Strategic management on Five Guys

Strategic management

Table of Contents
INTRODUCTION...........................................................................................................................1
Task..................................................................................................................................................1
CONCLUSION................................................................................................................................6
REFERENCES................................................................................................................................7

INTRODUCTION
Strategic management is an important aspect in organisation, it help the organisation to plan and
improve decision making process. Five Guys is an American based fastest growing casual
restaurant chain, which concentrate on the quality of food they serve and building and image
with their customer(Yadav and Kumar, 2015). Main products of Five Guys is French fries,
hamburgers, hot dogs, milkshakes, soft drinks. In this project report we will analyse external
environmental factor of Five guys by using PESTLE analysis and Porter's five forces model.
Also this assignment include Porter's generic model and Porter's tool.
Task
External analysis
Five Guys strives to become the top positioner from its competitors, which are
McDonald's and Burger King. To do so, the industry should address the main external issues
strategically by some analytical tools and models, like Pestle and Porter's five forces model.
Pestle analysis
Pestle analysis is an analytical tool which identifies external factors which influence an
organization. And it will help in to plan the strategy and in decision making. The analysis
examines influences by change in trends and technologies, governmental factors affecting the
business of Five Guys in Italy.
Political factor- This factor can have major effect on profitability of business from taxation
policies and decisions of government of Italy(Le, Nguyen and Tran, 2015). If government
support globalisation, it can be an opportunity for Five Guys to take advantage of these situations
through global expansion. Stability in political situation decrease challenges in company's
expansion and growth.
Economical factor- This factor concerned with economical changes such as unemployment rates,
interest rates, inflation rates and changes in trend influence the performance of business of Five
Guys. Economic changes of Italy can affect sales and revenue of the business. Economical factor
also include total income of consumer and spending power. Consumer's of Italy have moderate
to high spending power which build a good sale rate of Five Guys in Italy market.
Social factor- Consumer becoming more diverse in their preferences and choices, people are
becoming health conscious and prefer fresh food rather than froze. Keeping in mind to these all
factors, Five Guys major priority is serving quality food and serving the food according to their
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consumer choices. They use only fresh ground beef and no frozen vegetables or topping used by
them. Also they do not change their menu seasonally, which maintain the social stability.
Technological factor- all the food industry also becoming technological advanced with other
industry(Nyasimi and Gitau, 2016). Use of technology effectively can be add value to the
products and enhance the sales, but Five guys do not invest a lot of money, they spend minimum
amount on marketing, also they use free marketing resources like Facebook, Twitter, customer's
word of mouth.
Environmental factor- Sustainability is an important issue for Five Guys, they invest in
sustainability. Also with invest their money in food & serving quality food they also known for
taking care of its employees, as they reward their employees who perform well, which maintain
the positive environment in the industry.
Legal factor- The legal and regulatory issues also plays a major role in business, growth and
profitability. It includes health and safety laws, employment laws, discrimination laws etc. Five
Guys being true to their simple values and being transparent to the market and consumers. They
also concerned with implementing the proper laws in the working environment. And the
company can increase the sustainability performance based on environmental protection laws.
Porter's five forces model
This model analyse or asses the strength and competitive position of the company. This
helps in developing an understanding of where the different power lays in business
situation(Nieder, 2016).
Bargaining power of buyers- It depends on number of consumers, Five Guys have low
dependency on distributors which affect bargaining power of consumers, also there is pressure
on the company to offering in moderate price, to do so they have to cut down production and
supplier cost. With this they also have to maintain the quality.
Bargaining power of suppliers- Suppliers influence Five Guys in context of company's
production capacity, which is based on raw material availability. There are high competition
among suppliers, which also influence the production cost. Also there is high competition among
suppliers which reduce prices to producers.
Competitive rivalry among the competitors- Five Guys faces tough competition because market
is saturated of fast food restaurants. The model tackles the effecting factor. Five Guys does not
copy their competition, they balance the menu simple and qualitative how the consumer wants, it
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provides customer loyalty. The big brand competition of Five Guys is McDonald's, Burger king
and KFC. They cut down total cost by cutting down labour cost to providing affordable food to
the consumers.
