Analysis on Strategic System Management
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Strategic Planning is an integral part of any organisation irrespective of its nature, type and complexity. One of the components of this unit relates to System Management wherein an enterprise-wide administration of a series of systems, including computers, is carried out in a strategic manner (Bondarenko and et.al., 2017). This report focuses on taking into account a company operation and seeks to ascertain how its business is carried out. Additionally, it also aims to determine the main cost and income generated through such operations. The report also aims to measure corporate performance by comparing similar type of businesses in terms of profit, abilities and efficiency.
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For this purpose, Five Guys has been chosen so as to facilitate a successful discussion of its business activities by taking into account global expansion and analysing its corporate performance over the years. This organization is a part of UK’s Food Industry which was established by a family of five brothers in Virginia, US in 1986. Essentially, it’s a burger joint which focuses on the quality of the product rather than quantity. It has its own ways of making fries, burgers, milkshakes and producing the best quality food to its customers while maintaining the hygiene level at its best.
UK’s Food Industry
The Five Guys restaurant is a global organization originating from the United States of America and spreading to other parts of the world including UK. The Takeaway and fast food sector of UK has been a well-establish component of the food industry for quite a while (Ansoff and et.al., 2018). This industry has been performing well over the past five years. Among various fads and trends, one of the purchasing patterns depicted by the consumers showcased persistently is their need to have an economical and on-the-go food option. Additionally, over the years, takeaways have become more prominent. In the present-day-scenario, the demand among consumers has grown towards higher quality food which is low fat, salt and sugar as well as organic in nature. The main reason behind this trend is the increasing awareness among buyers towards their health.
Currently, the revenue of this sector accounted for £19.1bn with an annual growth of 1.9% ranging between the time periods 2014 and 2019 (Fast Food Sector of UK, 2019). Looking at the Brand Loyalty component of this sector, it is indicated that the consumers are more inclined towards spending their income on greater variety of restaurants which have adventurous tastes as well as a wide assortment of dining option available including Vegan alternatives of food to choose from. Comparing traditional branded restaurants with recent delivery-focused ones, the former were worth 4.9 billion British pounds in 2018 whereas the latter generated 2 billion pounds. Some of the main players of this industry comprise of:
- Fish and Chips
- Indian and Chinese Takeaway
Five Guys was established in Arlington, Virginia in 1986 by a family of five brothers. The main ingredients of their business model included Burgers and Fries. The outlet’s principle was to perfect the cooking process and serve their clientele in a manner that would their eating as well as overall experience in terms of service deliverance. One of the chief features of this company is that they do not have any sort of freezers available on-site, thus, each and every ingredient used by them is fresh and organic. This is due to the fact that preserving food produce in the freezers for longer periods of time results in deterioration of its quality as well as flavour to a great extent (Five Guys,2019).
With the demand for organic and healthier food options increasing in the fast food and takeaway sector of UK as well as other parts of the world, this is an attractive feature of Five Guys. In addition to this, the fast food chain does not use microwaves or automated timers or can-openers. This is due to the fact that the management of Five Guys believe that great cooking is more of an instinctive process rather than a timed event. Hence, the food is cooked based on sight, aroma and texture with maximum flavour ensured. For this purpose, the company is against the policy of corners cut or cheaper alternatives used as food produce so as to save costs.
Additionally, Five Guys is a firm believer of letting their customers decide what they wish to eat and in what manner. Thus, the company offers a multitude of possible toppings, approximately 250,000, along with mix-in 1,000 milkshake combinations. One can say that the customers are provided by a variety of customizable options which would take them to try all the combinations roughly 684 years if they consumed a product of Five Guys Outlet on a daily basis.
One can say that the company derives most of its income in the form of new store openings and improving their core store performance across all locations (Income Sources,2019).
