Table of Content
Chapter 1.0 2.0 3.0 #.0 5.0 (.0 ).0
1.0
Title
Page 2 2-5 5-2# 25-2$ 2$-30 30 31
Summary of the Case Main Issues S!T "nalysis Solutions %e&ommen'ations Con&lusion %eferen&es
Summary of the Case
Calveta was founded by Antonio Calveta and it was built on Antonio’s Antonio’s passion for food and traditional traditional family values. values. Calveta was was a $2 billion, privately privately held firm that managed managed food 1
service operations for nearly 1,000 senior living facilities in the nited !tates. "he restaurant began in 1# as a neighborhood restaurant in %roo&lyn, featuring old family recipes and subse'uently branched into second and third branch. Calveta was able gain access into the senior mar&et in 1#(2 through Antonio’s church parish who introduced a nursing home manager that managed the %ushwic& !enior )ome. Calveta attracted the senior home fol&s as they offer better food which is not only more nutritious but within their allocated food budget. !ervices were offered with a higher*'uality food in addition of a more personali+ed service. Calveta employed 1,000 people which consist of 00 wor&ers that wor&ed in the company’s %roo&lyn )-. !taff operated all aspects of resident dining facilities including menu development, meal preparation, service and implementation of special programs such as themed dinners and family events. After Antonio’s retirement in 200(, succeeding years of leadership, Antonio’s eldest son, /ran& was nominated as the C. /ran& was entrusted by his father to double up the company’s revenue within years.
2.0
Main Issues
/ran&, as the new C was re'uested to double the company’s revenues within five years, of which 2 years have passed without any credible strategy adopted yet. )e did not want to disturb the special company culture or ris& their reputation for 'uality food services on the race to double the revenue. ow he finds it difficult to carry out his father’s directives. "he humanistic and emphatically pro*employee company culture should not be disturbed while the growth strategy ta&es place. Currently, Currently, he is in a dilemma dilemma whether to e3pand beyond the !4/ mar&et and he is worried if he could continue to maintain the 'uality level, for which Calveta is renowned, in this process. 5n order to increase the revenue as promised to his father, /ran& has to consider growth strategies for his organi+ation. )e has a few strategies in his mind and has to wor& on them to see which one brings the ma3imum benefit and fulfils
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his needs aptly. "he strategies that he has in mind are either to continue in the e3isting situation itself or introduce it to the hospital segment. )e also has thought of ta&ing up 6reat !outhwest 7ining !ervice 86!79 which was situated in :hoeni3 and bringing a change to the organi+ation structure as a whole. i.
Continuing the e*isting business The a'+antages of this strategy are as follo,s "here is less ris& as their running in the same status as before. "hey would not be incurring any additional costs. "he reputation of the organi+ation will not be lost. "he provision of customi+ed service intertwined with the 'uality of food
remains constant and it will also not be affected. "he organi+ation will be able to uphold its own culture which was being followed traditionally. The 'isa'+antages of this strategy are Any &ind of growth or introducing itself to new mar&ets would be restricted in
choosing this strategy. A very less chance of meeting the targets that are put across.
ii.
Sprea'ing its business to hospital segment The merits on &hoosing this option are mentione' belo, "he hospital segment presented a more logical fit with Calveta’s core
competencies )ospital administrators might perceive Calveta’s s&ills at cost control as a means to containing e3penses. "rends toward the provision of fresher, more healthful menu offerings for both patients and visitors would also wor& in Calveta’s favour. Customers from the hospital segment would accept Calveta 7ining !ervices as that of the residents of !4/ without much hassle. The 'emerits on &hoosing this option are mentione' belo, 3
"he culture of the company might not be maintained as it gets mi3ed with that
of the hospital demographic. "here are entry barriers in the financial point of view in this segment. "he organi+ation cannot estimate or forecast its growth beforehand. 5t could also affect the reputation that the company has been having for a long
iii.
time. "&uiring /S an' restru&turing the organiation "he pros of the company on ta&ing up this strategy are as follows; "here are more chances of reaching the targets and obtaining desired mar&et attraction in this strategy. 5ts geographical coverage did not overlap with that of Calveta, which will increases its mar&et and also coverage. 6!7 is presently in a good position, when the revenue generation is ta&en into consideration. Calveta would attain a great deal of customer potential as it was maintained by 6!7. "he organi+ation hierarchy could be restructured so that it could accommodate significant growth while preserving the company’s core values. The &ons of the &ompany on taing up this strategy are as follo,s "hey will have to face a huge ris&. 6!7 had labour problems and substantial turnover in their management ran&s. !preading the company may reduce the 'uality of service. "hey will have to bear heavy debts. 6!7 was barely running in a profitable manner but it seemed to have a great
potential.
