A & W Drive-Ins Limited Strategic Analysis
Intensity of Competition: The competition is intense, especially due to the McDonald’s Chain which is selling at the lowest prices. McDonalds is drawing a strong market share but they are not threatening the other franchises or local restaurants in the area.
Strategic Group Analysis: Mr. Drayson has identified the challenges facing A & W as the rising cost of beef, the rising cost of labor and the competition from McDonalds. He must advise the company what actions to take and this is more complicated by the fact that some areas will have higher expenses than others. The advice may help some stores, therefore, while not helping and perhaps hurting, others. Although A & W is not in a bad position financially, they have to be careful of their actions in order to maintain the delicate balance of competitiveness and profit.
Competitor Analysis: The competition is not too much trouble at this moment, but with the rising cost of beef A & W is worried that they will lose to the competition if it raises prices and lose profits and investors if it does not. McDonald’s seems to target the A & W geographic locations as it consistently choses to build its restaurants near A & W drive-ins.
Company Analysis:
A & W has done very well in the northeastern corner of Canada. The McDonald’s company has apparently decided that A & W is its main competitor. A & W has, however, only experienced temporary decreases in income when a new McDonalds opens. After the initial opening, A & W income returns to previous levels.
The strategic cost and value chain comes from the company products. No other restaurant offers the root beer, root beer floats, car-side service and variety of menu of A & W. These features make A & W different from other companies and can not be underestimated as factors that draw customers to the restaurant.
The competitive position of the company is excellent. The other restaurant chains are more locked into a set menu than A & W. A family can order a wider variety of foods at A & W, which offers burgers, chicken and fish products, making it highly competitive with McDonalds and Kentucky Fried Chicken.
Alternatives Strategies and Evaluations:
• Reduce the size of the meat patties very slightly.
o Pro: more patties per pound will probably not be noticed and will save significant amount of money with the volume sold.
o Con: the psychological superiority of the products are very important in the competitiveness of the two companies. [next page]