Sample Report On Strategy Case Analysis
Problem/issue in the case
Calveta dining services, Inc is a food company that offers food-related services to many senior living facilities in US. When Frank Calveta took over as the president and CEO of Antonio Calveta from his father in 2007, he was instructed to ensure the revenue of the company double within the next five years. However, this was not easy for Frank Calveta for many reasons. In the recent past, the company has seen increased number of cases of customers who are terminating their contract with it citing regular changes in the company’s account managers who had been assigned to their facilities (Heskett & Girardi, 2011). Although the CEO thought that the vice president for account management had been handling such cases effectively in the past, the number of complains from the customers were increasing daily compelling him to look for an urgent solution. Within a period of ten years, one client complained that the company had seven different account managers for his facility. During the change of one manager to another, the client experienced low quality services, employees were under pressure since managers were not used to daily problems, among other bad experiences. Stress on the side of the employees increased their rate of turn over resulting to serious financial consequences to the clients. The increased customer dissatisfaction could have been contributed to the organizational structure of the company as it grow in the last few years but with little changes to align it with the customers preferences.
Five forces application
The bargaining power of the customers is relatively high in the company. Although they do not put any pressure on the prices of the company, they have many alternatives and can switch any time they feel not satisfied with services they are receiving. For example, the company has reported increased cases of contract termination as the customers become dissatisfied with the way account managers were frequently changed. This implies that they have set the standards of the service they expect to receive from the company. However, the bargaining power of the suppliers is low since there is competition among them in the provision of goods and services that Calveta requires. The company mainly requires raw foods that have many suppliers in the area at reasonable prices. There is no input differentiation and the company can buy from different suppliers at different times. On the other hand, the employees of the company may have high bargaining power due to their long time experiences and talents. For example, Jennifer Calveta has worked with the company for many years and may control it due to her family relation and innovation talent (Heskett & Girardi, 2011). The intensity of competitive rivalry is high in the industry since there are many companies that are offering food-related services to senior living facilities in US. In 2008, Calveta dining had 976 SLFs in the domestic market that represented only 10% of the entire market share. Some of the competitors are large and have been in the market for long compared to the Calveta dining. This fact forces the company to look for areas that it can gain a competitive advantage through continuous innovation and offering personalized services to the customers.
There are no many food regulations in the country that may limit new entrant in the food market for senior living facilities in the country. Any new company can enter in the market though there are a number of factors that may give the existing players an added advantage. These factors may include capital requirements, brand loyalty, product differentiation, and economies of scale among others. Finally, the threat of substitute services or products is low and customers may not easily switch to other services. The alternative that customers may have is to cook food for themselves or to hire individuals to provide such services. This may not be easy since the cost of switching to other services may be high to the customers. They can only switch to another rival company providing similar services to those provided by the Calveta Dining.
As one customer noted, the company has dedicated and likeable employees that provide excelled services to their customers. This has played a crucial role in building customers’ loyalty to the services of the company despite experiences a few hiccups due to frequent changes of the account managers who were handling different facilities. The second strength of the company is its ability to constantly develop new products and services that come as new items in their menu to meet the expectations of its customers. Under the leadership of Jennifer Calveta, who is the chief operating officer, the company keeps innovating new services each year. Jennifer is talented in the area of continuous innovation and uses her skills to give the company a competitive edge in that area (Heskett & Girardi, 2011). For instance, Jennifer introduced a catering program that would allow residents to order their meal one day in advance in 2006 in order to provide customized services to the bedridden customers. This was a unique innovation that earned recognition in the whole industry since it had never been seen before.
On the other hand, the company has over relied on one sector for long without ever thinking of how to diversify its services to other areas. It has focused on SLFs for many years, and the sector may not enable the company to double its revenue in the next five years due to increased competition and changing customers’ preferences. Hospitals are also experiencing limited budget after 2008 recession due to decreased government assistance and charitable donations. These financial constrains may reduce the market size of the company in the near future.
The company need to remain committed to “Antonio way” since it lay the foundation of the organization success.
The organizational structure of the company need to be slightly adjusted in order to put into consideration the recent growth without necessarily changing its core values.
The company management needs to consider acquiring GSD though the price and payment period may be negotiated.
The company should only consider taking loan from a financial institution if it does not have any other better option in terms of interest rates and recovery period.
The decision to acquire GSD and the source of funding ought to be discussed and agreed by all board members and the entire management in order to ensure it is implemented successfully.
Although the training budget for the company was already exhausted, it was important for all the new employees especially those in management positions to learn the organization’s culture for its future benefits. Diverting from the company’s culture may be very dangerous since it is the pillar that has held it for many years. Adjusting the organizational structure of the company will ensure that its senior management retains the customers touch despite the recent growth and expansion. Some customers have already started to complain that they have lost touch with the managers as they used to do during the leadership of Calveta senior. One of the major weaknesses of the company is to focus on one sector and region. Acquiring GSD will give the company an opportunity to expand its services to other regions and hence achieve its double revenue growth in the next few years. Although GSD may not have a good reputation in the, it has a large customer base that may offer a good opportunity for growth to Calveta. In addition, GSD main problem was offering poor quality services to customers, which is a major strength of Calveta dining.
Financial performance implications
Acquiring GSD may result to some financial constrains to the company especially in the first few months. However, in the long run, it will help to increase the revenue of the company through increased sales. Servicing the loan may also affect the cash flow of the company in the short-run, but it can be reduced through negotiating for favorable repayment period. In addition, increasing the training budget of the company may also reduce its profit, but it is necessary in order to preserve its culture.
Heskett, J.L. & Girardi, P. (2011). Calveta dining services, Inc.: A recipe for growth? Harvard business journal, 1-13.