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Transcript of A1 Candies Group
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HOCHSCHULE FR TECHNIK UND WIRTSCHAFT BERLINMASTER OF BUSINESS ADMINISTRATION & ENGINEERING
Case Study A1The Great Candies
Diana Montana, Daniella Chacon, Harry Utama, TanvirMahmud, Carlos Soares, Michael Khnlechner
Submitted to Dr. Birgit Hilberger
Strategy, Organization and HR Management
21.01.2013
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Table of Content
1. Executive Summary ........................................................................................................ 2
2. Understanding of the situation and objective .................................................................. 3
2.1 Food Industry ................................................................................................................ 3
2.2 Key Drivers of Food Industry ....................................................................................... 3
2.3 Market Outlook ............................................................................................................ 3
2.4 Competitors Analysis.................................................................................................. 3
2.4.1 Nestl ......................................................................................................................... 4
2.4.2 Kraft Foods Inc .......................................................................................................... 4
2.5 Customer structures ...................................................................................................... 4
2.6 Structured description of the actual situation of the company ..................................... 4
a. Actual organizational problems of The Great Candies to be solved ........................... 4
b. Actual strategic problems to be solved ........................................................................ 5c. Actual HR issues to be solved ..................................................................................... 5
3. Analysis and Insights ...................................................................................................... 5
3.1 SWOT Analysis ............................................................................................................ 5
3.2 Strategic Management ................................................................................................ 11
3.2.1 Derivation of strategies in The Great Candies ........................................................ 11
3.2.2 Corporate strategy.................................................................................................... 11
3.2.3 Business strategy ..................................................................................................... 11
3.2.4 Functional strategy .................................................................................................. 123.2.5 Interfaces and interdependencies ............................................................................. 13
3.2.6 Product portfolio management ................................................................................ 13
3.3 Organizational options for The Great Candies ........................................................... 14
4. Recommendations and Solutions .................................................................................. 20
4.1 Positioning in Market and Strategy of The Great Candies ......................................... 20
4.2 Strategic and Organizational Implementation Plan .................................................... 21
4.2.1 Implementation of Communication ......................................................................... 22
4.2.2 Organizational Change Plan .................................................................................... 23
5. Summary and next steps ................................................................................................... 24
List of Literature ................................................................................................................... 25
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1. Executive SummaryThe present case study is focused on the German company The Great Candies, a supplier
of consumer goods that offers products all over the world. It has a portfolio of candies, milk
products, mainly oil-based food, and some chilled products. Therefore the company is
divided in different segments within the food sector and has many competitors, insegments such as processed and frozen foods, beverages, milk products, and snacks. The
major players in the sector are Nestl and Kraft Foods.
Nowadays, The Great Candies is facing several strategic and organizational problems that
should be resolved to regain its profitability and to increase its revenues. In order to do this,
a SWOT profile was developed by using an external and internal analysis. During this phase
the rivalry among existing competitors and the bargaining power of buyers were identified
as the most important forces according to the model of five forces of Porter. On the other
hand, the development of the companysvalue chain helped to determine the key leverage
points and major cost drivers of The Great Candies. Additionally, a comparison with Nestl
was performed to identify imrpovement opportunities of The Great Candies.
Using the SWOT profile as an input, corporate, business and functional strategies for The
Great Candies were derived. Based on the results of product portfolio management using
BCG matrix, it was found that the company has to disinvest in its yogurt products and to
focus on marketing and product development of chilled food to increase its market share.
In addition, three organizational options such as adjusted functional, divisional and matrix
structure were proposed as possible solutions for The Great Candies. After an evaluation,
the divisional option was selected as the most effective one.
As a part of the strategic planning process for the next five years, the mission and vision,
for The Great Candies were redefined. Furthermore, four key parameters for its market
positioning were identified like premium product offering, closeness to customer,
internationalization, and care for health and wellness. In order to capture growth
opportunity in international market and expand the market share, the company
implemented product-market Ansoff matrix.
Finally, an implementation plan for the strategic and organizational changes based on
change management approach was established, to cover cultural and organizational
behavior aspects was developed. The mentioned plan for The Great Candys was developed
in compliance with the approach of Dr. John Kotter.
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2. Understanding of the situation and objectiveThe Great Candies is a supplier of consumer goods that offers its products all over the
world. The company has in its product portfolio candies, milk products and food, mainly oil-
based, some chilled products. Based on its portfolio The Great Candies is inserted in
different segments in the food sector, so, this case study will analyze each of the segments.
2.1 Food IndustryThe global dairy market is expected to reach almost $371 billion in 2014, representing
nearly 24% expansion over five years, reported by Market Line (1). Furthermore, milk
represents more than 35% of the overall dairy market. The market leader of this industry is
Nestle with 14% market share and followed by Danone with 11% market share (2). The
global chilled food industry has shown 6% growth in 2011 based on chilled food association
(3). This market is expected to expand 19% over five years to exceed $228 billion in 2015
(4). The global chocolate, snack and sweet markets are predicted to reach almost $335
billion by 2015. The main factors of this behavior are income levels, consumer perceptions
and demographics (4). The market is highly fragmented and intensely competitive, with an
abundance of industry players.
2.2 Key Drivers of Food Industry
According to MarketLine, the worlds milk market is expected to exceed $146 billion in
2015, a 21% hike in five years (1). By 2015, the market volume is expected to reach
110,000 million liters, representing nearly 13% growth in five years. Unflavored fresh liquid
milk is the markets leading segment, at almost 47% of overall market value. By 2015, the
worlds cocoa market will reach almost 5 million metric tons. The demand is particularly
strong in developing nations. The market is fuelled by increased coverage of health benefits
from eating certain types of chocolate for advantages such as nutrition content and the
cancer-fighting potential of chocolates with a high cocoa content (5).
