BBA 4001

STRATEGIC MANAGEMENT

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Content

TOPIC PAGES

3-6
1.1 INTRODUCTION OF ORGANIZATION
2.0 PORTER FIVE FORCE ANALYSIS 7-27
2.1 SWOT ANALYSIS
2.2 EVALUATION OF SUBWAYS STRATEGIC
STRENGTHS AND WEAKNESSES

3.0 CONCLUSION 28

4.0 REFERENCE 29

5.0 COURSEWORK 30-33

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1.0 Introduction

Subway prides itself in being a healthy fast food chain offering a variety of

sandwiches and subs. Founded in summer of 1965, by Fred Deluca and investor Dr.

Buck. As a growth strategy, and in effort to increase profits, they embarked on the

idea of franchising their business

The vision of Subway restaurants is want to be the no 1 Quick Serving Restaurant

(QSR) franchise in the world, while delivering fresh, delicious sandwiches and an

exceptional experience.

In 1965, Fred Deluca had just graduated from high school in Bridgeport, Connecticut,

USA. Like many young adults his age, he had dreams of attending college. Although

he was a hard-working, competent and dependable young man, the $1.25-per-hour he

earned working at the local hardware store wouldnt be enough to finance his

education.

The staff of Subway restaurants always challenge themselves each other to succeed

through teamwork, against shared goals and to be accountable for their

responsibilities.

Every organization has its goals that they wanted to achieve. This is to make sure they

can become a standard and high performance or quality restaurants among all the

competitors. Subways restaurants also have its own goals which are build their

business relationship by serving each other. For instance, their customers, their

communities and much as they do within their families.

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There will also a mission for every Subway restaurants all over the world. The

mission is delight every customer so that they want to tell their friends- with

great value through fresh ,delicious made to-order sandwiches and an

exceptional experience.

The Subway restaurants strategic intend to formulating a unique value proposition,

targeting an underserved customer segment, structuring an aggressive franchising

model and expanding internationally.

The growth strategies are all about considering ways to grow, there are four possible

product-market combinations. Subway expands with its existing products to new

markets (Market development). This happens through the franchisees to whom

Subway offers an easy concept. Subway is not looking for new markets or places to

open restaurants, the franchisee contacts Subway.

There will be some strategic analysis of Subway restaurants which are growth

strategies and porters Generic Strategies.

By lunchtime on the first day Fred and Petes submarine shop was open, customers

were pouring in. From that day on the company continued to grow. Fred and Pete had

a goal of opening 32 submarine sandwich shops within 10 years. By 1974, eight years

after they opened their first sandwich shop, Fred and Pete owned and operated sixteen

shops throughout the state of Connecticut, only halfway to their goal.

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Brian is known as the very first SUBWAY franchisee setting the new standard for

the SUBWAY business model. This enabled Pete and Fred to not only reach their

goal, but surpass it. Today, entering their 46th year of operation, SUBWAY restaurants

is the worlds largest submarine sandwich chain operates more units in the US,

Canada and Australia than McDonalds does. Countless awards and accolades have

been bestowed upon Fred DeLuca and the SUBWAY chain - the SUBWAY name and

its products have even appeared in numerous television and motion picture

productions. The SUBWAY franchise has come a long way from the modest sandwich

shop in Bridgeport, CT.

Discouraged, Fred decided to ask Dr. Peter Buck, an old family friend, for some

advice. The two had known each other for years and Fred half expected Dr. Buck to

loan him the money for college after telling him of his plans to study to become a

medical doctor. Instead, Dr. Buck gave Fred an idea that would change his life and the

lives of people around the world.

As Fred and Pete looked to grow the business, talk turned to franchising, an idea they

had previously dismissed as something only for the big guys. Determined to

succeed, Fred and Pete decided franchising was the key to achieving their goal. So

Fred met with his friend Brian Dixon and made him an offer he couldnt refuse. He

offered Brian a loan to buy one of their restaurants, but to sweeten the deal, Fred told

Brian that if he didnt like the business, he could return it and owe nothing.

Porters Generic Strategies is all about a differentiation strategy calls for the

development of a good product or service that offers unique attributes that are valued

by customers. Subway does not focus on just one segment; it has a broad target scope.

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Furthermore, the advantage of Subway is the product uniqueness. The customer can

select from a range of sandwiches and customize them. The model below shows

Subways position.

