburgers in various countries. Five Guys was founded by Jerry and
Janie Murrel in 1986. Its headquarter is in Lorton, Virginia, United States. It serves more than
15,00 locations across the world. Five Guys serves in the food industry. Food industry is one of
the largest industry in the world, the businesses or organizations that produce, manage, organize,
regulate and distribute food and beverages comprises the food industry. Before the industrial
revolution there were only few companies that were dealing food and beverages and non
alcoholic bevarege products. An important development in the food industry took place with the
processing and preservation took place through canning process in 1810 by Persian Chef Nicolas
Appert. But after world War 1st there had been a huge growth in food industry especially in U.S.
The key challenges that Five Guys have to face are minimal menu, poor quality and errors are
the challenges which are faced by Five guys. Now Five Guys is willing to expand the business in
Italy. This report discusses about the current strategic position of the organization and the
strategic recommendations for expanding the Five Guys business in Italy.
External Environmental Analysis:
Macro environmental factors: These are the factors which exists in the environment as
a whole rather than in a particular segment or a region. To study the Macro environmental
factors PESTLE analysis is the best way to determine the opportunities and threats available in
the macro environment of any organization (Barney., 2016).
Political factors: The political conditions of Italy is not good because economy is shaken totally
in Italy and Italian government is trying their best to grow their economy and this resulted in the
political instability in Italy. Italy was known as the one of the richest country in past and was
also a renowned nation of Europe but has suffered a lot due to economic downturn and this
resulted in the high unemployment rate in Italy. A hamstrung in the finances of the government
due to Euro crisis made the situation more worse for Italy,but the conditions are improving
because of the active participations of the citizens in the political process of the Italy and people
have gained trust in the government.
Economic factors: Italy is one of the richest country in the world as it owns highest Gross
domestic as well as capitalist economy per capita. Italy was named as the 7th largest economic
country of the world in 2008, but in recent years Italy has suffered from the irregular economic
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patterns in-spite of these irregular patterns Italy owns the lowest unemployment rate which is
8.5 percent in the world.
Social Factors: In 2009 Italy was nominated as the 6th most valued country in the world. The
high class people, high class entrepreneurs, self employed people has raised the standards of
living in Italy.
Technological factors: Italy has been the hub for the innovations and discoveries, because of
these innovations and discoveries it has changed the concept of the world (Bolt., 2014). Italy has
been enjoying the higher expectancies due to best technology that has been embedded in the
healthcare.
Environmental factors: Italy is ranked at 84th in terms of ecology. Italy is considered as the
worlds largest renewable energy and Italy is also ranked 5th solar energy country in 2009, but
pollution has been the major concern for Italy. Air pollution have resulted in various breathing or
inhaling problems in Italy. Northern area of Italy is ranked as 10th largest industrial in the
emission of Carbon dioxide. Deforestation and illegal developments and poor policy of land has
led to the erosions and pollutions in Italy.
Legal factors: legal factor of Italy entirely depends up on the Justice of Peace and this peace is
mostly based on the Jurisdiction of court. Jurisdiction of court is less focused on the civil
matters. The constant social change has resulted in the well established economy in Italy.
Country's strong economy will help in building strong legal structure and can perform various
tasks accordingly.
Micro environmental factors: The factors or the elements which are present in the area
of operation that have the effect on the organizations performance and decision makings
(Brown., 2015). To study the micro environmental factors of Five Guys, Porters five forces is the
best ways to determine the number of forces present in the Italian food markets which are as
follows:
Threat from competitors: For establishing the business in Italy Five Guys needs a strong
distribution network and Five Guys have to face the threats from the strong food brand that are
already present in Italy. Threat of new entrants is also due to the reason of limited barriers in the
entry of the food industry in Italy.
Threats from substitutes: Five Guys has to face threats from the substitutes like low switching
cost and substitute in lowers quality. Five Guys have to face this threat from the various
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substitutes within the specific business. Five Guys is mainly in hamburgers, hot dogs and French
fries substitutes of the foods would be Chinese food, Greek food and Spanish food etc even other
foods like sandwiches could also be a substitute available in Italy for Five Guys.
Threats from existing rivalry: Italian food industry is large in size and is growing at rapid ate
due to which Five Guys have to face the competition from the internation and national
competitors (Burack and et.al., 2014).
Bargaining power of suppliers: Presence of high competition among the suppliers in the Italian
food industry and diverse distribution channels and low switching costs available to suppliers has
resulted in the high bargaining power of suppliers in Italy but Five Guys would have to face low
bargaining power because the supplies Five Guys requires is very basic, therefore the switching
cost from one supplier to another supplier would be insignificant for Five Guys.
Bargaining power of customer: Food industry have to face high customers bargaining power
because of large number of substitutes available for the people of Italy, but as Five Guys sells
their special segment in hamburgers, hot dogs and French fries in Italy it would lower the
bargaining power of customers.