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Value Chain Analysis
A Value Chain Analysis is a tool that is utilised by businesses to identify their primary as well as supportive activities that are critical in adding value to their final product along with facilitating recognition of points which may enable them to reduce costs and increase differentiation (Davis and et.al., 2018). Its components have been discussed as under:
- Primary Activities: These relate to those processes of Five Guys chain that is directly involved with the production and selling of its products to the targeted customers. These are enumerated as follows:
- Inbound Logistics: This stage of VCA includes carrying out a careful analysis of in-bound logistics which are mainly related to the suppliers who provide raw materials to the organisation that facilitates production of final goods or services in an efficient manner. For Five Guys, this includes focusing on those aspects which are related to the retrieval of fresh produce on a daily purpose which enable them to keep their ingredients organic at all times.
- Operations: These activities are related to those stages when the restaurant has ordered raw materials from their suppliers and they have reached the premises of the food outlet (Derindag and Canakci, 2019). In the context of Five Guys, it includes those processes which turn the fresh produce into an end product in the form of a burger or fries ready to be consumed by the customer. Through the analysis of this stage, the chain’s management is able to know whether or not the productivity level of the organisation is maximum or lacking. In addition to this, they are also able to ascertain weak points that can be improvised and contribute to increasing revenue growth as well as profitability of the business by improving restaurant sales.
- Outbound Logistics: Similar to Inbound Logisitcs, these activities include the process which facilitates deliverance of goods and services to the final consumers in a manner that is highly qualitative as well as less time-consuming.
- Marketing and Sales: One of the most important stages for any fast food chain outlet is how they market and sell their products as well as services. For Five Guys, the marketing and sales activities may include providing discounts, customization as well as advertising and other promotional activities undertaken by it. Through their analysis, the management is able to ascertain that whether or not such activities effective and integrated enough to facilitate improvisation of Brand Equity of Five Guys Chain (Ergunova and et.al., 2017).
- Services: Both Post and Pre-Sales Services are a crucial part of any organisation. In the case of Five Guys, the restaurant must ensure that no kind of false commitment is being made to the clients regarding their products or services in any manner.
- Support: These relate to those processes of Five Guys chain that are directly involved with the controlling and supporting the primary activities related to products and services of the fast food outlet. These are enumerated as follows:
- Firm Infrastructure: This component enables the management to undertake the primary activities in a manner which helps in maximisation of quality and differentiation (Lee, Hallak and Sardeshmukh, 2016). It includes business functions such as Quality Management, Accounting, Financing, planning and managing among others. For Five Guys, a firm infrastructure would help them to establish a strong position in the market.
- Human Resource Management: It is important for the organisations to ensure that their factors of production are capable enough to provide their customers with products and services in a highly qualitative manner (Manning, 2015). Five Guys would require a team of staff that are quick, calm and great at customer service so as to ensure that the business is able to suffice all the needs of their customers within a stipulated time. Thus, ensuring that the human resources are managed in a proper manner with proper training and efficient skill-set.
- Technology Development: Today, the utilisation of technology has become inescapable. Employing technology in various processes such as production, distribution, marketing and Human Resource procurement helps in minimisation of time taken to produce a particular product. Even though Five Guys does not utilise technology in production of its products such as burgers and fries, it does employ it for other purpose such as billing. Thus, enabling them to ensure technology supported customer service is provided to their clientele in an effective manner. Recently, the company has installed Battery-powered wireless sensors which ensure that the ingredients stored in coolers, prep rooms including the milkshake machines are fresh at all times (Technology in Five Guys,2016).
- Procurement: This component denotes the activities which are concerned with the purchase of inputs such as equipments, machinery, raw material and other supplies among others that are required for the production of a final product. It is important for Five Guys, to ensure that the costs incurred in procurement of such items does not result in minimizing their overall profits. This can be achieved by keeping track of alternative prices as well as the prices offered by suppliers regarding such supplies.
Thus, one can say that through Value Chain Analysis, Fast food outlets such as Five Guys are able to ascertain cost overrun centres and minimize them accordingly.
