Restaurant Valuation: O'Charley's and AFC SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
Finance & Accounting
Strategy / MBA Resources
Case Study SWOT Analysis Solution
Case Study Description of Restaurant Valuation: O'Charley's and AFC
This case is a comparative analysis of the strategy, accounting, performance, and valuation for two restaurant chains alternatively having a company-owned versus franchising strategy. It requires students to identify these two different strategies, and the related impact on the financial statements, assessment of current performance, and choice of comparable firms and prediction of future performance to perform the valuation.
Swot Analysis of "Restaurant Valuation: O'Charley's and AFC" written by Edward J. Riedl, Jenny Everett includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Valuation O'charley's facing as an external strategic factors. Some of the topics covered in Restaurant Valuation: O'Charley's and AFC case study are - Strategic Management Strategies, and Finance & Accounting.
Some of the macro environment factors that can be used to understand the Restaurant Valuation: O'Charley's and AFC casestudy better are - – increasing transportation and logistics costs, cloud computing is disrupting traditional business models, banking and financial system is disrupted by Bitcoin and other crypto currencies, there is backlash against globalization, increasing household debt because of falling income levels, challanges to central banks by blockchain based private currencies, increasing commodity prices,
talent flight as more people leaving formal jobs, technology disruption, etc
Introduction to SWOT Analysis of Restaurant Valuation: O'Charley's and AFC
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Restaurant Valuation: O'Charley's and AFC case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Valuation O'charley's, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Valuation O'charley's operates in.
According to Harvard Business Review, 75% of the managers use SWOT analysis for various purposes such as – evaluating current scenario, strategic planning, new venture feasibility, personal growth goals, new market entry, Go To market strategies, portfolio management and strategic trade-off assessment, organizational restructuring, etc.
SWOT Objectives / Importance of SWOT Analysis and SWOT Matrix
SWOT analysis of Restaurant Valuation: O'Charley's and AFC can be done for the following purposes –
1. Strategic planning using facts provided in Restaurant Valuation: O'Charley's and AFC case study
2. Improving business portfolio management of Valuation O'charley's
3. Assessing feasibility of the new initiative in Finance & Accounting field.
4. Making a Finance & Accounting topic specific business decision
5. Set goals for the organization
6. Organizational restructuring of Valuation O'charley's
Strengths Restaurant Valuation: O'Charley's and AFC | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Valuation O'charley's in Restaurant Valuation: O'Charley's and AFC Harvard Business Review case study are -
Analytics focus
– Valuation O'charley's is putting a lot of focus on utilizing the power of analytics in business decision making. This has put it among the leading players in the industry. The technology infrastructure suggested by Edward J. Riedl, Jenny Everett can also help it to harness the power of analytics for – marketing optimization, demand forecasting, customer relationship management, inventory management, information sharing across the value chain etc.
Diverse revenue streams
– Valuation O'charley's is present in almost all the verticals within the industry. This has provided firm in Restaurant Valuation: O'Charley's and AFC case study a diverse revenue stream that has helped it to survive disruptions such as global pandemic in Covid-19, financial disruption of 2008, and supply chain disruption of 2021.
Successful track record of launching new products
– Valuation O'charley's has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Valuation O'charley's has effective processes in place that helps in exploring new product needs, doing quick pilot testing, and then launching the products quickly using its extensive distribution network.
High switching costs
– The high switching costs that Valuation O'charley's has built up over years in its products and services combo offer has resulted in high retention of customers, lower marketing costs, and greater ability of the firm to focus on its customers.
Ability to lead change in Finance & Accounting field
– Valuation O'charley's is one of the leading players in its industry. Over the years it has not only transformed the business landscape in its segment but also across the whole industry. The ability to lead change has enabled Valuation O'charley's in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Effective Research and Development (R&D)
– Valuation O'charley's has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in, as mentioned in case study Restaurant Valuation: O'Charley's and AFC - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Highly skilled collaborators
– Valuation O'charley's has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive segment. Secondly the value chain collaborators of the firm in Restaurant Valuation: O'Charley's and AFC HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
Digital Transformation in Finance & Accounting segment
- digital transformation varies from industry to industry. For Valuation O'charley's digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Valuation O'charley's has successfully integrated the four key components of digital transformation – digital integration in processes, digital integration in marketing and customer relationship management, digital integration into the value chain, and using technology to explore new products and market opportunities.
