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case study of business

Michigan State University : MSU
Uploaded: 5 years ago
Contributor: simpleman2242
Category: Business
Type: Assignment
Tags: business
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Filename:   Case study .docx (15.35 kB)
Page Count: 2
Credit Cost: 1
Views: 64
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Description
business case study specific criteria
Transcript
1) During the emergence stage, the early years of an industry, there is uncertainty about the future of the market. Since there was no dominant business model during the emergence stage of the north American fast food industry, it was not certain that the market would grow sufficiently to provide attractive financial returns and growth opportunities. Small fast food chains would have tended to be excited by the prospect and potential growth potential of the new market and would be first entering the new industry, compared to large established companies. This is due to the risk associated, as well as the burden of high overhead costs that large companies have. Smaller companies also have simpler structures and lower startup costs. Because of the uncertainty in a new industry, the emergence stage is a period of innovation and creativity, due to the hope and optimism that fuels the business owners. New markets are also volatile and have no clear boundaries and undefined segments. Market shares are unstable, and it is impossible to predict which companies will survive or fall. In addition to this, a new industry is required to have organizational, sociopolitical and cognitive legitimacy. The industry should be appropriate within some socially constructed system of norms, it should be endorsed by stakeholders and the level of public knowledge about the industry and its conformity to norms are desirable. To summarize, the objective of the emergence stage is to discover the dominant model of the new model, as well as get it institutionalized and accepted. During the growth stage, it becomes all about sales and market share. Once the dominant design of the industry is determined, that is when the growth stage begins, and where many restaurants exit the industry. Therefore some fast food restaurants would have followed the dominant design, or would have not done so and exited. Companies entering the industry have to follow the de jure standard, a standard legally mandated and enforced by the government or standards organization. There could have also been a possibility of a de facto standard, by virtue of common usage and not officially sanctioned by any authority. During time of growth, there is also a shakeout, where there are a large number of exits from the market at the same time as the output of the company increases due to purging and weeding of weak competitors. As output grows, economies of scale allow producers to have bigger savings, which drives prices lower, and is another important cause of industry shakeouts. Established companies from other industries that might have been behind the startups now enter the market because they see the industry as either lucrative or threatening to their own assets and markets, so casual restaurants may now be also starting a fast food chain of their own. 2) The market is saturated and competition intensifies, as seen in the case study with massive chains such as Burger King seeing their sales fall due to competition from other companies. Rivalry is fierce, and fast food restaurants start the “new and improved” versions of food such as specialty items and coffee, in order to delay the inevitable arrival of the decline stage. Commoditization of food makes consumers even more price conscious which forces restaurants to continuously squeeze out more cost savings from production. There is very little, if any entry to the fast food market due to competition, and also due to the requirement of a mechanistic structure with stricter rules, chain of command and narrow division of labour due to the transition from the high-flying early market to the stable cost efficient late market.

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