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FOODCHAIN has emerged as one of the most successful super market chain across several locations across the globe. The company had its inception 30 years back which initiated in the form of traditional grocery store. FOODCHAIN had its core operations in selling grocery items, meat, perishable and non-perishable items. Thus FOODCHAIN has been evolving itself in to the selling of food items and non-food items. FOODCHAIN had more number of distribution centre's 50 in number through which the products are sold to the customers. The nature of business operations at FOODCHAIN has been to increase mass sales of the products there by gaining huge profits across its outlets. FOODCHAIN has been concentrating on turning to be the most preferred super market chain by means of expanding and diversifying in to all possible modes under the retail food market in Srilanka (Deane, 2010).
Sales and Marketing
FOODCHAIN has developed a remarkable standard in sales. It has been successful enough to attract semi loyal customers. To maintain details on regular customers and daily sales they maintain a separate department called the sales and marketing department. This department works on creating awareness to the public regarding their offers and promotions, maintain sales statistics and provide regular reports to the respective managers.
Accounting and Technology
The existence of the accounting and technology department plays a major role in the development of FOODCHAIN. A business with 50 outlets around the island will find accounts maintenance as a very difficult task, therefore a special department with accounting professionals is allocated for it.
The technology staffs work on improving the connectivity of all these 50 outlets and database maintenance. This department has a high responsible due the increasing rivals.
Quality and product/ sales delivery
The increasing completion in the society FOODCHAIN has to maintain good quality in product. It is always essential to have professionals working in such departments who possess valuable skills to maintain quality on par with the trend. The product development and quality maintenance can be done together in one department.
Management, HR and Finance
Human resource is one of the pillars of an organization. The performance and success of a business depends on the human resource recruitment and their skills.
Finance is the other pillar. This department allocates and finds financial support to the business according to its requirements.
1.2 Structure and objectives of FOODCHAIN:
The organizational structure of FOODCHAIN
The organizational structure of FOODCHAIN has reflected its diversity in management as it exists across 50 outlets. The matrix structure of FOODCHAIN portrays the decentralized operations that the super market has across each one of its outlets.
A business requires an organization structure in order to have an organized form of information flow. This will help monitor the work done and the situation of business in a more effective way. A decentralized organizational structure is used to reduce complications and give power to store managers and regional managers to take necessary decisions which are instantly needed. This reduces the power of the top levels' decision making. Most organizations use the three layered structure but small organizations use two layered.
The most common one comprise the following layers:
Top level (or management level)
Low level (or operational level)
Top level management consist the CEO/Chairman/Director. They are the decision makers of the organization. From the information fed from the lower levels they make strategic decisions regarding what should be done next.
The middle level is the supervision level. It consists of managers/Team leaders. Their duty is to give instructions to the low level management and supervise their daily work. The work process and the improvements or problems need to be passed to the top level in a regular manner.
The low level management also known as the operational level management are the staff in direct contact with the customers. They do the transactional procedures. They take the instructions from the middle level and work accordingly.
FOODCHAIN being a large chain of supermarkets which has been in the industry for 30 years needs a good organizational structure for an effective business process. From the case study, a top level management, middle level management and low level management were identified. Since the business is a large chain with 50 branches around the island, the middle level is further divided in to two as upper middle level and the lower middle level.
So the FOODCHAIN organization has the following structure:
Upper middle level
Lower middle level
As mentioned above the top level consist the people who initiated the business 30 years ago and they are known as the organization's owners. They are the group of people who make the strategic decisions over the business functions. The decision on opening a new branch could be taken by this group of people only. Therefore their decisions are very important and are of a high risk. The right decision taken at the right time makes a successful business.
The middle level consists of two layers.
The upper middle level has the regional managers. They supervise the work of the store managers and pass the work information to the top level.
The lower middle level has the store managers and the team leaders. The manager instructs the team leaders what to do and the team leader would instruct his team of low level staff. The work process is informed by the team leader to the manager and the manager will pass it to the regional manager.
The low level management is where the transaction processing happens. They are the staffs who interact with the customers. This level includes cashiers and staff managing the stock. The basic functions of the business are done using the low level management.
