Cheesecake Factory: Strategic Analysis Research Paper

Introduction

The company under consideration in this paper is the Cheesecake Factory. As a matter of fact, it is considered to be a popular and famous restaurant in the United States. The majority of restaurants are located close to big cities. The reason why a lot of people across the United States like the restaurant are that the portions are bigger than in other cafés of such types and the menu offers visitors a variety of meals.

The Cheesecake Factory realizes the significance of hiring only the most professional and highly qualified workers to provide the visitors with an outstanding service combined with reasonable prices. It should be stated that the company is orientated to the market of North America, and thus, the enterprise does not enjoy great popularity on the global level. The primary purpose of the paper is to identify the business strategy of the company, conduct SWOT, functional, and PEST analysis, discover Porter’s Five Forces, analyze the company’s stock and share value during the period of one year, and offer a solution to potential future strategic issues of the Cheesecake Factory.

Corporate and Business Strategy

The Cheesecake Factory is a competitive business in the United States that has already taken advantage of the rivals. However, the question arises, what stimulated the success of the company? The answer to this question is hidden in the dimension of the quality of the restaurant and its business strategy. First and foremost, it is of paramount importance to note that the enterprise understands the significance of innovations and flexibility in order to adjust to the current market and customer’s needs.

The preferences of the customers are changing with dramatic speed, and thus, in order to stay popular and competitive, the managers implement marketing techniques and approach as well as dedicate a lot of time to the market research.

The pivotal role in marketing and business strategies is dedicated to the advertisement. The promotion of the product plays a fundamental and crucial role in providing innovations to the target group of the restaurant. The advertisement of the company is seen as a tool to enhance the traffic of the customers (visitors, who make transactions in the café). The company has already developed an advertising strategy in order to stay competitive. There are four aspects that are believed to be under consideration of the company, among them are the following ones, namely:

1. Reputation;
2. Location;
3. World of mouth;
4. Social media.

Understanding the importance of modern technologies and the digital world, the company communicates with the customers due to social media. Public relations are seen as a tool to reach personal goals and objectives (the popularity of the restaurant, an increase of the traffic). Thus, the managers came to the conclusion that some cooking demonstrations are good options that can help them in growth. Moreover, the company uses gift cards and certain promotion programs in order to attract new visitors.

The experts state that the success of the Cheesecake Factory across the United States can be explained based on the fact that the company uses a unique business model. In contrast to the rivals who have a restaurant or hotel chains, the Cheesecake Factory is the owner of every restaurant in America. The approximate number of restaurants is 200; however, the number of cafes is growing every year (Jakab par. 8).

According to Morgan Stanley, the business is one of the most profitable in the segment as they sell almost 11 million dollars in food every single year. The expert highlights that it is one of the most successful restaurants in the sphere. The reason for the success can be explained by a suitable business strategy that incorporates four aspects, among them are the following ones:

1. Expansion;
2. Outstanding quality;
3. Mass appeal;
4. Smart operations.

In order to get deeper involved in the issue, the aspects should be taken into consideration and discusses. As for the expansion plan, it should be noted that the company aims to popularize the restaurants and attract new visitors by providing more people with the ability to access the café. Currently, there are almost 200 restaurants that are functioning on the territory of the United States; however, the company aims to expand this number to 300. Nevertheless, it should be stressed that the Cheesecake Factory is selective in the process of opening the cafes, and thus, opens restaurants in big cities. Being attentive to the process of selection of the opening place was a beneficial idea that helped the company in their way of an accomplishment of the goal and finally led to success.

The outstanding quality is another guiding power for the company and the matter of the business concern. The expert once stated “nothing smacked of mass production. My beets were crisp and fresh, the hummus creamy, the salmon like butter in my mouth. No doubt everything we ordered was sweeter, fattier, and bigger than it had to be” (Gawande par. 5). Everything is homemade, and it leaves the visitors touched. It should be stated that the only thing that is not made in the restaurant and is produced in California is the famous cheesecakes of the company.

