The Malaysian fast food chain Wendys

Wendys Old Fashioned Hamburgers is an international fast food chain restaurant founded by Dave Thomas on November 15, 1969, in Columbus, Ohio, United States. The company decided to move its headquarters to Dublin, Ohio, on January 29, 2006. As of March 2010, Wendy’s was the world’s third largest hamburger fast food chain with approximately 6,650 locations, following McDonald’s 31,000+ locations and Burger King’s 12,000+ locations. On April 24, 2008, the company announced a merger with Triarc, the parent company of Arby’s. Despite the new ownership, Wendy’s headquarters remained in Dublin. Previously, Wendy’s had rejected more than two buyout offers from Triarc Companies Inc. Following the merger, Triarc became known as Wendy’s/Arby’s Group, a publicly traded company.

Approximately 77% of Wendy’s restaurants are franchised, the majority of which are located in North America. Wendy’s and its affiliates employ more than 46,000 people in its global operations. In fiscal year 2006, the firm had $2.469 billion (USD) in total sales. While Wendy’s sets standards for exterior store appearance, food quality and menu, individual owners have control over hours of operations, interior decor, pricing and staff uniforms and wages.

Wendy’s menu consists primarily of hamburgers, chicken sandwiches, French fries and beverages, including the Frosty. The company does not have a signature sandwich, such as the Big Mac or the Whopper. Instead, the square burger patties it uses in its sandwiches are the signature item. The company also advertises that its burgers are made from fresh ground beef, not frozen patties.

At year 2007, Wendy’s International, Inc. (NYSE:WEN) and Berjaya Corporation Berhad announced that they have signed a development agreement to build Wendy’s restaurants in Malaysia. Berjaya, through its wholly-owned subsidiary, Nadi Klasik Sdn Bhd, has been granted the right to develop and operate Wendy’s restaurants in Malaysia. Berjaya plans to open the first of these restaurants in Kuala Lumpur in late 2007 or early 2008 and will continue development in the Klang Valley region and other cities over the next 10 years. The new franchisee expects to open more than 70 Wendy’s restaurants in Malaysia.

Product

Step 1- Identification of problem

Loss of Wendy’s market share in Malaysia can be witness recently. A quick research is done right after discovery of the poor performance, it is believe that the problem arise from the burger itself. Most notably is the poor quality of the bread of Wendy’s hamburger. Feedback from customer commented that the bread of burger is even worse than other quality of normal bread. This is due to Wendy’s cutting cost of hamburger by collaborate with low quality hamburger bread manufacturer. Customers who cannot bare the low quality of burger spread bad word-of-mouth to others thus result in fewer customers patronize Wendy’s. As there are many fast food restaurants available in Malaysia, currently potential fast food customers not only want swift customer service, they demand good quality of food as well. If a fast food restaurant unable to provide required quality of product, the respective restaurant will be on the barred list for them. Reduce in sales is be expected if the symptom is continue. Major issue is economic factor triggered by Wendy’s cost saving strategy by collaborates with lower quality hamburger bread manufacturer. Obviously this is a mistake done by Wendy’s whereby reducing of cost not necessary by using low quality bread. Wendy’s is avoiding getting patent or license to collaborate with hamburger bread manufacturer that work with Wendy’s competitor due to the intense competition between Wendy’s and other fast food restaurant which continuously provide value meal.

Step 2-Diagnosis and analysis of causes

Wendy’s strategy to come into Malaysia market after many burger fast food restaurants is established well in Malaysia is the main weakness for Wendy’s. Due to the late introduction of Wendy’s into Malaysia market, many high quality burger bread manufacturers already collaborate with other fast food company. As a result, Wendy’s unable to get supply from those famous bread suppliers. Thus Wendy’s collaborate with burger bread manufacturer which all recognize as lower quality. Wendy’s take it as a win-win situation for them as they assume that they are not required increase production cost to get supply for higher quality bread and reduces the price of burger. Differ from the objective and slogan of Wendy’s Quality is our recipe, this poor is burger quality bring a huge disadvantage to Wendy’s in Malaysia, where gain of market share is the main objective of Wendy’s in opening franchise in Malaysia.