On the other hand, the growth of chilled food industry has been leveraged by theconsumers need of ready-to-eat meals. Furthermore, the economic recession has fuelled
the market growth as consumers looked for more convenient and cheaper meals.
2.3 Market Outlook
The global dairy industry is very competitive and pushes the market leaders to cut costs
and boost profit margins. Demand is rising due to economic growth in developing nations
and higher incomes coupled with evolving diet patterns, though the industry remains at the
mercy of extreme price volatility. Frozen prepared food manufacturers have the trend to
continue concentrating their efforts on product innovation and packaging. Convenience is
also the key in this segment and the awareness of the consumer concerning the benefits of
a fresh foods diet is an obstacle, according to Ibis World. The EU is the worlds largestcocoa market, with France, Germany and the Netherlands showing high consumption. Asia-
Pacific is expected to show the most rapid growth, led by Malaysia. The world
confectioneries market is expected to exceed $186 billion by 2015 (4).
2.4 Competitors Analysis
In the segments of processed food the great candies have many competitors. Although the
company and others sell similar products, each company has its differences by choosing
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their own sales strategies. This case study highlights some of the competitors strategies
below.
2.4.1 Nestl
The company invested U$2.7 billion in R&D and Advertisement. Nestl is strongly focused
in International Strategy as a global organization, so, International strategy is at the heart
of their competitive focus. When operating in a developed market, the company strives to
grow and gain economies of scale through foreign direct investment in big companies.
Another strategy that has been successful for Nestl involves striking strategic partnerships
with other large companies (6).
2.4.2 Kraft Foods Inc
The company invests $ 81.4 million in R&D and more than U$72.3 million with
advertisement. Kraft Foods have a strong Distribution system with more than 316
distribution centers and depots all around the world. Out of these 316, the Kraft Foods
owns 39 distribution centers and leases 125 distribution centers. Also it owns three depots
and leases 149 depots worldwide (6).
2.5 Customer structures
The general customer structure of the food industry can be defined geo demographics
situation, taking in consideration aspects as climate, tradition, behavioral data, purchase
history, current and future customer behavior. One of the possible segmentation according
to the demographic patterns is: Kids: 4-12 years old; Teenagers: 1317 years old; Adults:
18 44 years old; Elderly: 45 above.
2.6 Structured description of the actual situation of the company
Currently, the company is functioning as a formal organization using a structure which
divides management into several functions which are: Finance, Controlling, HR & Law,
Purchasing, Operations, and Sales & Marketing. There are two reporting levels in the
organization and the New Product Unit is directly coordinated by the Chairman of the Board.
The Great Candies is facing not only structural problems but also strategic and HR issues
that need to be solved in order to improve the organizational efficiency and effectiveness to
meet the markets challenges. In addition the management has to take the opportunity to
review the strategic approach for the international market. In this context, by declining
sales and profitability in the market, the Great Candies has been facing stagnating
revenues. According to the companys life cycle scheme, The Great Candies is in post
maturity stage at the moment. As a result of its poor management, the profitability has
begun to fall.
a. Actual organizational problems of The Great Candies to be solved1stReporting level of The Great Candies:
Centralized organizational structure where the functional managers makedecisions and provides direction for the company.
Lack of organizational efficiency and effectiveness resulting in non-realizingsynergies within the organization.
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The New Products department is stated under the Chairman of the Board but isnot clearly defined as Research & Development department.
There is no flow of information of new product development possible in thisstructure.
2ndReporting level of The Great Candies:
Absence of IT department within the organization. The organizational structure is not internationalized and a regional sales force is
missing.
Lack of coordination between divisions and departments. The organization is working as a single-line-system; the information paths are
too long.
Poorly defined functions for division responsible to international market.b. Actual strategic problems to be solved
Ineffective strategically approach to deal with declining profit by launching newproducts.
Poor internationalization approach characterized by centralized controlling offoreign markets
Cost efficiency, specific distribution channels and precise promotion of productsunder same niche are not differentiated.
Absence of general approach to implement strategies or to coordinateinternational activities
Unsuccessful attempts to launch new productsc. Actual HR issues to be solved
HRs responsibility for wages and salaries instead of also dealing with trainingand personal development of employees.
Recruitment process, which is not, clearly defined along the HR functions. Eightmanagers from second reporting level will retire soon and the companysneed
to solve this matter and prepare transition plan.3. Analysis and Insights
3.1 SWOT Analysis
Taking into consideration the market analysis and the actual situation of The Great Candies
previously addressed, external and internal tools were used in order to identify the
strengths, weaknesses, opportunities and threats of the company.
For the external assessment it was used the P.E.S.T analysis and the Model of Five Forces
of Porter. On the other hand, the value chain and competitor comparison were performed
as internal tools in order to derive The Great Candies SWOT profile.
3.1.1 External Analysis
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P.E.S.T Analysis
The P.E.S.T analysis constitutes a general assessment of the environmental framework where
the company operates by the addressing the following factors: political-legislation, economical,
socio-cultural, and technological.
In despite of its apparent simplicity, this tool provides a first holistic approach to identify
potential elements that might influence The Great Candies as we can see in Table 1.
POLITICS-
LEGISLATION
Advertising legislation.
SOCIO-CULTURAL Nutritional awareness of consumer.
Rigid control and governmentalregulations.