3.0
S!T "nalysis
%y evaluating Calveta 7ining service, many of the strengths write out as a result of the Calvetas culture, which focuses on the high standard calibre food and customi+ed services. %asically, the high* superior food with more alimental enables the association get high ratings from !4/ residents and managers. Considering the health reasons of their customers, the
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older people, Calveta admits fresh ingredients at a disgrace of monetary value, which creates a vital advantage over competitors who impart canned ingredients. 5n addition, the customi+ed services and continuous innovations of Calveta satisfy the customer’s need by building food service teams and a variety of menu offering in each facility. 5n addition, Calveta allows their customers to pre* drift their menus and personali+e service so that the customers feel contented. "he third strength is that the uni'ue human resource culture with the company motivates employees successfully by implementing pay*for*performance plan, wide*ranging training program, and the career proficiency program and among others. "he employees are highly motivated by act of great opportunities to be promoted and receiving generous benefits. Cost*control model helps Calveta indicate the contracts at a low price and therefore provides a lower price to customers. "his mode yields generous cost which proceeds to deduce cost of food through deterring wastes. Calveta has a great disadvantage on the organisational body structure caused by the instruction e3ecution of career progression programs, which encourages prevalent promotions and
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Stability /amily position typically determines who leads the business and as a result
there is usually longevity in leadership, which results in overall stability within the organi+ation. 5
•
Commitment !ince the needs of the family are at sta&e, there is a greater sense of
commitment and accountability. "his level of commitment is almost impossible to generate in non*family firms. "his long term commitment leads to additional benefits, such as a better understanding of the industry, organi+ation and
•
le*ibility /amily members are willing to wear several different hats and to ta&e on
tas&s outside of their formal
•
4ong-term !utloo ; on‐family firms thin& about hitting goals this 'uarter, while
family firms thin& years, and sometimes decades, ahead. "his =patience> and long* term perspective allows for good strategy and decision*ma&ing.
•
e&rease' Cost nli&e typical wor&ers, family members wor&ing at family firms are
willing to contribute their own finances to ensure the long‐term success of the organi+ation. "his could mean contributing capital, or ta&ing a pay cut. "his advantage comes in particularly handy during challenging times, such as during economic downturns, where it’s necessary to tighten the belt or personally suffer in order for the business to survive.
•
mployee e+elopment 6n&o+er mployee potential Calveta allows their employees to attend programs that
might help them spot the leaders of tomorrow within the current wor& force. !ome wor&ers
!ut ,ith the ol'- "raining the employees will give them the chance to understand the
latest developments and trends within the food ? dining industry. @hether it is new
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machinery or new social media tools, the world is constantly developing. 5f Calveta helps their employees &eep pace with these changes the company will definitely set it apart from their competitors. 4earning to use new tools and develop new strategies in developing dining services will allow the staff to ta&e on more challenging wor& and even higher roles within the business.
•
4ifelong 4earning %y developing the s&ills of their wor&force through leadership
programs they breed within them a spirit of lifelong learning. @ithin the ever changing world of technology and business there is always something to learn. 4ifelong 4earning will encourage independent learning in the individuals to develop themselves in a variety of sub
In&rease' Pro'u&ti+ity 5t is only natural that leadership development and training
will lead to increased productivity. ot only will the staff be able to do more and understand more, but they will have gained confidence within their tas&s because their s&ills are developed. •
6n'erstan' the *pe&tations 7evelopment and training programs will provide the
owner or manager of the company, with some insight into the e3pectations that the employees might have. "his way, Calveta can minimi+e their feeling of disappointment and increase their loyalty by managing these e3pectations.
•
%e+ise +ision an'
goals;
4eadership 7evelopment programs and training
opportunities are also the perfect setting to remind the employees of the long term goals that the company tries to achieve.
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7igh re+enue :rofit can be used to pay higher wages to owners and wor&ers8though if firm has
monopsony power, the profit may not be shared e'ually amongst wor&ers9 •
:rofit can be used to invest in research ? development to improve menu ? dining services. "his investment can potentially benefit consumer.