Step 3-Identification of decision criteria

Marketing decision criteria

Competitive advantage

Competitor reaction

Marketing objective

Wendy’s reputation

4 important criteria which aid in the selection of strategy in overcoming problem face by Wendy’s.

Step 4-Allocation of weight to criteria

After consideration of each criterion according the problem statement, we weighted each criterion for the point as shown as below, which a weight of 5 is most important criterion, descending number until a weight of 1 is less important criterion.

Criterion Weights

Wendy’s reputation 5

Marketing objective 4

Competitive advantage 1

Competitor reaction 2

We allocate 5 points for Wendy’s reputation because it is the most important criterion for judging a strategy in this problem because Wendy’s can regain it good reputation as guarantee quality burger restaurant if the problem is solve. Marketing objective get 4 points from us as we consider the factor is relatively important only it aid in the solving of problem face by Wendy’s. Competitive advantage gets the least point-1 as we unanimously agree that since all fast food restaurant is currently providing top quality food so it is normal for Wendy’s to provide high quality food as well to have the same criteria as competitor. Competitor reaction gets 4 points from us. After Wendy’s resolve this crisis; competitor certainly will take it as serious matter. Different competitor will react differently according to their company evaluation.

Step 5-Development of alternatives

A few strategy or marketing alternatives developed to overcome the problem face by Wendy’s on the product itself. To solve the problem, it is encourage that Wendy’s look for a better bread manufacturer. With the famous reputation of Wendy’s in US, it is believe that many burger bread manufacturers willing to conduct business with the large US based fast food restaurant. This provides the opportunity to collaborate with high quality bread manufacturer with the least production cost. Wendy’s can bargain for lower price for burger bread as if Wendy’s burger associated with famous local bread manufacturer, this bring win-win situation for both company. Bread manufacturer can sell more bread whilst Wendy’s can overcome the crisis of poor bread quality. This can be seen by the sales of Wendy’s in US which increase from time to time as it famously for its burger.

Research had shown that what customer really matter about fast food is first the quality of food then come with services of restaurant. Wendy’s is suggested to cooperate with bread manufacturer in nearby foreign country as well for example famous bread factory from Thailand. With this Wendy’s can underline its quality of burger with its famous ground meat and oversea famous bread combine together to bring maximum satisfaction to all customers. Wendy’s burger is presume by customer as foreign country’s food, so there is no trouble if Wendy’s cooperate with famous bread manufacturer at foreign country to provide customer.

Wendy’s in Malaysia may propose to headquarter to create own bread recipe. Wendy’s knows want consumer demand for burger bread, so by creating own bread recipe, Wendy’s can take the opportunity to position into customer’s mind that Wendy’s whole burger is produce by own and this is a unique recipe that customer cannot find somewhere else. Having an own recipe on burger bread surely able to attract customer attention and get back those customer who give up on Wendy’s burger. In term of attractiveness and cost saving, with creating own bread recipe, both of the factor fulfill Wendy’s demand. Wendy’s need not to rely on bread manufacturer, save a lot of cost and management effort to deal with them

Advertising can use to persuade audience either viewers, readers or listeners to purchase or try on the product. Wendy’s may use TV commercial and advertise on newspaper to attract customer after Wendy’s introduce the whole new Wendy’s burger with high quality bread. TV commercial and newspaper advertisement not only able to attracts new customers; moreover it can spread good word-of-mouth to recover reputation of Wendy’s.