The reason for having a four layered structure is, FOODCHAIN is a large business in the industry, to manage a store there is a store manager but since there are 50 stores island wide, it will be very complicated for the top level to come to a conclusion with the different types of information provided from 50 different stores. If there is a regional manager to integrate the information from the stores in his region and summarize it to be produced to the top level it will reduce the level of complications for better and effective decisions.
Objectives of FOODCHAIN
Business objectives of an organization have to be SMART to be valid and attainable. When an objective is first laid, a SMART analysis should be carried out.
SMART stands for:
S - Specific
M - Measurable
A - Achievable
R - Realistic
T - Time bound
Specific - being specific helps the business be focused and gives a clear view saying where we are and what we are doing. It should be able to answer questions What, Why and How?
Measurable - if a project is immeasurable then it turns out to be very unmanageable. It is very important to measure the project to understand its extent of possibility. An objective which is measurable helps to understand our progress.
Achievable - determine whether the stated objective is achievable or not by assessing the skills, resources and capital available.
Realistic - make sure you have enough skills resources and capital to make the project successful. It needs to be clarified whether it really could be possible or not. If not the project should be terminated immediately.
Time bound - setting a deadline for the project. This makes way to prepare a schedule and encourages to work effectively towards the goal.
Considering these facts objectives of FOODCHAIN were stated:
The objectives of FOODCHAIN have been to emerge as one of the favourite super market chain across its stakeholders in Srilanka.
To expand its business operations through online as well as offline modes of business operations
To enhance sustainability across the value chain of FOODCHAIN.
Increase the number of outlets to 80 in the next two years.
On assessing the profits, market share, return on capital employed FOODCHAIN has been falling short of the giants of retail players such as Cargills Food City, Laughs Sun Up, Keells Super, Arpico Super Centre and Premasiri Supermarket. It is evident that the retail players such as Cargills Food City and Arpico Super Centre have attained excellence through information technology and operational excellence. On assessing the customer base and the growth of customer service attributes FOODCHAIN stands down in increasing the loyal base of customers and offering more number of service to the customers (Cento, 2010). The sales of FOODCHAIN has been on the positive note hence there is a huge risk of losing its potential employees to the rivals under the super market chain.
1.3 PEST analysis:
It is evident that organization that exists in a super market chain business has been confronted to both internal and external factors which in turn shape the strategic goals and the behaviour of the FOODCHAIN. On the assessment of the micro and macro environment affecting FOODCHAIN the impact of external factors has been dramatic. The assessment of the political, legal, social and technological factors affecting FOODCHAIN paves way for understanding the factors driving the market growth and the restraining factors affecting the decline of market for FOODCHAIN. Thus the PEST analysis of FOODCHAIN will help in assessing the scope for development and there by influencing the decision making of FOODCHAIN's top management (Bryce, 2009).
As FOODCHAIN is operating across more than 50 islands the company has been influenced by legal legislations and policies derived from government across Srilanka. Hence FOODCHAIN faces more number of complexities in meeting the norms and the regulations laid down by the government including the economic union. On expanding the operations of FOODCHAIN in Asian countries there is a huge risk associated with the instability of the government which in turn affects the policies and procedures favouring business of FOODCHAIN. Post the end of civil war in Srilanka the support of government in promoting entry of super markets through FDI has been on the positive note.
Employment legislations affecting the staffing policies and procedures of FOODCHAIN has been on the favourable note. Given the scope for super market chains in taking different proportions of staffing modes such as full time, part time, lower paid, highly paid workers the support from the Srilankan government will be proactive. It is also evident that super market chain has contributed to the reducing rate of unemployment across the globe (Chaffey, 2009).
The core business activities of FOODCHAIN are influenced by both the supply and the demand factors in the Srilankan market. Consumer behaviours and spending power is influenced by the global economy and the financial turmoil has crucially affected the costs, profits associated with the products of FOODCHAIN. Changes in the oil prices on international context also affect the cost of operations and the objective of accomplishing sustainable business activities (Cao, 2011). After the end of civil war the spending power of the consumer has risen to a greater extent which in turn has enhanced the scope for the retail players. It is also evident that FOODCHAIN has been keen on promoting and selling products that originate from Srilanka so any economic changes / impact emerging from Srilanka will let down the accomplishment of strategic goals of FOODCHAIN.