High brand equity
– Valuation O'charley's has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Valuation O'charley's to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Learning organization
- Valuation O'charley's is a learning organization. It has inculcated three key characters of learning organization in its processes and operations – exploration, creativity, and expansiveness. The work place at Valuation O'charley's is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in Restaurant Valuation: O'Charley's and AFC Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Strong track record of project management
– Valuation O'charley's is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Cross disciplinary teams
– Horizontal connected teams at the Valuation O'charley's are driving operational speed, building greater agility, and keeping the organization nimble to compete with new competitors. It helps are organization to ideate new ideas, and execute them swiftly in the marketplace.
Weaknesses Restaurant Valuation: O'Charley's and AFC | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Restaurant Valuation: O'Charley's and AFC are -
Ability to respond to the competition
– As the decision making is very deliberative, highlighted in the case study Restaurant Valuation: O'Charley's and AFC, in the dynamic environment Valuation O'charley's has struggled to respond to the nimble upstart competition. Valuation O'charley's has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Increasing silos among functional specialists
– The organizational structure of Valuation O'charley's is dominated by functional specialists. It is not different from other players in the Finance & Accounting segment. Valuation O'charley's needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Valuation O'charley's to focus more on services rather than just following the product oriented approach.
High bargaining power of channel partners
– Because of the regulatory requirements, Edward J. Riedl, Jenny Everett suggests that, Valuation O'charley's is facing high bargaining power of the channel partners. So far it has not able to streamline the operations to reduce the bargaining power of the value chain partners in the industry.
High operating costs
– Compare to the competitors, firm in the HBR case study Restaurant Valuation: O'Charley's and AFC has high operating costs in the. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract Valuation O'charley's 's lucrative customers.
Low market penetration in new markets
– Outside its home market of Valuation O'charley's, firm in the HBR case study Restaurant Valuation: O'Charley's and AFC needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Lack of clear differentiation of Valuation O'charley's products
– To increase the profitability and margins on the products, Valuation O'charley's needs to provide more differentiated products than what it is currently offering in the marketplace.
Slow to strategic competitive environment developments
– As Restaurant Valuation: O'Charley's and AFC HBR case study mentions - Valuation O'charley's takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the industry in last five years.
High dependence on star products
– The top 2 products and services of the firm as mentioned in the Restaurant Valuation: O'Charley's and AFC HBR case study still accounts for major business revenue. This dependence on star products in has resulted into insufficient focus on developing new products, even though Valuation O'charley's has relatively successful track record of launching new products.
Interest costs
– Compare to the competition, Valuation O'charley's has borrowed money from the capital market at higher rates. It needs to restructure the interest payment and costs so that it can compete better and improve profitability.
No frontier risks strategy
– After analyzing the HBR case study Restaurant Valuation: O'Charley's and AFC, it seems that company is thinking about the frontier risks that can impact Finance & Accounting strategy. But it has very little resources allocation to manage the risks emerging from events such as natural disasters, climate change, melting of permafrost, tacking the rise of artificial intelligence, opportunities and threats emerging from commercialization of space etc.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Valuation O'charley's is slow explore the new channels of communication. These new channels of communication mentioned in marketing section of case study Restaurant Valuation: O'Charley's and AFC can help to provide better information regarding products and services. It can also build an online community to further reach out to potential customers.
Opportunities Restaurant Valuation: O'Charley's and AFC | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities highlighted in the Harvard Business Review case study Restaurant Valuation: O'Charley's and AFC are -
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Valuation O'charley's can use these opportunities to build new business models that can help the communities that Valuation O'charley's operates in. Secondly it can use opportunities from government spending in Finance & Accounting sector.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Valuation O'charley's to expand its talent hiring zone. According to McKinsey Global Institute, 20% of the high end workforce in fields such as finance, information technology, can continously work from remote local post Covid-19. This presents a really great opportunity for Valuation O'charley's to hire the very best people irrespective of their geographical location.