Step 6-Analysis of alternatives

Alternative

Wendy’s reputation

Marketing objective

Competitor reaction

Competitive Advantage

Total

Weight

5

4

2

1

Look for better bread manufacturer

3

4

2

3

Collaborate with foreign country bread manufacturer

2

2

3

4

Create own bread recipe

5

1

5

5

Advertising

0

0

1

2

Alternative

Wendy’s reputation

Marketing objective

Competitor reaction

Competitive Advantage

Total

Weight

5

4

2

1

Look for better bread manufacturer

15

16

4

3

38

Collaborate with foreign country bread manufacturer

10

8

6

4

28

Create own bread recipe

25

4

10

5

45

Advertising

0

0

2

2

4

From the above table, we can see that create own recipe (45 points)has the highest point among all alternative. Thus, this is the best solution to be selected by Wendy’s to solve the crisis face by Wendy’s. This table is created by using grid analysis.

Step 7-Selection of alternative

Result of grid analysis suggest Wendy’s to create own recipe in order to solve Wendy’s current crisis which is issue of poor quality of burger bread. Creating own bread recipe shows the enthusiasm and passion of Wendy’s to satisfy customer who wanted to consume on high quality burger in the way that Wendy’s always emphasize on the quality of burger. Not only the problem will be solve, good word-of-mouth will spread thorough all Malaysia by Wendy’s customer and more customer will patronize Wendy’s. Hence the main objective-Regain Wendy’s reputation is achieve by Wendy’s.

Step 8-Implementation of alternative

It is most likely that Wendy’s will endorse on the alternative chosen. The entire possible outcome is what Wendy’s chasing after all. After the selection, Wendy’s must implement the alternative to anticipate result and consequences of the implementation on Wendy’s. Wendy’s must pay attention to the environmental changes that will affect the implementation of creating own bread recipe. Wendy’s need to evaluate if the cost of ingredient of bread, management cost and other will affect the overall delivery of high quality of Wendy’s burger to customer. Likewise is important for Wendy’s to convey the implementation of creating own bread recipe to customer. Let customer understand that Wendy’s comprehend what customers want and Wendy’s is able to deliver to satisfy them.

Step 9-Evaluation of decision effectiveness

Evaluate an alternative is a must in order to check if the alternative successfully resolve the problem by company. Appraisal of result of creating new bread recipe can be checked through feedback from customer. Feedback is important to provide Wendy’s with information that can determine whether the succession of implementing the alternative or a new idea is needed. Collection of feedback or by looking at sales of Wendy’s can show the actual result from creating own bread recipe. If there is an increase in market share, obviously Wendy’s is regaining back its reputation as high quality burger provider. Otherwise, if the result shows the other way round, Wendy’s might consider come out with another or choose other alternative to solve problem faced.

Price Problem

Step 1- Identification of problem

Compare to other strong competitors, MacDonald and Burger King. Wendy’s selling a group of items at regular low prices rather than running special sales, frequently remodeling restaurants, and advertising effectively. Unfortunately, this prestige pricing strategy became the major problem of Wendy’s. A low price will result customer’s hesitation and undecided to purchase Wendy’s product and choose another fast food restaurant thus lead to lower sales.

Step 2- Diagnosis and analysis of causes

To cover the production costs of Wendy’s product and enjoy profit margin is not easy for Wendy’s due to low pricing strategy set by Wendy’s. Moreover, Wendy’s was heavily boosting its promotional activities and investing in operating new franchise during that time to expand their products throughout Malaysia. Besides, Wendy’s hired about 500 unnecessary employees to run the company during this period. All these had lead to high operational cost for Wendy’s, which eventually caused them to face serious some financial problem in expanding their franchise. In this case, Wendy’s failed to have their products launched cost-effectively and thus lose some potential customers such as teenager and adult.

