Download Lecture 2 ( August 10,2002)

Lecture 2
( January 18, 2003)
Strategic Thinking
Case Analysis
Fast-food industry: McDonald’s
Strategic Thinking
• Technology is rapidly changing what we do
in society, in business and at work
• Continual improvements and advances in
IT are encouraging even more changes to
business and society
• Example of change affecting us most :
Example of Change
old economy
work diligently
be loyal
secure
life time employment
new economy
specific skills
solve specific problems
complete special projects
move on to
other assignments
Technology & Industrial Trends
• Identifying certain trends
• Understanding their roles in the
industry
• Implementing them to assist you in
your endeavors to position yourself for
career growth and expansion
Trends
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Standardization
Leverage
Mass customization
Franchise
Methodology
Modularization
Liquid assets
Client/servers
Knowledge, information or expertise driven
workers
Standardization
The Conscious Effort to Make all Jobs
Similar, Routinized, and Interchangeable
- enforces rules set
- saves in economies
- preserves continuity
- prevents irregularity
Leverage
Move all tasks to the lowest possible
individual in terms of level and cost
- role & budgetary requirements force tasks to
be accomplished at an appropriate lower level
- billing structure ensures tasks are
accomplished
Mass Customization
focus all products and services on the
specific customer
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not only specific market segments
tailored to specific individuals
no contradictions to standardization
examples: discount coupons
special promotion mailers
Franchise
The Organization has become a small
central office with many autonomous, but
identically structured units
- strict guidelines in cost & output for each
location
- reporting to HQ in structured format
- reduces middle management layers, for example
no regional offices to evaluate & interpret
information received
Methodology
Methodology tells the user the steps to take
in the process
- simple step-by-step cookbook like approach
- available across the whole organization
- easy to learn & train, minimum skills required
- example: systems development
Modularization
Rather than be constructed at the most
granular level, projects are completed
using sections of code
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easier and faster to put modules together than
to work with individual lines of code every time
example, Microsoft Office Suite, the ability to fit
together Word, Excel, Access, PowerPoint and
FrontPage
Liquid vs Fixed Assets
Focus on Liquid Assets, Reducing
Fixed Assets
- reduce cost by reducing reliance on fixed
assets
- provide direct link of cost to expenditure
- examples, outsourcing of human resources,
technology departments, lease rather than
purchase of fixed assets
Client/Server
Enables data to be stored at
organizational, group, and individual
levels.
- decentralization of the technology tools
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stored and accessed efficiently at local level
while being maintained across the organization
Knowledge, Information, or
Expertise-Driven
Rather than work in a hierarchy, workers
develop a particular expertise and are
constantly reassembled to provide their
expertise to a project
- constant reassembly keeps workers fresh and
focused
- sharpness of expertise keeps the job rather
than longevity in the organization
- example, projects requiring a cross-section of
knowledge-driven skills
Data vs Information
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Importance of input
Knowledge and exposure
Life long learning
Technology advances and
changes
DATA
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raw numbers
bare text
sound
video
images
factual elements/opinions/comments
describing some object or event
• application value -- little
INFORMATION
• processed, organized and integrated
data to provide more inside
• precise, timely and specific
• supplied voluntarily or on demand
• of strategic value to decision makers
Data Processing
vs
Information Systems
• DP - Data Processing
• IS - Information Systems
Information Services
• TOO MUCH DATA
• TOO LITTLE INFORMATION
Analyzing and Building Systems
• evaluate existing operations
• explore new alternatives
• simple projects
– problems that can be solved by yourself, as users
– calling IS professionals is a waste of time and money
• complex projects
– need analysis and design by IS professionals
– need communication between yourself and IS
professionals to develop systems that meet your
needs
– solving yourself can lead to costly mistakes
Management and Decisions
• traditional roles of management
– organizing
– planning
– control
• job activities
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attending meetings
talking over the phone
reading/preparing reports
discussing projects with colleagues
explaining procedures
• decisions and decision process
Decision process
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Collecting data
Identifying problems
Making choices
Persuading others to accept a decision
Implementing the solution
Methodology and Franchises
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Decisions need input
Anticipation of data/information needed
Design of information systems to solve future problems
Reduction of management tasks to smaller problems
Smaller problems can be addressed with a standard
methodology
• Daily operating decisions reduced to a set of rules and
procedures
• Reduction of middle-level managers
• Franchises -- financial performance of individual units
Fast-food Industry
case analysis
• Franchising
• Fast-food industry
• McDonald’s
franchising
• Franchising is a system in which a producer or
marketer of a service, the franchisor, sells
others, the franchisees, the right to duplicate a
concept and use the trade name
• Franchisor: provides sales and other support
within a specific territory for an agreed period of
time
• Franchisees: order supplies from designated
sources, receive training at corporate sponsored
institutes
franchising types
• Simple franchising
– exclusiveness
• Product-trade name franchising
– selling products to distributors who resell
them
• Package (prototype) franchising
– products, services, inventory system, sales
and marketing methods, record-keeping
procedures etc.
advantages of franchising
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easy start to a business
minimum or no knowledge required
less risk to success
proven business
quick and higher market penetration
economy of scale
survival rate much higher than other
start-up business
Fast-food industry
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financial analysis
stock/investment outlook
competition and growth
technological impact
recommendations
financial analysis
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In the US, franchise restaurants
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Revenues and profits
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$800 billion industry
8 million employer
one-third of food services spending
start-up fees can range from $10,000 to $600,000
profit levels of 10% to 20% for the past decade
More health-conscious
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pizza and chicken enjoy faster growth than burger
stock/investment outlook
• National trend toward two-income
household contributes to more dining out
• Larger franchises have positioned
themselves to take advantage of the trend
• Smaller franchises are being acquired by
the giants due to the mergers and
acquisitions frenzy
• Long term prospects are favourable
competition and growth
• Domestic market has matured
• Competition is tight
– fast-food industry itself
– non fast-food industry such as grocery stores cooked
foods, deli counters, eat-in dining areas
• Search for new area of growth
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niche marketing
mergers and consolidations
dual-branding
non-traditional operations
international development
value offerings
technological impact
• Technological investments stimulate growth
• Information systems tracking inventories and sales
• Use of internet in the study of demographic and
market research reports in search of key locations
• Use web pages to advertise to prospective owners
• Training and support systems
• Global exchange of information
• Monitoring of the required uniformity of the
franchisee
• Research and development to keep ahead of
competition
recommendations
• Sales will lag in domestic market but can
grow internationally
• To increase or even keep the market share
will be increasingly difficult
• Focus on non-traditional markets and niche
markets, dual branding
• Service improvements like timeliness and
delivery speed
• Watch out for more merger and acquisitions
McDonald’s
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Read case p.6-18 from textbook
Give the case questions some thought
Discuss them among yourselves
Are you aware of the first possible loss
announcement since McDonald’s went
public in 1965?
• Bring up during the tutorials
• Enjoy your weekend
Reading Materials & Resources
• chapter 1 of textbook
• http://www.mcdonalds.com
• http://www.dietclub.com.au/createameal/?menu=1
• http://www.spring.gov.sg