Wednesday, April 12, 2017

A Local Favorite Expands Market Beyond Pittsburgh

After reading, GE's Growth Strategy and Seven Ways to Fail Big, I contemplated when a growth strategy is auspicious and effective and when it is inappropriate and a path to failure. GE is a success story of investing for future growth and focusing on cash generators. It pushed on through a volatile economy as a massive, integrated, well diversified company and successfully made it to the promise land.

My thought was what about the small company? Lacking scale and professional resources, is the small business left to double down on what makes it unique or can it align resources to an advantage? Carroll and Mui in Seven Ways to Fail Big warns against both stubbornly staying the course and rushing to expand. Reports point toward the restaurant industry as being unstable and big restaurant chains are struggling to retain profitability. So what would motivate a small business to grow into a chain?

The small company that comes to mind is one that I am very familiar with and have watched expand and reach iconic status over the years, everyone's favorite, Primanti Brothers. The gritty restaurant chain opened its first location in the Strip District of Pittsburgh and since then has expanded to 5 states. What makes them different from competitors is a huge sandwich that has french fries and coleslaw on it for only $7.50 that has become synonymous with the city of Pittsburgh. A competitive advantage in affordability and consistent unique quality.

Low prices and a differentiated product are surely competitive advantages but so is the Pittsburgh symbolism. With an investment in 2013, the chain has expanded to 44 locations. If you visit any of these new locations, the difference in atmosphere is identifiable. The restaurant has the appearance of a chain. While the product remains the same quality, the grit and zeal of the Strip District and South Side Pittsburgh locations are nowhere to be found.

Without access to financial statements, I cannot analyze the impact of this growth and expansion. I wonder if the strategy was a response to a need to expand beyond a regional business or if there were other motivations. Ongoing growth signals success, but it would be interesting to look at the strategy and impact in more detail.

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