Strategic Management

The fast-food industry has become increasingly competitive as existing firms expand and
new ones enter the industry, offering delicious and unique tasting foods to the target consumers.
Whataburger is an excellent example of a fast-food chain that has gained a competitive
advantage in this sector. The restaurant is headquartered in San Antonia, Texas. The fast-food
chain was developed in 1950 by Harmon Dobson and Paul Burton and has expanded drastically
over the years. Currently, the company has more than 700 operating stores in dispersed across
different American States. The restaurant specialises mostly in the production of burgers but has
added several different types of fast foods in its breakfast menu. Whataburger is a highly
competitive restaurant that has managed to expand its customer base and maintain a loyal
clientele, fortifying its brand.

Porters Five Forces

Michael porter developed a five-force model that analyses a company’s competitive
advantage. An analysis of Whataburger through Porter’s model allows one to identify the factors
that heighten the corporation’s competitiveness and those that threaten it. The first force is the
threat of new entrants, which is a weak force due to some reasons. First, one of the most
challenging feats to achieve in the fast-food industry is economies of scale. According to
Andrada (2014), fast food chains that supply more massive quantities of foodstuffs to consumers
enjoy a cost advantage while new entrants incur more production costs. The second factor is
product differentiation, that has enabled Whataburger and other corporations to increase their
competitive advantage compared to new entrants, who specialise primarily in the production of
standardised products. Companies that offer diversified products attract more clients because
they can gratify diverse needs. New entrants are forced to conduct comprehensive research to
identify the needs of the consumers and the different products that they can offer to meet them.
The process takes a considerable amount of time, hindering these new corporations from gaining
a competitive advantage in the industry. The threat of new entrants is, therefore, a weak force.
The bargaining power of suppliers is another weak force because of several factors. First,
the fast-food industry under which Whataburger operates comprises numerous suppliers
compared to the number of buyers. Concurrently, suppliers have minimal control over prices.
Secondly, these suppliers offer standardised and less differentiated commodities, decreasing the
switching costs (Andrada, 2014). Whataburger can, therefore, move from supplier to the next
based on the prices at which they sell their products. The restaurant has become one of the major
customers for suppliers. Additionally, its levels of profitability depend on how cost-effective the
prices of raw materials are. Hence, suppliers offer the required commodities to Whataburger and
other fast-food chains at a reasonable price, to retain them, because they purchase goods in bulk.
The discussed reasons make the bargaining power of suppliers a weak force.
The bargaining power of buyers is another weak force. The first reason why this is a
weak force is the presence of a few firms that specialise in the production of fast foods. Hence,
customers have few restaurants to choose from and have no significant control over the prices.
Secondly, product differentiation levels have amplified in the past five years. As a result, it is
difficult for consumers to find two or more companies that produce replicated products,
weakening their bargaining power. Furthermore, people prioritise quality over the price. Andrada
(2014) suggests that most of the clients of Whataburger make frequent purchases and display
lower levels of price sensitivity. Majority of them find no reason for bargaining and request cost

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reductions for the food they purchase because the company offers superb quality products. The
force is therefore weak and poses little threat to Whataburger.
The threat of substitute products or services is a strong force. Substitutes are one of the
critical concerns of Whataburger. Several alternatives exist for the restaurant’s products in local
bakeries, artisanal food producers. Dominant fast-food chains such as McDonald’s, and
hypermarkets such as Walmart that have ventured into the production of fast foods (Andrada,
2014). Furthermore, people have also gained the habit of preparing these delicacies in their
homes, decreasing the demand for the products offered by Whataburger and other fast-food
companies. The threat of substitutes is therefore potent and threatens the profitability of the firm.
Finally, the threat of competition is another strong force. The fast-food industry has
expanded dramatically as new restaurants enter the market and existing ones expand and
distribute their products via the stores they have established in foreign markets. Companies such
as McDonalds Chick-fil-A, In-N-Out Burger, Five Guys Burgers & Fries, McDonald’s and Jack
in the Box are some of the major competitors of Whataburger (Andrada, 2014). The companies
have engaged in product differentiation to increase their competitive advantage. McDonald’s has
even added healthy foods to its menu due to the growing concerns of the role played by high-
calorie foods in disease development increasing its profitability and competitiveness.
Additionally, the fluctuations in the demand and supply of food products due to factors such as
the decrease in the customers’ disposable incomes due to economic volatility creates an
additional problem for small restaurants such as Whataburger. In such cases, all the companies
are forced to reduce the prices at which they sell their products. Larger companies do not suffer
severely because they have many consumers and can, therefore, make substantial profits.
However, small firms such as Whataburger incur so many looses due to the price fluctuations
and the lack of vast number of customers. The existing exit barriers impede such companies from
leaving the industry and venturing into other profitable businesses. They are forced to produce
the same products at a low price and to fewer clients, decreasing their levels of profitability,
while giant corporations attract and retain more loyal customers and enjoy stable profits. The
threat of competition and competitive rivalry is therefore potent.
Resources, Capabilities, and Core Competencies

