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case sudyw with specific detailed instructions case sudyw with specific detailed instructions Case Two Potbelly Corporation Case 2 requires analyzing the internal environment as well as the external environment, as covered in Case 1 and in Chapter 3. The internal environment analysis is covered in Chapter 4.  You should draw heavily from the material in Chapter 4 in preparing your case. You may choose to analyze the internal environment using Michael Porter’s Value Chain approach or Jay Barney’s Resource Based View of the Firm (RBV).  Porter’s approach sees the firm as a collection of activities; Barney sees the firm as a collection of resources.  Both believe that the firm uses either activities or resources to build competitive advantage. Hence, the internal focus. For the case study, you will write a report to the CEO Alan Johnson about your analysis of the industry, the macro-environment and the strengths and weaknesses of Potbelly. The problem statement is about the most significant problem facing the company; that problem could be based on external factors or internal factors - or both. The analysis section is about the external and the internal environment. External factors are termed Opportunities and Threats, such as the Threat of Substitutes.  (Yes, something can be both an opportunity and a threat - much as the growth of Internet retail is both an opportunity and a threat for a retailer.) Opportunities and Threats are factors that affect the entire industry, maybe even the entire marketplace.  If an Opportunity or a Threat is company-specific, then it is not an external factor; it is an internal factor. Internal factors are Strengths and Weaknesses.  Be sure to read Chapter 4 to learn more about internal analysis, using either a resource based view, a value chain view or a competence perspective - or all three. Although you should include some reference to key financial aspects of the firm, no significant analysis of the financial aspects of the firm are needed until Case 3.  Based on your analysis, you recommend to the CEO what Potbelly should do strategically. And support your strategic recommendation.  Why is it the best solution to the significant problem you have identified? You might also consider: Does the new strategy make sense? Does the focus seem correct? Is the CEO zeroing in on the right issues, in your judgment? Why or why not? Your recommendation should have as foundation at least 1-5 internal factors and at least 1 -5 external factors.  You can mix and match - what strengths should the company use to take advantage of an opportunity; or what opportunity should the company take to solve one of its weaknesses.  What strengths could the company use to mitigate a threat; or what weaknesses must the company address so they do not fall victim to the treats facing the industry.  Yes - this is a SWOT analysis.  And the true payoff of SWOT analysis is learning enough to develop a strong strategic approach to gaining competitive advantage. Please see the three files for instructions regarding Case Studies in this class.  Remember: your report is based on where the company and the industry are now! 2018! The fourth file, New Potbelly CEO Wants to Make Sandwiches More Interesting is the basis for your case about the company.  At the end of the article is the link to the online version that also includes many charts, graphs and further information. You will be delving into the exciting world of the fast-casual restaurant industry (or the fast-casual sandwich industry – you choose). For your quantitative analysis draw on as many current sources as you can to get the material for some quantitative analysis of the industry and the current company. The company is publically traded; its annual report and 10-K will be most helpful. Best wishes for an interesting, successful and enjoyable case study! New Potbelly CEO Wants to Make Sandwiches More Interesting.docx https://www.wsj.com/articles/new-potbelly-ceo-wants-to-make-sandwiches-more-interesting-1531911600 Case Rubric revised.docx https://nsu.instructure.com/courses/2425099/files/132195858/download?wrap=1 Case Study Write Up Outline & Instructions-4.docx Executive Summary example rev.doc Case Instructions Part 2-1.docx case sudyw with specific detailed instructions New Potbelly CEO Wants to Make Sandwiches More Interesting The fast-casual chain has struggled in an increasingly crowded market By Julie Jargon July 18, 2018 7:00 a.m. ET Potbelly Corp.’s PBPB +0.38\% new chief executive says more interesting sandwiches can save the struggling restaurant chain. “You don’t differentiate yourself