Strategic Management: Analyzing Five Guys' Expansion into Italy

This report provides a strategic assessment of Five Guys' potential expansion into Italy. It begins with a company background and identifies key challenges, followed by an external environmental analysis using PESTLE and Porter's Five Forces to identify opportunities and threats in the Italian market. The internal environment is analyzed using VRIO to determine strengths and weaknesses. Competitive strategies are identified through Porter's Generic Strategies, and strategic directions for market, product, and services are discussed, including methods for expansion. The report concludes with recommendations to enhance Five Guys' market position in Italy, making it a valuable resource for understanding strategic market entry.

Running head: STRATEGIC MANAGEMENT
STRATEGIC MANAGEMENT
Name of the Student
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Author Notes

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Executive Summary
The aim of the report is to assess the success and failure of the expansion process of the
American local fast food joint Fast Guys into the arena of Italy which is one of the developed
European nations of the world. The analysis of the report is done based on the PESTLE of the
country along with the Porter’s five forces model for the organization on which the analysis
is being done. Moreover, the Porter’s generic strategies are also taken into consideration
which means that the analysis of the future prospects of the organization into the target
country is being done along with the marketing mix analysis. The recommendations for the
expansion and analysis are also being provided which acts as a statement to the analysis of
the facts making the success of the expansion of Five Guys into Italy one of the best
decisions of the enterprise.

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Table of Contents
1. Introduction........................................................................................................................3
1.1 Company Background..................................................................................................3
1.2 Key challenges faced by Five Guys.............................................................................3
2. External environmental analysis for identifying opportunities and threats.......................3
2.1 PESTLE analysis..........................................................................................................4
Micro Analysis...................................................................................................................5
2.2 Porter’s Five Force Framework...................................................................................5
3. Internal environmental analysis for Identifying strengths and weakness..........................7
3.1 VRIO analysis..............................................................................................................7
4. Identification of Competitive strategies.............................................................................9
4.1 Porter’s Generic Strategies...........................................................................................9
5. Strategic Directions for Market, Product and Services and methods for expansion........11
5.1 Market........................................................................................................................11
5.2 Product.......................................................................................................................11
5.3 Services......................................................................................................................12
5.4 Methods of expansion................................................................................................12
6. Conclusion........................................................................................................................13
8. References........................................................................................................................14

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1. Introduction
1.1 Company Background
The Five Guys enterprise is one of the most famous food brands in the province of
USA which has expanded into the European Union through various strategies and
developments. The company was established in the year 1986 under the genre of fast casual
restaurant by Jerry Murrell and Janie Murrell (Five Guys 2018). The company is
headquartered at Virginia in USA. The company is known to be focussed on the hamburgers,
hot dogs and French fries which is one of the most famous fast food options for the people.
The restaurant is one of the first restaurants in the country that has franchises at over 1500
locations worldwide with the tag of being the fastest growing fast food chain in USA at
approximately 32.8% growth from 2010-2011 (Five Guys 2018). The overall revenue for the
company is at $831.95million which is one of the greatest for any local-based restaurant
(Five Guys 2018).
1.2 Key challenges faced by Five Guys
One of the major challenges that is being faced by Five Guys is the inclusion of the
competitive forces in the market which can hamper their expansion into the different nations
of European Union (Telegraph UK 2018). The presence of rival companies like Mc Donald’s
and even the indirect rivals such as local restaurants and other fast food companies like KFC
and Subway serve as potential challenges which the company needs to adhere to (Telegraph
UK 2018).
The following report analyses the external and internal environmental analysis along
with the competitive strategies and strategic direction for the market of Five Guys in their
expansion to Italy, one of their desired expansion countries in European Union. The

