Strategic Analysis Report
Executive Summary
In-N-Out Burger is an American fast-food restaurant that is interested in expanding its operations into the New Zealand market. Considering the COVID-19 pandemic, it is important for the restaurant to consider the implementation of a viable strategy that will promote its efficiency in the market. In order to become successful in the new market, the fast-food restaurant should consider the implementation of strategies that will provide it with competitive advantage above its competitors (In-N-Out, n. d.). This study has analyzed the company in relation to its strengths, weaknesses, opportunities, and threats in the new market. The company’s strategy of the drive-in facility will provide it with a competitive advantage amid the COVID-19 pandemic. The firm is likely to suffer threats of competition and stringent government measures as a result of the pandemic that would limit its ability to succeed in the market. As such, the organization should consider the implementation of business-level strategies, among other measures that will increase its success in the market.
Contents
Strategic Analysis Report: In-N-Out Burgers New-Zealand. 4
Bargaining Power of Buyers. 11
The Threat of New Entrants. 12
Conclusion and Recommendation. 14
Strategic Analysis Report: In-N-Out Burgers New-Zealand
Since its establishment in 1948, In-N-Out Burgers has made continuous effort to expand its operations outside California, into other parts of the world including New Zealand. The company’s success in the new market will be determined by its ability to handle the weaknesses and threats presented in the industry through the implementation of efficient strategies such as cost leadership, differentiation, and growth strategies.
Overview of the Industry
The fast-food sector in New Zealand is defined by foods that vary from sandwiches, burgers, and pizza among others. Customers in this industry often make their payment after which their foods get provided in containers; the food can be taken away, delivered, or consumed in the restaurant, an aspect that has been affected by the pandemic.
Industry Size
The fast-food industry in this location has recorded exponential growth in the recent past with new outlets springing up every day. Per-capita records for the franchises show that McDonald and KFC are the most famous in the region. Records by Statista (2019) show that there is approximately one McDonald restaurant for at least 27,000 Kiwis. On the other hand, one KFC represents 41,000 of the population, an aspect that makes New Zealand a champion in the fast-foods considering that there are at least 14,200 Americans for every one McDonald franchise.
Leading Players
In 2018, the fast-food restaurant that had the highest visits in New Zealand was McDonald’s at 33% as shown below followed closely by KFC at 17%.
Source: Morgan, 2018
Records by Statista (2020) shows that the firm that registered the highest record was Dominos. Other players in this market include Burger King, Burger Fuel, Kentucky Fried Chicken, and Pizza Hut, among others.
Source; Statista, 2020
Fragmented Industry
The fast-food industry is made up of regional and national chains, independent operators, and franchises. Although the industry is highly fragmented, most independent operators in this region are a franchise of huge national chains such as Burger King.
Industry Trends
The main trends in this industry include the demand for healthy foods as a result of obesity, a shift from traditional products to more customized menus, and the use of social media platforms to place orders and make payments (IBISWorld, 2020).
Emerging Issues
The most significant emerging issues in the industry include obesity and the COVID-19 pandemic. Due to the growth of this industry in the country, New Zealand recorded high rates of obesity in comparison to other developed countries according to Statista (2020) records that show a high rate of obesity in the country. In a bid to remain relevant, most of the fast-food restaurants such as McDonald’s have taken the necessary steps to provide healthy alternatives in order to meet consumer’s changing tastes and preferences.
Since the outbreak of COVID-19 in Wuhan, China, the world has undergone an undesirable condition that has affected the growth of different sectors significantly. The fast-food industry has registered a 19.2% fall in 2020 due to diminished customer confidence and imposition of strict restrictions on various operations in the country (IBIS 2020). As a result, the revenue inherent in the fast-food industry has diminished significantly causing some industries such as Burger-King to opt for voluntary liquidation.
Although many restaurants have made efforts to remain relevant in the industry, the COVID-19 pandemic has affected the global food industry due to the government’s initiative to close bars and restaurants in a bid to reduce the spread of the disease (In-N-Out, n. d.). In order to get In-N-Out Burgers off the ground amid the COVID-19 pandemic, it is important to conduct an internal analysis to address areas of concern and core competencies (Morgan, 2018). This discussion will be centered around the company’s structure, control systems, and business level strategies to create a bigger picture of the areas that need to undergo alterations.