Growing concern for the environment.
Exportation governmentalpolicies.
Volatility of consumer preferences.
Increasing governmental laborlegislation.
Population growth rate.
ECONOMICS
Global economic recession.
TECHNOLOGICAL
Continuous technological advances alongthe food processing value chain, includingmachinery, processes, R&D, logistics,packaging, marketing, etc.
Changes in tax regulations. Social networking tools.
Free Trade Agreements.
International monetary instability.
Table 1Great Candies - P.E.S.T analysis
Model of five forces of Porter
The five forces of Porter is a practical approach that use an integral view of the industrys
situation where the company belongs to, helping to determine the threads and
opportunities of the environment. The result of this analysis delivers a valuable input to
formulate strategies for the companies profitable growth.
This model was developed as it follows.
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IndustryCompetitors
Rivalry amongexisting firms
PotentialEntrants
Substitutes
Threat of
NewEntrants
Threat ofsubstituteproducts
BargainingPower ofSuppliers
BargainingPower ofBuyers
Suppliers Buyers
Low Threat of New Entrants
High level of capital requirements
Presence of well-positionated brands
Strict sanitary control by govermental
authorities
High level of infraestructure
requirements
High logistics costs
Low threat of substitute products
There are no real substitutes for
food-grocery products.
High Intense rivalry among existing firms
Highly competitive industry
Presence of big competitors: Nestl, Kraft,
Unilever
Strong price competition
Constant marketing wars between competitors
Continuous product introduction by
competitors
Local brands increasingly trusted by consumers
High level of dealers own brands
Medium Bargaining power of
Suppliers
Minimal substitutes in supply
Increasing concentration
amoung suppliers
High Bargaining Power of Buyers
High level of price of sensitivity and
quality demand of customers
High variety of shopping types and
places available
Increasing brand conciousness of
customers
Figure 1 Model of five forces of Porter
3.1.2 Internal Analysis
Value Chain
The value chain, as a tool, provides a general overview of the companys core and support
processes. Furthermore, it helps to identify leverage points, success factors, major cost
drivers, as well as strengths and weaknesses for The Great Candies along the main
activities and/or functions of the chain.
According to Michael Porter (1980) "the value chain" is a simple perspective for assessing
and analyzing the competitive strength and position of a corporation or business
organization. Companies tend to use this tool to have a better understanding of the
activities which develops a competitive advantage (7). Thus, in order for Great Candies to
meet its margin point, both the primary and support activities will need to work as a team
to be able to gain profitability.The value chain of The Great Candies is presented inFigure
2.
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Figure 2The Great Candies value chain
R&D / Design /
EngineeringManufacturing
Marketing /
Sales
Customer
service
Procurement
Human Resources FinanceQuality
Management
Value
Chain
Leverage
Points for
competitive
advantage
Major Cost
drivers
Support
processes
Strategic alliances with
key suppliers.
High quality suppliers
with HACCP (hazardanalysis and critical
control points and GHP
(goog hygiene practices)
certifications.
Lead / delivery time.
Bulk purchasing
discounts.
Storage
Location of suppliers.
Volume order.
Product variety / diversity.
Innovation.
Patents. State of the art.
Rate of new product
development.
Packaging.
Developing
responsiveness to
consumer needs in
different markets.
Productivity
Quantity /Frequency of
change of new products
Number and location of
R&D centers.
Operation under
compliance of the GHP /
HACCP standards
Implementation of leansix sigma, TPM (Total
productive
Maintenance), 5S.
Automation.
Definition and fulfilment
of procedures,
standards and
processes.
Capacity utilization
Location.
Quality control.
Employee conmitment
and motivation
Degree of automation
Utilization of capacity /
resources.
Level of wages.
Degree of rejections.
Number and location of
Production facilities.
High level of Advertising
Customer research and analysis
(needs profile and behaviour)
Promotion
Pricing
Market targeting
Product line selection
Product positioning (local and
worldwide)
High quality sales-marketing
force
Sequence of product
introduction around the world
Strategic alliances with well
known retailers worldwide
Communication
channels with
customers and
consumers
Location of call centers /
outsourcing
Coordination of pricing
(local and worlwide).
Location of production
facilities vs target markets.
Level of wages
Advertising
Recruitment
Training
Rewarding
HR developing
Fulfillment of GHP /HACCP requirements.
Definition and compliance of standards
Quality Checkpoints along the produtive process (raw
materials, machinery, personnel, production conditions,
work in process, finished product, storaging)
Microbiological and physicochemical analysis along the
process
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Comparison with competitor
One way to look at competition is by performing a comparison with the companys m ajor
competitors. By doing this, the Great Candies can identify and develop potential enhancement
improvements and strategies.
InTable 2 it can be seen that The Great Candies was compared against Nestl, using the followingparameters: Companys philosophy and Competitive advantages, Growth drivers, Products/Brands,
Management, Procurement, Engineering, Technology, R&D, Manufacturing, Marketing, Sales &
Distribution, and Customer service.
NESTL GREAT CANDIES
Companysphilosophy and
competitiveadvantages
Good food, good life.Unmatched product and brand portfolio.Unmatched R&D capability.Unmatched geographic presence.People, culture, values and attitude"
Unique in the market with strongemphasis on branding and high-qualityproducts.
Growth drivers
*Nutrition, Health and Wellness.*Emerging markets and PPP (Public-PrivatePartnerships).*Out-of-home leadership.*Premiumisation.
Unclear growth drivers.
ManagementNestl Group is managed by geographies (Europe,Americas and Asia/Oceania/Africa) for most of thefood and beverage business.
