QUESTION
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Final paper
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Administrative Policy, GMGT 4010
Summer 2020
Take-home Individual Final Examination
Professor _Jijun Gao__ Section D01
IMPORTANT NOTICE – READ THIS FIRST
STATEMENT OF INTEGRITY
This assignment is intended to exercise and evaluate your capabilities in strategic management.
This take-home exam is to be completed on an individual basis and no consultation about this
case with anyone else, either within or outside the Administrative Policy class is permitted. Any
violations of this policy will be considered a breach of academic integrity by all the students
involved, and will be referred to the Dean’s office for disposition according to Faculty policy.
To reinforce the importance of this stipulation for the academic integrity of this examination,
your report must include this statement page. The submission of your exam case report indicates
your acceptance of the statement below. No signature needed.
I, __________________________________(please print your name), certify that I have
completed this take-home final examination written analysis strictly on my own, without
consultation with any other individual, either within or outside the Administrative Policy
class.
Further, I certify that I have not provided any advice or assistance with regard to this takehome
final examination to any other student currently enrolled in Administrative Policy at
the University of Manitoba, Summer 2020.
Finally, I certify that I have not used any information after the time of the case and that the
paper meets length and other format specifications given in these exam case instructions.
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TITLE PAGE
ADMINISTRATIVE POLICY
GMGT 4010
STUDENT NUMBER
(DO NOT WRITE STUDENT NAME)
Instructor: Jijun Gao
SECTION D01
FINAL TAKE-HOME EXAM
SUMMER 2020
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GMGT 4010 – Administrative Policy
Take-home Final Exam Case Instructions (subject to change before the exam)
PAPERS ARE DUE AT 4:00PM THURSDAY, AUGUST 13, 2020 to the designated
Assignment folder (file name in this format: Student # Name Final - GMGT4010 - D01).
Everything needs to be put in a single file (Word or PDF). You should proofread and format the
paper properly well ahead of the deadline (to avoid any rush during the day or breakdown of
internet) and plan to submit your paper a few minutes early. Please make sure you receive a
confirmation message of successful submission from the UMLearn system. Any papers that is
submitted late will receive a late penalty as described in the subsequent instructions.
The Assignment
Please go to Ivey Publishing website to purchase the exam case “Chick-fil-A:
International Expansion Challenges” (Ivey Publishing production ID 9B20M046). The easiest
way to find the case is to type in the Publication code 9B20M046 in the “Search” box. Please
note that some supplemental financial information has been provided in the same folder to
facilitate your financial analysis. Feel free to search for further financial information online, if
you wish, as long as you provide a reference.
Mr. Dan Cathy, CEO of Chick-fil-A, and his executive team are aware of your skills in
strategic analysis. They are asking you to help them assess the situation and to recommend a
competitive strategy for the company for the next five years. Please prepare an OUTLINE
report for them giving your assessment of the operational situation and your recommendations,
considering both strategy formulation and implementation issues.
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Further Instructions & Specifications
In addition of these Final Exam Instructions, please strictly follow the “Structure of
Final Exam Case Analysis Report” enclosed in the end of this document for specific sections
and exhibits to include in your case analysis report. Within the case, possible issues, questions,
opinions, and even courses of action may have been provided. You may choose to use them
or not based on your own judgment; you do not even need to agree with them. Please
remember that the creative thinking and unique thoughts shown in your strategic
alternatives are key to developing an excellent case analysis report. Keep in mind that your
task is to conduct strategic analysis for the company following the provided guidelines, not to
resolve a particular issue raised in the case (e.g., a particular debate or an innovation project
proposed in the case), even though they might be highly relevant to your analysis.
The paper (excluding all exhibits and title pages) must be put on a maximum of three
pages in single-space with 12-point Times New Roman font and one-inch (2.54cm) margins
on all sides. No text beyond the three pages will be taken into consideration for the grading
purpose. The body text of the paper should all be presented in bullet points format only, no
paragraphs and lengthy sentences (e.g., over two lines) are accepted (subject to 5% penalty
otherwise). The sub-points belonging to a major bullet point, if you use this format, can be put in
a smaller 11- point font. Please use the same section headings such as “External Assessment” as
given in the “Structure of Final Exam Case Analysis Report”; do NOT create other headings.