Consumer behaviour is influenced by the cultural trends and the demographics of people where FOODCHAIN exists. Hence majority of the consumers of FOODCHAIN look out for shops that offers all under one roof and the nature of purchase tends to be bulk in quantity. Ageing population in Srilanka has redesigned the portfolio and products sold by FOODCHAIN. On the other hand the number of female workers is increasing in and around Srilanka which has further enhanced the scope for increasing the value adding products offered to the customers (Nigel, 2009).
As far as the food and non-food retail industry is concerned, customers are exposed to more number of information and components of quality. Hygiene factors are highly influencing the attitude of the customers and hence the preference of the customers is highly fluctuating towards hygienic and quality factors. Marketing mix of FOODCHAIN has been subjected to change as a result of the social factors influencing the organization. It is also evident that majority of the population under generation -X and generation Y are preferring to make their purchases through the E-commerce and online shopping options. Thus the changing preference insists the need of shifting the business operations towards online modes of selling (Cao, 2011).
Role of information technology has changed the way super market chains operate today in the retail industry of Srilanka. Thanks to the dominance of information, communication and technology which has redesigned the way FOODCHAIN needs to operate in the near future. Use of enterprise resource packages across all the operations of the company has aided in offering more credits both to the customers as well as the company. IT devices has been influencing the super market chains such as wireless devices, RFID - Radio frequency identification devices, kiosk, self-check outs, E-commerce and electronic point of sales (Cento, 2010). Proactive role of government in incorporating IT across the value chain of super markets has been crucial at this juncture as huge number of investments has been made in the field of developing the Technological infrastructure across Srilanka in terms of connectivity.
1.4 Stakeholders of FOODCHAIN:
Who are the stakeholders?
Stakeholders are the people who are influenced or affected by the particular organization. The stakeholders of an organization can be categorized as follows;
Internal - directors, managers and employees
Connected - shareholders, customers, suppliers, competitors etc.
External - government, local, community, pressure groups etc.
FOODCHAIN has been driven by the presence of both internal as well as the external stakeholders. Employees and customers form the most important stakeholders with whom the organizational strategy and objectives frequently interact with. Employees are the most important assets of FOODCHAIN who have been loyal to the management of FOODCHAIN (Cao, 2011). On meeting the expectations of the employees FOODCHAIN has stayed back due to the increased battle for acquisition of battle across the super market chain. Customers on the other hand have more expectations in terms of modes of business and nature of products offered by FOODCHAIN. On meeting the expectation of the customers FOODCHAIN stays back with more scope for improving the customer relationship management interventions. Positive word of mouth marketing has been one of the most important credits that FOODCHAIN has in the portfolio of its customers (Deane, 2010).
Farmers of Srilanka play a crucial role as stakeholders as they offer FOODCHAIN products of perishability right from the initiation of procurement. Hence their role is inevitable with more emphasis to quality of the goods sourced from the farmers in a sustainable manner. This in turn enhances the overall gross domestic product and the quality of life in Srilanka for the community of farmers.
Shareholders form yet another important stakeholder of FOODCHAIN; stakeholder analysis has helped FOODCHAIN in offering more transparent and accurate information to the investors so that they do not lack trust or confidence on the strategic decisions of FOODCHAIN. Role of government as stakeholders is inevitable for FOODCHAIN as most of the expansion and the diversification plan of FOODCHAIN is supported and assisted by the governmental policies. On addressing the environmental issues FOODCHAIN has sustained a good rapport with its local community and the non-customers there by building a positive brand image (Ellis, 2011). Suppliers also have equal weightage as part of the stakeholder management as they act as an intermediate between the procurement of the food and non-food materials to the outlets of FOODCHAIN. Thus the stakeholders of FOODCHAIN have been in abundance there is a huge scope for meeting the requirement of the stakeholders (Cao, 2011).
Task - 2
2.1 Advantages of using E-business for the operations of FOODCHAIN
E-business is the digital enablement of transactions and processes within a firm and therefore does not include any exchange in value. No commercial transaction, an exchange of value across organizational or individual boundaries, takes place in e-business. (Pearson Education, 2010)
FOODCHAIN in the verge of getting expanded to more than 80 outlets within a span of 2 years needs the presence of technology. Hence implementing E-business as a part of its business operations will offer extensive benefits to the customers.