Centralized management (Germany)
ProcurementExistence of Nestl supplier code.
Undefined suppliers managementprocedures.
Strategic alliances with suppliers. Absence of alliances with suppliers.
R&D,Technology,Engineering
*Largest R&D network of any food company in theworld (32 R&D centres) network for R&D.
Centralized R&D center.
R&D in a variety of fields from packaging andequipment, to food processing technologies andmanufacturing new production systems
Limited R&D (only for products).
Strong emphasis on consumer needs.Weak strategy for new productsdevelopment and weak emphasis onconsumer needs.
Manufacturing
Manufacturing facilities around the worldOne production site located in centralGermany.
Implementation of operational models ofexcellence: TPM (Total productive maintenance),lean manufacturing, six sigma
*Low definition of manufacturingprocesses*Absence of operational models ofexcellence
High quality standards, fulfillment of HACCP(Hazard Analysis and Critical Control Point, ISO22000:2005/ISO 22002-1).
*Focus on high quality productsApplication of good manufacture practices,including design of equipment, standard operatingprocedures, training, machine maintenance, andhandling of materials.
Development of innovative technologies ofproduction
Use of nine different productiontechnologies for 24 brands
MarketingBrand maintenance and development.
Lack of brand maintenance anddevelopment.
Creation of an emotional approach. Absence of an emotional approach.
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Inyection of new product life cycle.Inexistence of inyection of new productlife cycle.
Customer targeting according to economic,geographic and social factors.
Some of the products are in the sameniche and compete for the same targetgroup.
Strong market orientated company, highly focuson undertanding and fulfilling customer needs.
Product orientated.
High investment in advertising. 100 Mio euros investment in advertising.
Sales &Distribution
Intensive distribution strategy in order to make itsproducts avalilable to a large customer base.
Worlwide products offering.Wide distribution channel and severalmanufacturing units around the world.
Reduction of distribution costs without affectingthe quality and lead times.
Abscense of programs for reducing thedistribution costs.
Customerservice
Existence of Nestl customer care division. Weak emphasis on customer service.
Excellent customer support through differentmechanisms.
Unclear mechanisms for customer service.
Table 2 Comparison with competitor (8)
SWOT-Profile of The Great Candies
Using the internal and external tools previously mentioned, it was possible to draw a SWOT profile
for The Great Candies as Fehler! Verweisquelle konnte nicht gefunden werden.shows. Thisvaluable information will be use as a key input to generate and develop strategies for the company.
Table 3 SWOT profile of The Great Candies
Offer of products all over the world. A formal meeting board does not exist
Strong emphasis on branding and high quality products.Decision making processes are not structured and are based on face to face
discussions.
High investment on TV-advertising.Tasks, functions and processes are not defined in the company, only the process of
introduction of new products is defined in detail.
Market leader in Germany. Some of the products are in the same niche and compete for the same target group
Only one production site (located in central Germany).
Inappropiate organizational structure.
Unclear growth drivers.
Abscense of well-defined alliances with key suppliers.
Abscense of knowledge management.
Weak emphasis on consumer needs.
Sales via retailers grow with a rate of 5 % p.a. since 5
years.Increasing concentration among re tailers.
M&A.Highly competitive industry: strong price competition, presence of huge positionated
companies.
Implementation of operational models of excellence. Local brands increasingly trusted by consumers.
Emerging economies (emerging marke ts) High le vels of dealers own brands.
Improvements in packaging (cost reductions, news
designs)Increasing concentration among suppliers.
Internal
Factors
(IFAS)
Strengths (S) Weaknesses (W)
External
Factors
(EFAS)
Opportunities (O) Threats (T)
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3.2 Strategic Management
3.2.1 Derivation of strategies in The Great Candies
Result of the SWOT analysis, and the four tools from chapter 3 were derived to get core of problems
and objectives to achieve by The Great Candies. Furthermore, from those defined problems and
objectives The Great Candies will divide its strategy into three general parts: corporate, business
and functional strategy. Each of them will be defined in detail together with a proposed method and
in this work it will also be discussed the implication of these strategies in the organization design of
the company.
3.2.2 Corporate strategy
Based on SWOT analysis, PEST and comparison with competitor, value chain and the model of five
forces of Porter, these are corporate strategies proposed to be implemented by The Great Candies:
1) Define clear mission and vision statements together with strategic goals and objectives, so thecompanys growth direction will be clear.
2) The Great Candies will focus on premium product with four different product portfolios.3) Focus on market research to gain optimum information in customer demand and needs, market
trends and competitor condition.
4) Give positive contribution to environment throughout Corporate Social Responsibility (CSR).These strategies will have implication in the organizational design of The Great Candies in term of
structure and process, such as:
1) Standardize food processing throughout every production plant of The Great Candies.2) Strong focus on CSR to build up good customer image and make company closer to customer.3.2.3 Business strategy
Based on SWOT analysis, PEST and comparison with competitor, value chain and the model of five
forces of Porter, these are the business strategies proposed to be implemented by The Great
Candies:
1) Implement differentiation strategy by selling a product at a premium price by providing morebenefits and features to the product so that the premium price is justified.
2) Marketing mix using the 4 P approach: product, promotion, price and place.- Product
The Great Candies has the policy to sell premium product for new country market only and
mix of premium product and regular product in Germany market.
- PromotionExpand market throughout intense marketing, advertising and finding the possibility of
Merger and Acquisition to increase positioning in market.
