Management Theory and Environmental Forces in the Fast Food Industry Abstract The development of American management theories

has strongly influenced the fast food industry. The application of these theories has lead to new efficiencies and provided competitive advantages that help to differentiate fast food restaurants from the competition. Management Theory and Environmental Forces in the Fast Food Industry The evolution of management thought since the industrial revolution in America has lead to the development of many management theories used in our corporate environments today. The application of these theories in the fast food restaurant industry has shaped the structure of these companies into fast, inexpensive companies that bring value to customers on a global scale. Evolution of Management Thought Following the industrial revolution of the nineteenth century, scientists and researchers were seeking various techniques and scientific methods to cope with the new ways of life; they were departing from a predominantly agrarian (based on agriculture) economy to a new industrial one. The goals of departing from an agrarian economy were to make life better resulting in the improvement of the global economy. Management as a disciplinary science which consists of the study of planning, organizing, leading, and controlling human and other resources to achieve organizational goals efficiently and effectively (Jones & George, 2009); plays a key role to the success of such endeavor. As a result of this global revolution, management has gone through a

dramatic evolutionary process which Daniel Wren, in The Evolution of Management Thought, divided into three main eras: The Scientific Management era began in the mid-nineteenth century to end by the early twentieth, the social person management era that started around the second or and third decade of the twentieth century to end in the early second half of the century, and lastly the modern management era that began around the second half of the twentieth century (Wren, 1994). Scientific Management Era The era that follows the industrial revolution in the US is the scientific management era named due to the fact it goes beyond a simple managerial historical time frame to reach a managerial scholastic movement. It is therefore during this era started two decades after the revolution that Colleges in America had begun to integrate a management field in their curriculum. The first school to integrate management study in their programs was the Wharton School of Finance and Economy at the University of Pennsylvania in 1881 (Wren, 1994). Scientific management became a field of study and the era in which the evolution of modern management started. Frederick W. Taylor (1856-1915), considered as the father of scientific management, is at the root of many of the scientific progressions. Taylor approached management as a systematic study of relationships between people and tasks for the purpose of redesigning the work process to increase efficiency and maximize productivity (Jones & George, 2009). Taylor did not live to see the ultimate evolution of what he had started, but he certainly paved the road for many followers that would transform the science of management to become what it is today. The Social Person Management Era This era is dominated mostly by management experiments. It was a theoretical time frame in the evolutionary process of the science of management. As a continuation of the previous era, 2

the social person management era was not only concerned with the efficiency of the organization but also the well-being of the worker. Among the experiments was the famous managerial Hawthorne research developed at the Hawthorne plant of Western Electric, the equipment supply arm of AT&T, during the Great Depression. This scientific study was focused solely on the people rather than the organization and their productivity. According to Wren, Hawthorne brought a shifting emphasis including: an increase[d] concern for people rather than production; exhortations to play down the rigidity of organizational structure; financial incentives as one of motivational picture; more concern for the illogic of sentiments rather than the logic of efficiency. (Wren, 1994). The results of the Hawthorne and other experiments that followed laid bare the importance of considerate supervision and incentives in the wellness of workers. Although there were many names involved in the Hawthorne experiment such Dugald C. Jackson, Charles E. Snow, Homer Hibarger, Georges Pennock and Clarence Stoll, the names that dominated the era was Elton Mayo, Mary Parker Follett, and Chester I. Barnard. There were many management theories that emerged during the person management era resulting from the various experiments. Despite the strong pressure from the financial and social crisis generated by the depression, management thoughts continued to develop. With the contribution of technology, communication, and international business relation, as the world was approaching the end of the twentieth century, the science of management was ready for a new era. The Modern Management Era While the previous eras were concerned with production, efficiency, and well-being of the people within the organization, the third era of management appears to be preoccupied with both aspects of the discipline of studies. During that era a great variety of management theories and