The target group of the customers is families. The restaurant can offer something for every family member of any taste and any preference. The New Yorker notes that “the Cheesecake Factory’s huge menu, which includes seafood, pasta, burgers, and more, appeals to a broad audience” (Lutz par. 7).

The operating system is an advantage of the company. The actual dishes are prepared by a cook; however, the restaurant is fully equipped with needed technical devices that facilitate the process of cooking and make the service work faster. In addition, the managers of the corporation found it reasonable to implement data analytics into the work in order to predict the preferences of the customers and what dishes they are likely to order. This system is sure to be working because the restaurant uses almost 100% of the products.

With the consideration of the above-stated information, the conclusion can be drawn that the strategies of the Cheesecake Factory involve:

1. Extensive and innovative menu;
2. Commitment to providing the customers only with the outstanding service;
3. Make high-quality restaurants; be attentive to location, and the layout of the restaurant;
4. Design and décor;
5. Only fresh ingredients are used in the dishes that are provided to the customers;
6. Vertical integration of the bakery operation process.

SWOT analysis

In order to understand the strengths and weaknesses of the company and to get deeper involved in the process of running the business, SWOT analysis is vital for taken into consideration. It is essential to get better informed regarding four fundamental aspects, namely:

1. Strengths;
2. Weaknesses;
3. Opportunities;
4. Threats.

First and foremost, it is of paramount importance to note that the restaurant can be found almost in every big city in the United States. The expansion politics of the Cheesecake Factory that was described above is considered to be one of the main strengths of the company. Caring staff and perfect business models contribute to the popularity of the restaurant across the United States. The second strength is the high quality of products.

The Cheesecake Factory uses only fresh ingredients to make the taste of the dishes outstanding and satisfy even the most demanding client. Big product line and the fact that every person can find something to order from the large menu positively influence the opinion of the customers regarding the restaurant. It should be pointed out that the company is flexible in management and is open to current trends in society. Nowadays, the healthy way of life, as well as, the sport is being promoted. Realizing the significance of the diet food, the company decided to take the advantage of the trend and have already developed the menu, Skinny Licious menu, for people who follow a healthy lifestyle (Jakab par. 8).

However, in spite of the fact that the strengths of the company are evident, one should not forget that there is hardly a business in the world that does not have weaknesses. Although the Cheesecake Factory has developed the menu for people who follow a healthy lifestyle, it should be highlighted that the rest of the food contains a lot of calories. The health of the nation is highly dependent on the restaurants and the food that they serve to the visitors.

The next weakness of the company is considered to be the lack of presence of the Cheesecake Factory in the global market. The rivals of the enterprise (McDonald’s, KFS, and Domino’s Pizza) are known worldwide (Nathan par. 4). Despite the fact that the Cheesecake Factory is successful in the United States people from other countries do not have access to the restaurants of this chain.

The next point for consideration is opportunities. The company has already outlined plans for market expansion. The managers realized that the business should be presented worldwide in order to develop and receive new opportunities and possibilities. Thus, the company plans to enter the markets of Asia and the Middle-East. Moreover, the opportunities that are open to the company can be found in the dimension of the low-calorie segment. The implementation of the Skinny Licious menu is the first step towards the promotion of a healthy way of life (Nathan par. 4). Better involvement in branding can attract new customers and increase the popularity of the Cheesecake Factory not only in the United States but on the global level as well.

As for the threats that the business is currently facing, it should be noted that one of the most significant dangers is the popularization of healthy and low-calorie food. In case the company does not focus attention on the development of the healthy menu, the customers are unlikely to visit the restaurants of the chain. The next threat is the threat of new entrants and intense competition from the rivals. In addition, the economic environment in the country influences the way the business is functioning.