Resources
Whataburger’s resources entail physical, financial, and human resource. The company
owns seven hundred stores in ten American states that generate annual revenue of one billion
dollars every year. Hence, the corporation has a robust financial position. Whataburger sold
products worth $2, 001, 306 in the fiscal year of 2016 (Whataburger’s Restaurants LLC, 2019).
The company has experienced steady financial growth since then. Its financial stability has
enabled it to establish more stores in different regions, strengthening its brand.
Whataburger has 40, 000 employees, that it considers critical corporate assets. Its stable
financial position has also allowed it to invest in significant business operations such as
employee training, imparting in workers the skills required for proper storage, and effective
handling and preparation of different types of foods (Whataburger’s Restaurants LLC, 2019).
Employee training and the presence of an HR department that prioritises the needs of its staffs
have not only increased job satisfaction but the quality of employee performance and the overall
productivity of the restaurant.
Capabilities and Core Competencies
Threshold capabilities entail resources that are not easily replicated or obtained, that meet
the needs of a target market and increase a company’s competitiveness. Conversely, core

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competencies refer to the skills and levels of expertise needed to deploy resources via a
company’s business operations, to gain a competitive advantage (Yang, 2015). Whataburger’s
threshold capabilities constitute its impeccable brand that represents aspects such as the
corporation’s capacity to connect with clients, listen to their complaints and feedback, and offer
transparent and quality products and services. Its core competencies lie on its ability to
effectively manage employees and retain high performers who are committed to the organisation
and its goals. The restaurant has succeeded in strengthening its brand and distinguishing itself
from its competitors through its core competencies and capabilities.
Whataburger’s Source of Competitive Advantage

Cost leadership is Whataburger’s primary source of competitive advantage. The
company sells fast foods that are similar to the ones provided by other restaurants but at a
relatively lower price. An analysis of the characteristics of its target customers revealed that
people are more willing to but commodities when they are sold at lower prices (An & Lifen,
2016). Whataburger has distinguished itself as a cost leader, offering foods at cost-effective
prices that are below what its rival companies charge. The company has refrained from changing
the costs of its products because it is one of the factors that result in the loss of loyal customers
who either purchase the foods in bulk or frequently. Cost leadership has increased the demand
for Whataburger’s foods and has enabled it to attract and retain vast numbers of consumers (An
& Lifen, 2016). Equally important, the company has maintained a good rapport with its supplies
enabling it to access raw materials at low prices. Concurrently, the restaurant produces foods in
larger quantities and sell them to more customers. To maintain its profitability.

Overall Business Strategy

Joint venturing has become a standard business expansion strategy among fast-food
chains, Whataburger included. The primary goal of the company is to expand and establish its
stores in more American states and host nations across the globe. Whataburger recently partnered
with BDT capital partners with the core ai of achieving this feat. The latter has from more than
three years voiced its admiration for the Whataburger brand. The joint venture will enable the
restaurant chain to experience continuous and sustainable growth and increase its competitive
advantage. BDT will develop a strategic vision for Whataburger and offer growth capital that
will promote the organisation’s gradual expansion (Whataburger Positions Itself for the Future,
2019). Furthermore, the partnership will allow it to engage in risk-taking practices such as the
introduction of new consumer products because the two corporations will share profits and
equally incur the losses. Furthermore, Whataburger’s new ally is anticipated to provide valuable
information on consumer needs and the dietary needs of the target customers due to its
experiences with foreign markets. The exposure will enable Whataburger to produce superb
quality products that fully gratify customer needs. Partnering with different organisations that do
not necessarily specialise in the production of fast foods is Whataburger’s overall strategy for
expansion and fortifying its brand

Conclusion

Whataburger is one of the fastest-growing restaurant chains in America. The corporation
is highly profitable and is anticipated to dominate the fast-food industry in the next three years.
Porters five force model has led to the identification of three weak forces that include the
bargaining power of buyers, the bargaining power of suppliers, and the threat of new entrants.
Conversely, competitive rivalry and the threat of substitute products and services are stronger
forces. Additionally, the company’s source of competitive advantage is cost leadership, through
which it sells products similar to those produced in other restaurants at a low price, attracting

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more customers. The company has also prioritised joint ventures as its chief strategy for
expansion. Whataburger is expected to develop more stores in foreign nations, attracting a
broader consumer base, and augmenting its competitiveness in the next five years.

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References

Andrada, J. (2014). Five Forces Model: External Threat (Whataburger). Prezi. Retrieved from
https://prezi.com/eryemxgkkeck/five-forces/
An, G., & Lifen, C. (2016, June). Explore the Integration of Cost Leadership Strategy and
Differentiation Strategy. In 7th International Conference on Education, Management,
Information and Computer Science (ICEMC 2017). Atlantis Press.
Whataburger Positions Itself for the Future (2019). BDT Capital Partners will partner
With tenured Whataburger leadership team to expand the brand. Whataburger. Retrieved
from
https://stories.whataburger.com/whataburger-positions-itself-for-the-future/
Whataburger’s Restaurants LLC, (2019). Company Profile. Dun & Bradstreet. Retrieved from
https://www.dnb.com/business-directory/company-
profiles.whataburger_restaurants_llc.01cb7598da34e87c38ddf8e92fca19e1.html?sitespec
tflag=TRUE&imok=hoovers&
Yang, C. C. (2015). The integrated model of core competence and core capability. Total Quality
Management & Business Excellence, 26(1-2), 173-189.