Strategic Planning of Wendy’s Essay

Strategic Planning of Wendy’s Essay

This paper will provide detailed analysis of the strategic planning for Wendy’s. The paper will cover the history of Wendy’s, its current strategies and objectives, mission and vision statement. The revised mission and vision statement will also be discussed. The competitive profile matrix will be helpful in analyzing the competitive position of the company in the market and it will cover the analysis of Wendy’s, KFC and Yum Brands. The internal factor evaluation and external factor evaluation matrix will be helpful in analyzing the strategic position of the company in the market.

The SWOT Matrix will assist in analyzing the different strategies adopted by Wendy’s restaurants for effectively managing the internal, as well as, external factors. The SPACE matrix will be based on the strategic position of the firm in the competitive market place. The BCG Matrix will assist in analyzing the market position of the company, as per the industry growth rate. The Grand Strategy Matrix will be helpful in assessing the competitive position of the organization in the growing market. It will aid in recommending strategies for the firm. The QSPM Matrix will be helpful in evaluating the strategy, which will lend a hand to the company in becoming successful in the competitive market place.

The analysis of the income statement and balance sheet of the corporation will be helpful in evaluating net profits gained by it over a specified period. The discussion about the legal and ethical, as well as, social and environmental issues will also be covered in the paper. Then, the recommended strategies for Wendy’s will be discussed. The paper will be helpful in effective analysis of the company’s position in the global marketplace.

Company History

Wendy’s is a successful fast food restaurant chain, which is effectively operating in the competitive business environment. It is among the biggest fast food chain of hamburgers, having its operations in more than 6,700 locations of US and other countries. It is a fully owned subsidiary of the Wendy’s International Inc. In the year 1969, Wendy’s was established by Dave Thomas and Robert Barney in the city Columbus, of the Ohio State. It was named as ‘Wendy’ after the nickname of the founder’s (Dave Thomas) daughter. During the early stage of its establishment, the founders mainly focused on providing high quality hamburgers to the clientele (About Us, 2009).

Initially, the offering and menu at the Wendy’s restaurant was very simple for economizing the labor cost. The decorations at the restaurant were refreshing and based on the original ideas of Dave Thomas. The main concern of the founders was to provide a place to the family for eating ‘square shaped hamburgers’ in a homely environment. After being successful at in the first venture, Dave Thomas established another Wendy’s restaurant at another location. Then, he decided to implement franchising strategy and allotted license for expanding his business at new locations. With the assistance of its effective advertising campaigns, the number of restaurant chains increased and provided soaring expansion to the shareholders (History of Wendy’s Restaurant, 2006).

It also assisted the fast food chain restaurants of Wendy’s in becoming the leading chain after McDonald’s and Burger King. The Wendy’s chain also offers innovative and diverse products to the customers for increasing its market share. Presently, it has fast food chains at USA, Canada, Greece, Japan, New Zealand, Mexico, Hungary, etc. The main product offerings of the Wendy’s Restaurant Group comprises of hamburgers, chili baked, chicken sandwiches, French fries, frosty dessert, fresh salads, kids meals, soft drinks, etc. The product offering is available in different quantities, as per the requirements of the customers. More than 1400 restaurants are under the direct control of Wendy’s and around 5,250 restaurants are under the franchisee of Wendy’s. The company also operates in around 3,700 restaurants of Arby’s Group, which has been merged in the Wendy’s Group (About Us, 2009).

There is a high competition in the market for Wendy’s restaurants. The main competitors of the company are McDonald’s, Burger King, KFC, Yum Brands, Jack in the Box, etc. The company’s advertising strategy is effective and plays significant role in the success of the Wendy’s restaurants in the competitive business environment. It is a well known brand for providing quality products and services, as well as, for rendering refreshing family environment to the customers. It assists in differentiating Wendy’s from the competitors (History of Wendy’s Restaurant, 2006).

Current Strategies and Objectives

Wendy’s restaurant stringently maintains its core competency of providing old fashioned hamburgers to the customers. The firm is focusing on global expansion for increasing its market potential. Along with this, it is also emphasizing on the ‘Market Penetration Strategy’ for differentiating its brand and gaining additional revenues from the operations in different countries. It is also essential for the company to increase its operational efficiency by expanding its business into untapped market locations. Apart from this, it has widened its product offering for being competitive in the market (About Us, 2009).

The corporation’s main objective is to provide superior quality products and customer service. It is also concerned towards strengthening the knowledge and learning of the human resource for developing innovative products and increasing the operational efficiency. Along with this, the company also concentrates on increasing its presence in the global market place for increasing its overall revenues (History of Wendy’s Restaurant, 2006).