Internal Analysis
In a bid to identify the company’s chances of success in the industry, this section of the report will undertake a SWOT analysis to analyze the company’s opportunities of success within the New Zealand environment
Strengths
In-N-Out Burger has an advantage over other fast-food industries in New Zealand owing to its ability to prioritize health alternative foods. Perman and Lester (2009) explain that In-N-Out Burger has a wide portfolio that will enable it to expand its customer base in the region. During this period of the COVID-19 pandemic, the company’s strong online presence on various networking sites will enable the organization to develop strong relationships with its customers without predisposing them to the pandemic risks (In-N-Out, n. d.). Due to the success that the organization has enjoyed since its establishment in 1948, the restaurant has established a strong financial position that will enable the firm to make viable and reasonable investments during this period. Its long service in the fast-food service industry has connected the organization with suppliers who provide raw materials at a lower cost that will improve its growth in the business. Additionally, the availability of raw materials will enable the organization to provide services at a cheaper cost with improved accessibility, an aspect that will enhance its brand image.
Like most fast-food industries in New Zealand, this joint enjoys a well-integrated infrastructure that can be utilized to improve the efficiency of operation and increase knowledge on the ongoing pandemic to its customers. Since its establishment, In-N-Out Burger has had a unique intellectual property that makes its product offering exclusive and unique such as to make it difficult for its competitors to imitate it. Additionally, the organization has been revered for high product quality that has enabled it to increase brand loyalty, an aspect that the organization can rely on to increase its viability during the COVID-19 pandemic.
Weaknesses
The success of In-N-Out Burger in New Zealand could be limited by its inability to integrate sustainability practices into its operation. Considering the shortage that has been introduced by the pandemic, the fast-food restaurant is likely to suffer further shortages due to poor inventory management practices. The management should be wary of insufficient budget particularly during this period that may affect the organization’s business performance as well as its ability to expand its customer base. Although entering the New Zealand market may provide the organization with additional opportunities for expansion, records show that reduced expenditure on development activities could reduce its ability to thrive in the market owing to diminished international market knowledge. According to the company’s product price before the pandemic, customers stated that the company’s pricing strategy was unjustified in that the product does not match the price (Barrows, Vieira Jr, & DiPietro, 2016). This has been facilitated by poor customer service, an aspect that could limit its growth amid the undesirable situation facilitated by the pandemic.
In the current situation, high staff turnover coupled with the pandemic situation is likely to reduce organizational productivity. Additionally, misalignment between the organization’s strategic objectives and leadership style could cause the company to lose its sense of direction particularly by venturing into a new location. In order to increase its success in the region, In-N-Out Burger should consider making changes to its organizational culture in order to align its business and strategic objectives.
Opportunities
The organization stands the opportunity to undertake in-depth market research that will enable it to benefit from the exponential growth in the region owing to changing customer needs and demands due to the need for healthy alternatives. Although the pandemic has introduced undesirable conditions to the fast-food industry Perman and Lester (2009) explain that making use of new technologies will enable the organization to meet consumer needs by prioritizing healthy alternatives while decreasing costs and improving efficiency. Restriction in movement can be taken as an opportunity to meet consumer needs through the provision of delivery services without predisposing the consumers to the risk of infection (In-N-Out, n. d.). The organization can also take advantage of social media marketing to improve its online presence on social networking platforms. This will enable it to identify new niches and provide various product line opportunities to the consumers. Restricted movements as a result of the pandemic also mean that the organization will have additional opportunities to meet consumer needs by taking advantage of new niches and opportunities to expand its product line to other parts of the world.