Functional analysis

The functional analysis allows for understanding potential problems or threat of the company in order for the managers to take appropriate actions in case some weaknesses were identified and master the strategy:

1. Internal environment (strength and weaknesses)
   1. Marketing. The managers of the company are sure that the implementation of traditional methods in the working process will not allow them to achieve the same results as the innovative strategies and their own path. The Cheesecake Factory receives its shares due to the perfectly chosen location and the fact that people who tried their food like it and advice to family and friends. The word of mouth is beneficial for the organization’s success. The company also successfully uses Facebook, Instagram, and Twitter to promote the products (Nathan par. 4).
   2. Finance. As a matter of fact, the company was facing growth since the establishment. According to the research, it increased the revenue from the last five years.
   3. Operations. The Cheesecake Factory needed a distribution company in order to supply the necessary products to the restaurants. A number of agreements that were signed between the companies help the Cheesecake Factory to control the prices and supply.
   4. Technologies. The technological aspect is well represented in the Cheesecake Factory as the enterprise needs a lot of technical devices in order to decrease production costs and improve the quality of service.
2. External environment (opportunities and threats)
   1. Customer analysis. The target group of customers of the Cheesecake Factory is considered to be families with children, people who follow healthy diets, and those who can spend more than the average amount of money on food.
   2. Competitive analysis. The company is facing intense competition in the American market. The Cheesecake Factory is represented in the countries of the Middle East; however, it should be noted that competition is not less intense there. In order to reach further progress, the company can expand the market and open restaurants in developing countries.
   3. Market analysis. There are a number of companies in the market. A lot of corporations emerge in the segment every year. Thus, customers have a variety of choices to decide where to eat. The fact that nowadays, more people follow healthy lifestyle influences the market in a significant way (Jakab par. 8). First and foremost, the company should provide people with more healthy dishes. It would solve the problem. However, the other side of the issue is that the prices in the restaurant are higher than the competitors have, even despite the fact that the portions in the Cheesecake Factory are bigger.
   4. Environmental analysis. As for this aspect, it should be stressed that people of any culture can visit the restaurant as everyone is likely to find something that he or she would like to eat. The governmental and economic environment impacts the business is a great way as well. The prices in the Cheesecake Factory are higher, and thus, the customers need to spend more money on dining in the restaurant than they would have spent making dinner at home or dining at the rivals of the corporation. In order to attract visitors and for people to be able to order food in the Cheesecake Factory, they need to make enough money. The economic crisis influences business operations in a significant way.

Porter Analysis

In order to get deeper involved in the questions regarding the business success of the Cheesecake Company, it is vital to take into consideration Porter’s Five Forces analysis. The aspects that are significant for discussions are the following ones, namely:

1. The threat of new entry;
2. Buyer power;
3. Supplier power;
4. The threat of substitution;
5. Competitive rivalry.

As for the competitive rivalry, it should be stressed that the environment in the industry is rather intense. Industry rivalry is considered to be high. The competition among the competitors is enormous, and thus, the companies usually do not have a second chance to make a mistake. To attract new customers, the corporation creates different menus for children and for people who follow a healthy lifestyle. Moreover, the company makes an accent on the quality of food that they serve and aims to satisfy every client. So, in spite of the fact that the industry rivalry is high, the Cheesecake Factory has all the chances to have the same success and even expand the market.

As for the next aspect, namely the power of the supplier, it is worth noting that is it low. There are a number of companies that the Cheesecake Factory can use as a supplier. Due to the fact that the environment in the industry of suppliers is intense as well, every company that performs the role of the supplier aims to provide the most outstanding service and the most reasonable prices to stay afloat. Taking into consideration this information, the conclusion can be drawn that the power of suppliers is low, and thus, it can be seen as an advantage for the Cheesecake Factory.