Mission Statement

Current: The present mission statement of the Wendy’s International Inc. is concerned towards performing excellently with the assistance of its culture. It is focused on making flexible policies for the human resource, so that the desired performance can be accomplished by involving the employees for effectively satisfying the customers (About Us, 2009).

Revised (or, new): The vision of the company can be attained by effective development and implementation of the mission statement. The Management of the company should focus on providing innovative products and services to the customers and should consider all the groups of stakeholders. The company’s commitment towards providing quality products is effective. The firm should focus on making proper adjustments in the products and services, as per the requirements of the customers. By analyzing the social responsibility of business, the Management of Wendy’s Restaurants should provide substantial returns to the investors.

Vision Statement

Current: The present vision statement of Wendy’s International Inc. is concerned towards consistently increasing the value of the stakeholders by providing leverage on the independent brands of the restaurant (About Us, 2009).

Revised (or, new): The vision statement of Wendy’s should be concerned towards the development of the company as a mostly acceptable and valued brand in the fast food restaurant chain in the world. The company is effectively accomplishing its vision statement by establishing more than 6,700 restaurants in approximately 29 countries.

Competitive Profile Matrix (CPM)

Wendy’s

KFC

Yum Brands

Critical Success Factors

Weight

Rating

Weighted Score

Rating

Weighted Score

Rating

Weighted Score

Advertising

0.15

4

0.6

3

0.45

3

0.45

Market Share

0.10

3

0.3

2

0.2

2

0.2

Product Quality

0.15

4

0.6

4

0.6

3

0.45

Customer Service

0.05

3

0.15

3

0.15

3

0.15

Global Expansion

0.15

3

0.45

2

0.3

2

0.3

Financial Position

0.15

2

0.3

2

0.3

2

0.3

Management

0.10

2

0.2

3

0.3

2

0.2

Price Competition

0.07

3

0.21

3

0.21

3

0.21

Customer Loyalty

0.08

3

0.24

3

0.24

3

0.24

Total

1.0

3.05

2.75

2.5

External Factor Evaluation (EFE)

Key External Factors

Weight

Rating

Weighted Score

Opportunities

Growth and expansion of the Chinese and Global Market

0.25

4

1.0

Alterations in the trends of Food Industry

0.10

3

0.3

Wendy’s merger with Triarc’s

0.15

4

0.6

Establishing Healthy Lifestyle Programs

0.10

3

0.3

Threats

Downturn in the Economy

0.15

3

0.45

Rising level of Competition

0.10

3

0.3

Future Commodity Risk is High

0.15

4

0.6

Total

3.55

Internal Factor Evaluation (IFE)

Key Internal Factors

Weight

Rating

Weighted Score

Strengths

Strong Market Position

0.25

5

1.25

Family concerned, Refreshing and Homely Environment

0.10

3

0.3

Increasing revenues from the Franchising Strategy

0.15

5

0.75

Operational Efficiency in Global Market

0.1

4

0.4

Weaknesses

Heavy Revenue Dependency from US

0.15

4

0.6

Fall in Liquidity Position

0.15

3

0.45

Reduction in Productivity of Human Resource

0.1

2

0.2

Total

1.0

3.95

Strengths-Weaknesses-Opportunities-Threats (SWOT) Matrix

Strengths

Weaknesses

  1. Strong Market Position

  2. Family concerned, Refreshing and Homely Environment

  3. Increasing Revenues from the Franchising Strategy

  4. Operational Efficiency in Global Market

  1. Heavy Revenue Dependency from US

  2. Fall in Liquidity Position

  3. Reduction in Productivity of Human Resource

Opportunities

S-O Strategies

W-O Strategies

  1. Growth and expansion of the Chinese and Global Market

  2. Alterations in the trends of Food Industry

  3. Wendy’s merger with Triarc’s

  4. Establishing Healthy Lifestyle Programs

  • Strong market position will assist in expanding its business in the emerging Chinese and Global market. (S1, O1)

  • The environment of the restaurant provides assistance in establishing healthy lifestyle programs. (S1, S2, O4)

  • Operational efficiency and franchising strategy will be helpful in effective management of merger. (S3, S4, O3)

  • Development of partnership with the global companies and especially, in the Chinese Market. (W1, O1)

  • Expansion of market operations for attaining Competitive Advantage. (W2, O1, O3)

  • Defining new strategies for managing the Global Partners. (W3, O2, O3)

Threats

S-T Strategies

W-T Strategies

  1. Downturn in the Economy

  2. Rising level of Competition

  3. Future Commodity Risk is High

  • Enhancement of the advertising strategy for reducing the affect of competition (T2, S3)

  • Increase the productivity and quality. (T1, T3, S4)

  • Introduction of new products & services for reducing the effect of competition. (T2, W1)

  • Enhancement of the ‘Market Penetration Strategy’ for managing the liquidity position effectively. (T3, W2)

Strategic Position and Action Evaluation Matrix (SPACE)

The SPACE matrix represents that the Management of Wendy’s Restaurant uses conservative strategy, which is identified on analyzing the key internal and external factors. The financial position of the company in the competitive market place is effective in comparison to its competitors. In accordance with the competitive profile matrix, Wendy’s is attaining competitive lead in the advertising, customer loyalty, market share and global expansion. The product development strategy will be helpful for the organization in adding value to the economic position.