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2.0 The Five Forces that Shape Industry Competition

Nowadays due to current financial crises and low purchasing Power of Buyers

(Consumer) and their loyalty with brand in not much strong because consumers are

looking for something cheap instead of becoming brand loyal. So Subway must have

to manage the strong buyer's power in order to get more market share. In UK context

there is always a big Threat of Substitute as lot of convenience shops, mid-range

restaurants, precooked food and some of the health food shops are available in the

market, and they are providing substitutes of Subway to the consumers. Fast food

industry is facing a stiff competition as there are lots of fast food chains available for

consumer in other words more Competitive Rivalry. The example of Mc Donald's,

KFC, Burger king etc are the big competitors of Subway. They are competing each

other in term of price, quality, branch networking as overall demand of their products

is increasing.

Michael Porter came up with a framework called Porters five forces. Porter wanted

to clarify that an industry is being influenced by five different forces. They are rivalry,

buyer power, threat of entry, supplier power and threat of substitutes. This framework

helps companies understand the strength of current competitive situation and also the

strength of a position the company likes to move into.

It is important to a company to know how many competitors there are in the market.

If there are only few competitors, then you have a lot of power and vice versa, the

more competitors there are the less power you have. It also depends on what

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competitors are offering to their customers. Customers do not come to you if they do

not get a good deal from you.

The Porter Five Force Analysis is all about the competition in the industry, potential

of new entrants into industry, power of suppliers, power of customers and threat of

substitute products. The name of forces is named after Michael E. Porter, this model

identifies and analyzes 5 competitive forces that shape every industry, and helps

determine an industry's weaknesses and strengths.

There is always a Threat of New Entrant in this market because of the low setting up

cost and no product differentiation in the specific fast food industry. As the UK fast

food market is concern there are lot of examples of new set up in that particular field.

Overall the world market of fast food suppliers are concern Bargaining Power of

Supplier is more due to the alliances among the supplier are taking place in order to

get more market share and profit as more potential and demand of their products in

international market as far as the farming industry is concern.

The number of buyers has a huge effect on this one but also how powerful a buyer is.

In this kind of market situation the buyers are the ones who set the price.

Suppliers play a big role also. Production companies need raw materials and they get

them from suppliers. This involves a relationship between the buyer and the supplier.

If there are only few suppliers in the market, suppliers can sell their products at a high

price and buyers cannot do anything about it.

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New companies are entering the market all the time. Every company should be able to

enter and exit the market whenever they want. In reality there are some factors which

can make the entering really hard, for example, the cost of entry vary from business to

business, the competition in the market and the government which creates barriers.

In this model, substitute products or services refer to products or services in other

industries. Companies have to think about how easily their products or services can be

substituted. So in other words, companies owners have to look at also what their 14

competitors are doing and what other types of products or services customers could

buy from them instead.

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The second competitive forces will be power of suppliers. Suppliers exert power in

the industry be threatening to raise prices or to reduce quality. Powerful suppliers can

squeeze industry profitability if firms are unable to recover cost increases. If a firms

suppliers have bargaining power they will Exercise that power, sell their products at a

higher price and squeeze industry profits.

We need to know that the suppliers are likely to be powerful if industry is dominated

by a few firms, suppliers products have few substitutes, buyer is not an important

customer to supplier, suppliers product is an important input to buyers product,

suppliers products are differentiated and suppliers products have high switching

costs.

The profit of supplier will be reduced if and only if the supplier forces up the price

paid for input. It follows that the more powerful the customer (buyer), the lower the

price that can be achieved by buying from them. By going through all of these,

suppliers will find themselves in a powerful position when there are no or few

substitute resources available, the customer is small and unimportant, there are only a

few large suppliers, the resource they supply is scarce, the supplier can threaten to

integrate vertically, the cost of switching to an alternative supplier is high and the

product is easy to distinguish and loyal customers are reluctant to switch.

Thus, what is the factors and how much power the supplier has is determined by

factors such as uniqueness of the input supplied. It states that if the resource is

essential to the buying firm and no close substitutes are available, suppliers are in a

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powerful position.

Next factor is number and size of firms supplying the resources. A few large suppliers

can exert more power over market prices that many smaller suppliers each with a

small market share.