- PriceThe Great Candies are proposed to develop pricing strategy based on competitor price and
customer perspectives. Furthermore, by utilizing these methods The Great Candies will be
able to balancing their profitability and fulfilling customer demand.
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- PlaceThe Great Candies will use intensive distribution so that the company can sell the product
through the maximum number of retailers and wholesalers, which will lead to more
competitive price. Furthermore, products of the company will have special spot in each of
supermarket to sell its products.
3) Implement three dimensional market definition by Abbel (9) to avoid releasing productscompeting in the same niche and customer group.Figure 3 was developed based on it.
4) Build up long term contract agreement with raw material supplier to gain advantage of volumebased discount.
5) Problem of increasing of concentration in retailer can be solved by making special agreementwith retailer, such as help retailer to obtain market access and in return get better pricing (10) ,
cooperation between suppliers of food to increase bargain power against retailer (10)
Figure 3 Functional organizational structure for The Great Candies
These strategies will have implication in organizational design of The Great Candies in terms of
structure and process, such as:
1) Decentralization of sales and marketing division to get more focus and intense closeness withmarket.
2) Creation of a new centralized function for innovation technologies and R&D in corporate center.3) Creation of a new centralized function for logistic in corporate center and implement global
supply chain management throughout supplier until retailer.
3.2.4 Functional strategy
Based on SWOT analysis, PEST and comparison with competitor, value chain and the model of fiveforces of Porter, these are functional strategies proposed to be implemented by The Great Candies:
1) Optimization process management in company by introducing IT as main driver.2) Optimization of sales by increasing customer satisfaction level.3) Optimizing flow of information and procedures for new product development.4) Develop excellent and continuous training and skill development to replace recruitment of more
staff. Because skill and experiences have a huge positive impact in term of productivity rather
than adding more people.
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These strategies will have implication in organizational design of The Great Candies in term ofstructure and process, such as:1) Establishing new function of IT for company under corporate center.2) Establishing new function for customer services under sales and marketing.3) Establishing new function for training and employee development under HR and Law.4) Create organization structure which will facilitate link of information chain from new product
division to sales and marketing division.
3.2.5 Interfaces and interdependencies
Interfaces and interdependencies between strategies can be found from several points:
1) Development of new product in R&D should fulfill target for differentiation market in premiumproduct.
2) Sales and marketing should develop their promotion strategy to differentiate The Great Candiesas premium product from other product in market.
3) Strategy of marketing orientated business should be follow by intense market research to getfull coverage of customer requirement.
4)
Intensive marketing campaign in new market should follow by high quality control in foodprocessing in production plant.
3.2.6 Product portfolio management
In this work, product portfolio was made by adapting Boston Consultant Group in portfolio
management (11). As it can be seen in the Table 4, The Great Candies has five major products
portfolios and comparison of revenues main competitor with market volume is taken. This case
study took data from global market share and analyzes it per each product segment to gain better
accuracy in calculation. For example, in portfolio yogurt, this work only considered global yogurt
market in 2010. To develop BCG product portfolio matrix, this work calculated market share relative
of each product with (11):
Market share relative =
(In this case, market growth was collected from official website of each correspondence industry
sector).
Product Revenue TheGreat Candies
Revenuecompetitor
Marketvolume
Marketshare
relative
Marketgrowth
Averagemarketgrowth
Drink Milk 595.00 2,319.62 53,101.89 0.26 2% 6%
Yoghurt 168.00 978.18 48,909.00 0.17 3%
Chocolate Bar 802.00 2,103.85 56,659.49 0.38 13%
Impulse food(snack)697.00 752.41 2,508.03 0.93 6%
Chilled food 383.00 2,633.58 75,245.00 0.15 6%
Table 4The Great Candies competitor database (In million EUR)(12) (13) (14) (15) (16)
The product portfolio shown in figure 4 was developed using the data ofTable 4.
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Figure 4 Product portfolio of The Great Candies
From table 4, it can be concluded that the market share relative of The Great Candies is smaller
than main players in each product portfolio. This problem is one of BCG matrix limitation, where
product with low market share doesnt mean its not profitable to company (17). Thats why this
work proposed to combine contribution margin data from company to adjust BCG matrix.Furthermore, this work proposed to adjusted market share line from 1 into 0.2 (dotted line) which is
separates yogurt and drink milk which has negative and positive contribution margin. This
assumption will bring more clear pictures of BCG matrix in The Great Candies product lines, as
shown in figure 4.
Based on figure 5, different strategies are derived from each of product portfolio:
1) Questions markBased on market research (18) , this food sector increasing 6% for the next years. This work
recommended The Great Candies to invest more in R&D of chilled food and also in advertising,
so that this product will get high quality and result on increasing of market share.
2) StarThese two products resulting 57% of total revenue of The Great Candies and its recommended
to this company to mainly increase their market share through market penetration and marketdevelopment (based on Ansoff strategies in previous sub chapter).
3) Cash cowsDrink milk has become The Great Candies cash cows and resulting 22% of total revenue this
company. Strategies for this product is to making cost efficiency production cost, so that
revenue from drink milk can be maximize and allocated to finance question mark products.
4) Poor dogsThe market growth forecast for this product is only 2.5% (19). That is why this company should
disinvest in yogurt product and deleting milk fat reduction production technology to avoid more
losses. Resources that are related to this product will be allocated to empowering question mark
products.
3.3 Organizational options for The Great Candies
As it was stated in the previous section, The Great Candies has been facing some strategic and
organizational problems which must be solved in order to overcome its current situation and have
success in the competitive food industry.
