Strategic Management Assignment | Five Guys

Strategic Management

Executive summery
This report has described the background of the restaurant Five Guys. For the external
analysis the PESTEL analysis has been conducted and For the analysis of threat & opportunity
the Five Force model has been applied. To analyse the micro factor of the restaurant VRIO
analysis has been conducted. The case study of the expansion of the business in Italy and the
expansion methods of business has been done In the report.

Table of Contents
INTRODUCTION...........................................................................................................................3
EXTERNAL ANALYSIS OF THE FIVE GUYS...........................................................................4
PESTEL Analysis of Five Guys..................................................................................................4
Five Force Framework................................................................................................................5
INTERNAL ANALYSIS OF THE FIVE GUYS............................................................................6
VRIO Analysis of the Five Guys................................................................................................6
STRATEGIC RECOMMENDATION FOR FIVE GUYS.............................................................7
Bowman's Strategic Clock model...............................................................................................7
STRATEGIC DIRECTION FOR THE EXPANSION....................................................................9
Methods of Expansion ..............................................................................................................10
CONCLUSION..............................................................................................................................10
REFERENCES..............................................................................................................................12

INTRODUCTION
Strategic management is a continuous monitoring, assessment, analysis and planning of
all the requirements to full fill the goals and objectives of the organization. This study is based
on the restaurant chain Five Guys which is currently operating in USA and in some part of UK.
The Five Guys is providing the fast food products like Hot Dogs, French Fries, Hamburgers and
different cold & hot drinks. This report is consists of brief information about the five guys and
challenges faced by the restaurant chain in starting years. This report also covers the external and
internal analysis of the restaurant. The study is also consists of the competitive strategies to
expand the business in Italy and methods of expansion.
Background
Five Guys is an American fast food restaurant chain and the focused on Hamburger,
French fries and Hot Dogs. Headquarter of the Five Guys is in Arlington County, Virginia USA.
This company was founded by Jerry Murrell and Janie Murrell in year 1986. The five members
of Five Guys are Jerry couple, Jim, Ben, Matt and Chad. This restaurant chain is currently
operating at 1500 location till the year 2016 and also looking for develop another 1500 restaurant
in different locations. Five guys believe in providing the fresh food to the customers and has no
freezer policy. For last 30 years the Five guys continuously receiving the media attention and
have huge following around the world.
Challenges Faced By the Company
In the journey of five guys, they have faced many challenges to grow up to 1500
locations. In the starting of their business most important struggle is to attract the consumer and
set a brand value in the local area. For the first 16 years the member of restaurant were operating
the Washington DC area and gaining the followers with their small limited menu. In year 2002
Five Guys takes an initiative for franchising the business and improve the business by operating
on more than one area. In the early location they don't have enough space for storage. Five guys
owner faced different challenges like financial challenges, planning and strategy related
challenges, competition and marketing challenges. It was really hard to recruit the proper staff
for the restaurant business. For expansion of the business the company need a proper planning
and strategy.

EXTERNAL ANALYSIS OF THE FIVE GUYS
The purpose of external analysis of Five guys will provide the information about the
external factors that affecting the business of the restaurant for the analysis of the external factor
the PESTEL analysis is used which will provide the information about the factors that are
affecting the business. To analysis the threats of the business the five force model is used.
PESTEL Analysis of Five Guys
PESTEL analysis is conducted to analyse the macro factors that affecting the business of
the Five Guys. This macro factors are Political, Economical, Social, Technological,
Environmental and Legal. For the current location of the Five Guys restaurant chain the PESTEL
analysis is conducted.
Political Factor
Political decisions like tax reforms and health regulation affect the business of the Five
Guys. Tax reforms affect the pricing policy of the restaurant, this reforms force the restaurant to
change the price of the products. And health regulation changes force the restaurant to change
their conventional methods which can affect the business of the Five Guys (Rosenbaum-Elliott
and et. al., 2015).
Economical Factor
The economic factors affect the business and profit of Five Guys. The minimum wage
policy and health of economy affect the business mainly. Change in minimum wage policy
company need to analyse that how many employees they can afford with in the business. The
health of economy also a larger factor that affect the business of the Five Guys.
Social Factor
Cultural and social factors affect the business plan and strategy of the business,
Awareness of local cultures and social values affect the menu of the business. In the area of
business have more vegetarian customer than the business of non vegetarian food product will be
affected and reduce the profit of the Five Guys.
Technological Factor
Technology is changing with the time and new technology is faster than the older one. In
the old systems the process of the customer handling was slow that can reduce the number of the
sales (Makadok, Burton, and Barney, 2018). By implementation of new technology the
management of staff and customer will be much faster and smoother.