Moreover, cost of switching to alternative sources is also one of the factors that

determine the power of supplier. A business may be locked in to using inputs from

particular suppliers e.g. if certain components or raw materials are designed into

their production processes. To change the supplier may mean changing a significant

part of production.

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The third competitive forces will be Potential of new entrants into industry which are

just same as intensity of rivalry within the industry. Why they are so afraid of the new

entrants into this industry. This is because If new entrants move into an industry they

will gain market share & rivalry will intensify. The position of existing firms is

stronger if there are barriers to entering the market. If barriers to entry are low then

the threat of new entrants will be high, and vice versa.

Barriers are will important to be known as they are vital in determining and knowing

the threat of new entrants. An industry can have one or more barriers. The following

are common examples of successful barriers.

The first successful barrier will be economies of scale available to existing firms. This

means that lower unit costs make it difficult for smaller newcomers to break into the

market and compete effectively.

The third successful barrier will be regulatory and legal restrictions. It states that Each

restriction can act as a barrier to entry.

E.g. patents provide the patent holder with protection, at least in the short run.

Moreover, the barriers which are successful also include access to suppliers and

distribution channels. A lack of access will make it difficult for newcomers to enter

the market

Next barrier will be product differentiation (including branding). Existing products

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with strong USPs and/or brand increase customer loyalty and make it difficult for

newcomers to gain market share.

In addition, barriers also include Investment cost which clearly shows that High cost

will deter entry. High capital requirements might mean that only large businesses can

compete.

Furthermore, retaliation by established products. The threat of price war will act to

discourage new entrants. But note that competition law outlaws actions like predatory

pricing. Last barriers will be customer switching cost.

There will be some of the reasons that make an industry easy or difficult to enter. We

will explain the reasons clearly and summarise the issues we should consider. The

reasons that make an industry easy to enter will be common technology, access to

distribution channels, low capital requirements, no need to have high capacity and

output. Lastly, Absence of strong brands and customer loyalty. All of these will the

reasons that will make an industry enter easily into a market and compete with others.

In turn, there will also reasons that make an industry difficult to enter which are

patented or proprietary know-how, well-established brands, restricted distribution

channels, high capital requirements and need to achieve economies of scale for

acceptable unit costs.

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The forth competitive forces will be threat of substitute products or services. A

substitute is a product that performs the same or similar function as another product.

Microeconomics teaches that the more substitutes a product has, the demand for the

product becomes more elastic. Elastic demand means increased consumer price

sensitivity which equates to less certainty of profits.

As there are a lot of other restaurants in the city and each of them offer their specific

kind of food, the threat of substitute products becomes very high. One of the main

solutions of decreasing the threat is to keep in touch with customer preferences and

offer wide range of products. If this solution is implemented successfully, the

restaurant can maintain a competitive advantage over rival firms and be able to keep

customers rather than lose them to substitute restaurants.

The existence of products outside of the realm of the common product boundaries

increases the propensity of customers to switch to alternatives. For example, tap water

might be considered a substitute for Coke, whereas Pepsi is a competitor's similar

product. Increased marketing for drinking tap water might "shrink the pie" for both

Coke and Pepsi, whereas increased Pepsi advertising would likely "grow the pie".

Substitute products are produced in a different industry but crucially satisfy the same

customer need. If there are many credible substitutes to a firms product, they will

limit the price that can be charged and will reduce industry profits.

So we need to look into the keys to evaluate substitute products are products with

improving price or performance tradeoffs relative to present industry products. For

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example, the electronic security systems in place of security guards and fax machines

in place of overnight mail delivery.

Several factors determine the degree of competitive rivalry; the main ones are The

power of buyers and the availability of substitutes. It shows that if buyers are strong

and/or if close substitutes are available, there will be more intense competitive rivalry.

Next, Product differentiation and brand loyalty. The greater the customer loyalty the

less intense the competition. The lower the degree of product differentiation the

greater the intensity of price competition.

Thirdly, Capacity utilisation. The existence of spare capacity will increase the

intensity of competition. Furthermore, Market size and growth prospects. Competition

is always most intense in stagnating markets. The cost structure of the industry.

Where fixed costs are a high percentage of costs then profits will be very dependent

on volume. As a result there will be intense competition over market shares.