Threats
Following the outbreak of the novel COVID-19 pandemic, this industry has experienced a decline in demand in New Zealand, among other parts of the world. The region has introduced strict regulations and regulatory frameworks that have imposed a threat to the success of organizations in the fast-food industry. Failure to comply with these regulations will cause In-N-Out Burger to suffer the risk of expensive lawsuits. This fast-food company is also likely to suffer the threat of competition from other companies that have established themselves in the country including McDonald’s, The Pit Falls, and Dominos Pizza, among others (Perman & Lester, 2009). COVID-19 has caused the economic conditions to deteriorate in a manner that has influenced customer’s purchasing power and spending patterns. Additionally, the company’s growth potential in New Zealand is likely to get limited by environmental instability and uncertainty caused by the pandemic and the consequent need to promote environmental sustainability that could act as a threat to its brand image. The pandemic is likely to favor the fast-food companies that have already established themselves in the country such as McDonald while reducing the chances of success for new entrants.
According to this analysis, In-N-Out Burger should invest in business-level strategies in order to benefit from competitive advantage as a result of differentiation, cost-leadership, and growth strategies.
Industry Analysis
Bargaining Power of Buyers
During the COVID-19 pandemic the buyers’ bargaining power is low due to reduced availability of substitutes products. As such, the presence of In-N-Out Burger in the industry at this time will increase its chances of survival particularly owing to the drive-in provision. In normal circumstances, buyers often have a high bargaining power due to low costs of switching, availability of substitutes, and moderate influence of consumer organizations.
Bargaining Power of Suppliers
Covid-19 pandemic has caused switching costs for suppliers to become relatively high. Although the suppliers have a high bargaining power owing to a decline in substitute products, their ability to change buyers has been limited by the pandemic as a result of the closure of restaurants.
Rivalry among Competitors
In-N-Out Burger could face the threat of rivalry in the region due to the high number of existing competitors such as McDonald’s, Subway, Burger King, and KFC, among others. With a decline in the demand for products as a result of the pandemic, there is a high likelihood that the company will face higher rivalry from the already established organizations. Although Perman and Lester (2009) advise that differentiation can help an organization remain relevant, such practices do not create customer loyalty, and the organization must invest in other strategies to remain relevant in the industry.
Threat of Substitutes
Threat of substitutes is low to moderate. The industry has limited substitutes during this period although customers also have the option to prepare their meals from their homes. The need for healthy alternatives has also necessitated fresh foods which are easy to prepare and quite affordable.
The Threat of New Entrants
Although the fast-food industry is often characterized by the frequency of new entrants, the pandemic has created barriers due to government restrictions and additional regulations to organizations, in a bid to reduce the effect of the pandemic. Capital requirements have increased owing to costly restrictions on social distancing as well as increased fixed and operating costs (Perman & Lester, 2009). Additionally, fast-food chains that are well established in the region such as McDonald are likely to enjoy incumbency advantages at the expense of others due to positive brand reputation and economies of scale.
Discussion
Only the fast-food companies that take a strong competitive position will remain successful amid the COVID-19 pandemic. Going by the internal analysis, it is evident that In-N-Out Burger stands an advantage above other companies owing to the aspect of a drive-in provision that will prioritize the protection of customers. However, in order for In-N-Out Burger to maximize its success in the New Zealand market, it is important to consider essential marketing strategies. As Barrows, Vieira Jr, and DiPietro (2016) postulates, this organization should adopt marketing strategies in line with sustainability, health, and wellness needs in order to position themselves strategically in the market through online, social networking strategies which can be achieved through targeted advertising.
Business Level Strategies
According to the analysis, the company’s competitive strategy is that of differentiation through drive-in and provision of healthy alternatives. Differentiation strategy refers to a scenario where a firm provides unique alternatives that could set itself apart from its competitors (Lyneis, 2020). Identifying gaps in the market within the current situation would enable the organization to stand out through reasonable pricing and provision of nutritious alternatives. The organization can focus on cost-leadership strategies considering the difficult economic times caused by COVID-19. Providing high quality and healthy alternatives at a cheap price will enable the organization to stand apart from its competitors.