by calling yourself generic names,” said Alan Johnson, a consultant and retail executive with turnaround experience who was recruited in December to take over as CEO. The four-decade-old company, named for the antique potbelly stoves that decorate its restaurants, built a devoted following with live music performances and hearty sandwiches such as “A Wreck,” piled high with salami, roast beef, turkey and ham. But in recent years, Chicago-based Potbelly became harder to distinguish from other sandwich makers. Consulting firm Technomic Inc. said the number of stores operated by fast-casual sandwich chains with more than $50 million in annual sales, a category that includes Jersey Mike’s Subs and Jimmy John’s Gourmet Sandwiches, grew 70\% to more than 7,500 over the past five years. After Potbelly’s sales growth began to slow, then-CEO Aylwin Lewis said in May 2017 that he would step down. Three months later, the company said it would review its business and consider selling itself. Mr. Johnson called 2018 a transition period and said that sales likely won’t improve until next year. For the quarter ended April 1, same-store sales at company-owned restaurants—most of the 500 total—fell 3.6\%. Potbelly’s shares are up less than 1\% this year. The Potbelly CEO said he is focused on improving Potbelly rather than selling the business. “We had a lot of interest, but in the end we and the board decided to implement the strategy we’re working on now,” he said. Mr. Johnson said Potbelly needs to make its sandwiches stand out. Chicken-salad and turkey club sandwiches introduced before he was hired, he said, sound too much like those served at other chains. The company wouldn’t offer any specific new names that it is considering. Mr. Johnson also said Potbelly’s menu had grown too complicated, with 115 items at 66 different prices. “It’s like looking at an Excel spreadsheet,” he said. He plans to trim it back and to pair sandwiches with cookies and drinks. Potbelly hasn’t offered such “combo meals” before. He recently overhauled Potbelly’s management team. One of his new recruits is Ryan LaRoche, a former executive sous chef at the Michelin-starred L’Atelier de Joël Robuchon in Las Vegas. Mr. LaRoche, the chain’s vice president of culinary innovation, also worked as an executive chef at Park Hyatt hotels in Chicago and Washington. One of the first menu items developed by Mr. LaRoche, two barbecue pulled-pork sandwiches—one spicy, one not—will go on sale at Potbelly restaurants for a limited time later this month. He also is working to improve breakfast items. Mr. Johnson said he also will expand the chain more slowly and convert more stores into franchises after what he said was a too-rapid expansion into too many markets. The sandwich chain has increased the number of customers in its loyalty program by 60\% to 800,000 since the beginning of the year by providing more personalized rewards and perks beyond a free cookie. The average Potbelly customer visits the chain 16 times a year, Mr. Johnson said. He wants to lure them in once more, and to get them to buy one more item when they visit. The company is spending more on marketing and training employees to upsell customers who order a sandwich by offering them a milkshake, too. To date, he said, too few employees are encouraging customers to add items to their order. “That’s the sales-prevention business,” he said. Write to Julie Jargon at [email protected] case sudyw with specific detailed instructions Southwest Airlines Case Analysis 17 Nova Southeastern University H. Wayne Huizenga Graduate School of Business & Entrepreneurship Assignment for Course: MGT 5170 – Applying Strategy for Managers Submitted to: Dr. Ronald Steffel Submitted by: Morgan Heath N01763775 Date of Submission: October 7, 2018 Title of Assignment: Southwest Airlines Case Study CERTIFICATION OF AUTHORSHIP: I certify that I am the author of this paper and that any assistance I received in its preparation is fully acknowledged and disclosed in the paper. I have also cited any sources from which I used data, ideas or words, either quoted directly or paraphrased. I also certify that this paper was prepared by me specifically for this course. Students Signature: Morgan Heath ***************************************************************** Instructors Grade on Assignment: Instructors Comments: Executive Summary Problem Statement Although still a strong competitor in the airline industry, Southwest Airlines faces strong pricing competition, unpredictable fuel prices, innovative technology demands, and the mounting challenge to exceed customer expectations that will challenge Southwest’s ability to remain