The factors also include number of competitors in the market. Competitive rivalry

will be higher in an industry with many current and potential competitors. Lastly, Exit

barriers are also one of them. If it is difficult or expensive to exit an industry, firms

will remain thus adding to the intensity of competition.

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The last competitive forces are bargaining power of customers (buyers)

Within a restaurant industry, the bargaining power of customers is very essential

aspect. This is because the prices should always be kept not higher than the

competitors prices. In this case customers power is strong as customer might set the

price. As soon as prices are increased way too much, the clients will leave our

restaurant and find another one. However, the idea of our business is that we are the

restaurant for students that provide food and drinks for quite reasonable prices. So this

power can be medium.

Powerful customers are able to exert pressure to drive down prices, or increase the

required quality for the same price, and therefore reduce profits in an industry. A great

example in the UK currently is the dominant grocery supermarkets which are able

exert great power over supply firms. There will be some of the factors which are

important in determining the bargaining power of customers.

The first factors will be The cost of switching. It is clearly states that customers that

are tied into using a suppliers products (e.g. key components) are less likely to switch

because there would be costs involved.

The second factor that is used in determining the power of customers is Number of

customers. It states obviously that the smaller the number of customers, the greater

their power.

Moreover, The threat of integrating backwards. It shows that If customers pose a

threat of integrating backwards they will enjoy increased power.

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Next, the factors also include their size of their orders. It explains that the larger the

volume, the greater the bargaining power of customers.

Eventually, the last once will be number of firms supplying the product. The smaller

the number of alternative suppliers, the less opportunity customers have for shopping

around.

The buyer groups are likely to be powerful if buyer has full information, buyers are

concentrated, purchase accounts for a significant fraction of suppliers sales, products

are undifferentiated, buyer presents a credible threat of backward integration and

buyers face few switching costs.

All of these clearly emphasize that buyers compete with the supplying industry by

bargaining down prices, forcing higher quality and playing firms off of each other. We

also need to know what is the time that customers tend to enjoy strong bargaining

power. It only occur when there are a few if them, they find it easy and inexpensive to

switch to alternative suppliers, they can choose from a wide range of supply firms, the

customer purchases a significant proportion of output of an industry and they possess

a credible backward integration threat that is they threaten to buy the producing firm

or its rivals.

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2.1 SWOT Analysis

SWOT is an acronym for Strengths, Weaknesses, Opportunities and Threats. By

definition, Strengths (S) and Weaknesses (W) are considered to be internal factors

over which you have some measure of control. Also, by definition, Opportunities (O)

and Threats (T) are considered to be external factors over which you have essentially

no control.

Situation analysis in which internal strengths and weaknesses of an organization, and

external opportunities and threats faced by it are closely examined to chart a strategy.

SWOT stands for strengths, weaknesses, opportunities, and threats. See also PEST

analysis.

SWOT Analysis is the most renowned tool for audit and analysis of the overall

strategic position of the business and its environment. Its key purpose is to identify

the strategies that will create a firm specific business model that will best align an

organizations resources and capabilities to the requirements of the environment in

which the firm operates. In other words, it is the foundation for evaluating the internal

potential and limitations and the probable/likely opportunities and threats from the

external environment. It views all positive and negative factors inside and outside the

firm that affect the success. A consistent study of the environment in which the firm

operates helps in forecasting/predicting the changing trends and also helps in

including them in the decision-making process of the organization.

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SWOT is meant to act primarily as an assessment technique, though its lengthy record

of success among many businesses makes it an invaluable tool in project

management.

The SWOT analysis enables companies to identify the positive and negative

influencing factors inside and outside of a company or organization. Besides

businesses, other organizations, in areas such as community health and development

and education have found much use in its guiding principles. The key role of SWOT

is to help develop a full awareness of all factors that may affect strategic planning

and decision making, a goal that can be applied to most any aspect of industry.

A SWOT analysis is commonly used in marketing and business in general as a

method of identifying opposition for a new venture or strategy. Short for Strengths,

Weaknesses, Opportunities and Threats, this allows professionals to identify all of the

positive and negative elements that may affect any new proposed actions.

A tool that identifies the strengths, weaknesses, opportunities and threats of an

organization. Specifically, SWOT is a basic, straightforward model that assesses what

an organization can and cannot do as well as its potential opportunities and threats.