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following paragraphs highlight the strategic recommendations for the expansion in the period
of time.
2. External environmental analysis for identifying opportunities and threats
Macro Analysis
2.1 PESTLE analysis
The PESTLE analysis for the targeted expansion country, Italy is as follows –
Political – Moro Visconti (2016) states that the political scene of Italy is of a parliamentary
system which is of democratic and republic nature. The system of the political system is
modified every seven years with the election of new president. The system of politics is of
stable variant in the country that encourages the establishment of the new companies in the
province. The overall analysis of the political situation is of the fact states that Italy is one of
the potential countries for the establishment of Five Guys.
Economic – Kumar, Gaur and Pattnaik (2012) states that the high GDP of Italy being one of
the developed capitalist in the world is one of the major factors for the establishment of
companies in the country. The establishment of the company will have economic stability in
the country which will enhance the economy of the country in the span of time. The overall
analysis of the economic development of the nation is positive in case of Italy (Moro Visconti
2016). The economy of the country being stable for the establishment of the company serving
fast food is generally one of the prime in the matter.
Social – The social system of Italy is based on the system of class which accounts for a
majority of differentiation in the overall span. The social system of Australia is one of the
major phases in which the three comprises of 10% of the higher class of the social order
while there is approximately 20% of the people belonging to the lower and the middle lower
class comprising of the working and the labour class (Kumar, Gaur and Pattnaik 2012). The

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rest of the people hail from the middle class people which constitute the majority of the
economy in the span of time. The social order of Italy is stable which promotes the
establishment of company especially the food companies like Five Guys that promotes fast
food among the people. This will enable the people of the country to have special view for
the making the enterprise a success in the longer span (Piekkari, Welch and Welch 2014).
Technological – Italy is a technologically advanced nation which makes the establishment of
technology one of the prime matters in the spectrum of time. The overall analysis of the
technological innovation makes for the fact that the establishment of company is of worth
value. Piekkari, Welch and Welch (2014) states that the technological advancement of the
company is to accomplish the system of having good prospects of the establishment of the
company in the country of Italy. The overall technological implications for the company is in
the positive direction.
Legal – The legal system of Italy is based on the Roman law code which holds prime
importance in the whole matter. Achtenhagen, Melin and Naldi (2013) states that the overall
legal analysis of the situation is of the fact that there are regulations for the establishment and
expansion of the economy which in turn helps to solve the legal matters related to the
company in the provincial state of time. The establishment of Five Guys is one of the factors
in the sect which had legal implications in the matter.
Environmental – The environmental condition of the country of Italy is one of the positive
in the world being it one of the leading countries which works against the working of the
pollution level and making the environment prone to better establishment of the company and
the working of the same (Achtenhagen, Melin and Naldi 2013). The regulations for the
protection of the environment is to be followed by the company which makes the country one
of the prime places to be established.

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Micro Analysis
2.2 Porter’s Five Force Framework
The Porter’s five force framework is one of the most important ways to determine the
level of competition and threat of rivalry among the industry catering to the different types
and competition of industry in a particular region. The Porter’s five forces for the
organization Five Guys in their expansion to the continent of European Union, especially to
the country of Italy can be seen in the following ways –
Competitive Rivalry – The competitive rivalry is defined as the amount of competition that
is there in the market for the company for which the analysis is being done. Banalieva and
Dhanaraj (2013) states that the competitive rivalry of the company is one of the factors that
determine the entry of a company into a new market as smaller the rate of competition the
greater chances for entry. For Five Guys, the competitive rivalry in Italy is less with
relatively few competitors and a large size for the industry making the expansion a positive
idea in the span.
Bargaining power of the suppliers – The bargaining power of the suppliers is defined as the
amount of power that is in the hands of the suppliers for the expansion of the business. There
is a large number of raw material needed for the production of the fast food genre which
comes from a large number of supplier chain (Banalieva and Dhanaraj 2013). Moreover,
there is a great amount of competition among the suppliers of the firms which make the
bargaining power of the suppliers’ way lesser. There is a diverse channel of distribution
among the supplier that provides ample amount of way for manufacturing the product. The
company can easily switch between the suppliers where and when needed and so Five Guys
have a benefit in this case (Jobber and Ellis-Chadwick 2012).

