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Sonic Corporation, Case Study Example

Pages: 1

Words: 540

Case Study

There are underlying social and economic trends that can be attributed to the dip in Sonic’s performance over the years, particularly between 2007 to 2010, and 2010 to 2012

Social Trends

On the onset over the 2010, the number of diagnosis of chronic illnesses related to poor eating habits increased drastically. Fast-foods that are greasy and contain too many calories were found to cause and trigger illnesses diabetes, hypertension (high blood pressure) and other lifestyle-related illnesses and complications. Furthermore, reports by WHO (World Health Organization) in 2008 that ranked the United States as the most obese country in the world, caused a movement by health organizations against poor eating habits in the United States. These factors quickly transformed the market into a health conscious market where nutritional value of all foods was scrutinized. This may have well been one the major contributing factors to the decline of Sonic’s performance over the years.

Economic Trends

Between 2007 and 2012, the value of fuel drastically increased by 16%. This increase in fuel meant the increase of every basic commodity in the market as fuel plays a huge role in the final price of commodities due to its use in the transportation of these commodities. This directly affected the prices of the raw materials that Sonic uses in its production process. This increase in expenditure led to an increase in the final price of commodities reducing the demand for these commodities.

Problem Recognition

Sonic can delve into researching on the underlying social problems within the society. In this case, poor eating habits would be within its scope of operations. This can be remedied through the introduction of healthy meals in order to attract the nutrition conscious consumer. This can be through the introduction of health drinks and shakes and even low-fat and low-carb meal combos.

The strategies that Sonic has employed are wise. However these options are not optimal. This is because these strategies have failed to translate into tangible economic and financial benefit to the company. Through the introduction of new meals, they have diversified and improved on their commodities offered, however, it has not improved on the quality of food that is in line with the trends in the market.

Sonic’s total revenue has declined significantly over the last 3 years reflected in the reduced company drive-in sales despite the increase in outlets and franchises in the Northeast, Northwest and along the U.S.-Canadian border. This means that the new ventures are not economically viable and Sonic should consider selling them out.

Stockholder’s equity has however continued to improve, especially between 2010 and 2011. However, with a continually decreasing net income, i.e. income after taxes, the stockholders may not be making much if the company continues with its current marketing strategy.

The company’s expense on marketing dropped between 2009 and 2010. However, this expense remained the same between 2010 and 2011. This is irrespective of the fact that in the three stated years, net income has continued to decrease. This points out to an insufficient and ineffective marketing strategy that the company has employed. The company needs to employ a new strategy that is geared towards the current trends in the market, such as the introduction of healthier foods and diversifying to meet the increasing number of vegetarians in the market.

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