As for the threat of substitution, it is of paramount importance to make an accent that it is high. The reason for it can be found in the dimension of the popularity of the places that are similar to the Cheesecake Factory and that provide almost the same dishes as they do. People like to eat and appreciate the outstanding service, and thus, the companies take the advantage of the situation, open interesting places with unique tastes of the dishes, and sometimes face the problem of lack of customers. It can be explained by the excessive amount of restaurants. People have a variety of choices, and thus, the threat of substitution is high. The primary rivals of the Cheesecake Factory are McDonald’s, Starbucks, and Domino’s Pizza.

The next factor that should be analyzed is the buyer’s power. This aspect is related to the previous one that was described above. The buyer’s power is believed to be high, and it is understandable. It should be highlighted once again that the customers have a variety of choices. There are plenty of companies that emerge with impressive speed, almost every day. Thus, people have a wide spectrum of different restaurants and are free to visit a new restaurant every day.

The aspect that is vital for consideration is considered to be the threat of new entrants. It should be stressed that there is a high threat that new businesses will enter the market. This segment of the industry is versatile. There are a number of enterprises that open and close almost every year. The segment is rather attractive for businessmen because people will always consume food, and thus, it is a way to make money on it. However, in spite of the fact that the threat of new entrants is considered to be high, it should be noted that it would be rather difficult for the young company to compete with such experienced and popular enterprises like the Cheesecake Factory or, for example, McDonald’s.

PEST Analysis

PEST analysis involves a combination of the following aspects:

1. Political;
2. Economical;
3. Socio-cultural;
4. Technological.

As for the political aspect, it should be noted that the company should adjust to the changing regulations and laws that are established in the segment. The government changes some laws related to zoning, labor, and alcoholic beverages.

The economic aspect should be discussed as well. The Cheesecake Factory offers high-quality products to customers. As a matter of fact, the prices in the restaurant are considered to be higher than in the primary competitors. According to recent research, the unemployment rate is considered to be 6,7, whereas during the economic crises it was higher. The economic environment can influence the functioning of business in a significant way because, in case of a higher unemployment rate or decrease in salaries, the customers are more likely to choose their competitors as the Cheesecake Factory offers higher prices in comparison to their rivals.

The social factor has a strong impact on the industry, and thus, should be taken into account. First and foremost, it is essential to stress that the Cheesecake Factory offers a variety of dishes to the customers. According to the research provided by IBIS, the last five years were characterized by little growth in the restaurant market. The experts state that the market experienced only 2,5% growth. The reason for such a low percentage that describes the market growth is the fact that people become more health-conscious and either prefer to cook the food at home or choose cheaper options. However, in spite of the fact that the society is changing and makes other choices, people still can visit the Cheesecake Factory like a place for gathering with friends or a reward after a week of hard work.

The technological aspect is essential because the Cheesecake Factory is considered to be dependent on it. First and foremost, the enterprise has implemented a number of technological equipment into the working process, and it is understandable because technologies and innovations not only facilitate the work of the staff but also are vital for making modern desserts and dishes. Technologies were seen as a factor that lowered the management costs, improved the service in a significant way, and, in addition, increased efficiency dramatically. The restaurant is considered to be one of the most innovative across the United States.

The Internet has influenced the industry and the Cheesecake Factory as well. Due to the Internet, it becomes possible to promote the product without huge investments in the sphere of promotion and advertisement. Social media are popular nowadays, and companies use it as a benefit. The promotion of the restaurant via mobile phones and computers has already reduced expenses.

Stock and Share Value of the Cheesecake Factory

As for the stock and share value of The Cheesecake Factory, it is worth making an accent that the company improved significantly and experiences the financial growth from the establishment till now (Fig A). According to the graph that is presented above, it is evident that the last five years were beneficial for the stock and share value of the company. The reason for success can be found in the dimension of quality (McLellan par. 5). The company aims to use only high quality and fresh products for the dishes in order to attract customers and provide them with outstanding taste. The company has all the chances to continue its success and enter the international market. However, some external forces can influence the operation of the corporation, namely governmental regulations and economic environment. The economic success of the Cheesecake Factory corresponds to the ability of society to make money. The unemployment rate in 2009 influenced the business in a significant way.