a cost leader in the industry while staying true to their core values. Analysis Southwest Airlines is a strong competitor in their market, the company has the second largest market share just behind American Airlines. Southwest was built on a strong corporate culture that has enabled them to withstand the test of time. Southwest values their employees and ensures that the work environment remains family oriented. Southwest has an impeccable record of never firing an employee, their No-Layoff Policy since their inception has helped Southwest maintain their strong culture. Southwest takes pride in their workforce, new hires are put through extensive training hour to ensure that employees are prepared to deliver top-notch customer service. Southwest also has beat out their competition with loyalty programs, international reservations systems and modernizing their aircraft fleet. Southwest can remain an industry leader if they continue to adapt to the technology that passengers are growing accustomed to. In the age of Amazon consumers desire the convenience of a one-stop shop experience, Southwest will have to discover new ways to adapt to the changing consumer buying patterns. Also, the competitive landscape for commercial airlines is starting to evolve, the market is driven by consumer demand, market maturity and the airlines ability to exceed customer expectations. Southwest is going to need to find ways to position themselves as the pricing leader, while still exceeding customer expectations. Alternatives: Incorporate travel distribution programs Create enhanced merchandising applications Expand network locally and globally Recommendation Southwest has a large untapped network that they can expand upon, the airline industry is saturated with intense pricing competition. Southwest can expand their network locally within the U.S. and also globally by increasing their revenues and customer base. Implementation: Southwest could expand to new routes by learning how to set prices, and negotiate deals, while also partnering with global hubs that already exist to save on building costs. Also, the company should ensure that they have a new fleet of airplanes to ensure that a fuel-efficient model of airplanes to fly between countries. Porter’s Five Forces Model Figure 1. Porter’s Five Forces Model. This figure analyzes Southwest Airlines’ competitive forces using Porter’s Five Forces Model. SWOT Strengths Strong Brand: Southwest airlines brand is a heart, made with blue, red and yellow that were linked with the tails of the plane. The heart is the symbol caught on making it notable, unique and it became very popular with employees and potential applicants. Southwest also established a language to communicate their fun-loving attitude, warrior spirit and commitment to their customers (McLaren, 2018). Southwest is focused on telling a consumer-centric story, the airline would like the consumer to understand why they operate the way that they do (Gallo, 2018). Southwest has a unique brand positioning, they are able to create experiences for customers that allow them to live their life to the fullest. Cost Leader: Southwest Airlines also offers one of the lowest-priced options for air travel. Southwest has been able to maintain their low prices, due to their low operating cost business model. Southwest Airlines services smaller airports that do not cost as much. If a consumer can find a lower-priced ticket, Southwest airlines will match that price (Investopedia, 2018). Weaknesses Employee safety: Southwest Airlines has been accused of creating a hostile and unsafe work environment for their employees. There have been instances of whistleblowing and there is mistrust in management over the employees safety. Southwest has short and frequent flights that put more stress on the engines, the crews are subjected to a quicker pace of work. In one instance an employee found corrosion on the plane, this employee was chastised for working beyond their scope of the work they had been assigned (Koenig, 2018). The FAA found that Southwest supervisors discouraged mechanics from reporting some aircraft problems and they found maintenance issues in portions of the plane that had been assigned to inspect (Koenig, 2018). Lawsuits: Southwest Airlines has paid millions in fines after enforcement actions by the FAA, these lawsuits are creating a negative brand image. Back in 2009 Southwest kept 46 planes flying even when they had skipped critical inspections of the fuselage for metal fatigue, due to this they were slapped with a $7.5 million fine from the FAA (Koenig, 2018). Five years later Southwest was hit with a $12 million fine, over 