Papers that grossly violate guidelines will receive a failing grade or serious penalty at the
instructor’s discretion. Please keep an eye on spacing between lines (keeping everything singlespaced),
so you can save some space for text. The most important thing is to get it done right
(nice and clear and concise), not to elaborate on your points too much.
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Late papers will be penalized as follows: Ten percent points will be deducted for each
24-hour period (or part thereof) of being late (To clarify: “part thereof” here means ten percent
will be deducted for papers that are late by a few minutes, half an hour, or one hour, etc. up to 24
hours). Exceptional circumstances that might affect a student's ability to meet this deadline must
be brought to the instructor's attention prior to the deadline. Extensions may be given to students
with university-approved reasons, such as disability.
External Research
You are not required to conduct any further external research on the company and its
industries. Be sure to provide references on a separate page for any search before the time of the
case and attach this page at the end of the paper. This page may contain only references and can
be in addition to the text-pages and exhibits.
Continue to see the Structure of Final Exam Case Analysis Report”
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Structure of Final Exam Case Analysis Report
(Summer 2020 D01 only)
Note: These guidelines are intended to help you get the structure right on the case report; meeting them
does not guarantee a quality work. Please use the same sections headings (e.g., Key Issues, Current
Strategy, etc.) in your paper. Please insert only bullet points (including short sentence) for each section;
each point shall be no more than two lines (3-5 words beyond the second line is acceptable in rare
cases). If you choose to fill in your points directly on this template, please make sure you remove all
instructional words (other than the section titles) for clear presentation.
Limit the text to 3 pages (12 font, single-spaced, 1” (2.54cm) margin on all sides), excluding cover
pages, tables and exhibits.
Key Issues (preferably 3-6 issues each in one bullet point;)
- Obvious and pressing issues, hidden problems, and long terms challenges facing the company.
These issues set a direction in terms of where your strategic alternatives should focus. Please
describe them (and number them) in order of importance.
External Assessment. Top Three most important opportunities/threats in total, not three each. A table of
external analysis (no need to include in the report) will be highly helpful for you to identify good
opportunities and threats.
Note: focus on the strategic group of which the focal company is a member, NOT the case company. Do
NOT give recommendations here as to what firms can do or should do with respect to these opportunities
and threats.
- One sentence describing the strategic group (similar strategy and competitors)
- Opp/threat #1: One sentence that clearly specifies the opp/threat for the strategic group; 1-2
bullet points following the sentence to provide evidence for the opp/threat
- Opp/threat #2: ditto
- Opp/threat #3: ditto
Internal Assessment. Top Three most important strengths/weaknesses in total, not three each.
- Str/weakness #1: One sentence identifying the strength/weakness; 1 subpoint providing evidence;
2-3 separate bullet points reporting the V, R, I evaluation of the strength. If it is a weakness, 1-2
points to discuss whether it can be transformed into a strength in the future.
- Str/weakness #2: ditto
- Str/weakness #3: ditto
Financial Diagnosis – Exhibit 1 for this section
- 3-6 bullet points to interpret the ratios in the Exhibit 1. Use various comparisons (e.g., temporal
changes) and financial ratios to diagnose the company’s financial situation. Remember to
comment on the company’s overall financial health and capacity to carry on future investments
that might be part of your strategic alternatives.
Current Strategy
Note: focus on what the company is currently doing; do NOT discuss what it can or should do in the
future
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- Business strategy (one sentence defining the strategy such as differentiation, followed by 1-3
bullet points of explanations)
- Functional strategy (2-3 separate points for major functional practices such as marketing
initiatives);
- Global strategy and corporate strategy, etc, whenever applicable
Implementable Strategic Alternatives (a total of TWO alternatives; the most important section!)
