A Strategic management paper for Potato Corner Atrium Franchise

Date of Publication

2007

Document Type

Oral Comprehensive Exam

Degree Name

Master of Business Administration

College

Ramon V. Del Rosario College of Business

Department/Unit

Decision Sciences and Innovation

Abstract/Summary

The growth in consumer food service industry despite political and economic turmoil poses a promising future for the industry. Increases in disposable income, fast changing lifestyle of Filipinos towards quick meals or snacks and higher eating out habits are among the drivers contributing to this growth. Globalization and tourism also contributed to this growth mainly through its impact on Filipino's acquisition of global taste preference and demand for wider food selection or differentiated products. Population growth and increasing personal consumption on food and beverages are also major demand drivers. Indeed, opportunities seem boundless for the continued growth of the industry.

While growth in the industry signifies opportunities, this also presents a threat towards greater competition. The consumer food service industry as a whole has an unattractive competitive structure primarily because of the presence of dominant players. For the specific food kiosk/stall segment of the industry where the business under study belongs, it was surprising to note that rivalry, supposed to be the highest form of competition, presents a weak to average competition for the industry. This means that most players have chances of co-existing with other players and still earn a decent profit. Fierce rivalry in the small segment of the industry is not fully achieved as most of the efforts of owners are geared towards operating and earning income than on competing head to head with rivals.

Potato Corner Atrium (PCA) is a franchise of Potato Corner that offers and sells flavored French fries as the main product. It acquired its franchise last January 2004 and started operations the following month at the Atrium of Makati Building, along Makati Avenue. It is operating under the food kiosk/stall format and leased a space of 3 X 3 square meters at the middle part of the building's 800 square meters ground lobby.

The basic strength of the company lies in its franchise, which was identified as one of the key success factors in the industry. The major benefit derived from franchising is the support in terms of systems, research and development, training and advertising, among others. These systems have already been tried and tested by the franchisor and proven to be successful. However, weaknesses also come in the form of restrictions and limitations imposed by the franchisor. These include limited product offering, inability to look for cheaper sources of supply due to sole sourcing from franchisor and standardized price setting.

The declining sales trend of the company because of the entry of many competitors in the existing outlet pushes PCA to come up with strategies best suited for its growth after the evaluation of its external and internal environment. Frameworks used in the analysis included Porter's Five Forces Model, Strategic Group Map. Porter's Value Chain Model, 7-S Framework and Financial Ratio Analysis.

In light of the foregoing circumstances, PCA came up with a vision statement to serve as a guide in its quest for growth. A food cart/kiosk in every viable area where potential demand for quick snacks is high. Its mission statement would be Catering to the needs of hungry and in a hurry passersby through quick snack offerings that are light and easy-to-carry, can be consumed on site or carried, affordable, and with well-known and recognized trademark.

To get near its vision, it came up with two strategic objectives for the company in the next three years. These are: (1) Widen the range of product offering and menu selection in the existing outlet beginning 2007 (2) Expand market reach by establishing a total of 8 outlets in strategic locations in Luzon in the next 3 to 5 years starting 2007 and participating in at least 1 special event per year. Its financial objective will be to achieve Return on Investment (ROI) of 40% to 41% by the end of 2007 with an annual increasing rate of 1 to 2%.

To realize its objectives, PCA proposes 3 strategies. These include: (1) Offer new products and package snacks at affordable price in the existing outlet (2) Expand market reach through participation in special events at least once a year in a strategic location (3) Expand market reach by setting up 2 outlets every year.

PCA will bank in its differentiating attribute - the only stall in the area selling hot flavored French fries - as its competitive advantage. It also banks on the convenience of eating the product while customers are standing in line queuing or sitting in a room, waiting, to pacify hunger or just to while away waiting time. PCA will address the needs of customers who are on go but are trapped in a situation mentioned above.

After coming up with financial projections based on financial and economic assumptions, results revealed that the financial objectives are attained in 2007. This is when the strategies are in place and the implementation and execution of the plans are made. Return on Investment was achieved at 42%, more than the objective of 40-41%.

PCA will indeed look at the growth in the industry as an opportunity rather than a threat. Tapping the boundless opportunity presentedy by the industry is the way to go for the company.

Abstract Format

html

Language

English

Format

Print

Accession Number

OCE1172

Shelf Location

Archives, The Learning Commons, 12F Henry Sy Sr. Hall

Physical Description

53, 5 unnumbered leaves ; 28 cm.

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