Any organization that wishes to gain a competitive advantage in a dynamic operational environment that comprises immense competition must apply effective strategic management efforts to remain relevant and gain a market share that would push it to break-even.
The objective of any company is to deliver values to its owners. This value is normally expressed in terms of returns to investments. With the increasing concerns of the roles of organizations in delivering value not only to the owners but also to other stakeholders who have vested interests in the performance of a firm, an organization has an additional responsibility to engage in business activities in a socially responsible manner. In the development of successful strategies for the Tico Mas fast foods company, consideration of the need to deliver value to the owners and communities within which the organization is established is found incredibly significant.
Tico Mas (a fast food hypothetical company), is an organization seeking to establish several company outlets and franchises within the US and nations in Asia. The choice to venture into the fast foods industry is driven by the cognition of the existing market potential in the industry. More people are continually opting to eat out as opposed to the preparation of homemade foods (Ali & Erdener et al. 1995). This trend is anticipated to rise over the next two decades. Establishing an organization that responds to the emerging customer needs in the fast foods sector such as increased health concerns associated with consumption of fast foods may amount to an incredible business position strategy that has high probabilities of pushing a company to gain a competitive advantage.
The aim of this paper is to present a strategic management report describing and analyzing different techniques for assessing the impacts of internal and external environment on strategy development. The report analyses Tico Mas’ internal environment, including resources, capabilities, and core competencies that help in making strategic decisions with the aim of developing strategies for attaining and maintaining a competitive advantage. However, before this section, an evaluation of the roles of strategic management in the development of effective business strategies is discussed.
Tico Mas plans to open outlets in all states within the US before expanding into the global market. The decisions to open into the international market is fuelled by the need to develop products, which meet the local tastes of people in areas where the company believes that the fast food market is not saturated.
These include China and India. Following the increasing concerns of a witnessed link between fast foods and terminal illnesses such as hypertension and obesity, which are often associated with diabetes, Tico Mas believes that it can tap the most from the fast foods industry by focusing on foods that are recommended by health professionals such as high-fiber foods. The mission of the company is to serve healthier fast foods in comparison with its competitors in an efficient and hygienic manner to create a long-lasting brand image to all its customers. This mission is aimed at ensuring that the organization can attract new sales in the future.
Tico Mas is new in the food industry. It is looking for mechanisms of rapid expansion to make it a leading organization in the industry. This effort goes hand in hand with the effort to make the company acquire a strong financial position, which is important for driving innovations. Tico Mas has invested heavily in community value-adding strategies in the effort to create a socially corporate responsible organization.
Indeed, Tico Mas recognizes that customers and employees are the most important available resources that the organization can utilize to gain success. While customers are highly responsive to the quality of service, employees are also highly responsible for the way their affairs are handled by the organization’s management. A mistake that may lead to improper handling of customers and employees may cause the organization to suffer incredibly due to low employees’ motivation and low customer satisfaction. Based on market feasibility studies completed over the last two years, the company believes in the high potential in the fast food industry. Armed with this information, the main challenge of the organization is how to leverage the strengths of the organization in an attempt to earn more profits while still serving as many customers as possible in the effort to gain the economies of scale so that low-price strategy for success becomes feasible to pursue.
Role of Strategic Management in the Development of Effective Competitive Advantage Strategies
Strategic management involves a group of continuous activities and comprehensive processes that organizations use to organize and align resources systematically. Actions in strategic management are aligned with the organization’s mission, visions, and plans (Dess, Lumpkin & Taylor, 2005). Activities in strategic management change a static plan into an organization that gives strategic performance outcome to reach decisions and enable strategies to gradually develop and grow as requirements and situations change. Strategic management focuses on “analyzing an organization’s strategic goals, which include visions, missions, and objectives alongside the analysis of the organization’s interior and exterior environment” (Dess, Lumpkin & Taylor 2005: 1).
Strategic management plays a very important role in an organization as it helps in gaining competitive advantage. Various strategies can be used in gaining a competitive advantage among them being pursuing low-cost strategies to help in driving success for an organization and conducting extensive promotion of products to win customer confidence (Dess, Lumpkin & Taylor, 2005). Cost reduction focuses on reducing the prices of products and services in the industries. It aims at increasing profits while reducing the operational costs. Companies use this strategy to impact low prices on key products. This strategy works best when customers are aware and conscious of the prices of products and services on offer.
Pursuing the low-cost strategy, among other strategies is done in the effort to make an organization gain a competitive advantage, which is an incredible measure for the performance of an organization. Organizations achieve a competitive advantage in case they can make more profit levels compared to other organizations operating in the same industry. Dess, Lumpkin, and Taylor define “strategic management as a bundle of decisions and acts, which a manager undertakes to decide the result of the firm’s performance” (2005: 26).
