Good Case Study About Technological Forces
Based upon the articles provided, describe which four (4) external forces may have impacted Island Abbey Foods the most in the last several years. Discuss in detail the nature of each force separately, with examples.
Island Abbey foods has been at the forefront in technological innovations in order to improve their honey products for their vast number of customer base. Their extensive innovation was driven by the founders experience during their mountain excavation in western Canada. John Rowes (The Honibe® Story, 2014). Rowes has been researching on the honey making concept since 1990s- a technique that siphons moisture from pure honey and retains its natural sweetness. Consequently, the technological initiative has earned rewards as well as helping the company sustain its competitive advantage against market rivals. According to Michael Porters, investment in technology is a significant factor in overcoming a company’s threat from substitutes by increasing the consumers’ switching costs. Moreover, technological forces in any market are characterized by economic expert as a healthy ingredient in an industry’s product and service improvement to the consumers.
Successful firms engage their employees in comprehensive research and development in order to enhance cost-effective production, product differentiation and overall downward price assessment for the benefit of consumers. For Instance Rowes and Susan hired a panel of scientist from PIE Food Technology Center situated as the University of Prince Edward Island (UPEI). In subsequent company’s financial results, the management announced a significant increase in revenue; an indication that the Honibe products had extended its market penetration segment in terms of customers. In addition, the management established a state-of the art laboratory where employees would undertake research on existing products with a core goal of improving customer satisfaction.
In any industry, the market is monopolistic where all firms and consumers have access to the market information. Firms utilize the available scarce resources and employ cost-effective capital and labor techniques in their operations. On the other hand, consumers are rational in their choices and their tastes and preferences are subject to change without warning. They would prefer a variety of substitutes for all the products and services. Therefore, unless the market and monopolized through government forces, it is unlikely for a market to attain firm entry saturation. Entry and thrive of new entrants will be determined by the unique nature of production and service delivery. Threat from new and existing firms drives the firm’s agenda towards innovation and efficiency. Island Abby Foods management has been facing competition from the other honey processing firms.
Intense competitive rivalry in honey processing and production industry is aggravating gradually especially due to the imminent extinction of honey bees and queen needed for producing raw honey. Consequently, Rowe and his management had shift from the norm of processing and packaging honey similar to their competitors. Competitive forces will continue to rise in the coming years as other firms imitate their dry-honey packaging technology. Market experts point out that competition is any company’s threat and could be overwhelmed through product differentiation and affordable pricing. For instance, the Honibe product is produced and sold in different brands such as honey drop with lemon, Honey drop-Honey to go for serving with coffee and tea, Honey sprinklers and many other branded products to suit the varying consumers’ tastes and preferences. The differentiation plan has helped the company to subside the competition forces from other notable companies such as pharmaceutical companies that have expressed interest in the company’s innovation. This is because honey is medically advocated as an alternative indigenous medicine and therefore the Honibe innovation could increase their sale revenue.
The social culture and the unpredictable consumer behavior form the key social aspects that influence a firm’s performance in the market. Consumer behavior theorists describe individual and corporate customers as rational beings who strive to satisfy their utility in terms of quality products, service delivery and affordable prices. Island abbey operation strategy values their customers-retailers and wholesalers by ensuring prompt availability of honey products to enhance consumer satisfaction. Branding Honibe in different categories is a key strategy to the company’s market penetration. As microeconomic experts would note, innovation in production cannot sustain a firm’s market performance but rather, the concept should be supplemented through aggressive marketing of new and existing products to bridge information asymmetry between the firm and the consumers.
Island Abbey Foods has allocated a huge percentage of its annual revenue towards direct and virtual marketing of its products in Canada and other countries. For instance, the marketing team is equipped with education skills on the preference of honey-based products over sugar-based products. The marketing strategy has responded well in favor of Island Abbey Foods across all the market segments including Canada, Ontario, British Columbia, Quebec and others. Therefore, the management has been able to accommodate the consumers’ needs and the social cultural diversity across the market coverage.