44 planes that had undergone improper fuselage repairs (Koenig, 2018). Southwest Airlines’ brand is being tarnished with the news of lawsuits and the lack of safety precautions taken by the company. Opportunities Digital transformation: Southwest Airlines currently utilizes an OpsSuite tool that allows the employees to monitor gate assignments, ensure luggage is loaded and track traveler data (Ungerleider, 2017). Southwest Airlines has the opportunity to increase revenue and sustain their competitive advantage through the utilization of technology, they are expected to see a boost in their earnings by 2020 as a direct result of the software (Ungerleider, 2017). Back in 2017 Southwest planned to bring OpsSuite’s functionality to phones and tablets in the coming years. They were making this change to ease employee communication at the airline. Southwest is going through an $800 million technological overhaul, which includes $300 million invested in new technology for operations and $500 million in a new reservation system. Southwest can take this a step further by implementing more technology in their daily operations to catapult their organization as a market leader in the industry. Increase freight business: Southwest Airlines Cargo recently began their international shipping program that traveled from Houston to Mexico City. Southwest has the opportunity to expand upon shipments to other areas such as Cancun, Puerto Vallarta and Los Cabos in the near future. Freight was only about 1\% of Southwest Airlines’ revenue in 2017, but this would provide an opportunity to better utilize their aircraft by loading shipments on the cargo holds of their Boeing 737s (Lopez, 2018). The air cargo industry is becoming a growing business opportunity, Southwest could take advantage of over 4,000 flights a day during peak periods to help meet the growing demand for fast delivery (Lopez, 2018). Threats Fuel prices: Rising fuel prices could pose a threat to the airline, to offset the high costs of fuel the airline might need to raise their ticket prices. Southwest reported fuel costs of $241 million during the first half of the year, which was a 12\% increase from the previous year (Jansen, 2018). To combat the higher fuel prices, Southwest has been forced to raise prices. Southwest customers have seen fare increases, the airline has boosted fares about 7\%-14\% since the summer of 2007 (Masson, 2018). Southwest airlines had to lower their 2018 outlook for available seats, from 5\% to 4\% due to the decreased revenue and higher oil prices (Narayanan, 2018). Government regulations: The FAA Reauthorization Bill is requiring the agency to set minimum seat width and pitch standards within a year. The government could possibly strengthen inspections and regulations to improve airline safety. In the U.S., the average number of seats per aircraft has increased by 8\% over the past 15 years (Elliott, 2018). This new trend of standardizing the seats on an aircraft could cause low-cost airlines such as Southwest to be forced to increase their fares. Financial Analysis The Quantitative analysis utilizes the income statement and balance sheet and compares the change from 2017 to 2016 for each line item. All income statement and balance sheet figures were retrieved from Yahoo Finance (Southwest, 2018). Southwest had a total revenue increase of 3.65\% and net income by 55.44\%. Unfortunately, they had a negative 5\% gross profit and an operating loss of 12.69\%. Southwest increased their total operating expenses, which is most likely due to their increased travel routes. Southwest Airlines total current assets increased by 7\%, total assets increased by 7.83\%. Accounts Payable increased by 12.05\% and total current liabilities increased by 0.89\%. Southwest airlines total current assets are increasing at a larger rate than total current liabilities. In 2017 Southwest Airlines had decreased their liabilities by 1.11\%. The common stock stayed the same in 2017, while retained earnings increased by 28.05\%. Total Stockholder Equity increased by 23.56\% and net tangible assets increased by 28.42\%. Overall, investors will be pleased that total net income increased by increased by 55.44\% and dividends increased by 23.42\%. Total cash flow from financing and investing activities decreased. Southwest increased their dividend exposure by 23.42\%. Southwest Airlines also increase their investment by 27.20\%, Southwest is investing in technology and expanding their cargo flights. Proposed Solutions Southwest Airlines is one of the top cost leaders in the industry, they are able to provide their consumers with low costs while not cutting