Creating value in data economy
– The success of analytics program of Valuation O'charley's has opened avenues for new revenue streams for the organization in the industry. This can help Valuation O'charley's to build a more holistic ecosystem as suggested in the Restaurant Valuation: O'Charley's and AFC case study. Valuation O'charley's can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
Loyalty marketing
– Valuation O'charley's has focused on building a highly responsive customer relationship management platform. This platform is built on in-house data and driven by analytics and artificial intelligence. The customer analytics can help the organization to fine tune its loyalty marketing efforts, increase the wallet share of the organization, reduce wastage on mainstream advertising spending, build better pricing strategies using personalization, etc.
Developing new processes and practices
– Valuation O'charley's can develop new processes and procedures in Finance & Accounting industry using technology such as automation using artificial intelligence, real time transportation and products tracking, 3D modeling for concept development and new products pilot testing etc.
Building a culture of innovation
– managers at Valuation O'charley's can make experimentation a productive activity and build a culture of innovation using approaches such as – mining transaction data, A/B testing of websites and selling platforms, engaging potential customers over various needs, and building on small ideas in the Finance & Accounting segment.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Valuation O'charley's can build a diversified supply chain model across various countries in - South East Asia, India, and other parts of the world. This reconfiguration of global supply chain can help, as suggested in case study, Restaurant Valuation: O'Charley's and AFC, to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Reconfiguring business model
– The expansion of digital payment system, the bringing down of international transactions costs using Bitcoin and other blockchain based currencies, etc can help Valuation O'charley's to reconfigure its entire business model. For example it can used blockchain based technologies to reduce piracy of its products in the big markets such as China. Secondly it can use the popularity of e-commerce in various developing markets to build a Direct to Customer business model rather than the current Channel Heavy distribution network.
Changes in consumer behavior post Covid-19
– Consumer behavior has changed in the Finance & Accounting industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Valuation O'charley's can take advantage of these changes in consumer behavior to build a far more efficient business model. For example consumer regular ordering of products can reduce both last mile delivery costs and market penetration costs. Valuation O'charley's can further use this consumer data to build better customer loyalty, provide better products and service collection, and improve the value proposition in inflationary times.
Buying journey improvements
– Valuation O'charley's can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. Restaurant Valuation: O'Charley's and AFC suggest that firm can provide automated chats to help consumers solve their own problems, provide online suggestions to get maximum out of the products and services, and help consumers to build a community where they can interact with each other to develop new features and uses.
Using analytics as competitive advantage
– Valuation O'charley's has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in the sector. This continuous investment in analytics has enabled, as illustrated in the Harvard case study Restaurant Valuation: O'Charley's and AFC - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Valuation O'charley's to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Valuation O'charley's in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Finance & Accounting segment, and it will provide faster access to the consumers.
Identify volunteer opportunities
– Covid-19 has impacted working population in two ways – it has led to people soul searching about their professional choices, resulting in mass resignation. Secondly it has encouraged people to do things that they are passionate about. This has opened opportunities for businesses to build volunteer oriented socially driven projects. Valuation O'charley's can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Threats Restaurant Valuation: O'Charley's and AFC External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Restaurant Valuation: O'Charley's and AFC are -
Instability in the European markets
– European Union markets are facing three big challenges post Covid – expanded balance sheets, Brexit related business disruption, and aggressive Russia looking to distract the existing security mechanism. Valuation O'charley's will face different problems in different parts of Europe. For example it will face inflationary pressures in UK, France, and Germany, balance sheet expansion and demand challenges in Southern European countries, and geopolitical instability in the Eastern Europe.