This means that managers for any organization have the noble role of analyzing both external and internal operational environment to determine the likelihoods of success for the organization they are in charge of managing. Consequently, to make decisions on the most viable decision that would make an organization to achieve a competitive advantage, an organization must conduct a SWOT analysis to determine its strength, weakness, opportunities, and threats to its operation. The goal for accomplishing this step is to help the management to capitalize on the opportunities and strengths besides delimiting the weakness and threats in the effort to drive organizational success. In the hypothetical company, it means that strategic management is deployed as a tool for predicting both the foreseeable and unpredictable dynamics that may affect the company.
In the developments of the efforts to gain a competitive advantage, it is crucial to note that Tico Mas will be operating in an environment that possesses intense rivalry. Therefore, the ideas that would work to make the company successful have high probabilities of being copied by the existing rivals. A good benchmark is exemplified by the case of the American Airlines, which made efforts in the 1980s to develop a competitive advantage through strategic management efforts that culminated into the introduction of ‘frequent flyer program’ (Dess, Lumpkin & Taylor 2005).
Before even a month was over, all organizations operating in the sector had introduced a similar program. This argument meant that, instead of the strategy helping American Airlines to become competitive, it ended up being a mechanism of conducting the industry’s competitive parity analysis. Borrowing from this experience, Tico Mas needs to develop a strategy that would be sustainable in the long term. Indeed, instead of focusing on the fast foods having high calories, the company focuses on specializing in foods that are rich in fibers such as vegetable and fruit salads as the main constituents of the menu on the company-owned outlets and franchises.
Through strategic management, the competitive advantage of an organization can be realized through several ways. Dess, Lumpkin, and Taylor agree with this assertion by further arguing, “Sustainable competitive advantage cannot be realized through operational effectiveness alone” (2005: 56). Rather, the scholar suggests that various innovations in management that have been realized over the last two decades act as crucial tools for enhancing a sustainable competitive advantage. These include benchmarking, deployment of strategies for effective products such just in time production philosophy, reengineering, and outsourcing, among others. In the context of discussions of this paper, operational effectiveness implies the ability to conduct organizational activities in ways that out power the rivals in the industry.
Articulating Mission and Vision
Organizations are guided into the present and future operations through statements of missions and vision, which are designed to form part of the organizational culture. The purpose of a mission statement is to stipulate what an organization wants to achieve in the future and how to do it (Dess, Lumpkin & Taylor 2005). This argument means that it acts as a source of inspiration of all employees and other stakeholders for organizations. It is also utilized as a mechanism of developing decisions as it acts as a decision-making criterion. Comparatively, the vision of an organization concentrates on the present. It lays the fundamental function and purpose of an organization. The vision of an organization deserves to define the customer together with critical processes for achieving customer satisfaction and retention.
The mission of Tico Mas is to be the favorite, and healthy eat out a place for persons seeking easy eating alternatives in the effort to save time. The operations of Tico Mas are centered on a winning strategy based on the creation of long-lasting customer experience with our brand that is pivoted by four main pillars: promotion, products, place, and price.
Tico Mas is immensely dedicated to ensuring that customer experience is improved through the engagement of customers in the provision of means for responding to their experience with the organizational products and service delivery. The vision of Tico Mas is to emerge as a leading fast foods service provider, beginning in the US and extending into global dimensions through an exploration of markets such as India and China in terms of the pace of service delivery and quality of the delivery of services to customers. It will uphold hygiene and value to ensure that all customers enjoy every visit at the outlets owned by the organization and franchises.
Through a first glance at the above mission and vision statements, people reading them can identify the nature of products they expect from the organization once they step into the company’s stores and franchises. This case is important since it aids in quick communication of the company’s important information coupled with the strategy. The statement ‘to be the favorite and healthy eat out a place for persons seeking an easy eating alternative in the effort to save time’ makes it clear that Tico Mas is concerned with the emerging trends in fast food preferences since the word healthy is captured in the statement.
The statement also speaks volumes that the organization aims at being the favorite eat out the place by strategically focusing on foods that respond to health concerns of the customers. The mission also articulates well with strategies to be deployed to win a market share of the company. These are people, price, proportion, and place. A mention of the focus on improving customers’ experience clearly shows that the company recognizes that the most important tool of success is focusing on retention of customer value. Consequently, when customers arrive at the organization’s premises, they see an organization that is established to serve their interests as opposed to pursuing profits at the expense of their hard-earned money. Employees are also able to specifically understand that the reason why Tico Mas employs them is to provide value to customers through quality customer service and hygienic foods that meet the health concerns of the clients.
Assessing the Situation
Assessing the possibility of success of any business venture prompts the evaluation of the internal and external environment. This goal is achieved by using techniques such as PESTLE and SWOT analysis.