Environmental Factor
The environment around the business place affect the profit of the Five Guys restaurant.
The location of the restaurant in high traffic area will increase the sells, nearby competitor
restaurant can affect the business, reduce the sells and force the Five Guys to change the pricing
policy with respect to the competitors.
Legal Factor
Legal factors some times can affect the business of the restaurant. Under the laws the
business related alcohol is bane and in some location as per the culture and social values of
residents some food products are not allowed to sell this can reduce the benefits of the restaurant
(Cook, 2015).
Five Force Framework
The five force modal is a powerful tool to analyse the influence of the competitor on the
business of the Five Guys and analyse the threat of the business from the competitors.
The Bargaining power of the Customer
The bargaining power of the customer is a threat to the Five Guys. The bargaining
influence or force the Company to reduce the price of product. In the case of the customer
bargaining threat, customer has high power to select the company or a particular company
product.
Bargaining Power of the Suppliers
This type of threat the power level depends on the number of raw material suppliers.
High number of raw material supplier has low level of power because if one supplier stops the
supply than the other supplier can keep the supply continuous. In condition of less number of
supplier gives high power to the supplier (Cosenz and Noto, 2016).
The Threat of New Entrants
New restaurant with same product is a threat because of the competition. If a restaurant
nearby is selling the same product as the Five Guys can reduce the number of sales for the
restaurant. This threat has moderate power cause the sell depends on the quality of the product.
Good quality of the product of competitor is higher threat to the business and average quality
product of competitor have lower threat.
Threat of Substitute

Competitor of the Five Guys introduce the same product the restaurant is selling have
high level of threat and this can reduce the sales of the Five Guys (Audretsch, 2015). In this the
consumer get two option for same type of the product and this lead the customer to switch if they
are not satisfied with the product of Five Guys.
Competitive Rivalry
In the market positive competition is good but when its become rivalry then it is not good
for the profit. This have high level of threat because in this rivalry both competitor tries to sell
their product in high number and reduce the price. This lead to loss in the business.
INTERNAL ANALYSIS OF THE FIVE GUYS
Internal analysis of the Five Guys is conducted to know the opportunities to gain the
market advantage (Slack and Brandon-Jones, 2018). For the internal analysis of the restaurant
the VRIO model is used. This analysis model will lead to the factors that are important to the
restaurant.
VRIO Analysis of the Five Guys
VIRO analysis of Five Guys is consists of the value analysis of resources, rarity of
resources, imitable resources and organization. By this analysis it is easy to organize the
resources in the way to gain the business advantage compared to the competitors. The resources
which are not valuable, they could be outsourced. The resources which are valuable and not rare,
are important for the market competition (Levinthal, 2018). The resources which are rare and
valuable but not expensive lead the restaurant to short term advantage. The resources which are
valuable, rare high to imitate and not easy to organize are most important and expensive for the
Five Guys. And finally the resources which are valuable, rare, expensive to imitate and
organizable for the restaurant, gives the permanent marketing advantage.
Values of Resources
The services provided by the Five Guys are valuable or not. The Five Guys different
valuable services like Wi-Fi access to the consumer, employee benefits, customer experience,
relation with the local farms that provides the raw material, brand value, brand logo, secret
recipe, interior set up, vision of the restaurant, location of the restaurant, fresh food and raw
materials, strict brand control, customer satisfaction. These are the services and resources which
are valuable and gives the advantage to the Five Guys in the market (Theriou, 2015).
Rareness of Resources

In this the rare services and product of the Five Guys. The special menu options that is
only provided by the Five Guys, interior setup of Five Guys, quality mix of the restaurant,
customer experience, patents and the brand value of the Five Guys comes in to the rarity. No
other restaurant could have this (Haines, 2016). This rare qualities of the Five guys are rare in the
market so this quality of the restaurant gives the advantage to the Five Guys.
Imitable resources
The rare and valuable resources of the restaurant are nearly non imitable. The brand logo,
secret resources, secret special recipes of the restaurant are not imitable and this gives the
restaurant an advantage, cause no other can copy this quality. For the competitors it is hard to
give the competition to the non imitable things of the restaurant so only thing they can do is
either copy or duplicate or to gain the competitive advantage.
Organization of Resources
In VRIO model after the evaluation of the valuable, rare and non imitable resources the
last thing is remained is the resources which are expensive to imitate, valuable and rare but
organizable are most important for the Five Guys. The resources of the restaurant which are
valuable, rare and non imitable are most important to gain the competitive advantage to the Five
Guys.
STRATEGIC RECOMMENDATION FOR FIVE GUYS
Five Guys restaurant wants to expand its business in the Italy. Bowman's strategic clock
is a model which explore the options of strategic positioning for the product to evaluate the best
competitive position.
Bowman's Strategic Clock model
The bowman strategic clock shows the options for the positioning of the product based on
two dimension 1. Price and 2. Perceived Value. The two dimension price and perceived value
gives eight positioning for the product.
Low Price And Low Value Added
This is the first position in the clock where the product price of the Five Guys restaurant
is low and the customer perceived little value. So it is not the best position for the competition. In
Italy keeping the price low is the only method for the company to compete with the other
suppliers.
Low Price