•
:rofit enables the firm to build up savings, which could help the company survive an economic downturn which is susceptible to ta&e over. 5f profit is low, shareholders may be disappointed in the low level of dividends and willing to sell to a ta&eover bid. ffe&ti+e Cost Control Mo'el
4ower 3penses; "he chief benefit of cost controls is that they lower the companyBs overall e3penses. %y limiting the amount of money employees can spend, the company places a cap on how much money can go out the door. "his allows the company to &eep more cash on hand, or to invest larger amounts of money in other ways, such as in capital e3penses or paying down debt. 4ess Abuse; 5n addition, by placing limits on how much money employees are allowed to spend, the company is ta&ing steps to limit potential abuse by employees. 5f an employee is given a strict limit as to how much he can spend on a particular e3pense, he may be less li&ely to spend money on unapproved activities, as he will not be able to meet his primary tas&s. %etter ecords; An ancillary benefit of cost control is that it facilitates accounting and helps financial planning by setting a limit on a companyBs costs. %y &nowing how much the company will be spending in a particular period, managers can better plan a
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budget. 5n addition, once the money has been spent, it will be easier for accountants and planners to determine how the money was spent. Customer fo&us
A customer*centric focus helps throughout the mar&eting process, which includes product research and development as well as promotional communication. A customer*centric focus typically leads the company to maintain a closer contact with core customers. /ocus groups and other research methods are used to maintain awareness of customer feedbac& on food, services and desires for improvements. "ailoring menu and services to fit the strongest desires of the target mar&et helps Calveta establish a more mar&etable product concept. !trong familiarity with the needs and desires of their customers helps them better promote Calveta brandBs value proposition. ffective research gives them a better understanding of what food ? service features and benefits are most valued, as well as which messaging strategies and techni'ues will have the intended effect. Customi+ed solutions that align well with a particular customerBs interests usually carry greater weight than more mass* mar&eted food or services with little direct appeal. Inno+ati+e
%y being innovative, Calveta generally employ a large number of creative and competent individuals who can not only introduce new menus, but also see it through to completion. Calveta often employ large numbers of people who oversee all stages of menu development and ensure the menuBs success in the mar&et through a process of conceptuali+ation, design and implementation that results in a finished menu that is highly desirable to consumers. Calveta also have the advantage of e3perience on their side. "hey typically get the process of menu development down to an e3act science 9
that can repeat over and over again. "heir ability to repeat this process with efficiency generally sets them apart from other companies that try to create new menu ? services for the first time. 7igh 8uality of Ser+i&e
-uality customer service is the &ey element re'uired for a successful business. 5n this customer driven mar&et, where competition is becoming stiffer day by day and critical deadlines are rife, one cannot thin& of business growth without e3ceptional customer service. -uality customer service can benefit Calveta’s business in countless ways and by observing the importance of customer service measures can be ta&en to provide consumers with a positive e3perience as they tend to discuss it in their social networ&, which leads to direct publicity and increased popularity of an organi+ation. Satisfie' Sharehol'ers !atisfactory response from consumers means increased
sales, which ultimately leads to increased satisfaction of shareholders. "hey tend to invest more in the organi+ation, which can dramatically improve the 5 of Calveta’s business. Su&&essful 9usiness Strategies ncouraging consumers for feedbac& and comments
is an integral part of 'uality customer service. /ollowing consumers’ feedbac& for analy+ing the strengths and wea&nesses is probably the best way to understand the e3pectations of consumers and adopt successful business strategies.
3.2 eaness asy entry into maret "he disadvantages;
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o !cope for economies of scale because of the high number of firms.
4ac& of supernormal profits may mean the investment of esearch and 7evelopment
8?79 is unli&ely.
@ith perfect &nowledge there is no incentive to develop new technology because of
the ability to share in reality it is more about theory rather than practical. "his creates e3treme spectrum of mar&et structure.
Internal Managerial Confli&t
Conflict within the organi+ation causes employees to become frustrated if they feel as if there’s no solution in sight, or if they feel that their opinions go unrecogni+ed by other employees. 5n this scenario there is contradicting opinion between the C, /ran& ? his sister Dennifer who is the C. Dennifer is convinced that preserving the company culture ? achieving such aggressive growth was conflicting ob
Decrease in Productivity: When the organiation s!ends "uch o# its ti"e dea$ing %ith con&ict' e"!$oyees ta(e ti"e a%ay #ro" #ocusing on the core goa$s they are tas(ed %ith achieving) *on&ict causes e"!$oyees to #ocus $ess on the !ro+ect at hand and "ore on gossi!ing a,out con&ict or venting a,out #rustrations) -s a resu$t' organiations can $ose "oney' donors and access to essentia$ resources) 11
."!$oyees /eave rganiation: rganiation e"!$oyees %ho are increasing$y #rustrated %ith the $eve$ o# con&ict %ithin *a$veta "ay decide to end their tenure) his is es!ecia$$y detri"enta$ %hen e"!$oyees are a !art o# the eecutive ,oard or heads o# co""ittees) nce e"!$oyees ,egin to $eave' the organiation has to recruit ne% e"!$oyees and a!!oint acting ,oard sta) ist ,et%een core co"!etencies gro%th strategy Core competencies of Calveta’s are based on =Antonio’s @ay> which is by offering highest 'uality food ? personali+ed service. Charges are made based on the budgets of the !4/ clients and the company. Calveta is constantly innovating and developing new service features in the menu. 5n addition, Calveta is very concern on developing every employee to hisE her potential. As whole, Calveta’s aspiration is to profitably grow and generate funds for future growth. %asically, it’s important for Calveta to &eep high standards with ongoing innovation strategy with no debt policy, with internal promotion ? staff training and employee satisfaction survey. )owever, the company struggles to find growth strategies which fit core competencies well because it is pigeon holed, lac&s of infrastructure and cash management process is contrary to growth goals. Calveta competency is focused on employee development thus hindering ac'uisition. ot only that, competitors usually use contradicting business structure ma&ing the process more difficult. 5nternal hiring managers are also regularly re*assigned. 7ue to e3pansion, core values suffer and threats from competitors are also inevitable besides the fact that there is a need for low cost services in the economic climate.