The organization should consider functional strategies such as production and marketing strategies to build a competitive advantage. In relation to marketing, the In-N-Out Burger should focus on price, product, and place promotional activities with minimal financial investments. However, this strategy alone may deem insufficient to create the desired feel of competitive advantage due to the COVID-19 pandemic.
The company’s production strategies should focus on cheap suppliers within New Zealand particularly the local growers in the country. In order to stand out from its competitors, In-N-Out Burger should provide superior quality products while incorporating sustainable strategies such as packaging using biodegradable packing to remain in line with environmental responsibilities.
Conclusion and Recommendation
In the event that business-level strategies fail, In-N-Out Burger can maintain continued growth in the New Zealand market through extensive promotional and advertising activities in order to remain relevant during the COVID-19 pandemic. Additionally, taking advantage of sustainability and wellness strategies are essential in that they will position the company ahead of its competitors. Failure to prioritize these concerns will cause In-N-Out Burger to lose relevance and suffer the stringent economic circumstances caused by the pandemic.
Upon expansion into New Zealand, this company should prioritize advertising on its website to increase visibility in the country. It is also pertinent to consider changing the organization structure such as to encourage both corporate and business strategies. For instance, expanding the investment strategies amid the unstable conditions caused by the pandemic will require the recruitment of supportive and motivated employees. Additionally, the management should consider redefining the business plan to reflect the above-stated recommendations particularly in relation to business-level strategies, corporate, and growth strategies.
References
Barrows, C. W., Vieira Jr, E. T., & DiPietro, R. B. (2016). Increasing the effectiveness of benchmarking in the restaurant industry. International Journal of Process Management and Benchmarking, 6(1), 79-111.
Michael, P., (2008). The five competitive forces that shape strategy. The Harvard Business Review.
Lyneis, J. M. (2020). Business policy and strategy, System Dynamics Applications to. System Dynamics: Theory and Applications, 179-207. https://doi.org/10.1007/978-1-4939-8790-0_45
Eyles, H. et al. (2018). Five-year trends in the serving size, energy, and sodium contents of New Zealand fast foods: 2012 to 2016. Nutritional Journal, 17(65). https://doi.org/10.1186/s12937-018-0373-7
IBISWorld (2020). Fast Food and Takeaway Food Services in New Zealand – Market Research Report. Retrieved from https://www.ibisworld.com.au/industry-trends/nz-market- research-reports/accommodation-food-services/fast-takeaway-food-services.html
In-N-Out (n. d.). History. Retrieved from https://www.in-n-out.com/history
Morgan, R. (2018). McDonald’s, KFC & Domino’s Pizza most visited NZ restaurants. Retrieved from http://www.roymorgan.com/findings/7613-new-zealand-eating-habits eating-in-out- QSR-restaurants-march-2018-201805310031
Morgan, R. (2018). McDonald’s, KFC & Domino’s Pizza most visited NZ restaurants. Retrieved from http://www.roymorgan.com/findings/7613-new-zealand-eating-habits-eating-in-out- QSR-restaurants-march-2018-201805310031
Perman, S., & Lester, L. (2009). In-N-Out Burger: A behind-the-counter Look at the Fast-food Chain that Breaks All the Rules. Harper Collins Publishers.
Statista (2019). Two-year growth of fast food in New Zealand in 2016, by type. Retrieved from https://www.statista.com/statistics/792740/new-zealand-fast-food-growth/
Appendices
Appendix 1
Appendix 2
Appendix 3
| Strengths | Weaknesses |
| · The employee-centered strategy thus reducing employee turnover amid the pandemic · Drive-through facility for customers thus fulfilling social distancing COVID-19 requirements. · Brand recognition within and outside the U.S. and beyond · Affordable, quality, and healthy alternatives · A loyal base of customers | · Limited diversity of items compared to competitors · A limited number of branches · Lack of global presence
|
| Opportunities | Threats |
| · In-n-Out Burger stands the chance of franchising · An online presence can benefit the organization · Expansion through growth strategy
| · Diminished economic stability as a result of COVID-19 pandemic · Health and wellness amongst customers · Competition from substitute companies · Price volatility · Travel and operation restrictions as a result of the pandemic |