Three organizational options have been proposed as possible solutions as it can be seen in Figure 5,
Figure 6 andFigure7.The company is going to partially migrate from its existing organizational functional structure to a
decentralized one that gives our newly reorganize business divisions more direct lines of
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responsibilities. This will involve an enormous undertaking from the concept point of view as well as
the implementation. The proposed model solutions will involve changing reporting lines, structures
and business divisions. This process will constitute the first phase of a larger change initiative that
will involve operational modifications for building up the companys sales as well as development of
products capabilities, among others.
3.3.1 OptionsThe first alternative is shown in Figure 5. The model consists of a functional structure partially
decentralized of the current Great Candies organizational structure. Themain features are:
- The Finance and Controlling departments were joined together under the same responsibilities.- The HR collar salary and the HR blue collar wages within the Human Resources and Law
department were combined. Additionally, Recruitment and Training were added to this
department.
- Innovation Technology and R&D will replace the staff unit of new products in the corporatelevel.
- Elimination of the manager and sales position.- The functions of the Media department were reallocated to the Advertising/Market Research
department.- The Marketing I and II departments were joined together under the Marketing and Sales
department which was decentralized by regions (Europe; Asia, Africa and Oceania; and the
Americas).
- A decentralized Customer Service department was created according to the same regions as theMarketing and Sales department.
The second option is shown in Figure 6. The model consists of a divisional structure partiallydecentralized.
- The divisions were created according to the existing product lines which are: Milk Products,Chocolate Bars, Impulse Food and Chilled Food.
- Each product division is headed by its own manager which reports directly to the CEO.- The Management Board is constituted by CEO, CFO, COO, CTO and the CMO; as well by 4
managers for the four product divisions.
- In a Corporate Center were centralized the following centralized functions: HR & law,Controlling, Accounting, Innovation Technology and R&D, Purchasing and Logistics. A
centralized IT function was added within the Corporate Center.
- The department of Sales and Marketing was decentralized. For the Milk and Chocolate divisionsit was done for the Europe and Asia, Africa and Oceania regions. For the Chilled Food and
Impulse Food divisions it was done for the three regions (Europe, Americas, Asia, Africa and
Oceania).
- The Marketing and Sales department includes: Advertising and Marketing Research andCustomer Service.
- The operation department includes: Production, Quality, Engineering, Safety and Environment.Finally, theFigure7proposed the last option, which consists of a matrix organizational structure. Thedivisions were defined according to regions (Europe; Asia, Africa and Oceania; and the Americas).
On the other hand, the functions are: Purchasing, Operations, Sales and marketing and Logistics.
Each of these functions is common for the three regions.- The Management Board is constituted by the Chairman of the Board and six managers, three
for each region (Europe; Asia, Africa and Oceania; and the Americas) and three for the following
functions: Finance & Controlling, HR & law and Innovation Technology and R & D.
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3.3.2 Evaluation of the options
The criteria used to evaluate the previously describe organizational options is: Effectiveness of
communication, Internationalization readiness, Cost saving, Efficiency decision making, and
Closeness to market. The weighting given to each parameter according to their level of importance
was: 20%, 25%, 10%, 20% and 25%, respectively. The evaluation scale was set from 1 to 5 where
1 is very good, 2 is good, 3 is satisfactory, 4 is sufficient and 5 insufficient The score given bycriteria for each of the described options is presented inTable 5.The justification of the scores given
per criteria for each alternative is shown in the following tables.
Criteria Score ArgumentEffectiveness ofcommunication 3
Communication not sufficiently promoted due to singleline organization.
Internationalizationreadiness
3Only Sales & Marketing is internationally segmented.
Cost saving (resources)3
Additional management staff needed for regionalsegmentation.
Efficiency decision making3
High number of interfaces compared to divisionalmodel (but still less than matrix organization)
Closeness to market 2 Marketing & Sales and Customer Servicesdecentralized by regions.
TOTAL 2,75Table 5Evaluation of adjusted Functional OrganizationCriteria Score ArgumentEffectiveness ofcommunication
3Possible conflict of interests within Corporate Centerand Product Managers.
Internationalizationreadiness
2Sales & Marketing for each product and decentralizedby regions.
Cost saving (resources) 2Cheaper due to Centralized Functions
Efficiency decision making 1Fast, simplified decision making due to focus on
products.Closeness to market 1
Responsibilities are divided by products and differentregion.
TOTAL 1,75Table 6Evaluation of Divisional OrganizationCriteria Score Argument
Effectiveness ofcommunication
2Communication adequately ensured due to crossconnections.
Internationalizationreadiness
2
Each section (Sales, Operations, Purchase, andLogistics) is covered for each region.
Cost saving (resources) 4Double coverage of management function.
Efficiency decision making 4Delay of decisions
Closeness to market 1All departments are represented in all regions.
TOTAL 2,35Table 7Evaluation of Matrix OrganizationAccording to the evaluation process applied, the divisional organizational alternative is the most
suitable option for The Great Candies compare with its actual organizational structure.
