Reference no: EM133053393

The Fast-Food Hamburger Industry in Wheatley Town

Wheatley Town residents loved to eat hamburger meals made up of hamburgers, fries and a soft drink. It is no wonder that quick service hamburger restaurants can be found in every corner of Wheatley Town. Even though A&B Burgers restaurant is the second-largest hamburger joint in Wheatley Town, it lagged behind Dairy Burger which had about 30% of the overall market share. Other major competitors are Taco Bell, Jack Dill burgers, Wendy's, Mann Burger as well as other smaller burger joints. Many of the hamburger restaurants have been operating for decades and have expanded operations such that the unit cost of burgers are as low as can be.

With the closing down of two big manufacturing companies in Wheatley Town, customers have become rather price sensitive and the demand for fast food and especially burger meals has slowed somewhat making the industry really competitive. This latest development prompted Dairy Burger to successfully differentiate itself from other rivals by launching the "Have it your way" advertising campaign which allowed customers to change the food prepared without a long wait.

While this strategy has earned Diary Burger some more customers, the residents of Wheatley Town continue to be on the lookout for cheaper alternatives such as teashops and pizza joints, which are springing up fast.

In a recent interview with the manager of Dairy Burger, he disclosed that the increase in the cost of burger meals was due to the increase in the price of the soft drinks that accompanied the burgers and fries. Also the suppliers of meat patties for the burgers are few in the industry and so have the ability to increase prices as and when they choose to do so.

The hamburger meal restaurants get their constant supply of fresh vegetables from Margin Farms which owns greenhouses that are used to grow vegetables all year round. Restaurants who have tried to buy vegetables elsewhere have realised to their dismay that alternative growers are seasonal and can only supply when the vegetables are in season in four months out of the whole year.

The burger buns are supplied by two bakeries; Fays Bakery and Bobby Bakes. The burger producers fear that too much haggling over the price of the buns could push the bakery owners to consider making burgers and so price negotiation is out of the question for now.

The news of the establishment of a new shoe factory is welcome news to Wheatley Town and restaurant operators are optimistic that with the promise of jobs for residents, business would soon pick up.

(Source: Adapted from Carpenter et al, (2011) Strategic Management, A Dynamic Perspective, New Jersey, Pearson Prentice Hall)

Qa. When the Fast-Food Hamburger Industry becomes attractive once again, new entrants would be willing and ready to enter the industry. Explain two barriers that could effectively keep new entrants away from the industry.

b. Explain two factors that give the customers power over the restaurant operators in Wheatley Town.

c. Explain two reasons why competition is intense in the Hamburger restaurant Industry

d. Explain three ways that suppliers of raw materials wield their power over the producers of Burger meals in order to raise prices of their materials

e. Identify a complementary product of hamburgers and explain how it affects the profitability of the industry