Internal Environmental Analysis:
Internal environment analysis of an organization is conducted after the external
environment analysis. As external environmental analysis provides an analysis of opportunities
and threats that are present in the external environment while as internal environment analysis
provides the analysis of strengths and weaknesses of the business. Value chain analysis will
provide a tool for Five Guys in identification of the activities within and around the firm and
these activities will also assess the organizations competitive strength. Food value chain will
provide Five Guys a sequence of activities in creating and building the value from the stage of
production to distribution through processing of food and beverages(Burgelman., 2014).
Value chain Analysis: Value chain analysis divides the various businesses activities into
primary and supportive activities and analysis of these activities while keeping in mind the
contribution of these activities towards the creation of the final product. Five Guys value chain
activities is grouped into primary and supportive activities which are discussed under.
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1. Primary Activities: This function will help the organization in the conversion of input into
output and also their distribution activities of these outputs. This function includes:
 Inbound logistics: Inbound logistics includes various activities like storing, receiving,
distribution etc which will help the organization in making the available goods and
services for the operational process. It also includes other activities like transportation,
stock control and material handling.
 Operations: This activity will transform the input raw material of Five Guys into final
product which will be ready for sale in the market. Operations forms an important part of
the value chain process. Operations will include the manufacturing of the products,
assembling of the final product and then packaging of the final product which will be
covered by the organization during operations.
 Outbound Logistics: At this stage organization will collect, store and deliver the final
products to the customers for consumption (Cannon., 2015). A company has to go for
various logistics services in order to make their product available to the consumers.
 Marketing and Sales: It is the important activity in the value chain process. A company
has to go for various ways of advertisements, promotions, public relations, sales etc in
order to make the customers aware of the companies product and services and also to
create and increase the demand of the product or service which a company offers to the
customers.
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 Service: A company has to provide the service to the customer to improve and to
maintain the value of the product within the market, the companies service will include
after sale service, financing services and other services to satisfy the customers.
2. Support Activities: Support activities are the type of the activities which helps the companies
primary activities to be accomplished i.e. it supports the organizational primary activities to be
attained easily are called support activities (Gluck,Kaufman andWalleck., 2014). Support
activities will include:
 Procurement: This is the type of the activity which will help the organization in
supplying the important or necessary inputs such as machinery, materials and other items
which will be required by the organization to perform the primary activities so that
primary activities of an organization are easily accomplished.
 Technological development: There has been technological improvement in the food
industry and at present this technological factor requires a handsome amount of
investment and this take a years of research and development plan but technological
developments has its benefits which an organization can enjoy for many years and also
helps in speeding up of the activities of the business process.
 Human Resource Management:It is the important and common activity which helps to
excel all primary activities in an organization. This activity includes selection of the
candidates, retention of employees, transfer and even dismissal of the employees in an
organization.
 Infrastructure: It is the internal management activity that provides services to entire
organization and this includes planning, information management, financing, quality,
legal and government affairs.
Every organizations aim is the customers satisfaction and this value chain
technique is the path way for achieving this aim at higher level. All the activities in the value
chain are considered as important which helps in contributing towards improving the
organizations value chain process (Horwitz, 2014).
Competitive Strategies
Five Guys can go for various competitive strategies to face the competition in Italy, but
the best competitive strategy that will help Five Guys to face and stay competitive is Porter's
Generic Strategy. Porter's generic strategies describes how would a company could achieve its
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competitive advantage within a chosen market. Five Guys could use four generic strategies like
cost leadership, differentiation, cost focus, and differentiation focus to achieve its competitive
advantage and face the tough competition in Italian food market. These strategies are as follows.
Cost leadership: Each company uses this strategy to achieve the competitive objective. It means
an attempt to gain the competitive edge in the market. By using this strategy Five Guys will try
to lead the market by controlling their costs in one or another way. By adopting this strategy, an
organization has two ways, one way is to offer the product at the lower costs that its competitors
this will convince the customers to pick the companies product because of the least expensive
choice available to the customers (Newkirk‐Moore and Bracker., 2014). Another way is to adopt
the cost leadership strategy by creating a product at the lower cost while charging the average
price for the companies products and this way will allow the company to gain more margin on
the product as compared to their competitors.
Differentiation: This strategy is totally opposite of cost leadership strategy. By adopting this
strategy Five Guys will try to take over the market by presenting their products which are
superior in quality function and features rather than simply selling their product at low costs in
the market. While taking a differentiation strategy a company should focus on the other luxury
brands present in the market, so this differentiation strategy will help in gaining the competitive
edge over the luxury brands. It will not be easy for the company to differentiate their products in
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terms of quality stand point, but a company should have a strong marketing plan to give an
information to the buyers and also company should have to produce a best product to offer to its
customers this will help an organization to achieve the competitive advantage over the others.
Cost Focus: This strategy is quite similar to cost leadership strategy, but the difference lies in
when the company focuses on one particular niche of the market and not trying to sell the
product to everyone in the market. By adopting this strategy a company have to sell their
products in the small portion of the market that a company focuses on buying a particular
product. This strategy may not have a growth in the potential market while dealing with the
large market, but the company will have the opportunity in becoming the major player in the
market in which the company is focusing.