Environmental forces/natural forces
Businesses are not immune to environmental influences that contribute both positive and negative to the firms operations and output. Firms therefore invest resources in the corporate social responsibility to ensure that they engage in their daily activities in an environmentally-safe area. Island Abbey Foods company is appreciates the surrounding environment through participation in communal activities and consumer awareness forums. In the recent past, the European union has raised an alarm over the escalating decline of honey and queen bees in New Brunswick and across Canada. According to Paul Vautor; Maritime Beekeepers association noted with grave concern that the unpredictable weather had adversely affected decline in honey produced. The prolonged winter season result in bees consuming their produced honey. Another environmental factor affecting honey processing is the pollution by pesticide The European Union noted that neonicotinoides containing pesticide were environmentally unhealthy for bees and Canada ought to impose a 2-year ban on the products (Another bad year for New Brunswick honey bees, par.14-17). The dry Honibe innovation by Rowes shielded the company partially from inputs deficiency since the processed honey could last for a longer period without losing its taste and nutrients. However, the management should be alert of such imminent environmental hazards that could derail its revenue targets and customer satisfaction.
Question 2 (20 marks):
Explain and discuss which one management philosophy would likely be most suited to the company, Island Abbey Foods: The Classical School of Management or the Behavioral School of management.
Management is a core feature in influencing positive outcome in any organizations. Effective management entails planning organizing firm activities, impartial staffing and coordinating all the firms’ operations categories towards a common goal of cost-effectiveness and profitability. Management theorists emphasized on equipping the workers with required capital and labor resources in order to improve productivity. However, other contributing theorists realized that workers too needed social motivation- a factor that augured well with the company’s output as witnessed in sampled organization. Island Abbey Foods Company has a high esteem for its workers who they believe are the key drivers to realizing its innovative success, product quality and customer satisfaction. Moreover, the company operates under a strict policy framework that involves work delegation, professional workers, and ethical code of conduct, participatory decision-making and efficient operations.
Therefore, it would be rationally logical to categorize Abbey’s management philosophy as a Classical school of management theory. The classical theorists believed that endowment of capital resources and centralized decision making were essential factors in firms effective management. Fredrick Taylor noted as the father of scientific management argued that productivity should be efficient and cost-effective and therefore developed a concept of reducing workforce and supplementing the remaining workers’ extra effort worth incentives. He further highlighted on the use of modern equipment to facilitate effectiveness and minimize idle machine cost. Fredrick Taylor’ deductions are manifested in island Abbey Foods company through the company’s adoption of an integrated supply chain system that coordinates distributors, wholesalers, retailers and producers with intent to enable optimal production and profitability. Through the initiative, the company recorded an average of $25million in revenue upon innovating honey candies, honibe and other lines of dry-honey products (Casey, par.2). Frank and Lillian Gilberth added their deductions to the theory by insisting that a firm should uphold the responsibility to train and allocate jobs to workers based on their competence. Additionally, team –work between workers and managers should be a key driving factor in performance improvement. Since its establishment, Island Abbeys has always encouraged involvement of workers in decision making, which is a core force that has influenced innovation of honey products such as Honibe and other differentiated products. In rhyming with the theory’s proposition, the management has extended the success of participatory decision making its customers where honesty and open forums are encouraged with the retailers and wholesalers in very product launch as a complementary strategy to grasp consumer’s concerns and reaction to the products.
Max weber and Henry Fayol proposed the essence of a defined hierarchy and a unity of command in managing an organization and facilitate coordination. The Island Abbey management operates on well-coordinated departments that operate in their respective mandates towards a common set objective. Rowes notes that despite the ranking of operational departments, the management acts as a ‘’ flat hierarchy” where all innovations originates from all firms stakeholders. The strategy has been attributed to the positive innovation trend that has inflated the consumers switching cost to the rivals’ products.