corners. Southwest Airlines is facing stiff competition with the other low-cost providers, Southwest needs to diversify their revenue in order to remain competitive in the saturated airline industry. Incorporate travel distribution programs: Southwest has been rolling out new technology that will ease the communication process among their employees while also collecting traveler data. Investing more money into a travel distribution program will better allow Southwest to increase communication between their travelers and the travel agents. Inspect airlines more regularly: Southwest Airlines has had several lawsuits and accidents related to lax inspections with their fleet of airlines. The airline should slow down and make safety their ultimate priority. Expand network locally and globally: The airline industry is becoming highly saturated with several other low-cost airlines. Southwest has the opportunity to service smaller ports all across the world to satisfy consumer demand and to gain more of the market share. Optimal Solution and Recommendations Expand network locally and globally: The airline industry is a highly saturated market, Southwest needs to separate themselves from the rest of the competition, by offering more flights globally and locally to gain a competitive advantage within their industry (Jet, 2018). Southwest Airlines has many loyal passengers that would like to start taking flights to Hawaii, and Southwest is looking into offering flights to this destination. Along with Hawaii the airline will be servicing Cancun which is a popular vacation spot, which will help to increase the airlines revenue stream (Jet, 2018). Southwest also has the opportunity to offer non-stop flights to several cities within the United States, Southwest will be able to keep costs low and because they will service smaller airlines. Implementation Research viable destinations: Southwest Airlines should research potential destinations that would be viable options for them to service. Their R&D teams could search out local and global destinations that would best align with Southwest’s low-cost strategy and would meet consumer travel demand. Southwest could start by learning where their competition is flying and then service those areas that are rarely accessed. Implement marketing: Once Southwest has finalized the destinations they plan to provide flights for, they will need to market their new destination to travelers. A great time to implement this new marketing campaign would be around the holidays when most people are planning getaways. The campaign could tie into their “Every Seat has a story” campaign, and highlight how they have added more places for memories to be made. The campaign would have to be rolled out in parts since Southwest is only going to trial a few destinations at a time. Trial flights: To better gauge demand, Southwest could service the most viable areas found during their research. One of the destinations that garnered great interest was Hawaii, Southwest could start taking reservations for these flights to garner interest. Southwest could do this with several other destinations, to figure out which flights are the biggest revenue drivers. Continue to utilize smaller global hubs: To continue driving down costs while expanding their business, Southwest will need to partner with global hubs. Partnering with global hubs will allow Southwest to utilize pre-existing building rather than investing in the construction of new facilities. Exhibit 1-Income Statement Exhibit 2-Balance Sheet Exhibit 3-Five Year Cash Flow Statement Resources Elliott, C. (2018,). Airline seat standards coming, as safety concerns, passenger complaints mount. Retrieved from https://www.usatoday.com/story/travel/advice/2018/07/15/airline-seat-standards-government-regulations-coming/777040002/ Field, J. (2018). Southwest Airlines Announces Additional Expansion Plans. Retrieved from https://airwaysmag.com/airlines/southwest-airlines-announces-additional-expansion-plans/ Gallo, C. (2018). How Southwest Airlines Uses Emotional Storytelling To Connect With Its Customers. Retrieved from https://www.forbes.com/sites/carminegallo/2018/03/28/how-southwest-airlines-uses-emotional-storytelling-to-connect-with-its-customers/ Investopedia. (2015). How Southwest Airlines Has Won Over Travelers. Retrieved from https://www.investopedia.com/articles/investing/061015/how-southwest-different-other-airlines.asp Jansen, B. (2018). Southwest says fares are down despite rising fuel costs. Retrieved from https://www.usatoday.com/story/travel/flights/todayinthesky/2018/07/26/southwest-offset-higher-fuel-costs-without-raising-fares/844347002/ Jet, J. (2018). Update On When Southwest Airlines Flights To Hawaii Will Start. Retrieved from https://www.forbes.com/sites/johnnyjet/2018/08/21/will-southwest-airlines-hawaii-flights-start-in-october-2018/ Koenig, D. (2018). Southwest Airlines has been faced with fines, union safety complaints. Retrieved from http://www.chicagotribune.com/business/ct-southwest-airlines-safety-investigation-20180424-story.html Lopez, E. (2018). Southwest Airlines Cargo makes first international trip. Retrieved from https://www.supplychaindive.com/news/southwest-airlines- cargo-expands-international-Mexico/528057/ Masson, M. F. (2018.). Southwests fuel gamble: Hedges keeps fares in check. Retrieved from https://abcnews.go.com/Travel/story?id=5918252&page=1 McLaren, M. (2018). How Southwest Airlines Built a Stand-Out Employer Brand in 5 Steps. Retrieved from https://business.linkedin.com/talent- solutions/blog/employer-brand/2018/how-southwest-airlines-built-a-stand-out-employer-brand-in-5-steps Narayana, A. (2018) Southwest Airlines Cuts Views, American Warns in Airfare Hike, IATA Sees Profit Slump. Retrieved from www.investors.com/news/southwest-delta-american-warn-on revenue-profits-load-factor/ Southwest Airlines, Co. (LUV) (2018). Balance Sheet. Retrieved from https://finance.yahoo.com/quote/LUV/financials/ Southwest Airlines, Co. (LUV) (2018). Cash Flow Statement. Retrieved from https://finance.yahoo.com/quote/LUV/financials/ Southwest Airlines, Co. (LUV) (2018). Income Statement. Retrieved from https://finance.yahoo.com/quote/LUV/financials/ Ungerleider, Neal. (2018) Southwest Airlines Digital Transformation Takes Off. Retrieved from www.fastcompany.com/3065045/southwest-airlines-digital-transformation-takes-off Valle, L. D. (2018). 8 passengers sue Southwest Airlines over fatal engine failure. Retrieved from https://www.cnn.com/2018/06/21/us/southwest-flight-lawsuit/index.html TITLE OF RUBRIC: Strategy Case Study Course: MGT 5170 LEARNING OUTCOME/S: See attached (CC 1 and 2) Date: PURPOSE: Applying theory to practice and consistently using Strategy Name of Professor VALIDITY: Strategy Best Practices Name of Student: COMPANION DOCUMENTS: Individual Cases Earning maximum points in each box in ‘PROFICIENT’ column and / or points in columns to the right of ‘PROFICIENT’ meets standard. <<<<<<<<<< less quality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . more quality >>>>>>>>>> Performance Criteria Basic Developing Proficient Accomplished Exemplary Score States Problem Effectively Does not identify the problem (0 pts) Identifies a symptom (4 pts) Identifies a significant problem (6 pts) Identifies a critical problem (8pts) Effectively identifies the crucial problem (10pts) Analyzes the Situation using Tools and Concepts of Strategic Management Does not present analysis (0 pts) Vaguely analyzes material (12 pts) Generally analyzes the situation (18 pts) Analyzes some key strategic factors (24 pts) Insightfully analyzes key strategic factors (30 pts) Analyzes Quantitative Factors Does not present quantitative analysis (0 pts) Presents irrelevant quantitative analysis (4pts) Generally analyzes the situation (6 pts) Analyzes some key quantitative measures (8pts) Insightfully analyzes key quantitative measures (10pts) Generates Realistic Strategic alternative Solutions Provides no realistic strategic solutions (0 pts) Provides ambiguous strategic solutions (4 pts) Provides strategic solutions (6 pts) Provides realistic strategic solutions (8 pts) Provides realistic strategic solutions related to the problem (10 pts) Evaluates Solutions/ Selects Optimal Selects without evaluation (0pts) Selects with little evaluation (8 pts) Evaluates alternatives and selects one (12 pts) Evaluates alternatives and explains rationale for selection (16pts) Evaluates alternatives, provides rationale, and selects optimal Strategic solution for the main problem (20 pts) Generates an Implementation Plan Provides no plan (0pt) Provides cursory plan (4 pts) Provides an implementation plan (6 pts) Provides realistic implementation plan (8pts) Provides implementation plan considering major factors (10 pts) Writes at the Graduate Level Does not use designated format or standard (0 pt) Uses designated format, but does not write clearly or in an organized fashion (4 pts) Uses designated format and effective style, grammar, punctuation, and references (6 pts) Uses designated format and writes at the graduate level (8 pts) Uses designated format and writes at the publishable level (10 pts) \% Comments: ____________________________________________________________________________________________________________________________________________________________