principles emerged to help face the social, financial, and political challenges that influence organizations. In that perspective Wren affirms, [t]he modern era has seen a proliferation of approaches to management thought and an increasing awareness of the environment of management. The search continues for both better theory and improved practice in management. It is this search that makes the study of management a most worthy intellectual and practical exercise. (Wren, 1994). The names of the management scholars that influenced this era were William H. Newman, Georges Terry, and Harold Koontz, etc. Despite their influence and contribution to the era, they are seen as Henri Fayol heirs whose life corresponds more to the previous era. Because Fayol was the first to formulate a management theory with its principles, his name resonates throughout the entire era as the person to whom all the others scholars had drawn their inspiration. The date of this third era of management thought was not really clear, but most of the work seemed to be performed around the second half of the twentieth century. Appropriation of American Business Industries to Management Thoughts The evolutionary process of management thought starting from the early management era to the Modern management area affected all the sectors of the American economy. Private and public sectors that produce goods or services were influenced somehow by management methods, theories, and principles stemming out the three eras. The restaurant fast food industry is considered to explore the direct impact of one of these eras on the industry. The organizational structure of one or two restaurant will be analyzed to investigate this relation. Sonic Drive-in Quick Service Restaurant

Sonic-Americas Drive-in was founded 1953 which correspond exactly to the second management era of the development of management thought. The restaurant has started in Oklahoma by Troy Smith under the name of Top Hat Drive-in. In 1959 the company was forced to change its name to adopt the name of Sonic-America Drive-In. One of the unique features of Sonic is the Carhop, a member of the Sonic crew who delivers food directly to customers cars (Adventures, 2010). Employees are trained to be polite, enthusiastic as they are delivering this courteous service to customers who wait in their cars. Their aim is that no one has to leave their vehicle to receive their meal, which was brought to them. In addition to this superior customer value, Sonic avails a large variety of drinks in their menu. It is clear that Sonics focus was on the people, its customers and their wellness. This business culture is directly related to the person management era where their focus was rather on the people and their welfare. Having been founded in the 1950s, Sonic fast food restaurant is a product of its era where its services are valued today by a great number among the American population. Indeed, Sonic is not classified among the very top of the fast food restaurants, but their management strategy and business culture allow them to remain in business, despite the cost and all other technical complexities that the company has to consider to keep their doors open. The Evolution of Scientific Management Theory The Industrial Revolution brought about significant changes in business and manufacturing which increased the demand for products and services worldwide. Modern machines and equipment had changed the way products were produced and distributed. As our global economies increased capacity to manufacture and produce products, it brought about significant changes in traditional business models. Products had shifted from small low volume facilities to larger more industrialized factories. As the business models changed, the traditional management theories and

techniques became practically inadequate to meet the requirements of the new age of industrialization. The Industrial Revolution created an environment that required individual workers to execute several different tasks within an organization. Managers struggled with the tasks of creating ways to increase their organizations efficiencies while maintaining product and employee effectiveness. After reviewing the evolution of management theories, which includes Scientific Management, Administrative Management, Behavioral Management, Management Science, and Organizational Environment Theories, we decided to research and determine which of these theories are most commonly applied in our modern day fast food restaurant industry. Scientific Management Theory Following the Industrial Revolution, Frederick W. Taylor published his work, The Principles of Scientific Management, in which he described how the application of the scientific method to the management of workers greatly could improve productivity (NetMBA, 20022010). Taylor suggested optimizing the way that tasks were performed and simplifying the jobs enough so that workers could be trained to perform their specialized tasks in the most efficient order and sequences of motions. He established four principles in an effort to increase employee production: study the way workers perform their tasks and develop a systematic process to improve the process, standardize the new process, train and match the worker with the right skill to the appropriate task, and establish acceptable performance levels, pay level, and performance incentives. Several years after Taylor studied and defined the scientific management theory, the manufacturing industry throughout the world began using his principles to increase efficiencies in workflow. It wasnt until 1955 that his theory was applied to the restaurant industry. McDonalds