The method of SWOT analysis is to take the information from an environmental

analysis and separate it into internal (strengths and weaknesses) and external issues

(opportunities and threats). Once this is completed, SWOT analysis determines what

may assist the firm in accomplishing its objectives, and what obstacles must be

overcome or minimized to achieve desired results.

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SWOT Analysis

Then, we want to use SWOT? SWOT is meant to be used during the proposal stage

of strategic planning. It acts as a precursor to any sort of company action, which

makes it appropriate for the following moments which are refining and redirecting

efforts mid-plan, exploring avenues for new initiatives, identifying possible areas for

change in a program and making decisions about execution strategies for a new

policy.

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When using SWOT analysis, be realistic about the strengths and weaknesses of your

organization. Distinguish between where your organization is today, and where it

could be in the future. Also remember to be specific by avoiding gray areas and

always analyze in relation to the competition. Finally, keep your SWOT analysis short

and simple, and avoid complexity and over-analysis since much of the information is

subjective. Thus, use it as a guide and not a prescription.

Subway is an American restaurant franchise that primarily sells submarine sandwiches

(subs), salads, and personal pizzas. It is owned and operated by Doctor's Associates,

Inc. (DAI). Subway is one of the fastest growing franchises in the world with

approximately 33,556 restaurants in 92 countries/territories as of October 1, 2010. It

is the largest single-brand restaurant chain globally and is the second largest

restaurant operator globally after Yum! Brands (35,000 locations).

Subway's main operations office is in Milford, Connecticut, and five regional centers

support Subway's growing international operations. The regional offices for European

franchises are located in Amsterdam, Netherlands. Australia and New Zealand are

supported from Brisbane, Australia; the Middle Eastern locations are supported from

offices located in Beirut, Lebanon; the Asian locations from Singapore; India and the

Latin America support center is in Miami, Florida. In the UK and Ireland the company

hopes to expand to 2,010 restaurants by some time in 2010.

Strength

Subway has well established itself as a brand in the fast food industry and having

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brand recognition all over the world. Due to its great strategies the company has

become the leading franchise in the United States in a very short period of time. The

company has even positioned itself in places like hospitals, churches, schools and

popular retail stores like Home Depot and Wal-Mart. This makes the start up cost of

franchises low. The strengths and weakness components of a marketing plan reflect an

evaluation of the firms internal situation. What are the things the firm does well, and

where are they below standard? The opportunities and threats reflect an assessment of

the external environment the firm faces, Reid (2010).

The company has been using some non-traditional channels for making its network

strong and the growth rate of the company has also been increasing year after year.

As summary, Subway restaurants possess the strengths of great degree of subs

customization, low startup costs, largest fast food restaurant chain in the world by the

number of outlets. All restaurants are owned by franchisees, marketing and

promotional strategies, partnerships with Britain and American Heart Associations

and choice of healthier meals.

Weaknesses

The decoration and look of the franchises is said to be old an outdated. Another

problem with franchises is that the satisfaction level of the customers is not the same

across franchises and also some franchises perform very poor.

The dcor and the look of the franchises seems to be old and outdated. Service

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commitment is not consistent from store to store. This could be related to staff as the

turnover rate of the employees is very high which explains why they lack motivation.

Other weaknesses include a small menu list, an increasing operational cost of

franchise etc.

Change is good in moderate amounts; however the company must be careful by not

believing that it must continually change its offerings in order to remain the market

leader. Too much change too soon can cause a company to lose favor with customers

and Subway has already shown signs of too much change, altering its menu multiple

times in the last five years.

As a result, the weaknesses of Subway restaurants including too much control over

franchisees, interior design of the outlets often looks cheap, services are not consistent

from store to store and high employee turnover.

Opportunities

Subway industry is still growing steadily despite of its slowdown in the economy.

Subway can invest more to expand its business in the international market and also

make improvements in its decoration and look to encourage dine-in. Signs of growth

in the virgin market sector. People turning healthier consciously. By improving the

customer service model customer loyalty and satisfaction can be increased. The target

costumer market group being from middle to upper- middle class. Continue to revise

and refresh menu offerings.

The company can invest more to expand its business in the international market and

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also make improvements in its decoration and look to encourage dine-in. By

improving the customer service model the satisfaction for the customer can be

increased and also the loyal customer base will increase.

The opportunities including introduction of drive-thru, increasing demand for

healthier food, changing customer habits and new customer groups and home meal

delivery.