This position is for the companies that produce in the bulk and with a cheaper
manufacturing cost. Their product are valuable but cause of this bulk production the products
sold at low price which lead to the low profit for a product. Still, the bulk production can
generate high profit but it is for the only companies that are looking for cheaper and fast
production. In the price war this strategy is used. For the Five Guys in Italy market this strategy
can't be used because this can harm the reputation of the restaurant and the faster production will
lead to the bad quality (Kerzner, 2019).
Hybrid
In this position the company uses the differentiation method so the product of the
company will be high valued. Company also focuses on the low price. In this the company is
providing the product to the customer and keep them convinced them that the product is good
valued and benefiting them. This position is one of the most effective position in the clock. Five
Guys can use this method to develop a competitive strategy. For this strategy restaurant have to
maintain the value of the product and try to reduce the price of the product to generate a
competitive position in Italy.
Differentiation
In this position the companies uses the differentiation method and try to keep their
product quality high as much as they can and sell the product at average price. In this position
the customer gets the best perceived value. In this method company not only giving the best
quality product but also focuses on the branding of the product to retain the customer in the same
numbers. Customer are more attracted towards the branding and the brand value retain the
customer and they are also ready to pay more for the product. This is also an effective method
for Five Guys to enter a new market in Italy and develop the competitive strategy. For
developing a competitive strategy restaurant should use the differentiation and maintain the
quality and try to provide the product to the customer at low price to attract them and then retain
them.
Focused Differentiation
This method is used by the high class brands. They are more focused on the best quality
production and at high price. They use the promotion, segmentation and distribution and this lead
to the high profit. The competitors of these brands are also high so the competition is about the
quality so they keep the price of the product high. This a good method for the restaurant that are

already established in the market but for Five Guys to settle in the market it is not a good
strategy.
Risky High margins
In this type of the method the company used to sell its product of average quality at
higher price. For short term it is profitable but for the long term it is risky for the business.
Ultimately the customer stop buying this product and look for the other product. This is not a
good method for the Five Guys to enter the market in Italy cause the customer are looking for the
product at good price with the good quality and they will move on to other product which is
comparatively at lower price and good quality.
Monopoly Pricing
This position is for the companies that have monopoly in the market, no other company is
producing the same product in the market. So this company have one specific price for their
product. They don't reduce the price of the product because the customers are depended on their
product. To keep the price of the product under certain limit the monopolies are regulated in the
most of the nation. For the Five Guys this not the right method cause the restaurant business
don't possess the monopoly.
Loss of Market Share
This position is for the companies which are not able to provide a good product or service
of customer value and price of the product is also high. So the customer don't buy this product.
For the Five Guys in the Italy it is not good method to develop a competitive strategy cause the
base of a restaurant business is customer following and restaurant can't afford to lose its
customer.
STRATEGIC DIRECTION FOR THE EXPANSION
For the Five Guys to expand its business in the Italy and develop a competitive strategy
these methods are helpful 1. Hybrid 2. Differentiation.
Hybrid Strategy
For the Five Guys to establish a new market base in the Italy, it is a good strategy. To
give the competition to the competitors it is the best method for a newcomer. By producing the
quality product and try to keep the price of the product low attract the customer. Through this
method the customer following of the restaurant will be increased and this can help the restaurant
to give a tough competition to the competitors.

Differentiation Strategy
This is also a good strategy to gain the customer following and develop the market of the
restaurant Five Guys. Through this method the restaurant can provide of product to the customer
with better branding by this the company want to retain the customer and also gain new customer
by attracting them. This can help the Five Guys to gain more following and the branding will add
new customer to the restaurant (Dagnino, King and Tienari, 2017).
Methods of Expansion
The expansion of business means, the methods that can help the to increase the size of the
business. To expansion of Five Guys can be done by two ways 1. Internal expansion, 2. External
Expansion and 3. Franchising.
Internal Expansion
In the internal expansion method there are two ways to expand the business
11 Recruitment of New Staff- by recruitment process the restaurant can expand its size.
Large number of staff will lead to increased production and allow the restaurant to serve
more customers. This process will help the Five Guys to increase its employees and
expand in Italy.11 Buying new equipment- same as the above point by buying more equipment the overall
production of the restaurant will increase. Increased production will allow the restaurant
to entertain more customer at same the time. By this the production of the Five Guys will
increase and help the restaurant to grow more.
External Expansion
In this method the restaurant can expand by merging operation or taking over procedure.
11 Merging- By merging one or more restaurants in one unit can expand the size of the
restaurant. By this operation the space will increase and number of equipment will
increase lead to expansion. This is not good enough for the Five Guys because it doesn't
have much restaurant in location11 Takes Over- To expand in the business taking over is a best strategy. By this procedure
the Five guys can take over any previously established restaurant and operate this as Five
Guys. This will help the restaurant to retain the customer of the restaurant and it will not
cost much money.

Franchising- This method is the most successful method to expand the business. In the origin
country of the restaurant, this method was implemented and was successful. So for the Italy this
method will be best to expand the business of restaurant Five Guys.
CONCLUSION
In this report is explanation of the study of Five Guys and its business in USA. By
conducting the PESTEL analysis and VRIO analysis the macro and micro factors that are
affecting the business of the Five Guys are analysed. This report also gives the information about
the threats and opportunities of the restaurant. The case study of expansion of business in
European country Italy, is a guidance for the future expansion of the business in Europe.

REFERENCES
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