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Chairman of the
Board
Manager Finance
and Controlling
1)
Manager
HR & Law 2)
Manager
Purchasing 1)
Innovation
Technology and
R&D
Manager Sales &
Marketing 1)
Manager
Operations 1)
Data processing
Banks,
Insurance,
Tax
External accounts
Operating
Controlling
Operating
Accounts
Controlling Sales
Recruitment
HR Salaries and
wages
Law
Raw Materials
Packaging
Special Projects
Quality
Engineering
Production
Marketing &
Sales
Advertising /Market Research
Controlling
Marketing
Controlling
Logistics
Milk
Safety and
Environment
Management Board
(1. Reporting level)
2. Reporting level)
1) Member of Management, 2) Deputy Member of Management Board
Training
Europe
Asia, Africa,
Oceania
Americas
Customer service
Asia, Africa,
Oceania
Americas
Europe
Planning and
Logistics
Transport
Technology
Figure 5Adjusted functional organizational structure for The Great Candies
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Figure 6 Divisional organizational structure for The Great Candies
CEO
Manager
Milk products
Division
Manager
Chocolate bars
Division
Manager
Impulse food
Division
Manager
Chilled food
Division
Operations
Sales &
Marketing
Operations
Sales &
Marketing
Operations
Sales &
Marketing
Operations
Sales &
Marketing
COO
CFO
CTO
CMO
Asia, Africa,Oceania
Europe
Asia, Africa,Oceania
Europe
Asia, Africa,Oceania
Americas
Europe
Asia, Africa,Oceania
Americas
Europe
Management Board
Corporate center:
centralized functions
HR & Law
Innovation,
Technologyand R&D
Purchasing
Accounting &
ControllingIT
Logistics
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Chairman of the
Board
Manager
HR & Law
Manager Finance
& Controlling
Manager Innovation,
Technology and R&D
Management Board
Corporate center /Centralized functions
ManagerRegion Asia,
Africa, Oceania
Manager
Region Americas
Manager
Region Europe
Purchasing
Operations
Sales &
Marketing
Logistics
Figure 7 Matrix organizational structure for The Great Candies
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4.Recommendations and SolutionsBased on the the results of the analysis, recommended solutions are derived in terms of Great
Candies positioning in the market and the implementation of the evaluated options.
4.1 Positioning in Market and Strategy of The Great Candies
As a part of the strategic planning process for the next five years, Great Candies has defined its
mission and vision as follows:
Mission: We are a company that provides a wellness, nutritional and delightfulexperience through premium food products that goes beyond our customers
expectations and creates value to our stakeholders!
Vision: By 2018 we will increase our global market share up to 15% by providingexceptional premium food products, strongly focus on customers needs.
Great Candies has therefore established four key parameters regarding its market positioning:
premium product offering, closeness to customer, internationalization, and care for health andwellness. The company will apply a product-market matrix according to Ansoff to capture
opportunity for growth in international markets and to increase market share within existing
markets.
Market
Products lines
Existing Market New Market
Existing product Market Penetration Market development
New Product Product development Diversification
Table 8Ansoff Matrix for Great Candies
a)Market PenetrationThis will be realized by increasing customer base in the existing markets, by winning
over the customer base of competitors for further growth by means of open exclusive
The Great Candies stores in shopping center, advertisements, promotion, price cutting
and loyalty scheme through membership.
b)Market DevelopmentThis is done throughout differentiating marketing campaign based on culture of each
country, aggressive price penetration and also collaboration with local retailer to access
market easier. Potential new markets for The Great Candies are Asian countries, North
America and South America.
c)Product developmentDevelopment of new products is vital for the sustenance of Great Candies as it is
essential for the growth of the company. In order to develop a successful product, the
company must have an understanding of its customers, the markets in which they
operate and its competitors. Due to high growth on chocolate bar market and potential
market growth in chilled foods, the company is recommended to focus Innovation and
R&D effort into these products.
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d)DiversificationThis step includes diversification of product portfolio and branding to get full customer
profiles and segment. Market growth in chocolate bar segment is highest compared to
other segments. Thus, its recommendableto also focus on diversifying this product. In
addition, The Great Candies is recommended to make seasonal premium chocolate bar
in based on certain special day in different countries to get attention of new market
(for example: thanksgiving chocolate bar).
4.2 Strategic and Organizational Implementation Plan
The implementation of Great Candys renewed strategy and its desired divisional structure is
conducted in compliance with the holistic approach according to Dr. John Kotter. By applying the
8-step model, Great Candies executives will ensure that all employees are well informed about
the necessity for change and the associated implementation procedure, thereby increasing their
chance of a successful implementation (20).
1. Creating a Sense of UrgencyIn order to emphasize the urgency of Great Candys change of direction, the board of
management develops an action plan including a precise explanation for the intendedchange. The basic idea is to point out the true status of business characterized by the
stagnation of sales figures and the unsuccessful attempts to increase those numbers
throughout previous years. To support the indicators, General Managers commissioned
a market survey to find out customers need and to learn about their buying
behaviour. Beyond this, a competitor analysis is also intended to endorse this
reasoning. However, the major argument for implementing the new strategy and for
structural change is supposed to demonstrate the potential for future growth of Great
Candies. Therefore, the Board of Management plans to make use of the promising
result of their investigation on important future markets within their initial
announcement.
2. Forming a Guiding CoalitionDriven by the idea of getting every employee involved into the implementation
process, each Functional Manager is required to identify willing and moreover
influential employees in order to form a team which is responsible for managing the
change initiative. Also the Department Managers are encouraged to ensure that
potential team members are capable to motivate and convince their co-workers that
changes are necessary and the implementation is conducted properly. According to the
Board of Management, the coalition has to consist of employees from different
departments and levels within Great Candies.
3. Developing a change vision and missionThe Great Candies develop new vision and mission to synchronize with strategic goals
of company to cope new challenges in market by maintaining the established cores
values of company.
4. Communicating the visionTo manifest the vision into the day-to-day business, the Marketing and Salesdepartment creates an initiative to improve the communication of the companys newvison. This measure mainly affects Great Candies corporate design which has totransport the statement not only throughout the whole company, but also to
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customers and suppliers. On this account, email signatures, corporate presentationsas well as advertising appearances contain the vision statement.