High level of anxiety and lack of motivation
– the Great Resignation in United States is the sign of broader dissatisfaction among the workforce in United States. Valuation O'charley's needs to understand the core reasons impacting the Finance & Accounting industry. This will help it in building a better workplace.
High dependence on third party suppliers
– Valuation O'charley's high dependence on third party suppliers can disrupt its processes and delivery mechanism. For example -the current troubles of car makers because of chip shortage is because the chip companies started producing chips for electronic companies rather than car manufacturers.
Consumer confidence and its impact on Valuation O'charley's demand
– There is a high probability of declining consumer confidence, given – high inflammation rate, rise of gig economy, lower job stability, increasing cost of living, higher interest rates, and aging demography. All the factors contribute to people saving higher rate of their income, resulting in lower consumer demand in the industry and other sectors.
Aging population
– As the populations of most advanced economies are aging, it will lead to high social security costs, higher savings among population, and lower demand for goods and services in the economy. The household savings in US, France, UK, Germany, and Japan are growing faster than predicted because of uncertainty caused by pandemic.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Valuation O'charley's with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
Capital market disruption
– During the Covid-19, Dow Jones has touched record high. The valuations of a number of companies are way beyond their existing business model potential. This can lead to capital market correction which can put a number of suppliers, collaborators, value chain partners in great financial difficulty. It will directly impact the business of Valuation O'charley's.
Regulatory challenges
– Valuation O'charley's needs to prepare for regulatory challenges as consumer protection groups and other pressure groups are vigorously advocating for more regulations on big business - to reduce inequality, to create a level playing field, to product data privacy and consumer privacy, to reduce the influence of big money on democratic institutions, etc. This can lead to significant changes in the Finance & Accounting industry regulations.
Environmental challenges
– Valuation O'charley's needs to have a robust strategy against the disruptions arising from climate change and energy requirements. EU has identified it as key priority area and spending 30% of its 880 billion Euros European post Covid-19 recovery funds on green technology. Valuation O'charley's can take advantage of this fund but it will also bring new competitors in the Finance & Accounting industry.
Backlash against dominant players
– US Congress and other legislative arms of the government are getting tough on big business especially technology companies. The digital arm of Valuation O'charley's business can come under increasing regulations regarding data privacy, data security, etc.
Shortening product life cycle
– it is one of the major threat that Valuation O'charley's is facing in Finance & Accounting sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Technology disruption because of hacks, piracy etc
– The colonial pipeline illustrated, how vulnerable modern organization are to international hackers, miscreants, and disruptors. The cyber security interruption, data leaks, etc can seriously jeopardize the future growth of the organization.
Easy access to finance
– Easy access to finance in Finance & Accounting field will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Valuation O'charley's can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Weighted SWOT Analysis of Restaurant Valuation: O'Charley's and AFC Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers in the HBR case study Restaurant Valuation: O'Charley's and AFC needs to zero down on the relative importance of each factor mentioned in the Strengths, Weakness, Opportunities, and Threats quadrants.
We can provide the relative importance to each factor by assigning relative weights. Weighted SWOT analysis process is a three stage process –
First stage for doing weighted SWOT analysis of the case study Restaurant Valuation: O'Charley's and AFC is to rank the strengths and weaknesses of the organization. This will help you to assess the most important strengths and weaknesses of the firm and which one of the strengths and weaknesses mentioned in the initial lists are marginal and can be left out.
Second stage for conducting weighted SWOT analysis of the Harvard case study Restaurant Valuation: O'Charley's and AFC is to give probabilities to the external strategic factors thus better understanding the opportunities and threats arising out of macro environment changes and developments.
Third stage of constructing weighted SWOT analysis of Restaurant Valuation: O'Charley's and AFC is to provide strategic recommendations includes – joining likelihood of external strategic factors such as opportunities and threats to the internal strategic factors – strengths and weaknesses. You should start with external factors as they will provide the direction of the overall industry. Secondly by joining probabilities with internal strategic factors can help the company not only strategic fit but also the most probably strategic trade-off that Valuation O'charley's needs to make to build a sustainable competitive advantage.