is credited with being the first fast-food restaurant to implement and formalize organized production-line techniques. They also implemented the use of job specialization to break each workers task down into smaller tasks. This was repeated until all tasks have been broken down to the smallest possible level. The resulting tasks were then rationalized to find the single most efficient method for completing each task. All other methods were then deemed inefficient and discarded. The process of management and high work specialization is now being used by McDonalds and other fast-food restaurants throughout the industry to efficiently make and sell their products. Prior to using scientific management, workers were generally trained in several areas and expected to perform effectively in a fairly short period of time. They did not focus on a specific area enough to develop and increase efficiency. George Ritzer, Sociology Professor at the University of Maryland, suggest that as result of the McDonalds franchise, the later part of the Twentieth Centurys socially structured form of the fast-food restaurant has become the organizational force representing and extending the process of rationalization further into the realm of everyday interaction and individual identity (Ritzer, 1993). Ritzer coined the term McDonaldization to describe this sociological shift in our society. McDonaldization is the process by which the principles of the fast-food restaurant are coming to dominate more and more sectors of American society, as well as the rest of the world (Ritzer, 1993). Administrative Management Theory The second management theory that is commonly used in the fast-food restaurant industry is the administrative management theory. Defined as the study of how to create an organization structure and control system that leads to high efficiency and effectiveness (Jones & George, 2009). Todays fast food restaurant industry has become a multi-billion dollar franchised industry.

In order for a business to achieve and sustain its competitive advantage, it has to be designed to promote efficiency and effectiveness in producing its products. Max Webers Theory of Bureaucracy is widely recognized and applied throughout the fast-food industry as an effective method of maintaining management control and effectiveness. His theory established a defined system of authority that holds managers accountable at all levels of authority, and ensures that competent managers are holding positions based on merit. His theory also ensures that all workers know and understand their supervisor responsibility and chain of authority. Under Webers philosophy of management, organizations must also establish clearly defined and publish their Standard Operating Procedures (SOPs). Although Henri Fayols theory of management supports Webers philosophy; he expands it into 14 principles of management. Fayols 14 Principles of Management provided detail that allowed managers to increase the levels of efficiency and control. Although many franchised fastfood restaurants have proven that they can effectively manage production, their greatest challenges are the retention of personnel. Stability of Tenure of Personnel is the principle that the entire restaurant industry struggles with each year. Although the Chick-fil-A franchise has the lowest employee turnover rate in the industry, it still has 60 percent hourly worker turnover rate. The industry average is 107 percent (Schmall, 2007). In the late 90s, Dominos Pizza was experiencing a 157 percent annual turnover rate. The U.S. Department of Labor estimates that it costs about 33 percent of a new recruits salary to replace a lost employee. In other words, it could cost $11,000 in indirect training expense and lost productivity to replace an experienced full-time employee making $33,000 (Employee Turnover). Understanding Fayols principles, the industry has continued to shift more effort and resources toward retention of employees. Organizations are now offering incentives to workers in

the form of educational benefits, favorable work schedules, improved work environments, and higher pay. The industry realizes that targeted incentive systems help solve many of the problems. Behavioral Management Theory Most management theories were based upon the managers perspective. Although Weber, Fayol, and Taylors theories were all well respected in the management field of study, Mary Parker Follett was the first to approach the creation of management efficiencies from the workers perspective. She knew that workers possessed a tremendous amount of institutional knowledge and valuable feedback. She recorded information that could be learned by not only observing workers, but actually allowing them to take part in the innovation process. Although similar to one of Max Webers principles, Follett also supported the belief that authority should go with knowledgewhether it is up the line or down (Jones & George, 2009). She believed that the more vertical the management hierarchy, the more ineffective it became. Folletts focus on human relations and manager interaction serves as the foundation for our current management system. Due to her contributions, managers within the fast food restaurant industry are now better prepared to address employee social issues and resolve conflict. Her theory of employee feedback has lead to some of the industries greatest equipment, and product innovations. Her theory of interdepartmental teams is not widely used within the industry, due to the fact that restaurants are now commonly computer based and more ergonomically designed. They are designed and organized to maximize reciprocal interdependence between groups with minimal verbal communication. Management Science Theory Management Science Theory allows managers the ability to quantitatively evaluate and measure production efficiency and effectiveness. The restaurant industry has always relied on