Boston Consulting Group (BCG) Matrix

Market Share

Industry Growth

High

Low

High

Stars

Question Marks

Low

Cash Cows

Dogs

On analyzing the financial position and industry growth of the current global market, the Wendy’s fast food restaurant chain is located in the question marks position of the BCG matrix. The company’s present market structure is uncertain due to the increase in the level of competition and downturn in the global economy. Therefore, it is essential for the company to follow ‘Product Development Strategy’, which will assist in increasing the market potential.

Grand Strategy (GS) Matrix

Grand Strategy Matrix assists in analyzing and establishing substitute strategies for the company. On the basis of the two important factors, which are competitive position in the market and market growth rate, the position of the company’s strategy in the competitive market place can be evaluated (Stahl & Grigsby, 1997).

The Wendy’s fast food restaurant chain lies in the ‘quadrant II’ of the Grand Strategy Matrix. It can be interpreted that the company has high market growth with high market potential, but it is representing weak competitive position. Therefore, for being more competitive in the market, it requires implementing ‘Market Penetration’ and ‘Product Development’ strategies. It will also assist the organization in leading the premium market with strong competitive position.

Quantitative Strategic Planning Matrix (QSPM)

It is essential for the Management of the Wendy’s restaurants to follow the strategies of ‘Market Penetration’ and ‘Product Development’ for attaining strong competitive position with increased market share in the competitive business environment.

Key Internal Factors

Weight

Market Penetration

Product Development

Strengths

Strong Market Position

0.25

4

1.0

4

1.0

Family concerned, Refreshing and Homely Environment

0.10

2

0.2

3

0.3

Increasing Revenues from the Franchising Strategy

0.15

3

0.45

3

0.45

Operational Efficiency in Global Market

0.1

4

0.4

3

0.3

Weaknesses

Heavy Revenue Dependency from US

0.15

3

0.45

3

0.45

Fall in Liquidity Position

0.15

3

0.45

2

0.3

Reduction in Productivity of Human Resource

0.1

2

0.2

2

0.2

Total

1.0

3.15

3.0

Key External Factors

Weight

Market Penetration

Product Development

Opportunities

Growth and expansion of the Chinese and Global Market

0.25

3

0.75

4

1.0

Alterations in the trends of Food Industry

0.10

2

0.2

2

0.2

Wendy’s merger with Triarc’s

0.15

4

0.6

4

0.6

Establishing Healthy Lifestyle Programs

0.10

3

0.3

3

0.3

Threats

Downturn in the Economy

0.15

2

0.3

2

0.3

Rising level of Competition

0.10

2

0.2

2

0.2

Future Commodity Risk is High

0.15

3

0.45

2

0.3

Total

1.0

2.8

2.9

On the basis of the analysis of key external factors, the strategy of ‘Product Development’ is more beneficial for the company. On the basis of the examination of key internal factors, the strategy of ‘Market Penetration’ is more beneficial for Wendy’s restaurants.

Income Statement and Balance Sheet Analysis

The income statement of the company describes that the net income of the company is decreasing continuously. The main reason of the reduction in the net profit amount of the company is an increase in the cost of the goods sold. The increase in the price of the product and services are not substantial according to the increases in the price of the raw material, which is also causing a decrease in the firm’s profit. But at the same time, the revenues from the franchise are increasing continuously. The expenses of goodwill impairment are also an important reason of a huge amount of loss for the company in the year 2008 as compared to the previous years. The decrease in the profit amount is also affecting the value of the shareholders.

The Company’s balance sheet reflects that in the current year i.e. 2008, its total assets & total liabilities have increased, as compared to the last years. But, total assets of the firm have risen by about 219.38%, while total liabilities have marked an increase of about 124.95% that is a good indication for the corporation. The balance sheet also reflects the negative working capital, which elucidates that company is unable to make payment to short term creditors and has also not applied its funds effectively. The total shareholders’ equity is also showing an increasing trend in contrast to the last year, which means that shareholders are getting significant returns on their investment.