The most important credit that FOODCHAIN will be able to gain through E-business is the cost advantage. A considerable amount of benefit would rise from reducing the operational costs associated with the maintenance of excess of inventory and the cost of transactions. High transparency is being achieved in the process of billing with less reliance on the human resource management (Cento, 2010). Customer will also be able to search different products at ease through access to the website thus decreasing the cost associated with the search of products for the customers (Dave, 2010).
Marketing and communications:
FOODCHAIN will be able to strengthen its marketing activities as a result of operating through E-business, thanks to the emergence of viral marketing initiatives that have increased the scope for spreading the positive word of mouth campaigns for organizations (Bryce, 2009). By implementing E-business, FOODCHAIN will be able to promote its offers and products through acquiring purchasing trends, preferences and customizing marketing activities according to them. Thus FOODCHAIN has the opportunity to interact with the existing as well as the potential customers by its official presence of the viral marketing campaigns. E- Business increases the scope of dragging the attention of the customers through loyalty programs and offering customized solutions to the customers of FOODCHAIN (Brazeal, 2009).
Understanding and responding to the highly volatile needs of the super market chain industry becomes feasible for FOODCHAIN as a result of implementing its E-business operations. FOODCHAIN will be able to increase its product life cycle and be able to identify potential strategies to take advantage of the rivals (Botha, 2011). On the other hand achieving economies of scale becomes easier for FOODCHAIN given the credit of inventory management and order tracking through IT systems and devices. Thus expanding and diversifying in to untapped locations across the globe becomes easier for FOODCHAIN by implementing E-business in its operations (Schenk, 2009).
2.2 Impact of introducing E-commerce system to FOODCHAIN including the risks as well as disadvantages
E-commerce is the use of the Internet and the Web to conduct business transactions. E-commerce involves digitally enabled commercial transactions between and among organizations and individuals. (Pearson Education, 2010)
E-commerce systems offer FOODCHAIN with huge volume of benefits for FOODCHAIN and its business operations. E-commerce system will aid FOODCHAIN in breaking the boundaries of geographical limitations with the absence of physical infrastructure there is huge scope for spreading the brand presence of FOODCHAIN. The option of attracting the customer through search engine visibility by use of search engine optimization, Google analytics are some of the credentials that FOODCHAIN will gain (Scott, 2009). The E-business working hours would also be extended to 24*7 as customers can order products at any time. FOODCHAIN will also be able to offer customers the option of comparison shopping with more information to the customers on description and information about the products (Sydney, 2009).
Equally there is more number of risks as well as disadvantages associated in implementing the E-commerce system for FOODCHAIN. The existing state of human resource portrays the issues associated with the attrition and migration of employees to other super market chains. Implementing E-commerce will call for acquisition as well as retention of IT employees of high skilled workforce. The cost of implementation associated with the E-commerce platform is huge and hence might exert the risk of failure. Integrating the supply chain management of FOODCHAIN with that of delivery of goods and services is a complex task as increased time taken to deliver the products will result in customer dissatisfaction (Traver, 2010). Addressing the issues of confidentiality, connectivity and disclosure of confidential information at the time of doing payment for the purchased goods is yet again a huge risk involved in E-commerce systems. The outcomes of the issues associated with payment will lead to poor trust amongst the customers and has high probabilities of spreading negative word of mouth marketing.
2.3 Global impact on E-commerce on society:
Globalization, privatization as well as liberalization have changed the way E-commerce act in developing the society across the globe. Through business to business transactions, business to consumer transactions and business to government transactions E-commerce has changed the way subsystems of the society interact with each other (Traver, 2010). Most business organizations have involved E-commerce to their functions as a mark on development. Initially they faced some unpleasant response due to unfamiliarity, but the increasing ICT usage later gave way to success.
On the other hand E-commerce approach to the business activities has reduced the investments associated with the infrastructure and physical resources there by reducing the depletion of natural resources. Reduced manpower requirement has in turn increased the unemployment rates to some extent as a result of E-commerce solution. This may rise a revolution among employees fighting for jobs.
Under developed, developed and developing countries have witnessed increase in the gross domestic product and consumer spending as a result of the E-commerce transactions involved in all modes of business activities. Virtual operations of the business have thus provoked the trends, culture, perceptions and preferences of the customers through E-commerce transactions across the globe (Jenkins, 2011).