various forms of scientific management in order to maintain a competitive advantage. Gaining control over the logistics in a cost effective manner can lead to the competitive advantage in the industry (Behera, 2009). The process of managing and accurately forecasting logistic requirements, customer demand, and production can have a significant impact on an organizations ROI. Todays information technology is providing the fast-food industry the capability to use Management Information Systems (MIS) to create, transfer, and receive information faster while significantly improving their overall Total Quality Management. Samuel Truett Cathy, Founder and CEO of Chick-fil-A, believes if operators train their employees to the best of their ability, the quality of work will be high. If employees produce high quality work, less people would need to be hired, fewer mistakes would be made and cost to producer would be cut (DiLegge, 2009). The goal of the industry is to increase product quality and demand while reducing operational inefficiencies. Direct and Indirect Forces Influencing the Fast Food Industry Globalization in the fast food industry has brought about many forces and conditions that affect the way an organization operates. It is essential for managers to understand all these forces, for they bring new opportunities and threats, and ultimately affect the way an organization performs. Managers must first distinguish these opportunities and threats as either coming from the task environment or the general environment. The task environment contains forces that have the most immediate and direct effect, and so they place pressure and influence on managers on a daily basis (Jones & George, 2009). Whereas in the general environment, these forces are not as direct and are more difficult to identify and respond to. Within the fast food industry the two forces that have a direct effect are customers, and competitors; while sociocultural and demographics have an effect on the general environment.

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Customers Customers are the groups or individuals that purchase the goods or services that are produced by an organization. It is essential for organizations to understand the perceptions and value of their customers in order to be successful. One critical dimension to the recent trend in society has been the increased pace of life. This means that to be successful, fast food industries need to be efficient: just-in-time production, faster service, streamlined operations, and tight schedules (Ritzer, 2004). Customers want to get what they need quickly and with less effort. As for the product itself, fast food restaurants are increasing efficiency by making their products simpler. The foods within these organizations require few ingredients, and are easy to prepare, serve, and eat (Ritzer, 2004). The name finger food came about due to the fact that in order to consume these foods individuals do not need utensils. For example, the Egg McMuffin constitutes an entire breakfast eggs, bacon, and an English muffin. Eating this sandwich is far easier than sitting down at the table and consuming each one separately. Furthermore, the most recognized finger food is the Chicken McNugget. People can eat these bite sized pieces virtually anywhere, even driving (Ritzer, 2004). Moving on from product efficiency, another factor that must be considered with the fast food chains is wait time. Time is a critical factor for individuals, and because of this they choose to eat at fast food restaurants. Customers have expectations on what an acceptable wait time consists of, and organizations need to make sure they meet these expectations. Having long lines or wait times can prevent a customer from even entering the store, because they value their time over the food. Furthermore, a customer may perceive these long lines and wait times as the restaurant being inefficient. Additionally, having a customer wait will affect their perception