Values play an imperative role in businesses as well as in society. They can be defined as the core beliefs or fundamentals that govern the behaviour of an individual or a firm. A Value System is one which includes a protocol that needs to be followed by the management of an organisation across all levels. It was propounded by Michael Porter and is founded upon the concept of Value Chain Analysis (Value System,2019). Value System of Five Guys has been also illustrated in the Appendices (2) section of this report. Such a system encompasses those components which enhances one's work ethic by directly impacting their behaviour and facilitates establishment of trust, confidence and commitment among the members of the organisation. Hence, a Value System is concerned with the overall goals and objectives of the business rather than the individual aims of its employees that are desired to be achieved by exhibiting a decent or appropriate behaviour on the part of the employees of such an enterprise. It is worthy to note that a value system is not only internal but also external. This means that a value system identifies all those processes that contribute in value addition at various stages of value chain until the product is delivered to the final customer. In order to develop a strong Value System in an organisation, it is important to know that whether or not the employees share the same beliefs as that of the business or not. This is due to the fact that each and every entity comprises a certain set of values which they may or may not be fully aware of. As the time passes by, these values become prominent through the policies, behaviour as well as work ethic followed by the management of the company across all levels.
No individual would like to associate themselves with an organisation that does not allow their employees to work towards achieving their individual goals. The value system of Five Guys includes a comprehensive system of adding quality to the pool of employees associated with the business. This is achieved by Five Guys by ensuring that their staff has freedom to follow their passion in a sustainable manner (Steiss, 2019). Essentially, the Value System of Five Guys comprises the following components:
- Integrity: Integrity as a core value is crucial as it enables the employers to select, train and retain those individuals who demonstrate sound morals and principles at the workplace. In the context of given case scenario, the company believes in being straightforward, respectful, honest and instilling a behaviour among its workforce which enables them to take responsibility for their actions. In addition to this, Five Guys also opines that accepting help and sharing success as a team rather than individually is one of the most important part of its values. Thus, providing an atmosphere wherein the employees can be highly trustful of each other as well as dependable.
- Get It Done: Another core value of Five Guys encourages its employees to have a 'Get It Done' attitude that includes hustle, hard work and focus at its heart. It is important for companies to remain optimistic at all times otherwise no business would try to revive itself in the face of adversities. For a business like Five Guys where high customisation and deliverance of food at quick as well as accurate rate exists, this value is paramount. In this context, the company promotes a work ethic that enables the staff to communicate, work coherently as well as in support of one another so as to serve the clients in an efficient as well as qualitative manner.
- Enthusiasm: This component is concerned with how a business incentivise their employees for the contributions they make towards achieving the business goals in both short-term and long-term periods. The Fast food chain, Five Guys, enables their personnel to showcase their creativeness by encouraging the staff to engage in those activities which are of maximum interest to them. In addition to this, their team consists of those individuals who are ardent learners and energetic as its business model requires talent which is able to serve customers in a prompt manner without compromising on quality.
- Competitiveness: Maintaining healthy competition within the business does not impact the company in a negative manner. On the contrary, it enables one to learn and grow in an environment which caters to their overall development in a holistic manner by pushing the employees to test their limits. Five Guys promotes healthy competition which enables its employees to work harder towards accomplishing their goals sustainably while remaining humble at the same time.
- Family: A company must work coherently. For this purpose, the members of the organisation must harbour a sense of belonging and oneness among old as well as new admits of the company. This will help the business to work together in harmony so as to grow, accomplish goals as well as encourage one other at all times. Thus, ensuring that each member of the workforce is motivated towards achieving individual as well as organisational goals in a sustainable manner.Being a family business, Five Guys instils such family values across all organisational levels.
By incorporating such core values in the overall business model of Five Guys, the fast food chain has been able to provide their customers with highest quality of service over the years.
