Competition In The Restaurant Industry example essay topic

Sonic: America's Drive- In The fast-food industry is changing everyday. There are new products being introduced in the market and new slogans being created. The companies in the fast-food industry will do their best to make the greater burger, and to make bigger and better fries. Founded in 1953, Sonic has become the largest drive-in chain in the nation. Sonic was founded by Troy Smith, Jr. in Shawnee, Oklahoma. His dream was to own his own business.

Sonic Drive-In keeps the 1950's alive through its chain of drive-in restaurants, each complete with speaker-based ordering systems and carhop servers - some on roller skates. Sonics top competitors are McDonald's, Burger King, and Wendy's. McDonald's is the leading competitor in the fast-food industry. McDonald's has the most restaurants with 12,380 locations and has over 364,000 employees. Burger King has 11,350 outlets in 57 countries and territories worldwide. About 75% is located in the United States.

Wendy's is the third largest quick-service hamburger restaurant chain in the world, with more than 6,600 restaurants in North America and international markets. In Exhibit 1, this states the Porters Five Forces Model of Competition of The Restaurant Industry. Threat of new entrants: Because the profit margins are so small, cost is low and anyone can enter into the quick-service restaurant business. Bargaining Power of Buyers: The National Restaurant Association showed that three out of ten customers agreed that food that was prepared at a restaurant or a fast-food restaurant were an important factor in their everyday lives. The survey also stated that "three out of five customers plan to eat on the premises of quick-service restaurants and seven out of ten said that plan to eat takeout or delivery. (Hitt, Ireland, & Huskisson, pg. 367) Customers buy when they feel it is necessary giving them the upper hand on the industry.

Bargaining power of suppliers: In the quick- service restaurant, the suppliers vary. They really do not rely distributors as large restaurants do. Threat of new substitutes: The restaurant industry is segmented into many parts: full service restaurants ($120 billion); quick- service restaurants ($110 billion); away-from-home managed institutions, examples: food services for schools and hospitals ($21 billion); and other food industries ($106 billion). (Marshall Jones, 1999). Rivalry among competition firms in the industry: Competition in the restaurant industry is strong. There are about 8 million restaurants in the world and 300,000 are restaurant companies.

Exhibit 2. Swot Analysis of Sonic: America's Drive-in Opportunities: Strengths: Sonics financial performance has had a great growth in the economy. From 1992-2001, net sales increased annually by 27%, 19%, 25%, 22%, 21%, 20%, 17%, 8%, and 18%. And on March 22, 2003, Sonic reported net income of $12.6 billion and revenue increased by 19%. Another opportunity is Sonic is very product differentiated.

Sonic is known for its unique made-to-order menu items. Sonic continues to support menu innovations, such as its breakfast menu, Sonic Summer Nights, toaster sandwiches, extra-long cheese coneys, and frozen and fountain favorites. Hamburgers are made to order and served in aluminum foil, preserving the heat and drinks are served in Styrofoam cups to preserve the cold. Opportunities: Weakness: Human resources: There is a low employee rate because of the high turnover. The restaurant industry tends employ more retirees than the younger generation. However, the industry could strengthen this weakness, by making the companies more attractive to the younger generation.

Threats: Strengths: Sonic is operating in a fast-food industry that is dominated by large competitors, but through it all Sonic stays on top as the nations largest drive- in chain. Threats: Weakness: The rising popularity of dieting could be real threat to Sonic. Sonics competitors have low-care menus and Sonic does not carry it on its product differentiated menu. McDonald " sEconomic: Food quality is the key focus of McDonalds. How the customer view the quality of their products is important. Political: McDonald's is very selective about the choice franchisees and requires that all franchisees be active participants in the management of the restaurants.

Demographic: Growth strategy focuses on the opening of profitable restaurants and expanding its operations. Sociocultural: Appeals to children, has the mighty kids meal, Disney tie-ins, play areas and Ronald McDonald: who is one of the trademark of McDonald's. Created a great name that associated with friendly, child loving atmosphere. Technological: Big on Advertisement. Slogan "I'm lov in it" Global: Public Awareness Campaigning Worldwide Balanced, Active lifestyles Burger King: Economic: September of 2002, Burger King introduced the 99-cent menu. Political: Franchise owner is required to attend minimum of 700 hours of classroom and restaurant training before given a franchise contract.

Sociocultural: Comedian Steve Harvey was the company's spokes person in 2002. Had Halloween tie-in with the Simpson's. Burger King is also the only that introduced and have a vegetarian menu. Technological: Advertising: The subservient chicken: a current viral marketing promotion. Wendy " sEconomic: Wendy does not supply food products to franchisees directly; it has a corporate arrangement with independent distributors. Demographic: Plans to expand in profitable areas.

Sociocultural: The Company and its franchisees operate and own Tim Horton's, Caf'e Express, Baja Fresh Mexican Grill, and Pasta Pomo doro. Sonic: America's Drive-in Economic: Committed to providing not only the freshest unique flavors and food for their customers, but superior service. Technological: System wide information system, SEI Information technology: provide software and hardware technical support for the new portal as well as training for Sonic employees and franchisees. Partner Net portal: provides Sonic operators with centralized access to a broad range of communication tools, sales data reporting features and etc. Mirapoint: a provider of Internet messaging systems, worked with Sonic Drive-ins to develop a Sonic-branded, web-based e-mail and calendaring solution for the portal. Sociocultural: Sonic has the wacky pack for the kids; children receive a learning activity and free toy.

Sonic provides season-based or generic toys instead of toys with movie or television tie-ins. Demographic: Brand building is an important asset to Sonic. After analyzing the position of this company and the characteristics of this industry, the key strategic issue facing this firm is cost containment. Since competitors continue to improve distribution models to gain a cost advantage.

An alternative that the industries should look at would be to reduce cost. Look at ways of keeping the unique product differentiation but find ways to reduce cost to stay ahead. There is not a perfect solution in the industry. No one can predict the economic because it is always changing. Sonics specialty menu has allowed the chain to differentiate. Through its increased marketing efforts, Sonic will gain brand recognition and increase its customer base.

Works Cite do Hitt, Michael A; Hokisson, Robert E. ; Ireland, RD. Strategic Management. 6th Ed., Masson, Ohio: Sought. Wester 2005. o "Burger King". Burger King Corporation. web "Answer. Com".

Burger King Corporation. web. com / burger %20 o "McDonald's". McDonald's Corporation. web "Answer. Com". McDonald's Corporation. web "Marshall Jones& Co". Restaurants. web page 30. htm o "Restaurant Business". Sonic Says Payment Stalls Boosted Gains. web display. j sp? vs. nu content id = 1000853253 o "Wendy's Restaurant".

Wendy's International. web 's. com / o "Yahoo!" Yahoo. Yahoo! Finance. web.