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negatively, and even though there may be nothing wrong with the quality of food that they were served, the customer will still complain (Church & Newman, 2000). In the fast food industry, there are three components to waiting: the time taken to reach the front of the queue, the time taken to place an order, and the time taken for the order to be served (Church & Newman, 2000). Upon entering an establishment, customers are prepared to wait a short time (approx. 2.5 minutes) before getting impatient. However, factors that increase a customers patience include: if the restaurant is busy, staff is working hard, the lines are moving, they are not time constrained, they are in a group, they have a large order, the wait is equitable, and if they are attended to (Church & Newman, 2000). The restaurant can overcome these issues by properly allocating their employees to ensure the upmost efficiency and speed. Other strategies to lessen the impact on customer delays include having some sort of distraction (i.e. food sampling or packet distribution); although most notably a simple apology would suffice (Church & Newman, 2000). Another critical factor is the amount of time taken to be served. Studies have found that customers will wait up to 1.5 minutes before becoming dissatisfied. However, this time is less critical than the wait time because customers have already put a commitment to the order (Church & Newman, 2000). To deal with the increased demand of speed and efficiency restaurants have the option to purchase simulation software. This software mimics actual operations of the business, and allows management to analyze the operation system. Management can simulate situations by changing the variables and noticing the resulting effects based on the time frame they choose (Church & Newman, 2000). Another strategy used to increase efficiency is the idea of putting the customer to work. Roy Rogers, for example, makes customers take their naked burger to the fixin bar where they can add their own condiments. Other examples include, having customers fill their own cups

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of ice and soda, as seen at Burger King, McDonalds and Subway; to even filling their plates at lunch buffets at Pizza Hut (Ritzer, 2004). McDonalds is also testing self-ordering kiosks allowing customers to place their orders there. Besides the trend of efficiency and timeliness, society has the bigger is better mentality. Quantity is just as important as quality. This mentality is carried out through the products at these fast food restaurants: Big Mac at McDonalds, the Whopper and Double Whopper at Burger King, Biggies and Biggie Fries at Wendys, Colossus at Jack in the Box, Big New Yorker at Pizza Hut, Mega meal at KFC, and Double Decker Tacos at Taco Bell. A larger serving is more desirable due to the fact that customers feel like they are getting more for their buck (Ritzer, 2004). Furthermore, the marketing strategies of fast food restaurants place more importance on the portion size, rather than quality, with the names they give their products. It has been observed that individuals go to these fast food chains, not for a delicious, pleasurable meal, but rather to refuel. It is far more efficient for customers to refuel with meals that are high in calories and carbohydrates so that they can continue on with their busy lifestyles (Ritzer, 2004). Competitors Competitors are other organizations that provide goods or services that are similar to a certain organizations goods or services (Jones & George, 2009). Todays business environment is hyper-competitive, and organizations are forced to rethink their strategic initiatives (Parsa & Kwansa, 2002). In the past, the foodservice supply chain focused on changes that were directly affecting their organization, such as: technology, quality, customer service, efficiency, and speed. However, future survival will require fast food organizations to go beyond these factors, and instead focus how these forces are affecting the end-consumer (Parsa & Kwansa, 2002). Within the fast food industry there are many direct competitors, such as McDonalds, Burger King and

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Wendys dominating the burger arena; or Dominos and Pizza Hut managing the pizza sector. There are also indirect competitors such as McDonalds to Pizza Hut. Both these restaurants operate as fast food restaurants; yet when individuals are looking for a burger, Pizza Hut will not satisfy their desire. The main success factor in all restaurants in the fast food industry is just as the name implies it is, fast food. Customers time is valuable and restaurants need to make sure they work efficiently and at a fast pace. If not, their business is lost to direct competition (Church & Newman, 2000). McDonalds and Burger King are two dominant forces in the fast food industry. Both are similar in their production and delivery systems and must employee differentiation strategies to stand out. The difference between these two organizations is in the way they promote. Burger King promotes based on the food it offers; while McDonalds promotes the McDonalds experience (Church & Newman, 2000). Furthermore, the trend of expansion has also changed in the same way for each restaurant. Primarily these organizations were focused on large, high volume streets, whereas now they are shifting their focus to smaller towns that once were thought of not being able to support these restaurants (Church & Newman, 2000). Fast food restaurants are also making their presence known in small satellite, express, or remote locations, even though these arent full scale restaurants. These small storefronts can be found in department stores, service stations, even schools (Ritzer, 2004). Competition further comes into play with globalization. The US and Canadian markets have become so saturated that the focus domestically is to gain market share, rather than new growth (Lee & Ulgado, 1997). To gain growth opportunities, retailers in the fast food industry are focusing on international expansion. Managers need to be aware of the organizations current position within the ever-changing environment. They also need to make sure they do not fall behind, but instead try to outdo their