*&ess Turno+er
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3cessive turnover decreases the overall efficiency of the company and comes with a high price tag. ach employee who resigns costs the company money. All of the money invested into that employee through training, education and licensing wal&s out the door with the employee. @hen they hire a replacement, the company spends money on those same areas to prepare the new hire for the position. Calveta also pays to advertise the vacancy and may incur costs for drug testing, physicals and moving e3penses. "he company could pay 1E of the yearly salary of the new employee in costs.
)igh turnover rates cost the company time in addition to money. Fanagers or human resources staff spends time conducting e3it interviews, advertising the
Productivity: he overa$$ !roductivity o# the %or(!$ace tends to decrease %ith high turnover) ince a ne% e"!$oyee has a !eriod o# ad+ust"ent' heshe %ont co"!$ete tas(s as uic($y as the !erson re!$aced) ;rou! !ro+ects that re$y on the ne% tea" "e",er "ay s$o% do%n' %hich aects e!erienced e"!$oyees !roductivity $eve$s) he $oss o# "o"entu" %hen an e"!$oyee resigns "ay a$so aect "ora$e) /itt$e ris( to$erance 13
genera$$y $o%er to$erance $eve$s? to va$ue creation >genera$$y higher to$erance $eve$s?) o$erances are a$so high$y de!endent on ho% %e$$ ca!ita$ied or nanced the organiation is) @t "ay ,e "ore averse to "ar(et &uctuations and great$y in&uenced ,y $ega$ and regu$atory reuire"ents) !erating %ithin ris( to$erances !rovides the "anage"ent greater assurance that the co"!any re"ains %ithin its ris( a!!etite' %hich' in turn' !rovides a higher degree o# co"#ort that' the co"!any %i$$ achieve its o,+ectives)
"he ma
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employees. 5f the company does not communicate properly, discourse is lost and the strategic lines become unclear. 5f there isn’t good communication among employees, each will understand things in their own way and the lac& of a common discourse will confuse the employees. 5f the employees feel that they are not informed about what is happening and that their opinions and ideas don’t matter, they will lose interest and passion for what they do and this will ma&e them less productive.
3.3 !pportunity 7ospital Maret "he sustainability movement has hit health care, as hospitals are ma&ing great
progress toward establishing healthier, more sustainable foodservice for patients and their families. Fany of these green efforts are influenced, at least in part, by the )ealthier )ospitals 5nitiative 8))59, a national campaign to improve environmental health and sustainability in the health care sector. )ealthier food is one of si3 challenges that form the basis of the ))5’s campaign, providing resources, insight, and support any hospital or health system can adapt to develop sustainable foodservice programs. Cleaning !ervices for )ospitals and !4/s can be potentially run as an outside subsidiary. *pansion into other regions :e, Customers A primary benefit of business e3pansion is the ability to attract and
retain new customers. @hen Calveta adds new menus to their portfolio or move into new mar&ets, they can bring in previously untapped customer mar&ets. eaching out to these new customers with e3pansion is one thing, but capturing them for long*term relationship building is primary. 6rowing a loyal customer base is the best way to achieve stable and growing profits over time. &onomies of S&ale 5f Calveta e3pands their business they will spread the ris&s of doing business and reduce the potential of one menu or one poor decision damaging their business. perating in multiple mar&ets or in many areas also allows them to 15
spread the costs of doing business across more mar&ets or customers. "his ma&es the costs of doing business less on a per*customer basis, which improves the potential to profit by adding new customers. Capital %euirements A drawbac& of business e3pansion is that when the company invests money and other resources to e3pand, it has less capital available for other business transactions. "his ma&es it especially important that they carefully weigh the mar&et potential of e3pansion before ma&ing the investment. Consider the potential return on investment from each new mar&et they could e3pand into before investing their capital into a path of e3pansion. Sprea' Too Thin "nother ris& of business e3pansion is that they could spread the companyBs resources and e3pertise too thin. ften, getting involved in too many mar&ets or products can cause the company to spread its abilities out to the point that it does not perform well in any area. %usiness e3pansion only ma&es sense if the company has ade'uate people and resources to cover the new area with e3pertise. Far&et e3pansion can also occur when they identify new groups of target customers in their current region. "o begin identifying these potential mar&ets, the company should identify who is currently buying the service. @hen loo&ing to e3pand into different mar&ets by generating new customers, it is important to thoroughly thin& about what adding new benefits or features would mean to the company. !ame*day service seems li&e a great idea on the surface, but providing that service may be much more difficult than it sounds. "he company must logistically provide a same*day service. "ging population Aging population of the %aby %oomers is increasing and by 200 e3pected to be (0 million which e'uates to 20 G of the ! population. Capacity rates of !4/s are up to H(.#G. "his shows an increasing trend. )ence demand for dining services will increase as well. According to Fedicare ? Fedicaid !ervices, there were roughly 1H,000 nursing homes in ! in 200H.%y percentage, G of the facilities are operated 16