Threat

The company faces serious threats from some of the large fast food chains in the

world which include Yum brands like Wendys, KFC, McDonalds etc. These

restaurants are very old and have developed large loyal customer base over the years.

Sales of sandwiches are growing 15 percent annually, outpacing the 3 percent sales

growth rate for burgers and steaks.

This increase in sales of the sandwiches has been a result of decreases in consumer

interest in hamburgers and fries and increases in demand for healthier options.

Subway has a large loyal customer base which developed over the years.

It had an easy entry into the industry being one the healthier fast food chains.

Economic downturn is one of the major threats caused because of the current

economic recession.

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The threats nowadays happened in Subway are lawsuit against Subway, Saturated fast

food markets in the developed economies, currency fluctuations, trend towards

healthy eating and local fast food restaurant chains.

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2.2 Evaluation of its strategic strengths and weaknesses

Largest fast food restaurant chain in the world by the number of outlets. Currently the

comapny operates 38,181 restaurants in 99 countries, more than McDonalds or any

other fast food chain operator.

According to my evaluation to the Subway restaurants strategic strengths are choice

of healthier meals. Subway offers a range of low calorie, fresh and nutritious food,

which you cant find in other fast food stores, at least not to such an extent. This

Subway strength meets current trend of eating healthier food.

Low startup costs. One of the reasons behind such a high growth rate of Subway

stores is the low startup costs. Subway stores are smaller and require less money for

leasehold improvements and equipment.

All restaurants are owned by franchisees. Subway doesnt own any restaurants itself

so it experiences less risk and can focus its efforts on marketing and growing the

franchise.

Marketing and promotional strategies. Subway employs superior marketing

techniques and promotional strategies to attract and grow their customer base. The

most successful Subways promotional offer was to offer footlongs for only $5, which

became a new pricing standard of a sub.

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Great degree of subs customization. Customers always like to choose and the more

choices they can make about their purchase the more satisfied they are with it.

Subway is better than any other large fast food chain in providing the choice of meal

customization.

After this I also do some evaluation to its weaknesses which will explain clearly in the

following. Subway is too much control over franchisees. Despite the fact that Subway

fails to ensure consistent quality throughout the stores it exerts too much control over

its franchisees. This is done through the contracts that are more favourable to the

franchisor. An example of such high control is seizeing of franchisee restaurants if the

later one is struggling to keep them open.

Partnership with Britain and American Heart Associations. Subway has received

certificates from both organizations that it serves health meal options, which is a great

reward and differentiates the business from other fast food restaurants.

High employee turnover. Subway Sandwich Artists job is a low paid and a low skilled

job. It results in low performance and high employee turnover, which increases

training costs and add to overall costs of Subway.

Next, interior design of the outlets often looks cheap. Subway restaurants lack the

interior design and quality that would welcome everyone to stay and feel more

comfortable than in the competitors restaurants.

Lastly, services are not consistent from store to store. The business struggles to ensure

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consistent services quality throughout it stores and so a service in one store may

please a customer when another may fail to do that.

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3.0 Conclusion

I think that Subway restaurants should introduce of drive-thru. McDonalds already

offer only drive-thru restaurants, which is a great opportunity for Subway to jump.

Subway can also make home meal delivery. Subway could exploit an opportunity of

delivering food to home and increase its reach to customers.

I guess Subway pray Subway get a location in the middle of nowhere with highway

traffic? This is what I have in my neighborhood with Subway alone...I could drive

passed about a half dozen Subways on my way home off of BW8.

Everything I have heard about a Subway franchise is that they are very hard to

compete. Margins are tight and competition is very fierce, even among your own

franchisee's. Entrepreneur magazine online has a lot of franchise info. What do you

want to know? How much do you have to invest?

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4.0 Reference

1. http://www.managementparadise.com/forums/principles-management-p-o-
m/208146-swot-analysis-subway.html

2. http://akashpawar.wordpress.com/2011/11/28/my-swot-analysis-on-subway/

3. http://www.strategicmanagementinsight.com/swot-analyses/subway-swot-analysis.
html

4. http://publications.theseus.fi/bitstream/handle/10024/23519/Liutu_Riina.pdf

5. http://www.ukessays.com/essays/marketing/subway-eat-fresh.php

6. http://www.docstoc.com/docs/142095589/subway-Porter-s-Five-forces-restauran
t---PPT-presentation

7. http://www.investopedia.com/terms/p/porter.asp

8. http://www.businessdictionary.com/definition/Porter-s-5-forces.html

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5.0 COURSEWORK

1) Transformation leaders have been able to command respect and to influence

strategy formulation and implementation because they tend to have THREE

key characteristics. Explain carefully each of them.