Legal/Ethical and Social/Environmental Issues

The Legal and Ethical issues, as well as, Social and Environmental issues faced by Restaurant Groups are:

  • Providing unhygienic food products with cheaper quality and high price. The company has strong orientation towards providing superior quality products to the customers and fulfilling its social responsibility of business.

  • The business code of conduct differs from one country to another and therefore, the ‘wage difference’ exists among the employees of different countries. The productivity of the staff gets affected due to this (Fitzpatrick & Bronstein, 2006).

  • The management of waste products is creating environmental issues for the company and therefore, the company has started utilizing recyclable materials in its servings.

  • The company also faced legal issues due to the irresponsible behavior of employees in supplying the food products to the customers (Wendy’s Says Hairy Burger Is Isolated Incident, 2009).

Conclusion

It can be interpreted from the above discussion that Wendy’s is effectively performing in the competitive market place. The company has become successful in attaining loyalty of customers present in the international market. The firm though, requires focusing on utilizing its strengths for overcoming its weaknesses and capturing the opportunities for overcoming the possible threats from the market. For increasing its market share and being more competitive in the market, Wendy’s should implement ‘Market Penetration’ and ‘Product Development’ strategies.

Recommendations

The market performance and financial position of the corporation is effective from the perspective of the key Stakeholders. The Management of Wendy’s should implement the following strategies for making its market position strong, which are:

  • The company should focus on the development of new products for effectively expanding its business at new locations in the global market place, which will also assist in increasing its market share (Wilson & Gilligan, 2005).

  • The Market Penetration Strategy will be helpful for Wendy’s in establishing strong brand identification and gaining revenues from the other countries in the diverse economic conditions of the US Economy.

  • The corporation also requires focusing on increasing its operational efficiency for providing effective customer service and superior quality products. It will assist in adding value to the product offering for attracting new clientele.

Work Cited

“About Us.” Wendy’s Old Fashioned Hamburgers. 2009. 12 May 2009 <http://www.wendys.com/about_us/>

Fitzpatrick, Kathy & Bronstein, Carolyn. “Ethics in Public Relations: Responsible Advocacy.” 2006.

“History of Wendy’s Restaurant “. 2006. 13 May 2009 <http://www.syl.com/travel/historyofwendysrestaurant.html>

Stahl, Michael & Grigsby, David. “Strategic Management: Total Quality and Global Competition.” 1997.

“Wendy’s Says Hairy Burger Is Isolated Incident.” Wtov9.com. 2009. 13 May 2009 <http://www.wtov9.com/news/18951680/detail.html>

Wilson, Richard & Gilligan, Colin. “Strategic Marketing Management: Planning, Implementation and Control.” 2005.

Appendices

Financial Ratio Analysis

Growth Rates %

Wendy’s

Industry

S&P 500

EPS

-71.78

Sales (5-Year Annual Avg.)

44.08

7.72

14.43

Capital Spending (5-Year Annual Avg.)

83.82

2.00

14.24

Price Ratios

Current P/E Ratio

6.67

93.78

P/E Ratio 5-Year High

N/A

1.23

29.68

P/E Ratio 5-Year Low

N/A

0.42

6.35

Price/Sales Ratio

0.98

0.28

1.69

Price/Book Value

0.87

3.23

3.40

Price/Cash Flow Ratio

3.36

10.44

Profit Margins

Gross Margin

23.83

6.04

38.56

Pre-Tax Margin

-21.84

1.87

11.27

Net Profit Margin

-18.24

1.29

7.81

5-Yr Gross Margins (5-Year Avg.)

30.60

51.38

38.74

5-Yr Pre-Tax Margin (5-Year Avg.)

-11.98

4.11

17.37

5-Yr Net Profit Margin (5-Year Avg.)

-9.44

2.05

12.15

Financial Condition

Debt/Equity Ratio

46.71

116.28

132.64

Current Ratio

0.88

1.20

1.59

Quick Ratio

0.83

1.08

1.34

Interest Coverage

0.20

1.20

26.51

Investment Returns %

Return on Equity

-31.77

6.78

20.75

Return on Investment

-16.25

1.51

9.55

Return on Assets

-14.37

1.24

6.84

Return on Equity (5-Year Avg.)

-18.06

5.45

19.80

Return on Investment (5-Year Avg.)

-6.94

3.42

10.89

Return on Assets (5-Year Avg.)

-5.22

2.58

8.05

Management Efficiency

Income/Employee

-6,210

1,680

65,372

Revenue/Employee

34,056

14,690

821,214

Receivable Turnover

39.05

8.09

14.90

Inventory Turnover

104.36

11.25

10.16

Asset Turnover

0.79

0.18

0.82

(Source: Google Finance)

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