Threat of substitution- Five Guys concentrate on their simplicity and rarely change menu which
impact negatively also on the organisation(Amberg and McGaughey, 2016). There is very less
chances of this threat as the company offers quality and fresh product which other does not
provide, but there are some chances of that consumer can switch to its competitors like,
McDonald's and burger king, where they find the better substitute of the products with better
taste.
Threat of new entrants- The new entrants can weaken up the company's position in the market.
For overcoming the threat of new competitors, Five Guys required strong distribution network.
Also it is important to make position in the market and building strong brand name, although
Five Guys have their own uniqueness and identity for providing unfrozen potato fries and fresh
ground beef, which other competitors don't do. It build up consumer loyalty towards the brand.
Internal analysis
Internal analysis helps in identify and evaluate capabilities, resources and core competencies
within the company(Salajeghe, Mehdizadeh and Nazeri, 2017). Also it helps in to know strength
and weaknesses of the organisation. It can be done by SWOT analysis. It helps in develop
strategic plan to grow the industry.
Strength of Five Guys- Strength or competency analysis helps in to determine level of strength in
an organisation. The main strength of Five Guys is, that they provide customize burgers. The
services and priority to the quality of products is proven its competency ability with other fast
food joints. It was voted as best burger chain in 2012 for highest level of consumer retention. As
the consumers are of health conscious, their has no trans fat in their food.
Weaknesses of Five Guys- Five Guys are rarely improve or expand their menu which can make
consumer to switch to other brands for having new in the food menu. Zero advertisement can
affect the sale rate and slow down the growth of new franchise. The brand have no global
presence which affect market share.
Opportunities- By succession of some branches in Italy, they have opportunity to open up more
branches there. As they concentrate on serving healthy foods to their consumers they have
opportunity to expand their menu and offer more healthy substitutes.
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Threats- Threats of competitions are major issues of Five Guys. McDonald's also willing to
expand and change their menu in some countries it create very tough competition for Five Guy.
Value chain of Five Guys
Value chain is a model to analysing organisational functional activities which deliver
valuable product and services to the consumers. It starts from supply chain to distribution chain.
The value chain analysis looks at every production step from raw material to finished product.
The main motive behind this is to deliver high value for the minimum manageable total
cost(Ferreira, J.J.M, Fernandes and Ratten, 2016). It can improve the competitiveness, improve
the market share and reduce the cost. It is categorise in two major component.
Primary activities and secondary activities
Five Guys supports backward channel which reduce the power of supplier. As they
concentrate on quality and health, the raw material used for burgers or fries are not frozen at all.
All the ingredients used are fresh and grounded. Five Guys operates company owned restaurant,
in 2003 it start its first franchise. In Italy the restaurant is company owned. In the field of
marketing, the industry believes on zero marketing. They don't spend money on marketing rather
than they spend that money on their employees. For growth in sales they use on mouth marketing
and social media. Also they believe in serving quality products to the consumers, which
automatically increases the sales rate. Their services include- free unlimited toppings, customize
burger, surprise free food with consumer's order
Porter's Generic Competitive Strategies
Porter's generic competitive strategies showcases how a company embraces competitive
advantage within its chosen market scope(Planko and et.al,2016). It includes three/four generic
strategies, either lower cost, differentiated, or focus.
Cost Leadership: In this leadership, a firm chooses to become a low cost producer in its industry.
The structure of industry determines the sources of cost advantage. It is important for them
to include the pursuit of economies of scale, propriety technology, preferential access to raw
materials and other factors as well. This strategy for 5 guys will prove as the best one as in
this strategy low cost producer can find and exploit all sources of cost advantage. This can
make 5 guys achieve overall cost leadership and can the organisation above average
performer in its industry, provided this can command prices at or close to the industry
average.
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Differentiation: While using differentiation strategy a firm seeks to be distinctive in its industry
with some dimensions that are greatly valued by the buyers. The strategy choose one or
more attributes where different buyers in a particular industry perceive as chief, and
positions itself to meet those needs.