Even though everything is getting limited to a small computer considering the busy schedule of man, eventually everything including his job seems to be right there at easy reach on his PC which makes him idle. Through this the efficiency and all the man power a human is gifted with lay waste.
3.1 Business to Business opportunities &Business to consumer opportunities
Business to Business opportunities involve selling of the grocery and the non-food items to the other business organizations or a whole seller. Given the credit of diversified product portfolio for FOODCHAIN there is a huge scope for FOODCHAIN to offer clothing, apparels and other non-food items to other business organizations. Even though there is a huge amount of risk involved in it the mass procurement of FOODCHAIN will help in realizing the economies of scale through B2B within a short period of time. Sustainable procurement from the farmers as well as the other suppliers further stimulates the possibilities of driving the B2B business for FOODCHAIN.
Some business to business online services:
Business to consumer opportunities for FOODCHAIN is in abundance as it involves offering pre sales information to the customers through the internet as well as the social networks comprising the prices, offers, discounts and the information associated with the coupons for the customers (Kalb, 2009). Thus the shift has to be towards opting for hybrid stores of FOODCHAIN which involves selling the goods across multiple channels. With the emergence of E-customer relationship management there is huge scope for FOODCHAIN to establish its business to consumer opportunities in selling both the food and non-food items across the globe using effective E-commerce value chain.
Some business to consumer online services:
3.2 Off line and online marketing strategies
Online marketing strategies are vital to promote the E-business and the E-commerce presence of FOODCHAIN. Online marketing strategies are in abundance but given the existing scenario of FOODCHAIN both social media marketing and viral marketing are the two most vibrant online marketing initiatives that will aid in yielding the return on investments. Amidst this search engine marketing, search engine optimization, email marketing and display advertising are some of the most effective ways of online advertising that FOODCHAIN can take in to account (Kalb, 2009).
On the offline marketing initiatives include offering sponsorships to sports events such as golf and football. Amidst these offering nongovernmental organizations support on eco-friendly and social issues is one of the most attractive modes of offline marketing. Newspaper adds, advertising through radio, televisions still stands to be the recommended offline marketing for FOODCHAIN (Scott, 2009).
Basic need of infrastructure, marketing personal and tools for marketing purpose.
Requirement of only a web
Large number of staff required to maintain market. Resulting in high cost.
Market depends on the extent of access to the internet. The more people access it the higher the market penetration would be.
Approach to the customer
Effort to visit the customer to contact or mail. Consumes time and effort. Work gets delayed.
A customer can be contacted over click. They can mail them or approach them whenever since the web is available 24*7.
Very costly and does not reach customers on time.
Comparatively cheap. Time consumed. Immediately makes customer aware of it.
Increased work force is required to maintain large number of staff. This increases the expenses of the organization.
No work force needed, just a few to maintain the web records will help. Less man power keeps the expenses down.
Customers have to spare time to walk into a showroom to buy. This consumes time and staff will not be there all the time.
The availability of the web for 24 hours helps the customer to make orders whenever free and get it delivered when they wish.
High expenses occur due to outsourcing.
Considerable expense, online marketing needs no such outsourcing.
Return on investment
Only one customer at a time can be catered by a staff. Also when they make orders confirmation mails will take long to reach customers. Therefore there is very less return on capital.
Very high return on capital compared to offline. Many customers can view a product at a time and make orders. Response will be sent within few moments.
No regular and accurate flow of information
MIS and reporting can be streamlined. The management can be informed with the productivity of online marketing strategies instantly.
3.3 Strengths and Weakness
On analysing the case of FOODCHAIN it could be inferred that there are equal proportions of strengths as well as weakens affecting the business operations of FOODCHAIN.
- Brand Image and experience in the field of super market chain for more than 30 years
- Stability in financial resources and target of middle income group of customers
- Presence of semi loyal customers
- Existing portfolio of suppliers and retailers
- Absence of E-commerce and E-business initiatives
- Inability to enhance customer relationship management with customers
- Threat of losing potential human capital to the competitors of FOODCHAIN.
- Increasing core competencies of rivals and use of Information technology as competitive edge.