for profit2(G ,as for non* profit( G were government owned and ut of these facilities, G were run by large chains. "hese !4/ facilities clearly provide a vast mar&et for Calveta to ac'uire dining service business. %e&ent health tren's an' &on&erns !ocially conscious consumers use their purchasing power to try and improve the
world around them. "heir decisions are based on whether a productBs positioning on issues, such as the environment or method of production, aligns with their values, perceptions or &nowledge. "hey can act on their consciences in positive or negative ways, either buying a product that meets their beliefs or boycotting a product or company that doesnBt meet their standards. Any @hile this demonstrates a definite change in attitude, actual buying patterns in the mar&etplace indicate that the percentage of consumers acting on their beliefs is smaller than what is reported, generally &eeping socially conscious products in niche categories. 6iven the traction already gained in the mar&etplace, socially conscious consumption will li&ely become more main stream over time. A number of integrated factors will drive this trend forward; a growing volume of national and international legislation regarding environmental and social standards more companies enacting corporate social responsibility policies as a way to differentiate themselves and their products greater public awareness of how purchase behavior lin&s to social issues and the growing need for consumers to e3press their personal values through their buying patterns. 5t is important to understand consumer behavior in a potential mar&et to ta&e advantage of any opportunities based in this trend. Calveta which is interested in being competitive in this mar&et need to build trust with their customers by providing reliable and relatable information about the health, social, and environmental benefits of their products and services that can be verified by an independent source. 4abeling will continue to be the most apparent e3planation of why a productBs production
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systems, footprint, pac&aging techni'ues, or ingredients are more socially responsible than those of the competition. )owever, a variety of other mar&eting techni'ues, particularly social media, will have to be used to promote both the product attributes and the companyBs approach to corporate social responsibility to successfully attract consumers interested in ma&ing purchases from this perspective. 3.# Threat :e, ntrants
@hen new companies enter the mar&et, the variables that influence the performance of the business will change and Calveta has to react to maintain their position. As the mar&et changes, they have to ta&e into account the strengths of the new entrant when forming a strategy to &eep their customers. "ypical barriers for a mar&et entry are high capital costs to establish facilities, customer loyalty resulting from special product features, or economies of scale if e3isting competitors are large operations. 5f the Calveta invests heavily to compete, they have to e3amine whether they have e3tensive capital resources or whether the investment has stretched their capacity. 5f the competitors introduce a product similar to Calveta, they have to react. 5f they are smaller than Calveta, they will not have the same economies of scale and will not be able to compete on price. @hen a new buyer enters a mar&et, suppliers often can raise prices because of higher demand. "he new entrant needs the same materials and components Calveta does to offer the same &inds of products in the mar&et. 5f they can loc& in the supplier costs with long*term contracts while the suppliers charge the new entrant higher prices, they can maintain their pricing structure and compete on 'uality and uni'ue features. 5f the suppliers raise prices, they can reduce inventory and see& substitutes for the most e3pensive items. "he entry of a new competitor in a mar&et tends to reduce the mar&et prices. @hen there are more companies competing
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for the same mar&et share, customers choose those with lower pricing, and the general price level goes down. 5f there is an inherent cost advantages because of factors such as location, menu design or low labor costs, Calveta can compete on price. 5f no competitor has inherent cost advantages, they can compete on price if the financial resources are higher than those of some competitors. Possible taeo+ers Cons;
6oodwill, often paid in e3cess for the ac'uisition
Culture clashes within the two companies causes employees to be less*efficient or
despondent
educed competition and choice for consumers in oligopoly mar&ets 8%ad for
consumers, although this is good for the companies involved in the ta&eover9
4i&elihood of
Cultural integrationEconflict with new management
)idden liabilities of target entity
"he monetary cost to the company
4ac& of motivation for employees in the company being bought.