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competition. For example, restaurants may bring back specialty items for a limited time to boost sales. McDonalds brought back the McRib in 2010, for a six week period. Restaurants may even have specials on certain days of the week. McDonalds also has $.49 and $.59 hamburgers and cheeseburgers. Managers can also use Porters five forces model, to analyze the competitive forces and potential threats in the environment. The forces include: the level of rivalry among organizations in an industry, the potential for entry, the power of large suppliers, the power of large customers, and the threat of substitute products (Jones & George, 2009). Sociocultural Sociocultural forces are the pressures that come from the social structure of a country or society or from national culture (Jones & George, 2009). This external force is extremely important especially with the rapid expansions that the fast food industries are taking internationally. The value for time, for instance, is different in America than in Asian or European cultures. In America, society is always on the go, and so the traditional family style dinner rarely applies these days. Individuals simply refuel or snack on food instead of having a formal meal (Ritzer, 2004). On the other hand, Asian and European countries consider eating a social, family-oriented, and entertaining experience. These collective societies depend on the fast food restaurants to meet their needs, and if not, then react quickly to make sure expectations will be met (Lee & Ulgado, 1997). The McDonalds in Beijing has an environment that allows individuals to hang out and have birthday parties or other ceremonies. Moreover, McDonalds employs receptionists, called Aunt McDonald and Uncle McDonald, who are hired to deal with children and parents (Ritzer, 2004). In the United States, marketing tactics that fast food restaurants use promote low price and quick service speed; however, this will definitely not be appropriate for international markets.

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Instead, the fast food restaurants located internationally need to become part of their local culture. McDonalds, for example, is very successful at transforming their menu to adjust to local traditions. In Norway, McDonalds has the McLaks, - a grilled salmon sandwich; in Netherlands, the Groentenburger a vegetarian burger; in Uruguay, McHuevos hamburgers with a poached egg, also the McQuesos toasted cheese sandwich; in Japan, chicken tatsuta sandwich fried chicken spiced with soy sauce and ginger, with cabbage and mustard mayonnaise; in Philippines, McSpaghetti tomato sauce or meat sauce with frank-furter bits; and in Russia, Pirozhok potato, mushroom and cheese pies. Other fast food restaurants place as much efforts in local customization: during Passover in Israel, Pizza Hut sells pizza with unleavened bread; also, KFCs fried chicken uses barbeque sauce to replace breading (Ritzer, 2004). Demographics Demographic forces are the outcomes of changes in, or changing attitudes toward, the characteristics of a population, such as age, gender, ethnic origin, race, sexual orientation, and social class (Jones & George, 2009). The role women play; have a factor in the frequency of eating out. More women are now part of the workforce, which means that after a full day of work, taking care of personal improvements, and other social activities, women are too tired to come home and prepare a meal. Furthermore, it has been shown that families who have two sources of income spend almost twice as much money going to restaurants, than a single income household (Reiter, 1991). In addition, the number of single family households has also increased. With societies fast pace, single parents no longer have the time to work, take care of the children, and take care of whatever else may need to be done throughout the day (Ritzer, 2004). As a result, more single families are eating at fast food restaurants because it provides a quick meal at a low price.