Step 3- Identification of decision criteria

First, the operating cost is one of the decision criteria which can affect the decision making of company to do any business project. The high operating cost which is means the Wendy’s was highly invest on its business run, this will make those consumers pay more attention on Wendy’s information so that Wendy’s can cover back the expenses which is use in design the business by gaining the sales profit from customers. Secondly, the brand corporate image is also an important factor to represent the reputation of Wendy’s. The higher brand corporate image which represents famous name of the company, thus people can get more confident to rely on the information and products of the company. Hence, the people will not compare the prices with other fast food restaurant once they have trust and believe on Wendy’s. Thirdly, the customer behavior will be other decision criteria for doing the business. There are different buying behaviors among the customers in their purchase decision making process such as some people want to save their spending, thus they are willing to purchase the lower price of meal. Besides that, many customers are influenced by word of mouth; they will make their purchasing decision based on the information from their family and friends. Next, the government support is another major decision criteria as the pricing strategies need to support and approve by the government. Or else, the pricing strategy cannot be implemented in the price competition. Lastly, the company must have strong financial position to implement its pricing strategy. If the Wendy’s implement prices increase on its products, its revenue will be higher than or same with its competitor due to the increasing pricing strategy. Thus, the strong financial capital can cover expenses of the company and will earn more profit in the future.

Step 4-Allocation of weight to criteria

In the decision criteria, the customer behavior is most important to impact the price competition. Nowadays, many customers are price sensitive buyer. If Wendy’s implemented a new pricing strategy on product, the customers will evaluate on the product price then make their purchasing decision. Once the product price is remaining same, the customers will not purchase on the Wendy’s product which they questioned about Wendy’s quality, they will consider switch to another fast food restaurant. When the meal price is increasing, this will lead the customers more favorable to purchase on the Wendy’s product that match its excellent quality of meal. The strong financial position will be the second important criteria in the price competition. This is because strong capital can cover the expenses when Wendy’s implement its expensive pricing strategy. If the financial capital is insufficient, the Wendy’s cannot fully cover its operating expenses and may continue making loses due to fewer passengers in future. The next important criteria will be brand corporate image. Normally, the people will look at the company corporate image to judge the price whether it worthiness or unreasonable. The well-known company will lead its customers to less consider on the price as they think that the price is worthiness to pay for receive a delicious meal. The operating cost criteria will become less impact to the price competition as those companies usually high spending on their business expenditure in order to get more customers’ attention even the company is not take part in price competition. The least important criteria will be government support because the government is the policy maker. There are not necessary to require the government support in price competition as the government will make any regulation to restrict the pricing strategies that offered by the fast food restaurant. This is because the government wants to ensure the product must be affordable to pay by all consumers.

Step 5-Development of alternatives

There are five alternatives gain market share and sales. First, the increasing price strategy can help Wendy’s to capture other portion of customers who like to do a price-quality comparison. Since Wendy’s customer feedback is welcome accept by Malaysia when customers’ perceived quality worth the price, they are more satisfied and thus develop brand loyalty to Wendy’s.. Next, the bundle price which is most favourable strategy for many companies to implement on their business. Bundle pricing strategy is means the company combines many products into a package and offers a discount price to the customers. For fast food restaurant, they offer several meal packages with a discount prices which are contain delicious food and drinks in a package. By consider these benefit, the customers are more willing to purchase the products with bundle price as they can save their expenses by compare to purchase the products in different time. The captive product pricing, which is the price of products cannot be used without a companion product, such as child’s toy or souvenir. Often the fast food restaurant company will use a product mix pricing strategy wherein they will set a low price on the companion product for customers to enjoy the extra benefits of captive product.

Step 6-Analysis of alternatives

Consumer behavior

(10)

Strong financial position

(9)

Brand corporate image

(7)

Operating cost

(6)

Government support

(3)

Total

Price decrease

10

3

1

4

5

173

Standard price

7

8

3

5

6

211

Bundle price

8

6

9

10

4

269

Captive product price

2

9

6

7

3

194

The bundle pricing strategy is most high scores of the alternatives strategies. The operating cost, brand corporate image and customer behavior are relative important in this pricing strategy as the company need to spend more in design and innovative the meal packages. Without strong financial position, the fast food company cannot implement bundle pricing due to the high operating expenses. Besides that, the brand corporate image and customer behavior are the next important impact to the fast food restaurant. If the reputation of the fast food restaurant is low, the customers will lose confident even the company implement bundle price on its meal as the customers will think the fast food restaurant is bad so that they will unwilling to even try and experience Fast food restaurant product. The other ratings of pricing strategies are below than bundle pricing which are standard pricing, captive product pricing, and price increase strategy.