Assessing the Situation using SWOT Analysis
SWOT analysis is a strategic management tool for evaluating the strengths, limitations, and opportunities while not negating the threat that an organization encounters in the market environment. In the context of Tico Mas, strengths encompass all characteristics of the organization that make it have an advantage in comparison to other organizations operating in the fast foods industry. One of the strengths of Tico Mas is that it is a high-quality service provider.
The organization also plans to open several restaurants across the US and other parts of the world, including India and China. Tico Mas offers incredible quality services at customer friendly prices. Capitalizing on the provision of foods considered healthy by health professionals such as fruit salads and vegetables alongside other fasts foods is yet another important strength of the company that can enhance its competitive advantage. This strength also goes far in enhancing the efforts to build a strong brand image for the company.
Tico Mas is planning to launch a website where customers will access all the ingredients used to make the products offered in the menus of the organization. The website will also include the prices of all products offered at the organization’s restaurants. This argument means that the organization has extra strength since all prices for its products will be standardized in all franchises and company-owned stores.
Additionally, Tico Mas is capable of delivering efficient and fast services with a turnaround of fewer than 2 minutes. This strength provides all customers with an opportunity to save time waiting to be served. The strength is largely consistent with the mission statement of the company since it helps Tico Mas to accomplish the purpose for which fast food organizations are established to serve: to offer quick eating alternatives to people who do not have time to prepare homemade takeaway meals.
Although Tico Mas has incredible strengths that can make it remain competitive in the fast food industry, it has some weakness. Weakness or limitations are the characteristics of an organization that place it at a disadvantage in comparison with other organizations in the same industry. One of the subtle weaknesses of Tico Mas is attributed to the fact the company declines from offering food services at discounted rates for first-time customers in the attempt to establish positive relationships with them.
Secondly, there is intensive competition from other fast food providers such as Starbucks and McDonald’s among many others. These organizations have a large market share. This case makes Tico Mas suffer from advantages associated with large economies of scale, such as offering products and services at low prices and yet break even while operating within the profitability range of cost versus quantity curve.
Opportunities are the existing external chances, which, while utilized, make an organization improve its performance. One of the opportunities for Tico Mas is the possibility of opening new outlets in areas where the existing fast foods in the US have not yet fully penetrated such as India and China. These markets have the probabilities of increasing the clientele levels. Asia is undergoing the process of high industrial growth.
Consequently, there is a large emerging population of the middle-class people who are likely to opt for eating in the fast-food outlets in the effort to save time to cater for their increasing roles in workplaces. Another opportunity is to offer discounted food services for first-time customers in the effort to build market potential through network marketing. This strategy can increase customer experience with the company as stipulated in the Tico Mas’ mission and vision statements.
Threats are the external changes that impair the performance of an organization. One of the threats of Tico Mas is the external competitive market force, which creates pressure on profit margins of the company, especially in some of the most popular outlets where the competitors have dominated. There is also an increasing trend of negative perceptions about fast foods by consumers. Increased campaigns against the consumption of fast foods by health promotional bodies have resulted in the creation of the impression that all fast food has calories, thus having a bad repercussion to the health of their consumers. This issue is a major weakness that fast food organizations have to counter to remain significant.
Analysis of the Internal and External Environment using PESTLE Analysis
The decisions made by managers of any organization are affected by a myriad of factors. From the PESTEL organizational analysis approach, these factors are political, economic, social, technological, environmental, and legal factors (Gerry, Kevan & Whittington 2005: 105).
For Tico Mas, the political environment influences the operations of the company via taxing policies since the company must pay charges in the form of taxes to the nations wherever the company has established stores and franchises. The management must also comply with environmental regulations, tariffs, employment laws established within the US, China, and India. From the perspective of economic factors, the operational, economic environment of the Tico Mas is characterized by the rapidly fluctuating customer tastes and preferences, which influence the financial performance of the company in terms of increased costs of running businesses that are associated with new designs and innovations.
The decision to become socially corporate responsible implies that the organization will be committing a lot of money in funding societal activities that are not accompanied by a direct increase in production. Increasing the funds to address the negative profiling of companies engaging in the fast foods business put barriers to the margin of profits that the company can reinvest in its growth and channeling to the CSR. Social factors act as incredible success factors that influence Tico Mas because customers are concerned with safety standards of the foods offered by the organization. Hence, enhancing the hygiene and safety of all foods offered for sale at Tico Mas helps in retaining and attracting new clients since people having first time experience with the company always send an impressive message to other potential clients.
In terms of technology, Tico Mas plans to deploy the internet to accomplish tasks such as making it possible for customers to make price comparisons of various fast food alternatives offered at the company and other organizations in the industry. Through the power of the internet in enhancing quick communication, technology is also important in helping to send promotional materials through blogs and direct interaction with customers on social media.