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Going beyond the patterns of consumption, the changing demographics also affect the labor force. Women who are married and are over twenty-five, and full-time high school students, compose the two largest sections of the part-time workers. Both of these groups are also limited in the days and periods of time that they can work. With this said, these two groups are the sources of cheap labor for many industries, including fast food industries (Reiter, 1991). Nutrition also plays a big role in the food choices people make. In the past two decades, there has been a shift in food consumption patterns. Consumers are consuming and purchasing less beverage milks, eggs, pork, and beef; while consuming and purchasing more poultry, fish, fruits and vegetables (Parsa & Kwansa, 2002). People are also becoming more aware of cholesterol, sodium and fat levels in food. In order to retain their competitive advantage restaurants must realize these health concerns and act on them. Menu changes that have occurred in the fast food industry include: decaffeinated coffee, salad bars, skinless poultry, low fat or low calorie salad dressings, margarine, grilled chicken sandwiches, low fat frozen yogurt, low fat/low cholesterol mayonnaise, egg substitutes, salt substitutes, and fresh fruit (Price & Lawson, 1992). The new menu items that help to satisfy this trend of low calorie and light and low fat, serves to supplement, not replace the traditional menu (Kara, Kaynak, Kucukemiroglu, 1997). Kentucky Fried Chicken, for example, changed its logo to KFC because of the negative connotation associated with the word fried. Besides changing the logo, KFC also offers healthy menu options such as Tender Roast, Honey BBQ sandwiches, and the bucket of Kentucky Grilled Chicken. See Table 1 below for a comparison of socio-economic and demographic characteristics

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of fast food consumers.

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Linking Value Driven Management to Environmental Forces One of the key elements of Value Driven Management is that the creation of knowledge and its adequate use leads to the creation of value (Pohlman & Gardiner, 2000). This knowledge 19

can come from many different sources including the numerous environmental forces that commonly affect the fast-food industry. Restaurants must tap into this knowledge as much as possible so that decision makers can have the best information available to make sound decisions. How well a company is able to predict and react to environmental forces will determine what value drivers a company should invest time, allocate money, and focus resources on. Customers are Value Drivers The customer is one of the forces in the task environment and according to Value Driven Management is also a key value driver. There is no doubt that an organizations success depends on its response to customer needs. If you don't have any customers, you are not in business. If you don't have enough customers, you are always trying to find ways to attract more. Whether they are internal or external, your customers are the reason you are in business. In the fast-food industry, customers demand fast service, but most of all they demand low prices. McDonalds is no doubt the king of value as defined by their very popular dollar value menu, which accounts for about 13% of their total sales. A key concept that McDonald's has been able to grasp is that value means something different to everyone. For a college student, it may be a sandwich for a buck, but for a working mother, it may be driving through for a breakfast latte that's a dollar cheaper than Starbucks (York, 2009). Fast-food companies, like McDonalds, spend millions of dollars trying to find out what customers want. By understanding what the customer wants and values, McDonalds is able to turn what could potentially be a value destroyer into a value adder. Competitors and Competitive Advantage Create Value Another value driver and environmental force that companies face is that generated by its competitors. The behavior and values of one competitor will very likely influence the behavior and values of another. In the fast-food market, the rivalry between competitors is probably the

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most threatening force that a company must unavoidably deal with. And there is no more popular rivalry in the fast-food industry than that of McDonalds and Burger King, which constantly compete for the consumers hard earned dollar. During hard economic times, more than ever, these two giants have to fight more and more to win business as the amount of money consumers have to spend on dining out declines. "Consumers are strapped for cash, and the fast-food companies with the best value proposition will win over customers'' (Sterrett, 2009). Burger King, Wendy's, Taco Bell, KFC and Sonic, all quickly reacted to environmental competitors forces, by adding items to their value menu as soon as McDonald's removed its most popular sandwich, the double cheeseburger, from its value menu. This strategic action was planned to steal existing McDonald's customers who are looking for inexpensive eats as the recession forces consumers to cut spending. If there is one value driver that can quickly become a value destroyer is ignoring the competitor drivers that quickly transform and shape the fast-food industry. Competitive advantage is very important in market driven economies. According to Pohlman & Gardiner, delivering superior customer value can be a competitive advantage more valuable than the product itself. Another characteristic present in both global environmental forces and value-driven management is the belief that the marketplace provides vital information. Supply vs. demand is one of the oldest recognized principles in economics. In a free-market society, resources flow to those organizations that can make the most productive and profitable use of them, and hence create the most value over time. If a company chooses to focus on activities in which it doesn't have a comparative advantage, then the company will most likely not be able to compete with others that do and this will be reflected in lower revenues and losses. Such a company, no doubt, is wasting resources. Companies exploiting their comparative advantage will