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Bargaining power of customers – The customers are the main source of income for any
business organization and so it is very important for the business to have a decent buyer
number. The customer base for Five Guys is very high because of its high reputation among
the people of the native as well as the expanded country. Jobber and Ellis-Chadwick (2012)
states that due to their provision of both traditional and modern food items in both veg and
non-veg genre, the amount of customers is large and makes the company less dependent on
the distributors. The price sensitivity of the company is lower which make the company have
advantage position.
Threat of the New Entrants – The new entrants always pose a dual situation to the existing
companies especially in the case of fast food genre where the taste of the people change
within some days. Lovelock and Patterson (2015) states that the threat of new entrants is one
of the prime factors in any of the cases as with greater threat to the entry of the products, it
becomes way important for the companies to have good backing. In case of Five Guys in the
province of Italy, the amount of threat of new entrant is comparatively less as the customers
of the place are loyal to the existing brand of the food. In addition, the brand names play an
important role in making sure that the customers are attracted to the same brand with the
same point of time. The strong distribution network to the existing brands are important for
the Five Guys and their expansion to Italy (Lovelock and Patterson 2015).
Threat of Substitute of products – The substitute is defined as the kind of product which is
used as a replacement to the original product in terms of the quality and the differentiation of
product. The overall threat for the substitution of the products is one of the most important in
the expansion for any of the companies into a new country or place (Hartley and Claycomb
2013). In case of Five Guys, the threat for substitution is lesser as the customers would not
settle for inferior grade and low quality product with less amount of differentiation in the sect

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of time. The overall threat for the product is low which makes the expansion one of the great
in the company.
3. Internal environmental analysis for Identifying strengths and weakness
3.1 VRIO analysis
VRIO analysis is one of the major analysis for any company or brand in terms of the
internal environmental analysis in terms of the competitive advantage of the company as well
as the resources that are being used by the company to evaluate the dimension of the brand.
The VRIO analysis of the company is assessed in terms of Value, Rareness, Imitability and
Organization of the place.
Value – The value of a resource is defined as the amount of money that is being allocated for
a particular resource and the amount of ease that is there for the allocation of that particular
amount of resources. Hartley and Claycomb (2013) states that the resource that is being used
in the company Five Guys comprises of all the three types of financial, physical as well as the
human resources. The physical resources inclusive of labour has medium to high value due to
lack of apt labour forces, the financial resources are available at a well manner whereas the
human resources are available at a major rate (Babin and Zikmund 2015). The overall value
of the company in terms of the resource analysis is therefore high.
Rareness – The resources that are being used by the brand for the manufacturing of the
products are not rare as the raw materials needed for the manufacturing of the food item is
sourced from organic and local firms and places making the overall product nor rare in any
sense. Babin and Zikmund (2015) states that in addition, the overall rareness of the product is
in coordination to the amount of limited resources which is not the case.

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Imitability – The difficulty in imitating the sources is medium to low as the sources from
which the company attains its raw materials and other resources are easily available and can
be attained without any difficulty (Czinkota and Ronkainen 2013). The amount of difficulty
for the attainment of the sources is very low making the products and the sources one of the
less imitable in the period.
Organization – The sources from which the raw materials and other forms of resources are
attained by the company can be well utilised by the brand in making the overall internal
environment of the sources heavily attainable. Czinkota and Ronkainen (2013) states that the
organization which is used for the manufacturing of fast food items is wholly able to make
the food item worth for its customers making the competitive advantage of the food better.
Analysing the VRIO analysis for the company, the internal environment is being
assessed which means that the possibility for setting up of a good food item and its
production is of worth value.
4. Identification of Competitive strategies
4.1 Porter’s Generic Strategies
Michael Porter in the year 1985 established the factors that led to the identification of
competitive strategies for the strategies related to the concepts of cost leadership and
differentiation in the focus. Hull (2014) states that the creation of a special product for the
market and also providing a special service for the niche market. The ways of competing
among the different types of concepts in the market condition of the firm is being assessed
here.
There are two basic types of competitive strategies in the market that provides
advantage to the company for the better business in the future (Dobbs 2015). The overall

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analysis leads to approximately three generic strategies for making sure that the amount of
performance in the industry is at par the cost leadership strategies and in keeping mind with
the differentiation and focus.
Figure – Porter’s Generic Strategies
(Source – Dobbs 2015)
Cost Leadership – One of the chief marketing plans for an organization is to have the lowest
cost in the industry which makes the cost of the company one of the most advantageous
position for the economy. Cardeal and Antonio (2012) states that the variation in the cost
advantage of the company varies from the technological point to the economies of scale
which is helpful in making the company less probable for cost amount in the span of time.
The overall cost leadership for Five Guys is not that low as the company is more focussed on
producing more quality food rather than focusing on the cost of the product. Though the
company tries to keep the cost of the product at a bare minimum, the work is done not at the