However, it also poses challenges in case negative profiling is sent through the same media. It takes a long time to remove a bad image about an organization’s products than to create positive images of the same (Dess, Lumpkin & Taylor 2005).
Tico Mas is also incredibly concerned about its environmental impacts. Fast foods are packaged. How consumers dispose of packaging wastes is an immense issue of concern to the company since it determines whether the company is environmentally conscious or not. Indeed, waste disposal is an important issue to Tico Mas because, in the US and even in other parts of the world where the company plans to open outlets and franchises, organizations are required by law to put in place strategies for proper waste disposal as the world endeavors to be environmentally green.
Strategy Development, Goals, and Objectives
The aim of strategic management is to derive strategies that would make an organization gain a competitive advantage about other organizations operating in the fast food industry with Tico Mas. In this endeavor, the strategy for Tico Mas is to focus on price, products, place, and promotions or the 4Ps of the marketing mix to survive in and remain significant in the highly competitive market environment.
The products that the company deals with are fast foods, with a particular focus on the addition of healthy meals such as vegetable and fruit salad. The place of the offering of the products has been discussed in the previous section of the paper. Hence, its treatment is not warranted. It has also been argued before that Tico Mas will be pursuing the low-price strategy in the effort to gain a competitive advantage for the first five years of its operation particularly in India and China where competition is anticipated to be less as compared to the US. The heart of strategic management at Tico Mas rests in communication as the promotional strategy.
Communication through promotional techniques is a crucial factor for maintaining an organizational competitive advantage. For the case of Tico Mas, venturing into new markets is considered a challenging endeavor, but the organization believes that communication is the central mechanism of placement of products into any market with success. This argument is particularly the case when the company attempts to establish a presence in New York City and other places where McDonald’s has dominated the market. Therefore, the organization recognizes and invests in communication as the most vital strategy for venturing into a new market whose overall reception has not yet been completely known.
Effective formal and informal communication strategies need to take into consideration the mechanisms of handling negative perceptions about an organization in the effort to boost the effort of re-claiming and acquiring new market. Tico Mas is not free from encountering problems associated with negative profiling especially because it is venturing in the fast food industry, which is highly criticized for selling high-calorie foods with a negative repercussion to the health of consumers. Successful use of promotion as a strategic management tool at Tico Mas requires the target audience to be defined first.
Target audience is important since diverse viewers respond in a unique way to diverse promotional tactics in all industries. For instance, in health care settings, “communication and channels through which it occurs within hospital settings are critical for effective clinical care” (Edwards, Sevdalis, Vincent & Holmes 2012: 25). Applying this argument in the case of Tico Mas, as argued before in the paper, the company faces challenges associated with negative profiling of fast food organizations. Consequently, in the promotional strategies, healthcare activists form a central audience that Tico Mas needs to target in the attempt to display that the foods it terms as healthy meals can indeed be offered in the form of fast foods.
Before any attempt is made to place promotion in any media, effort should be made to clear negative profiling of the fast food in the news media, including social media. In this effort, Tico Mas deploys the strategy of providing information that not all fast foods have the voiced implication on the health of consumers by ensuring that the news media is one of the target audiences of Tico Mas communication strategies. Communication about the business viability of new investment ventures and places such as India and China to shareholders is also significant because shareholders are normally willing to invest in business opportunities, which are profitable in the end.
Currently, many people are engaging with social media and other online sites and activities such as blogging. Tico Mas plans to take advantage of this opportunity to reach a large number of people. The choice of the internet as the media for promotion of Tico Mas is important by considering the argument that “people and critics read about a situation and expressed their opinions online” (Quelch & Klein 1996: 62) in the era of the modern forms of communications. How this strategy would be effective in presenting Tico Mas in a positive way before its potential clients in new markets is dependent on the methodologies that are utilized by people to garner and distribute information that may influence the organization.
Online communication strategy for Tico Mas can be realized through a myriad of modalities. These modalities are driven by two main objectives. The first objective is to establish a two-way form of a conversation between the organization and other concerned parties, and provisions of well-thought and implementable details relating to the measures taken by Tico Mas to ensure that the company adapts to the new markets and can secure a quantifiable market share. The first objective is valuable from the perspective of effective communication to potential customers of the organization while the second is essential from the perspective of the shareholders of the company and other stakeholders. This step is an effort of presenting Tico Mas as a socially corporate responsible organization.
The paper presents strategic management as a fundamental concept for enhancing competitive advantage for Tico Mas, which is a hypothetical company that operates in the fast food industry. It was argued that evaluation or assessing the feasibility of the company requires PESTLE and SWOT analysis to be conducted before deriving the strategies for the operation of the company based on the 4Ps as the elements of the marketing mix: price, promotion through communication, place, and product.
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