5. Removing BarriersAn external consultancy, specialized on implementation processes, is engaged to
identify risks and potential obstacles which are impeding the change processes.
6. Creating short-term winsA rewarding system is introduced to maintain employees motivation to participate
actively in the companys change processes. Outstanding achievements are rewarded
with premiums or additional paid days off.
7. Consolidating and ProceedingTogether with external consultants and the members of the internal implementation
team, the Management Board meets on a weekly basis to check the progress of the
change procedure and to identify the lessons learned. Based on this information, new
goals are defined and the status updates are reported via company newsletter.
8. Anchoring Changes in Corporate CultureSince some members of the guiding coalition may leave the company, a rotation
system is applied in order to avoid a loss of knowledge. The change team is also
responsible for training new employees in terms of ongoing chances.
4.2.1 Implementation of Communication
Management
All changes regarding the companys strategy and its organizational structure have to becommunicated company-wide by the Chairman of the Board. This is supposed to happen duringan extraordinary employee meeting after all Functional Managers have finally approved the
implementation procedure.
Operations
Additionally, all Functional Managers have to meet with their responsible Department Managersto clarify the implementation procedure.
Functional Managers have to provide an implementation guideline document containing allessential measures which are necessary for a successful implementation. Each DepartmentManager must then forward individual plans by email to every member of the respectivedepartment and clarify the procedure within next department meeting. The implementationprogress has to be tracked by every Department Manager and directly reported to the GeneralManagers on a regular basis.
Externals
All major clients as well as supplier will be informed about the significant changes by letter rightafter final decisions have been made and all employees have been informed. Based on the newproduct portfolio, existing contracts will be adjusted.
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4.2.2 Organizational Change Plan
Creation of Change Management Project TeamThe company has to set up a change management team dedicated to take care of the
organizational restructuring. Based on the 27 currently existing departments, the change
management team will be set up on just as much internal employees who will work full-time on the restructuring process. The team is required to establish the new structure
within 7 month.
1. Renewal of Role and Job DescriptionsThe Human Resources & Law department was appointed to entirely recreate all relevant
job descriptions which are affected by the organizational restructuring. By doing so,
Great Candies intends to guarantee that all future roles and responsibilities are clarified
and documented upfront. In addition, the department elaborated updated competency
requirements, policy charters and employee grades, before the actual change process is
conducted (21).
2. Revision of staffing processSince new jobs and responsibilities are created, staffing process needs also to be revised.
Therefore, functional managers, together with the HR & Law department, are responsible
for creating new requirement profiles for new jobs which have to be filled by internal
employees, or if necessary- by external applicants. In analogy to the job description,
profiles are also required to be prepared before the changing procedure takes place.
Execution
1. Restructuring Board of Management: Chairman of Board will remain in current position Functional Managers will form the corporate officer level (Manager Finance CFO;
Manager Operations COO; Manager Sales & Marketing CMO; Manager of NewProducts CTO)
Divisional Managers are elected by c-Level executives (Manager Purchasing ManagerMilk products Division, Manager Sales (deputy) Manager Chocolate bars Division,
Manager Controlling Manager Impulse Food, Manager Chilled Food Division)
2. Creation of Corporate Centre with Centralized Functions: HR & Law will include Wage & Salary department (combined out of blue/white collar),
a Recruiting & Training department will also be established Accounting & Controlling: Operating Accounts will remain, Controlling Sales,
Controlling Marketing, Controlling Logistics, Operating Controlling combined
Innovation Technology and R&D: New Products, Technology out ofQuality/Technology combined with Engineering out of operations
Purchasing will completely be shifted and new Department Manager elected Logistics will be created based on Planning an Logistic IT: created upon new employees
3. Creation of Divisional Departments Operations: Production, Quality, Safety & Environment according to previous
specialization on different products, departments are divided into the four divisional
lines. Additional employees have to be recruited
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Marketing & Sales: consisting of Customer Service and Sales and Marketing fortargeted region. Additional employees need to be hired.
4. Senior Manager Retirement and Knowledge Management: Creation of training programs for young managers directed by the managers who are
going to leave the company within the next six years.
Implementation of Knowledge Management along the organization. Recruitment of retired managers as consultant.
5. Summary and next steps
This case study mainly discussed challenges faced by the Great Candies as food supplier in the
global market. Problems of this company are taken into consideration by dividing solution into
strategy perspectives and organization perspectives.
Based on strategy perspectives, the Great Candies has several critical problems to solve, such as
declining profit and poor definition of market for each product portfolio. During this work a SWOT
analysis was performed to define more details inside the company as its environment. After that,product portfolio management by BCG is used to define product position in market and Ansoff
matrix is carried out to define growth strategy based on existing and new market with existing
and new product.
Based on organization perspectives, the Great Candies is suggested to change their
organizational structure into divisional organization to resolve problem in coordination and
communication between innovation division and sales and marketing division during development
of new products. Furthermore, this new organization structure will transform companys business
into internationalization of market and make them closer to market and customer.
After defined two solutions above, this work proposed implementation plan to execute both
solutions smoothly. This is done by considering change management plan, cultural and
organizational behavior.
This work proposed to apply more tools and methods in The Great Candies case study, so that
each of problems can have deeper analysis and solutions. Tools such as balance score card for
implementation phase, analysis of competitive dynamic, forecast analysis for internationalization
and many more is suggested in this case.
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