Porter's Five Forces Model
This strategy tool was developed by Michael E. Porter in 1979 to assess and evaluate the competitive strength and position of a business. The components taken into account for this purpose include those forces which critically impact the ability of a business to serve their customers and earn profit. These forces are discussed hereunder:
- Threat of New Entrants: This force is concerned with ascertaining whether or not it is easy for other entrepreneurs or start-ups to enter into a particular industry or market. As an international franchise Five Guys' main costs are in the form of management fee it includes a fixed component worth $25 million per annum for every franchise along with a variable component worth $25,000 per franchise and $55,000 per location (Costs of Five Guys,2017). As a result, the threat of new entrants is moderate, mainly due to the reason that it is difficult for new entrants to achieve such expansion in a smaller period of time. Apart from this patents on food recipes also plays an important role in preventing new entrants to gain market shares so promptly.
- Threat of Substitutes: If a customer has a wide variety of alternatives to choose from one can affirm that there is a threat of substitutes for a particular business. In the context of Five Guys, threat of substitutes is low/moderate. This is because the company provides almost 250,000+ options to customise from along with 1,000 milkshake combinations. It totally depends upon the customer to curate and order a burger from the outlet.
- Rivalry among existing competitors: Some of the prominent competitors of UK's Fast Food industry include McDonald's, KFC, Nando's, Burger King and In-N-Out among others. Being a player of similar size and type, Five Guys faces high rivalry from such competitors. In 2016 (UK), Five Guys was crowned as the top fast food chain outlet, overtaking first spot from Nando's (Position among competitors, 2017). Since the company has highly differentiated product offerings, it has been able to secure its market attractiveness sustainably in UK.
- Bargaining power of Buyers: This aspect talks about how much influence a customer has over the firm. In the context of Five Guys, the bargaining power resting with its customers is moderate. Mainly because, the buyers have options such as Subway and McDonald's which provide burgers and fries at a cheaper or economical price. Hence, if they feel a Five Guys' burger is expensive, they can easily switch to such alternatives.
- Bargaining power of Suppliers: This force is concerned with the assessment of influence that is resting with the suppliers in regards to a particular firm. As concept of Five Guys is built on freshness, its suppliers hold a moderate bargaining power on the company since the company buys fresh produce on a daily basis. Thus, making it a viable client of the supplying parties. Another reason is that the business is operational on a large scale, thus, making its suppliers have little to moderate influence on bargaining.
Keeping these points in mind, it can be said that the corporate performance of Five Guys, in comparison to other industry players, is much stronger. The main reason behind this is the range of products and customisations made available by the company to its customer base. Since the UK's food industry is moving from fast foods to healthier options, using fresh produce providing customers with the power to curate products on their own has a potential to disrupt the existing market in a significant manner.
In order to conduct an external environment analysis, PESTEL has been chosen as the suitable evaluation tool in the context of Five Guys Food chain. This assessment has been carried out in the following manner:
- Political: This aspect relates to the degree of government intervention is prevalent in a particular economy that results in impacting every part of the society, including businesses. In the context of Five Guys, Brexit may cause the company to halt its expansion plan as there are rising costs involved which may cause hike in their menu prices offered to the customers. As a result, the chain has to find a way to eliminate competition, improve expansionary activities and stay economical at the same time (Five Guys and Brexit,2017).
- Economic: In the recent times, economic factors such as Unemployment rates and Inflation may cause a business to topple down and shrink its total market share. In the context of Five Guys, the burger surpasses McDonald's and Burger King in prices. Thus, making it a part of upmarket burger segment. This is also due to the fact that healthier options have gained immense importance in current business scenario, thus, making it become a premium choice among people having a high demand for such products in countries including UK (Concept of Better Burger,2017).
- Social: It is important to note that social trends govern what the customers want from the businesses. In the context of Five Guys, healthier and organic products have gained popularity in the fast food sector. Utilisation of fresh produce in their products which are not frozen on any day has resulted in creation of demand which is in sync with customer needs for the business. Thus, allowing it to flourish despite of having an expensive price menu in comparison to other industry players such as Subway and Burger King.