Programs A program is a statement of the activities or steps needed to accomplish a

single-use plan. It makes a strategy action oriented. It may involve restructuring the

corporation, changing the company's internal culture, or beginning a new research

effort. For example, Boeing's strategy to regain industry leadership with its proposed

787 Dreamliner meant that the company had to increase its manufacturing efficiency

in order to keep the price low. To significantly cut costs, management decided to

implement a series of programs:

Outsource approximately 70% of manufacturing

Reduce final assembly time to three clays (compared to 20 for its 737 plane) by

having suppliers build completed plane sections.*

Use new, lightweight composite materials in place of aluminum to reduce

inspection time.

Resolve poor relations with labor unions caused by downsizing and

outsourcing.

Another example is a set of programs used by automaker BMW to achieve its

objective of increasing production efficiency by 5% each year: (a) shorten new model

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development time from 60 to 30 months, (b) reduce preproduction time from a year to

no more than five months, and (c) build at least two vehicles in each plant so that

production can shift among models depending upon demand.

Budgets A budget is a statement of a corporation's programs in terms of dollars.

Used in planning and control, a budget lists the detailed cost of each program. Many

corporations demand a certain percentage return on investment, often called a "hurdle

rate," before management will approve a new program. This ensures that the new

program will significantly add to the corporation's profit performance and thus build

shareholder value. The budget thus not only serves as a detailed plan of the new

strategy in action, it also specifies through pro forma financial statements the

expected impact on the firm's financial future. For example, General Motors budgeted

$4.3 billion to update and expand its Cadillac line of automobiles. With this money,

the company was able to increase the number of models from five to nine and to offer

more powerful engines, sportier handling, and edgier styling.

The company reversed its declining market share by appealing to a younger market.

(The average Cadillac buyer in 2000 was 67 years old.) Another example is the $8

billion budget that General Electric established to invest in new jet engine technology

for regional-jet airplanes. Management decided that an anticipated growth in regional

jets should be the company's target market. The program paid off when GE won a $3

billion contract to provide jet engines for China's new fleet of 500 regional jets in time

for the 2008 Beijing Olympics.

Procedures, sometimes termed Standard Operating Procedures (SOP), are a system

of sequential steps or techniques that describe in detail how a particular task or job is

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to be done. They typically detail the various activities that must be carried out in order

to complete the corporation's program. For example, when the home improvement

retailer Home Depot noted that sales were lagging because its stores were full of

clogged aisles, long checkout times, and too few salespeople, management changed

its procedures for restocking shelves and pricing the products. Instead of requiring its

employees to do these activities at the same time they were working with customers,

management moved these activities to when the stores were closed at night.

Employees were then able to focus on increasing customer sales during the day. Both

UPS and FedEx put such an emphasis on consistent, quality service that both

companies have strict rules for employee behavior, ranging from how a driver dresses

to how keys are held when approaching a customer's door.

2) Please descried FOUR responsibilities of business.

1. Economic responsibilities of a business organization's management are to

produce goods and services of value to society so that the firm may repay its

creditors and shareholders.

2. Legal responsibilities are defined by governments in laws that management is

expected to obey. For example, U.S. business firms are required to hire and

promote people based on their credentials rather than to discriminate on non-

job-related characteristics such as race, gender, or religion.

3. Ethical responsibilities of an organization's management are to follow the

generally held beliefs about behavior in a society. For example, society

generally expects firms to work with the employees and the community in

planning for layoffs, even though no law may require this. The affected people

can get very upset if an organization's management fails to act according to

generally prevailing ethical values.

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4. Discretionary responsibilities are the purely voluntary obligations a corporation

assumes. Examples are philanthropic contributions, training the hard-core

unemployed, and providing day-care centers. The difference between ethical

and discretionary responsibilities is that few people expect an organization to

fulfill discretionary responsibilities, whereas many expect an organization to

fulfill ethical ones.

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