Hardee's Restaurants: Stuck in the Middle or Creating Competitive Advantage?

Article excerpt

CASE DESCRIPTION

Business-level strategy is the primary focus of this case. Secondary issues examined include strategic groups and strategic reorientation. The case has a difficulty level of four, appropriate for senior level courses. The case is designed to be taught in one class hour and is expected to require one hour of outside preparation by students.

CASE SYNOPSIS

On January 21, 2003, Andrew Puzder, CEO and president of Hardee's Food Systems, Inc. stated, "We are distinguishing ourselves from the competition as the premium burger specialist among quick-service restaurants." But how much value can you really add to a hamburger? Clearly companies like Outback Steakhouse, Cracker Barrel, and Shoney's offer menu selections similar to Hardees' "Thickburger," but these restaurants set themselves apart by offering a casual dining atmosphere, a wide selection of entrées beyond hamburgers, and table service rather than order counters. On the other end of the spectrum are fast food restaurants such as McDonalds, Burger King, and Wendy's, Hardee's traditional competitors offering low cost convenience meals. Hardee's Thickburger initiative goes beyond efforts at differentiating itself from its competition. Instead, the company is taking actions it hopes will move it into a new strategic group where competition is less intense. This case examines the difficulties in strategic reorientation when such reorientation requires a business-level strategy that moves a firm from one strategic group to another. Students must decide if Hardee's new initiatives will be successful or whether the fast food franchise will be "stuck in the middle" with neither a feasible low cost nor a feasible differentiation strategy.

INSTRUCTORS' NOTES

This case presents Hardee's initiative to stem declining sales and profits through a reorientation of its strategy. After four years of decline against well known market leaders such as McDonald's, Burger King, and Wendy's, Hardee's introduced a new menu item in late 200 1 , the "Six Dollar Burger", that was an instant hit with consumers. This success gave the company the confidence to initiate a new strategy-remove 40 items from its menu, replaced with the Thickburger line, and remodel the restaurants. The case focuses around whether these changes are enough to differentiate Hardee's from other fast food competitors.

This case was developed using publicly available information from press releases, industry publications and financial reports. It was course tested in a senior level business policy class and modified based on student comments.

The case fits well just after teaching business level strategy in business policy and strategic management cases. There are three primary teaching points. First, the case illustrates strategic reorientation of business level strategy. Second, the case is an excellent example of being "stuck in the middle" with neither a cost leadership nor an adequate differentiation strategy. Third, the case clearly shows how competition within strategic groups is more intense than competition among strategic groups within an industry.

To teach the case, a good starting point is to ask students to identify Hardee's competitors. They will quickly note fast food chains such as Burger King, Crystal's, and others, but are unlikely to mention other full service restaurants in the industry such as Cracker Barrel and Outback Steakhouse. This allows the instructor the opportunity to point out that although all of these are in the same restaurants industry, individual companies do not always compete directly with all companies in that industry. The teaching point to be made here is that competition within strategic groups is more intense than competition between strategic groups within an industry.

Next, ask students to identify steps Hardee's has taken to differentiate itself from its strategic group-the fast food (qiuckservice) segment of the restaurant industry. …