The strategic management of a business is a process of planning, controlling, analyzing and a continuous assessment of the plan for the business to meet its goals and objectives. To cope with the customer’s expectations, which are driven by the forces of innovation, technologies, and the living standard of customers, the business organization should think tactfully and make decisions strategically to remain successful in the business. An effective business strategy helps a business to know their current position in the market, helps to make plans and decisions, implement the plans and analyze the effectiveness of the implemented plans.
A strategic management plan of a business may include: analyzing the internal and the external force or the environment of the business, formulating actions plans according to the result of analyzation, and executing the plans. This paper will try to provide an overview of the strategic management of the Five Guys in positioning their business in the European market more specifically in Italy.
It is said that the fast food industry was first originated in the United States with White Castle in 1921. Since then, the fast food industry is growing immensely because of its quick service providing facility. For this, the competition in fast food business is getting higher. The worldwide market of fast food now has Macdonald’s, KFC and many more franchises in this industry. While the concept of eating outside the home in a fast food restaurant, Italy became one of the most potential market for fast food business. The reason of this potentiality is that, Italian peoples are changing their food habits, which is now experimenting new foods, and innovating idea for new recipes and for that the business is growing rapidly. That’s why, the consumers are looking for added value that can differentiate one fast food business from another. The following chart provides the industry overview according to the consumers preference of Canadian fast food business.
Company Background: Five Guys
The Five Guys Enterprise LLC is a fast food restaurant chain, founded in 1986 by Janie and Jerry Murrell. The main purpose of the business was to provide different fast food items including hamburgers, hot dogs, French fries etc to the consumers with a very high level of customer service. Their mission was to serve the customer different fast food items made with fresh ingredients and in a clean environment at a reasonable price. By 2001, the restaurant chain expanded their business in 5 more locations throughout the Washington DC. In 2003, they started their franchising program and after about 18 months, they sold over 300 franchised locations. The company was the fastest growing fast-food chain since 2010 in the United States.
Challenges Faced by Five Guys
Since Five Guys Enterprise LLC started its journey, it faces many challenges in positioning the business in the market. It was criticized by the Men’s Health magazine as an unhealthy fast food provider. The main challenge the Five Guys Enterprise LLC faced, is to remain the same. Some key challenges the faces doing business in this industry includes:
• Positioning the business in the market was the most fundamental challenge the faces regarding competitor like McDonald’s, KFC etc.
• Another challenge they faced was the advertising or promotion of their products. They mainly relied on word of mouth promotion.
• The most important challenge they face was maintained the quality of goods healthy. They were criticized for being unhealthy in their fast-food service.
External Environment Analysis
The European fast-food industry is being affected by the trend from the north American segment, but the opportunity of market growing, chain penetration is higher in the Europe. The consumer of Europe feel too time constrained in preparing food at home which benefits the fast-casual segments of eating facility outside home. According to the statistics, it is estimated that the fast-food industry of the Europe will grow by about 10.3b within the next three years. And the country, Italy have the most opportunity or room for segment growth. But the opportunity of growth is not enough. To position the business in the market the proper research is important. To do so, we will perform the PESTEL analysis and Porters five forces model of Five Guys.
The PESTEL analysis identifies the external factors of a business environment or industry market which affects the business in different ways. The PESTEL analysis of the market of Italy is given below.
Political Factors: The political factors of the market of Italy includes:
• The politics of Italy is consisting of a parliamentary, democratic republic and a multi-party system, which is favourable for the business industries.
• The political factors are now pushing the food industry to add healthier options to their menus as public health policy which increases the cost of service production.
• According to the heath menu choice acts, the fast food industry in Europe, more specifically in Italy are now being pressurized for adding the value of ingredients like the number of calories besides their items in the menu. Which affect the consumptions of fast-food.
• There are more important political factors like the taxation, inflations and maybe the import cost and policies of ingredients may affect the fast-food business in Italy.
Economic Factors: The economic factors of the market of Italy includes:
• Italy is consisting of a capitalist economy with a high GDP (Gross Domestic Product) and developed infrastructures. Which in in favour of business.
• The state and the unemployment rate of Italy may affect the food industry.
• As we said earlier, for different political pressure the food industry needs to maintain the healthier ingredients in their food items, which are may pricier than normal easy to make meals.
• The rate of interest on fast-foods, taxation of the consumers, or consumer spending will affect the food industry of Italy.
Social: The social factors of the market of Italy includes:
• In 2009, Italy was nominated as the sixth internationally valued country with the opportunity and growth potentiality for doing new business in Italy.
• The social class of Italy can be divided into different ranks mostly with higher disposable income and with a times constraint in their daily life. Which is a opportunity for the fast-casual restaurants to grow the business.
• The trends in fast-food industry varies by what the customer wants. As mentioned earlier, healthier is the main concern in the food industry of Italy, there is not only a pressure from the government, but also from the consumer.
• How foods appeal to the people is mainly based on the promotion and brand outlook of the business organization. As Five Guys are one of the most successful food chains, it will have a good impression in the market of Italy. To attract the younger generation, the Five Guys should adapt their brand outlook to the lifestyle of the young generation.
Technological: The technological factors of the market of Italy includes:
• Technology in the food industry of the market of Italy can give a competitive edge.
• Nowadays, technology in the food industry helps in packaging, labeling, and the production of food services.
• With the advance in technology, the Five Guys will have to acquire these goals and will have to reach the consumers in new and easier methods.
Environmental: The economic factors of the market of Italy includes:
• Italy is 84th in ranking of the world’s sustainable country with high priority in the waste management, and renewable energy.
• sustainability is a very important factor in the food industry. The changing government rules and regulations may pressurize the industry to adopt a greener approach. Food and environment related regulations are growing very strictly in Europe.
• The proper waste management is e must. The rules and regulations about the waste management or sustainability may force the industry to change their approach but it will result in a more loyal customer.
Legal: Legal aspects of the food industry is now going through an important change. The pressure of legal requirements of food quality in rising day by day not only in Europe but all around the world. The food quality and nutritive value are the most affected area by the laws and regulations, for this reason, the entire food industry needs to change their approach in doing business in the European market. And as the competition is growing higher and higher the food industry or business needs to add more value to their services. To do so, hygiene, sustainability and following the rules and regulations of waste management are top of the list.
Porters Five Forces
Internal Environment Analysis
Value Chain Analysis
Identification of Competitive Strategies
Porters Generic Strategies