Note: (1) Business level strategies are expected, while corporate level strategies are accepted. Please do
not propose functional level strategies (HR, marketing, etc.) as explained in Chapter 4, which focus on
operational changes that aim to improve internal efficiency and effectiveness. (2) Business strategies
represent major moves in the way the company competes on the market. They often involve significant
investments or divestments that carry long term impact on the company’s competitiveness. These
strategies are externally oriented, often answering the question of what to serve, who to serve, where and
how to compete. (3) Business level strategic alternatives, often developed based on existing/potential
strengths/weaknesses and available environmental opportunities/threats, should deal with key issues
(including the pressure for growth). (4) Two alternatives need to be significantly distinctive, yet they all
need to generate significant revenue or market growth to the company, which means that simply divesting
(stop doing) something may not suffice. (5) Both strategies should go beyond a general goal (e.g.,
international expansion) and discuss what the company needs to do exactly. (6) Both alternatives should
be plausible and appealing, supported with solid reasoning and strong arguments. Note that using status
quo or current strategy (that is, continue to do what has been doing) as an strategy alternative
demonstrates weak creativity; I need to see your OWN original ideas. Selling off the company is not
an option of strategy in the exam.
- Alternative #1: One sentence specifying the strategy, followed by 3-5 bullet points of
explanations of what it is exactly and why it is considered a good strategy, with respect to the
analysis in previous sections
- Alternative #2: ditto
Criteria and Evaluation of Alternatives by Criteria (second most important section) – Exhibit 2-3 for
this section
- One sentence to list 3 criteria (e.g., NPV), and 1-2 sentences to justify your choice of these
criteria (that is, why these, not others?)
- Then, separate points in correspondence to the three criteria, each point using one criterion to
compare the two alternatives with clear conclusion (which one is better) and justifications (why).
Recommendation and its Implementation
- 1-2 points to summarize the evaluations and recommend one strategy based on the evaluations
- 1-2 points to discuss major issues/challenges regarding the implementation of the strategy
- 1-2 points to discuss the limitations of the recommended strategy with respect to the identified
key issues. Offer suggestions on possible solutions if you can.
Exhibits (append all exhibits to the end of the paper in the following order)
- Exhibit 1: Financial Analysis. A table that presents financial ratios of multiple categories, such as
profitability, leverage, liquidity, etc., as well as any useful historical comparisons such as sales
increase/decrease. No specific ratios are mandatory. All depends on your analysis and needs.
- Exhibit 2-3 (optional, with bonus): Two Exhibits of NPV corresponding to the two strategic
alternatives respectively; put key assumptions, with brief justifications, either at the bottom of the
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tables or on a separate page. Please refer to the Westover Inn case in your case package for a
template of NPV.
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| Subject | Business | Pages | 3 | Style | APA |
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Answer
ADMINISTRATIVE POLICY
A COMPETITIVE STRATEGY FOR CHIK-FIL-A FOR THE NEXT FIVE YEARS
Number of Words: 1087
Key Issues
Chik-Fila-A is facing various issues which have an impact on its strategic direction as follows;
- Intense competitive rivalry in the fast-food industry.
- Competitors in the fast-food industry such as McDonald’s and Popeye have introduced their own version of spicy chicken sandwich.
- Strong opposition from the Lesbians, Gay, Bisexual, Transgender and Questioning (LGBTQ) community.
- The company’s franchising strategy whereby the company charges the lowest franchising fees in the industry
External Assessment
- The players in the strategic group include MacDonald’s, KFC and Popeye which offer similar fast foods as Chik-Fil-A and compete in the same market segment.
The opportunities for the company and the strategic group include:
- Expansion in the size of the menu. This can be done by introducing new menu items
- Expansion into new markets internationally
The threats that the company and the strategic group faces include:
- Intense competitive rivalry in the industry
- Rising cost of inputs which puts pressure on profit margins
- Avian flu and bad publicity associated with the quality of chicken used in these establishments
Internal Assessment
Internal weaknesses that the company faces include;
- Dealing in high calorie foods such as chicken sandwiches and soft beverages. The company can overcome this by introducing healthy and organic alternatives
- Strong religious culture and funding on anti-LGBTQ organizations. The organization could change its strong religious culture and adopt a more tolerant policy.
The company’s strengths include;
- Good customer service culture. The company was voted as the best in that aspect
- Its franchising strategy which enables it to offer the cheapest franchising fees
Financial Diagnosis
- The company’s revenues grew by 13.7% as from 2017 to 2018.This implies that the current strategy is generating positive returns for the company
- Net cash from operating activities grew by 11.7% from 2017 to 2018 implying that the current business is generating positive cash flows from its activities.
