Wawa Case Study - Alex Kalafatides PDF

Preview

Summary

Alex Kalafatides...

Description

Wawa Case Study Balance of Payments Wawa is headquartered in Wawa, Pennsylvania and operates a dairy and produces iced tea, milk, and ice cream under its brand name. It is these products that would be exported to stores in the new expansion. In addition to the goods exported, management services would be needed by the new locations so there also would be an export of management services. No imports back to corporate headquarters are expected however earnings would be transferred back to corporate treasury. The capital would reflect investment in real estate, building and furniture and fixtures at the new locations. Wawa does not franchise or license its product or brand so there would be no external investment. Wawa Balance of Payments (In thousands $) Current Account Goods Goods Exported to Stores Goods Imported from Stores Balance of Merchandise Trade Services Services Exported to Stores Services Imported from Stores Balance of Merchandise Trade Investment Income Received from Stores Paid Balance in Investment Income Balance in Current Account Capital Account Portfolio, Short Term (net outflow) Portfolio, Long-term New Corporate Investment in Stores Balance in Capital Account Official Reserves Errors and Omissions Net Balance

1,000,000 0 1,000,000 500,000 0 500,000 100,000 (25,000) 75,000 1,575,000 (400,000) (1,700,000) (2,100,000) 600,000 (75,000) 0

State Policies and Regional Issues As Wawa expands into new states the company will need to be aware of tax policy and environmental laws in deciding new store locations. Certain state and local governments may offer tax incentives to attract companies to establish presence in their community and Wawa should take full advantage of those favorable tax incentives. Alternatively, certain governments may impose additional taxes such as a beverage tax or a local business tax and these additional tax costs need to be considered in any cost-benefit analysis for store location. Environmental policy also needs to be considered especially with the Wawa gas service since underground storage tanks are involved. State and local laws regarding underground storage tanks and dispensing fuel as well as the costs to monitor these facilities need to be considered in the costbenefit analysis for store location. Food tastes vary by region and need to be considered in product offerings. An item may sell well in the Northeast but may fail in the Southwest. For example, in California there is a great focus on eating healthy so lighter and organic foods are preferred, so the Wawa Turkey Gobbler Hoagie may not succeed in California yet it is a huge success in the Mid-Atlantic region. The availability of fresh, high quality food may also vary by region and sourcing, and transporting these foods will impact costs and need to be considered. Wawa prides itself on the quality of its food and that quality must be maintained to ensure the Wawa brand and reputation is preserved. Wawa needs to identify trading partners that can supply the local fresh food items, working with food and farm cooperatives in the region is important to ensure not only quality and freshness of food items but also quantity. Wawa should join the National Milk Producers Federation, if it hasn’t already, because dairy products are a major stream of revenue for Wawa. In addition to the national association,

Wawa should also participate in the state milk producers associations as well. Other entities that Wawa should consider are the local business and trade organizations in each state. It is important to establish communication and community presence in each state that Wawa expands into to generate corporate presence and goodwill.

SWOT Analysis Strengths 

Brand name recognition



Quality and convenient fast food offerings at reasonable prices



Owns all real estate of its store locations, high standards in store appearance



Excellent customer service



Stores designed to move customer in and out quickly



Produces own dairy products and the famous Wawa Ice Tea



No surcharge ATM attracts customer into store



Fuel services at most locations, convenient to fuel car and feed customer



Privately held, focus on long-term growth over short-term performance

Weaknesses 

Does not franchise any locations, limits store expansion to what they are financially able to handle, roughly 50 stores per year



Does not license its products, especially the Iced Tea which could be sold in grocery stores for additional revenues



Conservative in expansion plans, focus is on store clustering in an new location and expanding from the epicenter of its corporate headquarters in Wawa, PA



No external investors, limits available capital for expansion

Opportunities 

National expansion as Wawa has brand name recognition and word of mouth marketing



Sell Wawa dairy products and iced tea in grocery stores



Consider casual dining restaurants



Lots of competition including large multinational corporations such as Dunkin

Threats

Donuts, McDonalds, Starbucks, other fast food restaurants and other convenience stores 

Fuel and tobacco sales are declining as people drive less and purchase fuel efficient cars and the war on smoking has been successful



Rapid expansion may compromise Wawa’s high standards with respect to customer service, quality of food and store appearance...