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A & W Drive-Ins Limited Strategic Analysis

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Introduction

A & W Drive-Ins Limited Strategic Analysis Statement of the Problem: Mr. Ed Drayson must prepare a set of recommendations for Mr. Harry Braithwaite about the A & W Drive Ins in North Eastern Canada. The drive-ins are facing the challenge of rising costs at the same time as increasing competition. The McDonald's Corporation appears to be targeting A & W specifically by opening restaurants in close proximity to A & W drive-ins. Furthermore, the cost of meat is rising approximately 40 percent. Not every restaurant is facing the same price increases. The meat cost increase may be temporary but the labor costs will be permanent. The decisions that have to be made are very serious are require careful analysis with long-term consequences in mind. Analysis: The fast food industry is growing rapidly. In the area of New Brunswick, Nova Scotia and Prince Edward Island, the growth of fast food restaurants has more than doubled in a few years. The introduction of new restaurants has only had a temporary negative impact on existing restaurants indicating a general increase in the numbers of people eating outside the home. The characteristics of the industry are to provide food that is fast and reasonably inexpensive to the customer. ...read more.

Middle

Taking lunch becomes complicated in a large workforce as foods generally require refrigeration or heating and there is not enough storage space in the work place for storing lunches from home. Furthermore, the food is not safe from being mistaken or stolen by other people. The unique needs of the workforce has made the fast food industry with its speed, low costs and convenience the popular alternative to bring lunch from home. Forces of Competition: Bargaining power: The bargaining power of the customers is that there are so many choices of fast food restaurants. The bigger the chain the lower the costs of the production and the cheaper the food to the customer. With a broad range of prices between the fast food the customer decides what his or her budget will allow. It is in the interests of the chains to keep the costs to the customer as low as possible and the quality of the food as high as possible in order to keep the customer returning. The bargaining power of the suppliers is that they are offering a variety of foods at a variety of prices for the customers. ...read more.

Conclusion

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. ...read more.

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