Focus: The generic strategy of cost focus depends on the choice on a very limited competitive
scope within an industry. The one who is responsible chooses a segment or group of them in
the industry and tailors its strategy to serving them while excluding others. It is important
for a focus strategy to target those markets which are less vulnerable to substitutes and
where a competition is the weakest to earn the above-average ROI.
Differentiation Focus: In differentiation focus one has to target a niche market with having the
unique features in their products. While using this strategy the organisation has to be a
strong customer base and loyalty. It is necessary to ensure that the product remains unique to
stay ahead in a possible competition.
Porter's tools-
Cost leadership: Five guys adopting porter's competitive strategy of cost leadership while
expanding its business in Germany. Cost leadership is a strategy of acquiring larger market
share by selling its products at low prices than its rival firms in the proposed international
market. The reason for using this strategy by the company is to have a competitive edge over
other local and international firms operating in Germany. Cost leadership is achieved by
having low cost of management and operations so that company can sell its products at
relatively cheaper price than its competitive organisations in the industry(De Jong, Veijer
and Das, 2014). This strategy is generally adopted for taking the advantages of producing
goods at large scale. The other advantages are enlarging the customer base in Germany,
building barrier for new companies to enter the market, more customer satisfaction than the
company producing same type of products, stable profitability. However, there are some
concerns that Five Guys should consider like low price should not be at the cost of product's
quality and focusing only on price factor will hamper the level of competition in the
industry.
Innovation: Five guys expansion plan must have porter's innovative strategy as it will provide
them a superior position in the market by either having a new product, innovative marketing
styles, different methods of production, patented know how's, or latest technology.
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Customers expects creative and new products from the company and for making a sable
place in the customers' mind demands innovation which can be any in any form. This
strategy has become one of the most crucial corporate strategy because of never ending
wants of customers, their ever changing taste and preferences. When expanding business in
international markets, cultural differences also asks for the innovation. If Five Guys
company fails to incorporate its innovation strategy while expanding its business
internationally, it might not become successful in its overseas operations.
Niche marketing
This marketing defined as mixing all marketing activity towards one well defined
segment of the population. Niche marketing created by smart marketing techniques and
identifying what customer want. Five Guys burger are made from fresh ground beef and fries
from fresh cut potatoes in pure peanut oil, they do not use frozen vegetables. Also they decorated
by unlimited free topping according to consumer's preference. The motive of following this
philosophy is to concentrate on some items and serve them to the best of their ability.
CONCLUSION
The above study analysed different external factors which can affect Five Guys it helped to know
that quality product and legal laws can help the company to overcome these barriers. And also
discussed about Porter's five forces. It gave overview about the how porter's tool can elp the
company to sustain the growth.
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REFERENCES
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& Discreet Planning.International Journal of Applied Research.1(11), pp.685-688.
Le, B.N., Nguyen, M.C. and Tran, D.T., 2015. PBL Implementation of Computer Simulation in
the Teaching of Strategic Management at Duy Tan University.Global Research
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Nyasimi, S. and Gitau, R., 2016. Effects of strategic responses on competitiveness and
sustainability in cement manufacturing firms in Kenya.International Academic Journal
of Human Resource and Business Administration.2(2), pp.177-194.
Nieder, N., 2016.Effective Big Data Mangement: a development of critical sucess factors and an
analysis of firms' capabilities in the automotive industry(Doctoral dissertation).
Amberg, J.J. and McGaughey, S.L., 2016. Strategic human resource management and inertia in
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Human Resource Management, pp.1-35.
Salajeghe, S., Mehdizadeh, S. and Nazeri, M., 2017. Journal of Industrial Strategic
Management.Journal of Industrial Strategic Management.2(2), pp.89-96.
Ferreira, J.J.M., Fernandes, C.I. and Ratten, V., 2016. A co-citation bibliometric analysis of
strategic management research. Scientometrics.109(1), pp.1-32.
Planko and et.al.,2016. Strategic collective system building to commercialize sustainability
innovations.Journal of cleaner production.112, pp.2328-2341.
De Jong, G.J.A.L.T., Veijer, J. and Das, T.K., 2014. Cooperative behavior in strategic decision
making: Human capital and personality traits.Behavioral strategy: Emerging
perspectives, pp.55-78.
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