case study stage 1

STAGE 1: Business Environment Analysis

In 1952 in the great city of San Antonio, Texas my grandfather established The Hometown Deli. He ran his deli in such a way that kept very loyal clientele returning. For decades his deli was successful with just word of mouth from clients. Like most things, time changes everything and in this case it’s the same. His word of mouth technique just is not reaching enough clientele anymore or the younger generations. I enthusiastically accepted his invitation to take over the business and distinguished many of the strengths which made The Hometown Deli a success. However, I also discovered the business had been declining the last five years and numerous weaknesses needed to be addressed. In order to bring The Hometown Deli into the 21st century there are several changes that need to be implemented and I’m enthusiastic about its future.

We will utilize Michael Porter’s Five Forces Model for our business environment analysis, which includes the development of our strategic direction, improvement of our business model, and how we use technology solutions to enable strategic outcomes. In using Michael Porter’s Five Forces Model we should be able to transition The Hometown Deli into the 21st century smoothly and successfully.

Michael Porter’s Five Forces Model analyzes the competitive forces in which a company’s operating environment operates in order to assess the potential for profitability in an industry. Its purpose is to combat these competitive forces by identifying opportunities, competitive advantages, and competitive intelligence. If the forces are strong, they increase competition; if the forces are weak, they decrease competition (Baltzan, 2012). (p.15-16)

(1) Buyer Power- This is the ability of buyers to affect the price they must pay for an item. Buyer Power becomes high in this situation. As mentioned in the case study, there is a rumor that a new deli will be going in a few blocks away called the “Wall Street Deli”. Business has been declining, it is a great possibility that customers are going elsewhere beyond the neighborhood and this may be because they are not receiving services they necessarily want. This has caused less business, which has decreased revenues. There are a few strategies to keep customers coming back and to bring new customers in.

* Menu, marketing, and services will be altered to what our customers prefer and with what our new customers desire

* The customer population is aging and the younger generations have not been marketed to, we will start and continue marketing to the younger crowd as well as the current loyal clientele

* Create a website that will present who we are, where we are located, our menu, our hours, and our history, but we will create an interactive website for community recipes, coupons, referrals, and information that customers want from the surveys and feedback we regularly receive

* free Wi-Fi at the deli for all customers

* Create a loyalty program with a plastic membership card that is verifiable so that customers can receive free items from our Deli after so many points based on purchases. This allows us to option to send coupons, call the customer by their first name as the card is swiped with payment, and track marketing trends for ordering, marketing, and profitability

* Encourage customers for their feedback by giving them a 25-50% coupon off their next purchase

(2) Supplier Power- Suppliers have the ability to influence the prices they charge for supplies, which means profits can be driven down by suppliers. In this situation that would mean the Supplier Power is high. In the food retail business, food prices continue to rise. However, increased pricing to our customers and future customers would not work at this point. The objective at this point is to reclaim our position in the food market and grow our business. To obtain this we will use the following strategies:

* Create relationships with local vendors for best price and quality of goods

* Utilize MIS (Management Information Systems) to find alternative products (online food ordering, inventory, etc.)

* Revise the menu to incorporate what the customer desires along with food price to receive the most profits

(3) Threat of Substitute Products or Services- The threat is high when there are many alternatives for products or services and low when there are few alternatives. There is a strong possibility that customers can be stolen by competitors. The rumor is that the “Wall Street Deli” might be going in a few blocks away, which creates a high threat for our Deli. We have already been losing business for five years which means the customers are going elsewhere and we need to prevent this. A strategy for this is listed as follows:

* Marketing The Hometown Deli thoroughly; best choice from pricing, nutritional eating, customer menu driven selection; rewards loyalty program; community involvement; addressing each customer by name as they pay for their food items; hard to resist offers that bring customers back yet brings a profit; Catering at a minimum order amount; and customer relations training for all staff to improve relations

(4) Threats of New Entrants- The threat is high when the capital investment to enter a market is low and low when the investment is high. The investment is high to open up a new deli in this area considering there’s no other deli’s around except for the rumor of the “Wall Street Deli.” Investment capital can be stolen by new market entrants and our goal is to prevent this and stay competitive. Our strategy is to:

* Assess and find out if the rumor is true about “Wall Street Deli” and to analyze what they will be offering if they do open. Continuous assessing will be necessary when they open for pricing, menu, offerings, marketing, and their capabilities.

(5) Rivalry among Existing Competitors- This is high when competition is fierce in a market and low when competitors are more complacent. Because customers can always choose other substitute products I would say our rivalry is high. This is obvious in the last 5 years because clientele have been going elsewhere. Our strategy is:

* Not only address what The Hometown Deli is about (quality, excellent customer service, pricing, healthy food, specials, and an atmosphere our customers desire), but to stay vigilant of what our customers want us to give them.

* We provide a happy median in pricing (not too low or high) – our focus will be quality, customer service, and an environment where people want to come and share with fellow friends (Five Forces Definition, Baltzan, Paige, page 15-18, Business Driven Information Systems).

Porter’s Generic Business Strategies

Using Porter’s Generic Business Strategies, the best strategy to rebuilding The Hometown Deli would be the “Focused” strategy. At this point the goal of the Deli is to reach a narrow market with lower costs and this was chosen so that we can be a deli of differentiation. The idea is to have lower prices on services with the best possible quality and services. We want an atmosphere where people want to meet and do business, and refer others. We want the customers to leave feeling completely satisfied with smiles on their faces.

Strategic Area for Business Improvement

To figure out where to strategically start to improve a business it’s good to understand what business strategy is and what strategy is. The definition of business strategy is a long term plan of action designed to achieve a particular goal or set of goals or objectives. Strategy is management's game plan for strengthening the performance of the enterprise (Stewart, Syd, 2008, website). With this being said, my overall strategic area will be to ultimately re-establish the The Hometown Deli focusing primarily on Customer Satisfaction. Customer Satisfaction incorporates many areas within the business. I believe the customer satisfaction has declined in the last several years due to the deli not being able to adapt and progress with the current demands of the customers. We will engage the customers the minute they enter the doors to the completion of their services and they walk out the doors. Not only will we engage them within the store but we will implement programs and marketing that will engage potential customers outside the business as well.

To do all of this we will need to utilize technology to see success in our strategic area. Our strategy, through the use of technology will affect our suppliers, deli staff, customers, and The Hometown Deli corporate, which include:

* Software that affects Payroll, Inventory, Purchasing, Customer transactions, Recipes, Training, Marketing, Coupons, Menu’s, Advertising, Referrals, Track Customer Traffic and Menu Items (for staffing purposes and menu items), and Accounting

* Our interactive website for driven customers

* Track Loyalty reward program

* Deli Wi-Fi

We can improve this process by using IT/MIS and by using IT/MIS we can create value. IT/MIS creates value by implementing processes known as customer-facing and business-facing. Customer-facing results in a product or service that is received by an organization’s external customer. This includes areas such as fulfilling orders, communicating with customers, and marketing information. Business-facing is invisible to the customer but essential to the effective management of the business. This includes areas such as goal setting, day-to-day planning, giving performance feedback and rewards, and allocating resources. When we incorporate all these programs and strategies The Hometown Deli will be well on its way to continuous success in the 21st century.

References

Baltzan, Paige (2012). Business Driven Information Systems, Third Edition. The McGraw-Hill Companies, Inc.

Steward, Syd (February 02, 2012). A Definition of Business Strategy. Rapid Business Intelligence Success. http://www.rapid-business-intelligence-success.com/definition-of-business strategy.html.