Thus the weakness listed above offer huge scope for FOODCHAIN to derive and implement an E-commerce solution. The business implication comprises:
- Establishing E-commerce operation to the website of FOODCHAIN
- Linking all the 50 outlets of FOODCHAIN through E-commerce platform
- Build effective supply chain management to support E-commerce platform
- Increase the total number of sales through E-marketing and E-commerce
- Increase the profit sheets there by increasing the scope for offering superior human resource practices to the employees of FOODCHAIN.
- Increase the loyal base of customers there by increasing the market share.
3.4 Technological requirements, Key business process, security and legal aspects design E-commerce solution
Figure 1 Revenue model
Flow of money
Flow of product
Advantages of referring a revenue model:
Products can be sold at a very low price.
Order is built according to the customers' wish.
Payments are received earlier.
A new product can be easily advertised.
Usage of customer data to provide customized value added service.
Proactive decision making.
This model is called the "Direct to customer model". I chose this model to design because the facilities are more advantageous to the FOODCHAIN.
Technical Resources essential for E-commerce solution of FOODCHAIN:
High Resolution camera for snapshots of products of FOODCHAIN
Rooms for stalling IT servers
Vehicles, Trucks for Transportation of Logistics to all parts of the world
3.5 Suitability of new E-commerce solution to competitive position of FOODCHAIN
The suitability of the proposed E-commerce solution will add value to the operations and the functions of FOODCHAIN. The competitive position of the organization is gained by witnessed progress and positive developments such as:
Increase in financial outcomes of FOODCHAIN in form of high net present value, return on investments, and acquisition of market share, financial reports highlighting profit of FOODCHAIN, economies of scale, slash in operational costs, and increased profit in E-commerce transactions (Cao, 2011).
Development in the marketing outcomes comprise increasing number of customer base for online shipping of FOODCHAIN, volume of data acquired about customers, buying preferences and contacts. Success of loyalty schemes and viral marketing initiatives reflecting in increased customer satisfaction and word of mouth marketing, expansion in to international markets through E-commerce (Botha, 2011).
Apart from the marketing and the financial perspectives the most important metric that would justify the suitability of proposed E-commerce platform includes analysis of the human resource management interventions which reflects in reduced rate of attrition, number of candidates successful recruited and selected through E-commerce website, overall productivity and commitment of the employees (Botha, 2011).
3.6 Market Analysis:
Size of super market chain across the globe has been huge and is undoubtedly the most lucrative industry for potential investors. The cost of entry as well as the exit has been high and similarly the profits associated with the super market chain business.
Historical background of the super market industry emerged in the form of chain stores during 1920. As each one of these stores was being employed by 2 to 3 employees the transition to the super market took place during the span of 1930 to that of 1940. Industrial revolution and the world wars took an active participation in the transition of traditional outlets to that of super markets. Yet again the super markets took another level of transition during the 1960's in the form of shopping centre's which are also termed as suburbs. Post the globalization organization realized the need of merging, strategic alliance and acquisitions which in turned restored the concept of retailing and thus the super markets chain emerged in the verge of international expansion by several brands (Allen, 2009).
Characteristics of the super market chain have been criticized for its high volatility and need for organization to meet the changing demands across its stakeholders. Super market chains have been a part of the retail industry and have always been exposed to the political, social, technological and the economic factors influencing the expansion of retail outlets.
Competitors in the super market chain are intense as the nature of industry is attractive for potential investors there has been more number of players entering the retail industry in Srilanka. The major players include
Cargill's food city has expanded dramatically over 200 outlets across the island; the market share of Cargill's food city has crossed 50% there by taking a lead over the other players such as Lanka Santhosa, Arpico Super Centre, Jay marketing and Laugfs Sunup. The initiative of Cargills foods towards manufacturing of won foods has turned out be a threat for the other super market players in Srilanka.
The emerging trends in the super market chain have been associated with the multiplication of ecommerce and e- marketing initiatives that are turning the mode of business operations to the next level (Barnhart, 2009).
Wide range of source for reference.
Ability to apply from the referred articles and journals.
Usage of appropriate language.
Difficulty faced when researching supermarkets in Srilanka
Lessons I learnt
Gained inestimable knowledge on business oriented world and the role of technology.
How creativeness is needed to be unique in the business world
Business language (business terms)