Step 7-Selection of alternative

In our opinion, Wendy’s should implement the bundle pricing because it is the highest score and best solution to address the problem in price competition. The bundle pricing is feasibility, because Wendy’s can customize customer needs & wants just like it offered different meal packages and innovative souvenirs or child’s toy to satisfy the customers’ need. Moreover, Wendy’s implement bundle pricing on its products also can show its suitability to the low income customers and family members, because the bundle price can make them more affordable to pay and enjoy the meal of Wendy’s without heavy spending on expensive meal for those customers who purchase bundle price package. Lastly, the bundle pricing is acceptability by all customers as they can get the special discount price on the multi-selectable delicious meal.

Step 8-Implementation of alternative

The implementation of bundle pricing is necessary, or else Wendy’s will lose many customers and continue suffer in the reduction customer in the future and result in sales drop. In addition, the bundle pricing is meeting the customer requirements as the customers know it is worthiness to purchase the meal packages at the discount prices which include the high quality of foods and suitable quantity for person. This can lead many people continue have their meal on Wendy’s. In the end, the revenue and percentages of customers will also rise in the future.

Step 9-Evaluation of decision effectiveness

There are several methods to evaluate the result of implement bundle pricing whether it is effective or useless. First, Wendy’s can get the feedback from customers by providing survey form to them in order to get their opinion and perception about Wendy’s. Secondly, Wendy’s compare the gap between actual and desired outcome to evaluate the result and see whether the bundle pricing method is efficiency to solve the problem of price competition.

Distribution

Step 1- Identification of problem

Wendy’s in Malaysia currently had facing sales drop situation. Based on the research that we had done, we found that Wendy’s sales drop is occurs due to its inconvenience stores location. Wendy’s had enter it business in Malaysia since 3 years ago and currently opened total eight outlets .Most of Wendy’s outlets are opened only in KL areas inside the shopping complex or in Petaling Jaya shopping complex while not the other areas in Malaysia. These situations make the Wendy’s consumers feel that Wendy’s fast food are hardly to get it and it doesn’t not bring any convenience to them because it outlets normally only can get in shopping mall or shopping complex in KL. Customers feel that Wendy’s do not provide any convenience to them compare to Macdonald, KFC or Pizza Hut. This will lead to Wendy’s outlets market share in Malaysia getting less and less and facing sales diminishing problem. The problem of outlets location must be solve immediately and consequences in order to avoid continuing of sales drop.

Step 2-Diagnosis and analysis of causes

Wendy facing outlet location problems since Wendy’s using one of the market coverage strategies-concentrated marketing, which focuses on one small part of the marketplace is for expand their outlets. After opened its first outlet in Sunway Pyramid, Petaling Jaya, and then Wendy’s is open seven more outlets concentrated in busy areas which neither in shopping centers in Kuala Lumpur nor in Petaling Jaya. Although expand it outlets in shopping centre or busy areas is a good strategy for fast food industry but over depending on it will lead consumer feel lack of convenience to consume. Fast food is not only standing for fast and self services, convenience in fast food also play an important role. For those consumers who like shopping always might feel comfortable with Wendy’s outlet location because after they shopping they will go for Wendy’s for having a lunch or dinner. But for those white-collars or blue collar busy consumer, they might feel inconvenience or wasting time to find a parking and then having a ordinary lunch or dinner in a shopping complex. Furthermore, almost all the Wendy’s in Malaysia outlet location is not free standing; this cause Wendy’s unavailable to provide drive thru or home delivery services of its product to customer. In this case, customer will feel that Wendy’s is failed to distribute its product in convenience outlets location.

Step 3-Identification of decision criteria

Due to the high costs of setting up and operating a fast food restaurant, financial strength stands out as very an important criteria for the long-term survival of these ventures. To sustain the Wendy’s business, it is necessary to maintain a sufficiently high volume of sales in order to have enough financial backup.