"a&eovers also tend to substitute debt for e'uity. 5n a sense, any government ta3 policy of allowing for deduction of interest e3penses but not of dividends has
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essentially provided a substantial subsidy to ta&eovers. 5t can punish more* conservative or prudent management that do not allow their companies to leverage themselves into a high*ris& position. )igh leverage will lead to high profits if circumstances go well, but can lead to catastrophic failure if circumstances do not go favorably. "his can create substantial negative e3ternalities for employees, suppliers and other sta&eholders. %usiness ta&eover can have a positive or negative impact on the labor force. A ta&eover that is friendly and planned has the potential to benefit the e3isting wor&force, while one that is initiated by creditors and is une3pected can have a detrimental effect.
Strong Competition
Competition, according to the theory, causes companies to develop new products, services and technologies, which would give consumers greater selection and better products. "he greater selection typically causes lower prices for the products, compared to what the price would be if there was no competition 8monopoly9 or little competition 8oligopoly9.
)owever, competition may also lead to wasted 8duplicated9 effort and to increased costs 8and prices9 in some circumstances. /or e3ample, the intense competition for new menu development ? to offer uni'ue ? e3ceptional dining services may inspire Calveta to ma&e substantial investments for enhancement which some might not be recouped, because only a fraction of the effort might become successful.
"he negative effects on the business are the following;
Customers; 5n any mar&et there are a limited number of customers that businesses are competing for, so the more businesses there are the lesser the mar&et share. 20
esources; Also limited in supply, resources li&e s&illed employees, raw materials and other resources that might be needed will become more e3pensive when there is more competition. Calveta will have to compete to ac'uire those limited resources ma&ing the resources more and more e3pensive.
"here are many struggles that Calveta will face due to competition within business, and it has negative effects. Competition can drastically harm Calveta through various labour costs, production, and price factors. "hey have to face more and more businesses and mar&ets and have to worry about trying to beat out their competition. Conse'uentially, this also affects Calveta’s revenue stream. @ith all the competition springing up, Calveta has to, at times lower their prices
%ising employment ; ingre'ients &ost
@hen the government imposes a higher minimum wage, employers face higher labor costs and are forced to respond by decreasing other e3penses. As these employers cope with the increased costs of a mandated wage raise, they often respond by cutting the
5ncreased ingredient prices will directly force Calveta to increase the food prices which were eventually result in dissatisfaction among its customers. )ence, they might resource for services from other dining services that suit their budget. ven though Calveta doesn’t resort to increase the food price, the company might need to compromise on the 'uality or the 'uantity of the ingredients in the menu. onetheless, this might also lead to customer being unhappy and frustrated with Calveta’s food ? services. ising commodity costs are threatening to destroy CalvetaIs opinion that they were climbing out of the nation’s economic woes.
&onomi& 'o,nturn- re&ession
An economic decline in the nited !tates is pretty much guaranteed to reduce the income of the business sector. 4ower growth leads to lower profits, therefore dividends decline and shares become less attractive. 5f the ! enters into recession, firms will e3perience a decline in profitability. "his is because there is a tendency for price wars to develop in a recession. 4ow sales encourage firms to cut prices and falling sales will lead to lower revenues.As sales revenues and profits decline, the employers will cut bac& on hiring new employees, or free+e hiring entirely. 3penditures for mar&eting and advertising may also be reduced. "hese cost*cutting efforts will impact Calveta’s business which provides goods and services .@hen the companyBs stoc& falls and the dividends decline or stop, institutional investors who hold that stoc& may sell and reinvest the proceeds into better*performing stoc&s. "his will further depress the companyBs stoc& price. "he customers of the company that owe it money may pay slowly, late, partially or not at all. "hen, with reduced revenues, Calveta will pay its own bills more slowly, late, or in smaller increments than the original credit agreement re'uired. 4ate or delin'uent payments will reduce
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the valuation of the corporationBs debt, bonds and ability to obtain financing. "he companyBs ability to service its debt 8pay interest on the money it has borrowed9 may also be impaired, eventuating in defaults on bonds and other debt, further damaging the firmBs credit rating and preventing further borrowing. 7ebt will have to be restructured andEor refinanced, meaning new terms will have to be agreed upon by creditors. 5f the companyBs debts cannot be serviced and cannot be repaid as agreed upon in the lending contract, then ban&ruptcy may ensue. "he company will then be protected from its creditors as it undergoes reorgani+ation, or it may go out of business completely.