- The company will be able to generate adequate cash flows to finance international expansion.
- The net profit margin was 16.39% in 2017 and 15.03% in 2018.
- The negative growth in profit margin indicates that the company needs to identify strategies to grow its revenues and/or cut costs to grow the net profit margin
- The company is in a strong financial position as its generated strong cash flows from its operating activities.
- The company is able to obtain 800 million dollars from financial institutions using the credit agreement to finance an international expansion strategy.
Current Strategy
The company’s strategies are as follows;
The business strategy is differentiation as it;
- Focuses on offering top quality food
- Use of large spacious restaurants e.g. the 8000 square feet Hawaii themed dine-in restaurant
- Offers best customer service in the industry
- Lack of attention on pricing of products
Functional strategies include;
- Humorous advertising such as “Eat mor chickin” adverts
- Advertising on highway bill boards
- Charging cheapest franchising fees
Global strategy includes franchising e.g. the company used CAD$ 15,000 to expand to Canada
Implementable Strategic Alternatives
- The first strategy is changing its official policy on LGBTQ community due to the following reasons;
- The LGBTQ community has a strong lobbying ability as demonstrated in the United Kingdom where renewal of the lease was declined due to its activities
- This community represents a growing customer base which should not be ignored
- The bible on which the company is founded, encourages Christians to love sinners of which LGBTQ falls under. Hating others is a sin in the bible.
- The company should grow its menu size by adding new food items and cuisines due to;
- Threat of break out of Avian flu
- Increased competition from chicken based cuisines
- Threat from health conscious consumers
Criteria and Evaluation of Alternatives by Criteria
- The company could use various methods to evaluate the various strategies and they include net present value, internal rate of return and payback period.
These criteria have been chosen because;
- They are able to determine the viability of a strategy
- They determine whether a strategy will be profitable or not
The most ideal criterion is net present value as;
- It takes into account what each strategy will cost to implement it.
- Cash flows expected throughout several years are discounted using the company’s cost of capital to determine whether the investment will generate capital gains or losses.
- This method takes into account the concept of time value of money.
- For example, in 2018, the average sales per franchisee in $ thousands for Chik-Fil-A was 4,166.67.
- Using these figures, the company can determine how much it will take to set up a franchise restaurant and then project the cash flows for several years.
- Using the company’s cost of capital as the discount factor it can then determine whether the project will return a positive or negative NPV
- The company can use the investment cost of starting a franchise restaurant to determine whether it will generate sufficient IRR to cover the cost of capital.
- The interest rate on the 800 million should be the discount factor which is used as the cost of capital
- The discount factor can be used to discount projected cash inflows from franchisee restaurants to arrive at the present value of cash inflows
Recommendation and its Implementation
Of two strategies the best strategy will be changing the company policy on LGBTQ community. This is because this strategy is easier to implement than growing the size of the menu that the company offers.
Challenges regarding implementation of the strategy;
- The company may lose its traditional uniqueness in the market. However, there is no proof whether this uniqueness translates into economic benefits
- The company will be required to change its marketing information which will take up substantial resources
The major strategy limitation includes;
- The major limitation of this strategy is changing the company’s core values.
- The founder’s children are religious hardliners who feel that their interpretation of the bible is final. This may be challenging to change.
Overcoming the major strategy limitation should involve;
- Enrolling the founder’s children to a bible exposition college to teach them what it means to love other people and not hate them because of their weaknesses.
- Undertake a cost benefit analysis of the existing policy to identify the benefits of changing it.
- Changing the policy is good since its costly as it has caused protests in the United Kingdom and loss of a lucrative business opportunity
Exhibit 1: Financial Analysis
|
2017 |
2018 |
Change |
|
|
In US $ Millions |
In US $ Millions |
Percent |
|
|
Total Revenues |
2,600.00 |
3,000.00 |
13.70% |
|
Net cash from operating activities |
814.70 |
910.40 |
11.70% |
|
Comprehensive earnings (Profits) |
426.20 |
450.90 |
5.70% |
|
Profit margin |
16.39% |
15.03% |
|
|
Credit Agreement |
800.00 |
References