Customer conveniences also consider an important criteria identification marketing decision. In fast food industry, customer conveniences play important roles. Most of the customer prefers purchase product or services in convenience way, because conveniences can bring them cost and time saving. . Which company provides most suitable convenience to its customer will its customer satisfy and royalty to the company.

Meanwhile, Wendy’s marketing strategies must be formulated to attract customers. To be successful in this highly competitive fast food industry, Wendy’s must be able to project the right marketing strategy as well as to meet the desired needs of customers. The marketing strategy not only to attract customer meanwhile still must associate with the company objective in order to bring out company mission and vision and create desired goal.

Furthermore, Wendy’s competitive advantages also important criteria for decision making. In order to develop a competitive advantage the firm must have resources and capabilities that are superior to those of its competitors. Wendy’s must process a competitive advantage over it rival to able deliver the same benefits as competitors but at lower, or deliver benefits that exceed those of competing product. Thus, a competitive advantage enables the firm to create superior value for its customer and superior profits for itself.

Step 4-Allocation of weight to criteria

After consideration of each criterion according the problem statement, we weighted each criterion for the point as shown as below, which a weight of 5 is most important criterion, descending number until a weight of 1 is less important criterion.

Criterion Weight

Financial Position 5

Marketing Strategies 4

Customer Conveniences 4

Competitive Advantages 3

Financial position will be most important for a fast food company, because started a fast food restaurant need a lot of investment from different way.

Marketing strategies will be second important criteria, without a good marketing strategy, no matter how good of the product or services quality also won’t achieve desired sales volume. The third important criteria will be customer conveniences. Fast food is about to provide food in faster way and also bring convenience to the consumer. So, as a fast food company, convenience is a necessary in order to satisfy customer. Lastly, a competitive advantage is needed to enable firm to create superior value to its customer and a superior profits to itself.

Step 5-Development of alternatives

In order to solve inconvenience outlet problem, we had prepared few alternatives. First, open more outlets in other areas while not only in KL and Petalling Jaya. By open more outlets in other areas, Wendy’s can target even more broad range of customer while not only citizen which live in urban areas. Besides that, open more outlets can increase the population of the name Wendy’s fast food and make the brand name well known.

Secondly, add in home delivery services. For currently trend, product delivery is very important in order to bring customer time saving and convenience. So, by adding home delivery services not only can bring more convenience to the consumer meanwhile can further satisfy the consumer needs.

Lastly, move some of the outlet to free standing building in order to save cost. Rented for a slot in shopping complex is costly compare to rent a free standing building. Moving an outlet might be costly and time consuming but it will worth when it is added drive thru to bring more convenience to customer

.

Step 6-Analysis of alternatives

Quantitative Strategic Planning Matrix (QSPM) of Wendy’s company.

Key factors

Alternatives 1

Open more outlets in other areas while not only in shopping complex

Alternatives 2

Add home delivery service to bring more convenience to customer

Alternatives 3

Move some of the outlets from shopping complex out to free standing building

Weight

Attractive scores

Total attractive scores

Weight

Attractive scores

Total attractive scores

Weight

Attractive scores

Total attractive scores

Strength

Unique product

0.15

1

0.15

0.3

2

0.6

0.21

1

0.21

Financial position

0.3

3

0.9

0.15

1

0.15

0.15

4

0.6

Quality of product

0.1

2

0.2

0.1

3

0.3

0.12

2

0.24

Weaknesses

Poor marketing & sales

0.25

2

0.5

0.2

2

0.4

0.24

3

0.72

Inconvenience outlet location

0.2

4

0.8

0.25

1

0.25

0.28

2

0.56

Sum weight 100% 100% 100%

Opportunity

Competitive advantages

0.3

4

1.2

0.1

2

0.2

0.27

3

0.81

Possible acquisition of a competitor

0.2

3

0.6

0.4

3

1.2

0.1

1

0.1

Threats

Price war

0.17

5

0.85

0.15

1

0.15

0.22

2

0.44

Increasing competition

0.2

3

0.6

0.2

1

0.2

0.31

2

0.62

Competitor Oligopoly

0.13

1

0.13

0