- Technological: This aspect indicates how the company utilises technology to gain competitive advantage among its competitors. On the contrary, Five Guys does not believe in utilising automated timers or can openers while making its products, however the company does utilises websites to provide essential information regarding to allergen information and other similar notices so as to promote awareness regarding its products.
- Environmental: A business is subjected to certain rules and regulations which may prevent the business to undertake certain activities that are considered to be harmful to the environment. For instance, waste management is one such regulation which ensures that all the businesses including Five Guys do not engage in activities which may cause deterioration of environment in a critical manner.
- Legal: A global organisation is subjected to a wide variety of national as well as international laws. Being a fast growing franchise, Five Guys needs to keep in mind the regulations governing UK as a EU member. However, once Brexit takes into full-fledged effect, such legislations may change for the company in a significant manner.
Thus, one can affirm that an organisation such as Five Guys is highly affected by the consumer needs, tastes and preferences which may differ from country to country and person-to-person. Due to this, it is important for a global organisation such as Five Guys to keep in mind political, legal, social, economical and environmental factors so as to ensure their expansion in a sustainable and efficient manner.
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SWOT Analysis is a strategic tool which helps in carrying out a comprehensive internal analysis of a particular business. As a result, the management is able to accurately determine the points of strengths and weaknesses in terms of the operational activities undertaken by it (Phadermrod, Crowder and Wills, 2019). In the context of given case scenario, the following table provides a detailed SWOT Analysis for the company:
- Five Guys provides highly customisable products to its clientele. This includes 1,000 milkshake combinations as well as around 250000 ways to order burgers from its assortments.
- The ingredients used are fresh and not at all frozen.
- One of the fast growing fast food chains.
- Portion to Price Ratio is cheap. This means that large portions are sold for an economical price to the customer.
- Customer Service is beyond par. This includes free refills, peanuts while waiting for order and a hygienic environment for the customers.
- Low Brand Awareness.
- Limited utilisation of technological devices such as Timers, Freezers and can-openers which are helpful in reducing the overall preparation time of the order.
- No Drive-through for the customers. Thus, no takeaway facility available. Only option is utilisation of Deliveroo application.
- Slow product serving time since all fast food is prepared from scratch and there is no takeaway facility available at the premises.
- Expansionary opportunities by undertaking aggressive brand awareness strategies across different parts of the world.
- Healthier Options pose a great opportunity to be accepted among individuals living across the world as the customers have become more health aware.
- Development of Drive-through facilities at the premises would facilitate in retaining the customers which are busy and do not have the time to get in a queue for their order.
- Growing competition from well-established businesses such as Burger King, Subway and In-N-Out among others.
- Extinction of traditional fast food options due to increasing dependence on healthier alternatives by the customers.
- Health concerns due to widespread epidemics such as Bird Flu could impact those who are ardent lovers of a chicken burger and result in creation of allergic tendencies. Thus, leading to the decline in overall market share of Five Guys.
From the above report it can be ascertained that value chain analysis plays an important role while analysing the various systems which are engaged in production, controlling, selling and facilitating the final products or services offered by a business. By determining various Value Systems and engaging in VCA, the business able to forecast, plan and formulate various business strategies regarding systems in a sustainable manner. Along with this, the management is also able to identify various cost overrun centres that may result in deterioration of corporate growth and minimization of profitability as well as differentiation for the company. Apart from this, strategic tools such Porter's Five Forces Model, PESTEL and SWOT help in ascertaining the overall picture of the company. This is helpful in communicating to the management of the business, the direction in which the company is headed. Any kind of deviation from its vision is easily identified and steps to remedy such gaps are effectively formulated in terms of short-term as well as long-term strategies so as to accomplish their overall goals.
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