In a complementary proposition, Mary Parker Follet laid emphasis on equal employee platform to express their innovation and managerial decisions for consideration in the final deduction. Island Abbey’s success could be attributed to the implementation of classical management theorists by fostering transformative leadership towards innovation and customer satisfaction. Engagement with scientific laboratories and other nutritionist is a true manifestation of the company’s open-minded mode of leadership that has strengthened Ltd competitive advantage and customer loyalty in the market.
Question 3 (20 marks):
Explain which organizational structure would likely work best for Island Abbey Foods. Consider the characteristics of the following as part of your analysis:
Management theorists argue that an organizational structure should be impartial and should accommodate every stakeholder through the process of structuring and allocation of resources and delegation of responsibilities based on workers’ of competencies. Island Abbey Company under the leadership of Rowes and Susan has been critical in employing competent staff and fostering subjective decision mode of communication among all related stakeholders in the company. As a result, the company boasts of an aggressive innovation trend through team work and allocation of advanced capital resources.
Traditional bureaucracy versus modern organizations
Max weber, in his contribution to the classical school of management theory, emphasized on introduction of bureaucracy in managing any organization. This traditional management practice entailed a centralized unit of command immune from objection by other stakeholders below the senior rank. Most organizations have been implementing the managerial approach that has curtailed the innovation pace and encouraged corruption. However, the rise of modern bureaucracy has established a platform for equal participation in leadership and formulation of policies. Island Abbey company utilizes a modern bureaucratic mode of leadership in its operation where the departmental unit managers are only limited to overseeing the operations and not imposing impartial rules. As a result, the company’s policy on integrated relationship between employees and external stakeholders has led to remarkable increase in Honibe sale revenue as well as wide market penetration. The current post –bureaucratic leadership draws its force through emotional intelligence where senior management values junior employees’ sentiments and operational ideas.
Work specialization: functional versus social
Work specialization is integral in advancing productivity, efficiency and profitability of any organization. Every firm performs its daily production in a cost effective manner so as to attain profitability and under low production cost. One of the key contributing factors of productivity and efficiency is work specialization where employees are assigned duties based on the skills and experience in specific field. Specialization encourages quality production and minimizes uneven quantities of output among various employees’ inputs. Functional specialization is the most managerial concept applied in most companies across the globe.
A firm is structure into different departments where employees are fixed based on their competence. Island Abby Company has developed various departments such as supply chain logistics, operations and laboratory research as well as finance departments. Besides conducting interview and research from the applicants, the company also refers to the Canadian Trade commission services for consultation and staffing support. On the other hand social work specialization is minimal in the company since professionalism and little bureaucracy is endorsed in the company’s operation framework. Functional work delegation has facilitated engagement with other stakeholders such as pharmaceutical companies and government agencies to spearhead research and development. Moreover, specialization minimizes capital and labor force idling thus accelerating prompt availability of honey products at the request of consumers.
Mechanistic versus organic
In mechanistic organizational structure, centralization and specialization are the core practices utilized by an organization. A systematic procedure is formulated by the executive with minimal involvement of junior employees in policy formulation. Under this kind of organization structure, the management and the employees are different entities and the latter must oblige to the former’s instructions. One of the advantage of this approach is that decision making is swift, however, biased polices may prevail due to principal agent problem between the management and junior employees. On the other hand organic organization structure rides on a flat hierarchy where decision making involves consultative approach among all pertinent stakeholders. Additionally, flexibility and job decentralization is highly practiced thus creating a platform for innovation and fairness in working policy formulation.
Island Abbey Foods Company operates on an organic form of structure where employees have an opportunity to inject their competence in developing Honibe products. The essence of organic managerial structure is its focus on transformational leadership that capitalizes on equitable allocation of capital and labor resources to the production process to realize profitability. Organizational structure is the basis of Island Abbey Foods Company to encourage co-branding with notable companies such as Comvita to accelerate market penetration and expand customer base.
Question 4 (20 marks)
Discuss what type of business-level strategy is Island Abbey Foods likely using in its business? Why does this business-level strategy make sense given the nature of its Honibe-brand products?
