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Identifying needs Stating future actions

We’ve got to get more information. So, the next thing to do is

We need more information about… What we’ve got to do now is ….

Case study Texan Chicken: Work out a strategy to save a failing fast food company

Background

Texan Chicken was founded by Eva and Ramon Martinez. They have had no previous experience in the restaurant industry. They opened their first restaurant in West London, and within five years had built up a chain of 40 outlets, using a franchising system.

The reason for their success was the quality of their product. Their delicious fried chicken was based on a recipe that Ramon had discovered when traveling in Texas.

It was served with a sauce which varied from mild to very hot, depending on the customer’s taste. All the restaurants offered a take-out service, which was popular with customers.

When Texan Chicken went public the share price rose by 120% within a week. There seemed to be no limit to Texan Chicken’s profits and expansion.

Present situation

Unfortunately the company’s share price has fallen recently by over 80 %. There has also been a strong pressure on Eva and Ramon Martinez to resign as co-chairmen of the business. At present, they own 40 % of the shares. The other major shareholder is a South African businessman, Martin Webb, who own 12 %. Eva and Ramon Martinez have called in a team of management consultants to advise them on their future strategy.

Listening

Listen to this interview on Business News, a daily radio program in which experts comment on topical business items. Note down four problems facing the business.

Texan Chicken recently did a survey to find out what its customers thought about its restaurants. Here are the results.

Consumer survey (summary)

Customers

Age 18 – 30 58 %

30 – 40 32 %

40+ 10 %

Sex Male 54 %

Female 46 %

Status Single 65 %

Married, no children 23 %

Married, with children 12 %

How often customers visit their restaurants

First visit 8 %

More than once a week 5 %

Once a week to once a fortnight 29 %

Food products bought most often

1. Quarter chicken, salad and rice

2. Chicken breast burger

Customers’ opinions (%)

Good OK poor

Quality / freshness of food 40 50 10

Value for money 10 30 60

Service 8 38 54

Cleanliness 5 14 80

Friendliness of staff 24 48 28

Decor 1 34 65

Task

You are members of the management consultant team called in by Eva and Ramon Martinez to advise them on their future strategy. Discuss the options below. Consider any other ideas for improving profitability. Work out a plan of actions which will turn the company round.

Options

The following options will be discussed by the management consultants at their next

meeting.

1. Persuade Eva and Ramon Martinez to resign. Appoint a new Chief Executive with extensive experience of franchising in the food industry.

2. Seek opportunities to merge with a large fast food company which could offer management expertise and financial resources.

3. Improve profits by expanding in Europe through joint ventures. A German supermarket chain has already shown interest in such a venture.

4. Make major changes in the business. For example:

a) Have more company-owned outlets. This would give greater control over the restaurants.

b) Offer special promotions (e.g. huge discounts on certain meals).

c) Launch a major advertising campaign.

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