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satisfy customers and earn higher revenue. A company cannot create or maintain a competitive advantage unless it knows what the competition is doing. This environmental force, also a value driver, is so important that analytical models have been created to study the competitive forces in a specific industry. A company needs to analyze what their competitors are doing to strive to be more successful than its rivals in attracting and retaining customers. In the fast-food industry the most important competitive advantage is proving to the customer that you carry an overall better value in your menu (a combination of quality, portion size, and pricing). To succeed in building a competitive advantage a company must provide buyers with what they perceive as superior value. Between McDonalds and Burger King, this means a good burger at a lower price or a better burger that is worth a higher price. The Value in Recognizing Demographics For the business manager, identifying the demographic groups that are of interest to your company can mean the difference between success and failure. Like other forces, demographics present managers the opportunity to grow their business, but at the same time present threats to shrink it. Demographics in a given area can change over time. For instance, two long-term demographical changes for which many companies are taking notice lately are the growing percentage of Hispanics and the growing percentage of baby-boomers soon retiring in the USA. Demographical studies can be used to identify who your customers are (present and future), how they shop, where they live, how much they spend, and how likely they are to purchase your product. By studying their customers, fast-food companies identify changing needs in the marketplace and adjust to them. If changes in demographics are not analyzed and taken seriously, they could become value destroyers. A common trend among fast-food companies nowadays is producing target advertising, rather than mass marketing which traditionally tries to reach the most

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people possible via popular media channels. Fast-food companies rely heavily on attracting younger children with target advertising depicting onsite playgrounds and free toys inside their meals. Another popular trend nowadays, as a result of demographical studies, is leaving stores open past regular dinner hours. More and more we see popular fast-food chains promoting the Open Until Late campaign because theyve found new opportunities in the hours following the dinner time. Burger King forced its franchisees to stay open until 2AM because the extended hours are a response to consumer demand in a 24-hour society where people no longer work traditional 9-to-5 days" (Nation's Restaurant News, 2009). Dennys, Taco Bell and others are attracting younger late-night customers by bringing in local bands to play at their stores. Demographical studies show that most customers visiting the late shift are males 18-25 (Dawson, 2009). Some demographical environmental forces can be matched with similar external cultural value drivers. Socio-Cultural Forces Dictate What Consumers Value Socio-cultural forces emanate from values in the local society or community, just like external cultural value drivers. An organization is undoubtedly impacted by the values in a community. Big fast-food companies witness this very clearly when expanding and opening stores in foreign countries. Kentucky Fried Chicken has over 2,200 stores in China and is by far the largest American fast-food restaurant there (McDonalds is second with 800 stores). According to top executives, KFCs success in China is attributed to adapting to the Chinese market by continuously modifying its Chinese KFC menus to suit local tastes. They shifted their menu away from all fried food and now offer preserved egg porridge and fried dough alongside their world famous chicken. Like many foreign companies in China, KFC discovered it cannot rely just on brand recognition for growth but rather must instead adapt to local tastes and lifestyles. KFC has

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given a Chinese twist to its menu by adding dishes similar to the food that millions of Chinese customers buy from street vendors or small restaurants on their way to work every day. Conclusion As the fast food industry continues to grow and compete on a global scale, it must constantly measure what their customers value. In order to maintain a competitive advantage, these companies must deploy differentiation strategies and value adders that exceed the customers expectations. The fast food industry is so efficient at applying the proper management theories and understanding what their customers value, that American society as a whole has started mimicking this model in organizing their day to day lives.

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