The Strategic Situation

The analysis of the strategic situation helps to understand the strategies of the marketing plan better. First and foremost, it should be stressed that nowadays a variety of companies emerge every year. It can be explained by the desire of the businessmen to make money on the fundamental need of a human being, namely food consumption. Thus, the segment is overwhelmed with new restaurants and cafes that eager to attract the attention of the consumers. Someplace use the name of a famous brand, some restaurants follow modern trends, however, the Cheesecake Factory is guided by the approach of providing the customers with:

1. Unique atmosphere;
2. Outstanding service;
3. Fresh ingredients;
4. Larger portions than the competitors have (Shankar par. 3).

The stated above information related to the intense situation on the market stimulated the managers of the Cheesecake Factory to develop a marketing plan and the strategies that would correspond to the needs of the clients and satisfy their preferences. The situation on the national and global market influences the operation of the business, and thus should be taken into consideration in order to succeed. The Cheesecake Factory aims to make the ordinary food delicious and unforgettable transforming the weakness of the market into personal advantages.

Recommendations

There are not so many problems that the business is currently experiencing, however, it should be stated that there is no perfect company, and thus, there is still room for improvement. It is worth noting that some management and strategically important decisions can lead the company to even better success and foster development.

The Cheesecake Factory is now facing intense competition because the main rivals of the company occupy not only the market of North America, however, the global one as well. In 2013, the Cheesecake Factory stated that they had almost 115 million dollars of income (Shankar par. 3). In comparison to the previous year, this amount is higher. After the process of analyzing the company using different tools, the conclusion can be drawn that one of the most significant strategies for the company now is the expansion of the global market.

Moreover, in order to succeed, the company can open restaurants in the developing countries where the primary rivals of the Cheesecake Factory are not presented. A lot of developing countries across the globe experience rapid economic growth, and thus, it is essential to find a niche on the market before the competitors will expand their market as well. The Cheesecake Factory is represented in some of the countries of the Middle East, however, the market environment in those countries is rather intense, and they have to compete with the famous and internationally powerful countries.

The company has all the chances to receive global popularity and establish some restaurants worldwide. The reason for such a suggestion is that cheesecake is not so popular globally; however, the unique taste of the dessert is likely to satisfy the taste of every demanding client across the world in every country. In order to follow the politics of globalization and expand the market for the Cheesecake Factory, a well-developed competitive strategy is needed.

Conclusion

In conclusion, it should be pointed out that the restaurant the Cheesecake Factory is a successful business that is represented in North America. The strategies of the company and the decisions of the top managers have already contributed to the development and improvement of the business in a significant way. However, it should be stressed that high prices, lack of international presence, and a small menu for people who follow a healthy lifestyle are the fundamental weak points of the company.

Nonetheless, in spite of the fact that the Cheesecake Factory is experiencing some difficulties, the business has a variety of advantages, namely large menu, high quality and fast service, fresh ingredients, unique and stylish atmosphere, and unordinary dishes. The corporation has all chances to succeed on the market not only in the United States but also internationally. The research presented in the paper would help to identify possible strategies and innovations in order to transform the weaknesses into strengths.

Works Cited

Gawande, Atul. “Big Med.” The New Yorker. 2012. Web.

Jakab, Spencer. “Cheesecake Factory: A Meal Worth Waiting For.” The Wall Street Journal. 2015. Web.

Lutz, Ashley. “4 Reasons The Cheesecake Factory Is Crushing the Competition.” Business Insider. Business Insider, Inc, 2015. Web.

McLellan, Michael. “The Cheesecake Factory Still Bringing in the Cheddar.” A Business Blog. 2012. Web.

Nathan, Ralph. What Is The Cheesecake Factory’s Marketing Strategy? 2015. Web.

Shankar, Nick. “Does The Cheesecake Factory’s Success Hinge On Their Management’s Succession Plan?” Seeking Alpha. 2015. Web.

Appendix