"he business may cut employees, and more wor& will have to be done by fewer people. :roductivity per employee may increase, but morale may suffer as hours become longer, wor& becomes harder, wage increases are stopped and fear of further layoffs persists. As the recession increases in severity and length, management and labour may meet and agree to mutual concessions, both to save the company and to save
#.0 Solutions
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5t is understood that /ran& is liable to choose any one of the mentioned strategies, so that Calveta is able to double its revenue by the end of the year 2011. very strategy has got its own pro and cons from which a decision had to be made. As all the options have been analysed, it can be derived that the third alternative is comparatively worth enough to be used rather than the others. ven though it has to bear huge ris&s, it seemed to be having a great customer potential if it could retain its customer accounts. "he problems in ta&ing up the other strategies are cleared out below;
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5f the company continues in the e3isting status, it would not earn much of revenue as such which therefore would ma&e it unable to cover the desired target of doubling the revenue, even though it had less ris&, no additional cost, reputation
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and 'uality of service. As they have had a previous e3perience of spreading their company into the educational segment which turned out to be a failure, it would be better not to
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e3pand them into the hospital segment. 5t also includes huge ris&s. @hen 6!7 is ta&en into consideration, it produced annual revenue of $1. billion and has a growth in revenue. !ince it was barely profitable, indirect e3penses and administrative e3penses were high in 6!7. n using the cost*control system of Calveta, they could increase their net profit. "he calculations are given below as
follows; Current atio J Current AssetsECurrent 4iabilities J 0.##;1 :rofit Fargin atio J et 5ncome !ales J $ million E $2021 million K 100 J .22G 7ebt 'uity atio J "otal liabilities E "otal !hareholders’ 'uity J $2(2 million E $1H1 million J 1.0;1 5t is evident from the above that the company’s ability to meet short term liabilities is low as the re'uired ratio for the current ratio is 2;1. "he company’s debt is more than e'uity as the supposed ratio to be is 1;1. 5t’s better to increase the share capital than going for ban& loan as the shareholders e'uity in the organi+ation is low.
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/rom the case analysed, the third option is chosen wherein Calveta has to ac'uire 6eneral !outhwest 7ining !ervices 86!79 as; 6!7 does not generate revenue in a smooth or good manner for which they need
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Calveta to
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reputation of the company as a whole. 5t is also better to increase the share capital than going for a ban& loan, because
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the company’s financial position is bad. "he employees of 6!7 have to be provided with training and they also have to recruit few into the company and restructure the organi+ation by shifting
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managers from Calveta to 6!7. A new organi+ational structure has to be made that accommodate significant growth while preserving the company’s core values. 5t has to consider in dividing the sales and operations functions completely, creating additional regions and
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districts, and eliminating management levels. Analysis "he nited !tates Census %ureau’s survey showed that only 2G of the total !4/’s in !A had contracted to food services, this survey alone shows that there is a great potential for growth in the !4/’s segment and therefore it would have been meaningful for /ran& to buy 6reat !outh @est 7ining but the eye popping debt figures that came before him alone are sufficient to say that it would not be a feasible solution and it would be much better decision for /ran& to diversify Calveta 7ining !ervices by e3tending to other segments, li&e providing food services to the hospitals. /ew reasons why /ran& should e3tend to other segments
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are. 1. /ran& considered moving into the ducation !ector, and
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preparations to ma&e potential clients believe that Calveta 7ining can also cater to
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the needs of a young generation. 2. "he financial challenges of getting into the hospital segment were there but it
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was always achievable. . "he greatest positive to Calveta 7ining !ervices was the wor&ing culture by
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which they could prosper in any segment. 5nterpretation "he interpretation that can be derived from the above analysis is that it would be better for /ran& to thin& about diversifying the business rather than ac'uiring 6!7. ven /ran& &new that it was a huge ris& to ac'uire 6!7 considering the heavy debt the business would be in after the ac'uisition, besides Calveta 7ining would find it difficult to train 6!7 employees to the wor& culture of Calveta 7ining. /ran& should not ma&e this decision only with the purpose of meeting his father’s goal because this may harm the firm in the long run. /ran& had his own problems organi+ational restructuring to do for Calveta 7ining and in such a circumstance if /ran& ac'uired 6!7 then his problem would grow from bad to worse because it would not be an easy tas& to change the entire wor& culture of 6!7 within a short span of time, and apart from the debts of ac'uiring 6!7 /ran& would also need to generate funds for the training of the staff teaching them Antonio’s way. "he reason for a few customer dissatisfaction was in the promotion from within concept of Calveta 7ining !ervice, Calveta dining promoted their front line employees to higher ran&s if they showed outstanding wor& s&ills and dedication which was motivating the employees, but it also meant that they would be rotated from one place to another which displeased few of the !4/ residents, this could be easily resolved by hi&ing the salaries of outstanding employees and still &eep them motivated rather than promoting