Business-level strategy is a collection of integrated approaches that a firm applies in its strive to withstand competition from rival companies and retain competitive advantage. Successful firms engage their stakeholders in brainstorming sessions where feasible policies are devised with intent to compile a comprehensive strategic framework. Economic experts argue that consumers’ rationality is the base factor for a firm’s business strategy aimed at improving productivity and enhancing efficiency. Different companies apply various business-level strategies that include cost leadership, focused cost leadership product differentiation strategy and integrated overall/ product differentiation strategy. Island Abbey company innovation strategy has cemented its competitive force against rivals and lured customers loyalty in its product and services. In addition, the company understands the unpredictability behavior of consumer’s tastes and preference.
The company’s management philosophy focuses on customer satisfaction, quality production and increasing customer base. For instance, indigenous packaged honey contained moisture, additives such as sucrose as well as preservative to increase its durability and add flavors. On the other Hand, Rowes and Susan invested in research to invent a dry-free honey product whose perishability rate was very low compared to rivals’ products. This differentiation strategy spurred the company’s revenue and customer base in Canada and across over twenty countries in the world. Moreover, their products are manufactured using high-efficient capital equipment leading to a lower market price.
Therefore, the company’s business strategy is the Integrated overall cost leadership/ differentiation strategy that produces products using modern capital equipment and skilled employees with an objective to attain product uniqueness and customer satisfaction. Affordability in pricing is another result for innovation advanced by the honey producing company. The management has been operating on a flat hierarchy platform where innovation has been the norm across all departments.
The management established a laboratory for research where employees participate in advancing the positive impact of Honibe products (A Honey of an idea!, par.9). Additionally, its association with PEI Food Technology center to enhance product research. The result of the initiative is the variety production of Honibe products such as Honibe lemons, Vitamin honey Lozenges, Honey delight suckers and many other varieties. Further, the marketing management has collaborated with Orion and Sato pharmaceuticals whose market domination is notable in Europe and Asian continents. The Co-branding strategy with the companies has expanded the products market segment and increased customers loyalty and confidence on the honey products. Consequently, Island Honibe products differentiation technique shields the company from competitive pressure and imminent threat from existing and potential market players.
Integrated cost leadership and product differentiation strategy contributes to the management’s performance assessment through production and shipping procedures. For instance, the company entered into a contractual engagement with Comvita- a global company that facilitates shipping of honey products to consumers in more than twenty products that feature Honibe products. The core essence of the business strategy is due to the varying cultural differences among customers in different market segments. The differentiation strategy helps the company understand new market segments’ cultural diversity and develop products suited to their taste. Uniqueness of the products and its differentiation strategy is the capitalization factor for the management to juggle with the market price based on the nature of consumers such as social status and the market availability of similar products. For instance, honibe Lozenge product will feature in the Canadian Snacks for space contestants, an indication that the differentiation strategy had captured market value (CBC News, par.3). Therefore, the integrated business strategy is the best approach to any company that strives to attain both consumer satisfaction and market penetration and profitability.
"A Honey of an idea!" Atlantic Canada Opportunities Agency (2012): n. pag. Web. <http://www.acoa-apeca.gc.ca/eng/Pages/IslandAbbey.aspx>.
"Another bad year for New Brunswick honey bees." CBC News (2013): n. pag. Web. <http://www.cbc.ca/news/canada/new-brunswick/another-bad-year-for-new-brunswick-honey-bees-1.1302684>.
"CBC News." P.E.I. honey product blasting into space (2012): n. pag. Web. <http://www.cbc.ca/news/canada/prince-edward-island/p-e-i-honey-product-blasting-into-space-1.1264673>.
"The honibe® Story." N.p., Jan. 2014. Web. <http://honibe.com/our-story/>.
Casey, Q. "Island Abbey Foods used a “best in the world” new-product win and Dragons’ Den notoriety to turn its 700% growth rate into a platform for going it alone."Progress Magazine 19.06 (2008): n. pag. Web.