Management
Financial Analysis
The strategy of the company is working, which can be explained from the financial analysis of the company. The Return on assets of the company is indicating positive trend by showing improvement. It is representing that the company is managing its assets in an efficient way, and is earning revenue from the assets. Return on invested capital of the company is also showing marked improvement, which means that the company is generating investment from the capital that is provided. Return on equity of the company has also increased in recent years if considered from 7 years time period. Previously, the ratio showed varying trend, as it increased in one year, and then decreased in the next year as shown in Table 1 below.
But, now it is indicating improvement, which means that the company is effectively utilizing its skills in order to get profit from the money invested by the shareholders in the company. Further, improvement is also evident in the net margin of the company, which is directing towards increase in revenue of the company. Gross margins and operating margins of the company are also showing an upward trend. Improvement in Gross margin means that the company sale efficiency of the company is increasing. Increase is operating margins for Jack in the Box means that the company is earning profit from the sale of its products. The reader should be capable of making conclusions after conducting financial analysis. He/she should be skilled enough to link strategy with the analysis of the company. The issue that the company is facing is that the financial leverage of the company is increasing, which means that the company is borrowing more money in order to increase its volume of production; hence, debt of the company is increasing, as indicated by Table 1 below.
SWOT Analysis
Strengths
Jack in the box is providing more exciting and affordable items in menu as compared to its competitors. The company is serving those customers who are in the need of high quality food at affordable price via its network of food chains, because of which it is considered as strength of the company. Wide network of food chain is allowing the company to reach huge customer base (Ungerleider).
Franchising serves as a cushion that ensures protection of the firm from complete exposure. The company has well organized franchises because of establishment of strong relations with franchisees. This system of franchise provides helps in ensuring effective management on location in order to make the operations of the restaurant smooth in the business climate. The company has skilled and experienced franchisees, who take appropriate measures in a timely manner, because of which the company is less exposed to the risks. Additionally, reduction of selling, general, and administrative expense is allowing the company to achieve more profitability, which is also strength for the company.
Weaknesses
Change in the economic conditions affects the operations of the company, such as recession decreases spending of consumers, because of which customers purchase less on their visit. Though, it is considered that the fast food companies and in fact the industry is recession-proof, yet recession exerts its influence on profitability of the company.
Further, market saturation is also a related problem in the fast food industry. There are many competitors who are offering same products, but customers are less in accordance with each location. The fast food restaurants are, however, losing their market share, as many restaurants that are providing fast food have entered into the market, which is weakness for Jack in the box.
The company is emphasizing on its operations in just two states of America, and not considering serving market in other states, as a result of which customers are not much aware about the company and its products in the entire country.
Opportunities
Jack in the box can expand its product line such as provision of coffee to customers, which is a good opportunity for the company to attract more customers, and can acquire significant market share. It can use latest technology in order to ensure quick service to the customers
Focus and investment in Marketing and advertisement can help the company in sustaining against its competitors. Moreover, the company can provide healthy food such as low calorie products for attracting more customers.
Threats
The increase in labor cost is a threat for the company because it increases operating expense of the company.
The issue regarding food contamination may arise that may cause sickness and other ill-effects on health, which can hamper normal operations of the company.
Changing tastes and preferences of customer serve as a threat for the company because with the shift in attitude, popularity of some food items decreases, and it becomes difficult for the company to spontaneously shift to changing needs and demands of customers (Macbeth).
Corporate Strategy Analysis
The best strategy that can work for the company is merger and acquisition. The company has previously also undergone acquisition, and these acquisitions paved the way to success of the company. The company can ensure mergers in order to bring more efficiency in its operations. Mergers can help Jack in the box to achieve economies of scale, greater efficiency, and diversification, more investment in research and development, and competition at international level. Investment in research and development helps the company to provide better quality products to the customers. Mergers are also effective in protecting a company from closing, and make the firm capable of dealing with threats from multi-national organizations (Doole and Lowe).
Recommendations
The company should try to convert its weaknesses into its strengths. It should expand its operations in other states also, and should take adequate measures in order to ensure protection from changing economic conditions. It should try to reduce its threats by ensuring safety of food so that customers can remain protected from diseases, and should be capable of adapting to changing needs and demands of customers in order to facilitate them in shortest possible time. Mergers can be beneficial for Jack in the box, as they can contribute to profitability of the company. The company should invest more in research and development as well as in marketing and advertisement. Research and development is essential for ensuring product quality and marketing and advertisement is necessary for creating an appeal to the customers. Investment in both fields helps the company to gain more market share, and also to achieve profitability.
References
Macbeth, Helen M. Food Preferences and Taste: Continuity and Change. New York: Berghahn, 1997.
Neal, Ungerleider. "This Is How Jack In The Box Is Overhauling Its Menu." Fast Company., 21 Jan. 2016. Web. 5 Aug. 2016
Phillips, Chris, Isobel Doole, and Robin Lowe. International Marketing Strategy: Analysis, Development, and Implementation. London: Routledge, 1994.