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also a minor restructuring of Calveta 7ining’s organi+ational structure with
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dedicated management representatives and area managers for a client. !ynthesis 5f /ran& were to come up with new strategies for growth only with the intention of meeting his father’s goal, then in the long run it would harm the business. Considering the dedicated staff and employees of Calveta 7ining, it would be
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better for /ran& and the business to diversify rather than ac'uiring 6!7 Conclusion /ran& should consider the reviews given by his sister and not ma&e decisions clouded by his ego and
"nalyses of /S 'eal spe&ifi&ally &ultural &on&erns 1. "he si+e of the company would almost double 8(G of the current revenue from
$2 %illion to $. %illion9. @ith this si+e company, the current organi+ational structure would be untenable 8assuming 6!7 has a similar structure9. 2. Company culture has already deteriorated; Calveta has grown so big that their training program does not instil the basic goals 8=Antonio’s @ay>9 in the new trainees effectively. "o highlight this, =over the years, Calveta’s :resident and C met with every new employee. %y 200#, with 1,000 management trainees 3. /ran& already had a growing concern regarding the =diversity of s&ills of area and account managers. ecent college and business school graduates who entered the business lac&ed the industry e3perience of counterparts who had wor&ed their way up through the ran&s.> #. Dennifer also ac&nowledged it was becoming harder to find operations managers who fully embraced =Antonio’s @ay.> 5. 6!7 does not have great reputation and has had issues with labour and management turnover. 27
(. Career growth opportunities alienate customers. ). @ithin Calveta there seems to be a power struggle between /ran& and )is sister
Dennifer.
5.0 %e&ommen'ations 1. Combine !6?A and eliminate redundant positions. "his would include combining
supply chain, customer service, accounting and 5". All !6?A savings would be diverted to cultural training in Calveta’s basic goals 8see step L9. 2. )and over day*to*day operations of Calveta to Dennifer and have /ran& ta&e care of the 6!7 operations.
5ntegrate and significantly reduce current combined
organi+ational structure by addressing 6!7s high management turnover with an influ3 of Calveta middle and senior leadership. 3. se 6!7 as a growth platform for internal Calveta promotions. "his will be a good way to spread Calveta culture into 6!7’s operational environment. %ring over 'ualified staff from Calveta into 6!7 operations as temporary 8short term9 assignments to help spread the Calveta culture from within. !elected 6!7 staff is li&ewise sent and trained in a Calveta operation, with the plan being that they eventually return to 6!7. #. Create the concept of =Calveta niversity> to help train and integrate 6!7 employees and help prevent the erosion to Calveta’s culture.
"his would include a robust
program centred on continuous improvement training such as a curriculum of; new hire 8 days9, #0*day orientation 81 day9, and annual =retreats> 81 day9. "his can also be used to train new hires for 6!7 and Calveta as well as future growth. 5nstil the need for a 7ivision :resident or above to meet the trainees as a way to replace the C greeting of new employees, which is no longer feasible to maintain.
(.0 Con&lusion
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estructure the organi+ational structure in order to improve internal communication. :ursue differentiation focus strategy. %uild sustainable competitive advantage by focusing on core values. /ran& is trying to do what is best for his father and not his business. 5t is for this reason that Calveta should stay within their niche and continue to do what has made them successful to date as (G of the mar&et is still un* contracted.
).0 %eferen&es •
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:hilip Motler et al, Far&eting management, An Asian :erspective, th edition. Resources for your business-Putting the focus on your customer (2010)etrieve
from;www.mar&etingdonut.co.u& •
Employee Development(2012) etrieve from;www.shrm.org
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Employee Development(2012) etrieve from;www.shrm.org
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/our re'uirements for ffective Cost Control. etrieved from www.wor&.chron.com
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Business-ompetition-!he-"oo#-$n#-B$#-Effects-for-Businesses-%$rge-$n#-&m$ll (2012) etrieve from; http'.businessinsi#er.comi*e$s-reput$tion-h$s-t$*en-$be$ting-201+-+.
•
onsumers
$n#
,oo#
Price
nfl$tion-,D(201+)
etrieve
from;
https;EEwww.fas.orgEsgpEcrsEmiscEL0L.pdf •
ising /ood :rices; Causes and Conse'uences*C7 820129. etrieve from; http;EEwww.oecd.orgEtradeEagricultural*tradeEL0HL(0HH.pdf
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