Differentiation Focus: Differentiation focus would look similar to the cost focus but the
difference is that a company is focusing on the particular niche market but it is trying to
compromise with the quality standards of the product. It doesn't matter how expensive or how
inexpensive a product is but if the company is bale to provide the kind of product to the
customers that they are looking for this will help the company in gaining the competitive
advantage in the market more it can also help the company is justifying higher prices that a
company would be able to grab in the large share in the niche market (Osbaldeston and Barham.,
2014).
So these strategies are the best way for the company in gaining the competitive
advantages in the market, by using these strategies at earlier in the planning process will help
Five Guys in picking up a strategy that will help the company in leading the market.
Strategic Directions:
Strategic directions are the kind of the directions that focuses on achieving the
organizational objectives. The vision, mission, tactics strategies and other core values that
contributes in the establishment of the companies strategic directions. It is the important force of
the business in achieving the objectives. It helps in establishing the proper structure of
responsibilities for the each department and employees to achieve the vision and the objectives
of an organization. The strategic directions of Five Guys in various segments are as follows:
Markets: The strategic direction of Five Guys to enter the new market includes the following
steps:
1. A company should define the target market which the company is willing to enter.
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2. A company should do a proper market research to identify what are its strengths,
weaknesses, opportunities and threats before entering in the Italian markets. Proper
market research will help the company in formulating a proper plan for entering in the
target markets in Italy.
3. After formulating the plan a company should enter in the new market or target market to
operate the business in that particular target markets.
4. After making an entry in the Italian market a company should focus on what type of
customers to target and formulate the plans for it.
Products: As Five Guys mainly focuses on three segment i.e. hamburgers, hot dogs and French
fries so Five Guys should enter the market with all the three product categories that they should
offer to the customers in Italy. By offering these three product it will differentiate their products
from its competitors and this will help the company in gaining the competitive advantage in the
market. The companies strategy of positioning the products and targeting the right customers will
help in achieving the objectives of an organisation.
Services: A company should offer better services as compared to its competitors as Italy has
high living standards an by offering the quality services to its customers it will help in achieving
the organizational objectives (Thomson and et.al., 2015). So Five Guys should focus on
providing the quality service to its customers.
Methods of expansion: Following are the methods of business expansion in Italy
1. Adding a new product or services: this method of expansion a company decides the to
add new product or service in the market. By adding new product or service at right time
in the markets will help the organization in expanding the business. A company can add
new product category or service or both in mix to go for the business expansion. A
should only consider the expansion when the market progression is at right place and is
suitable for the company to enter the market.
2. Selling more product and services: A company can expand the business by making
efforts in selling more products and services to the existing customers. In this method a
company has to produce it goods in bulk quantities to achieve this objective.
3. Expand in new territories: A company can look for other territories to start the
bushiness while selection a territory or a region a should carefully select the site, location
of the company plays an important part for the business expansion.
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4. Target new customers: It is the another method of business expansion by targeting the
new customers and organization has to formulate the plans for targeting such customers
CONCLUSION
This report concludes that Five Guys in order to expand the business in Italy has to for
various strategic management process to be successful in operating the business in Italy. It is
concluded from the report that Five Guys uses PESTLE analysis to identify the opportunities and
threats in the macro environment of Italy and also Five Guys uses Porter's Five forces to analyse
the various forces available in the market. The report also concludes that Value chain analysis
helps in the identification of strengths and weaknesses in the markets and in order to gain the
competitive advantage Five Guys uses Porter's generic strategies. This report also concludes that
Five Guys has various options available for expansion of the business that could prove
favourable for Five Guys in future.
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REFERENCES
Books and Journals
Barney, J., 2016. Firm resources and sustained competitive advantage. Journal of Management.
Vol. 17 No. (1). pp. 99‐120.
Bolt, J., 2014. Achieving the CEO's agenda: education for executives. Management Review,
May. pp.44‐9
Brown, P., 2015. Seeking success through strategic management development. Journal of
European Industrial Training. Vol. 27 No. (6). pp. 292‐303.
Burack, E and et.al., 2014. The new management development paradigm. Human Resource
Planning. Vol. 20 No.( 1). pp. 4‐21.
Burgelman, R., 2014. A process model of the internal corporate venturing in the diversified
major firm. Administrative Science Quarterly. Vol. (28) pp. 223‐44
Cannon, T., 2015. The Cannon Working Party report. Management Development to the
Millennium, Institute of Management, Corby.
Gluck, F., Kaufman, S. and Walleck, A., 2014. The four phases of strategic management.
Journal of Business Strategy. Winter pp.9‐21.
Horwitz, F., 2014.The emergence of strategic training and development: the current state of play.
Journal of European Industrial Training. Vol. 23 No. (4/5). pp. 180‐90.
Newkirk‐Moore, S and Bracker, J., 2014. Strategic management training and commitment to
planning: critical partners in stimulating firm performance. International Journal of
Training and Development. Vol. 2 No. (2). pp.82‐90.
Osbaldeston, M and Barham, K., 2014. Using management development for competitive
advantage.Long Range Planning, Vol. 25 No. (6). pp. 18‐24.
Thomson, A and et.al., 2015. A Portrait of Management Development. Institute of Management.
London.
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