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I choose Gate Gourmet as an organisation for use as case study. It is headquartered at Zurich-Airport, Switzerland and is the world’s second largest airline catering company, providing catering services to many of the world’s major airlines, such as British Airways, Swissair, United Airlines, Delta Airlines, Virgin Atlantic and Cathay Pacific to name just a few. The scale and complexity of the Gate Gourmet operations is high and it operates in global environment in an industry that is highly competitive and cost sensitive. This gives an opportunity to evaluate the macro and micro environment in line with the strategic options that Gate Gourmet has.
There are several practices that are used for strategic planning in the industry today and the choice of these are driven by factors such as type of industry, market realities, competitive pressures, size of the business and of course the culture and ethical practices of the organisation. Planning horizons have now considerably shortened considering the dynamic nature of business of the 21st century. The horizons have now become 2-3 years. There are however several best practices that have emerged from what is observed across industries:
Stretch goals are an imperative to make strategic thinking more out of the box
Planning processes are now regarded as evolving and flexible and it is to the organisation’s credit how quickly it can course correct.
With the understanding of importance of stakeholder buy in and support there is an emphasis on communication in the strategic plan. This is an integral part of the quality planning in the strategic planning.
Detailed plans are now created to tie the objectives to activities and outcomes.
An organisations competitiveness is now determined by a set interconnected core competencies and not by a single core competency. This has emerged from the understanding that there are various organisational aspects that go into building a competitive advantage.
In addition to the best practices mentioned above, there are some theories and frameworks that support the strategic planning:
SWOT analysis for environmental analysis
Porter’s 5 forces theory for environmental analysis
Strategy as an ecology to understand the competition
Balanced Scorecard approach
McKinsey’s 7-S model to understand how the organisational factor’s help drive it’s operation strategy
Ansoff’s matrix to define the service or product strategy
BCG and McKinsey matrix to review the product portfolio
Value chain analysis as to how the organisation is adding value and interacting with it’s ecosystem
Core Competency approach for deciding differentiation approach
Top down or bottom up approach for participation and communication
Strategic narratives that help in framing and analysis of strategic options
For Gate Gourmet to formulate it’s strategy, we must look the following:
Environmental analysis and the position of Gate Gourmet relative to it’s environment. I would recommend using Porter’s 5 forces and SWOT as it will help us understand both the macro and micro environment and link it with the Gate Gourmet’s position in the competitive landscape.
Since the industry of inflight catering is defined largely by operational excellence, we can use the 4-V analysis to understand the areas of operational excellence that can be used to differentiate, not merely to drive operational efficiency, but also to achieve competitive advantage.
The SWOT will also then help us understand the core competency of Gate Gourmet and if that fits with the differentiation strategy that will help it achieve competitive advantage.
From the core competencies, the balanced scored card can be used to outline the business objectives that will help leverage the core competencies and achieve competitive advantage. These objectives will be defined across financial, customer, human resources and knowledge management aspects of the organisation.
Relevant theories for the marketing plan for Gate Gourmet are product Life cycle management using Ansoff’s matrix and BCG matrix, service marketing strategy and innovation based marketing strategy. Looking at the product life cycle of the inflight catering business, we understand that the business is a mature business and therefore will require innovation and service differentiation focus to compete.
Also, BCG matrix will help Gate Gourmet evaluate the services and geographies that can be dropped from it’s portfolios and the ones that need to be consolidated and invested in. Ansoff’s matrix will help Gate Gourmet to decide the innovation strategy through new product launch. This will help improve it’s utilization of the supply chain resources and the investments and thus help reduce it’s per unit costs.
There are 2 general strategic options that are available to Gate Gourmet: Cost Leadership and Differentiation. Let us look at the relative advantages and disadvantages:
Cost Leadership: Gate Gourmet’s business drives the need for it to be increasingly efficient as its airline customers face heightened cost pressures due to the changing business and economic scenario. It operates in a business which is low margin and increasingly coming under further squeeze. Hence Cost leadership is a requirement for business in this industry in the in flight catering business. It cannot be a source of competitive advantage.
Differentiation: Given that efficiency focus is a requirement or a qualifying criterion in the industry of Gate Gourmet, what can lead to a competitive advantage is through a differentiation strategy. Quality and flexibility are areas that can help Gate Gourmet differentiate itself to its competition. However, focus on quality and flexibility will lead to overheads that can act against the cost leadership requirement. Therefore Gate Gourmet will also need to have a robust operational strategy to drive the quality and flexibility differentiation with cost leadership.
The following are Gate Gourmet’s key stakeholders:
Employees and contractors: The strategy of flexibility and consolidation will impact the employees as Gate Gourmet will have to resort to lay offs for its permanent employees and look at flexible hiring model to suit it’s operations.
Raw Material Suppliers: Gate Gourmet will have to look at creating a deeper alliance and information sharing to implement it’s strategy of flexibility and quality focus. This will happen though further integration of their systems and through real time information sharing. For cost leadership, Gate Gourmet will need to get into longer term contracts and choose strategic suppliers that can offer it better unit prices.
Supply Chain/Logistics partners: Gate Gourmet will need to have more integration and alignment with it’s supply chain partners to put in place a quality and flexibility strategy. It will need to agree with them on standard quality practices to ensure consistent quality experience creating the competitive advantage that Gate Gourmet is looking at.
Airlines: Flexibility and cost leadership will require Gate Gourmet to receive information from it’s airline customers in real time. Gate Gourmet will also need to have
The following are the key areas that need to be paid special attention to by the management team implementing the strategy:
The communication of the strategy, it’s objectives and the rationale behind that needs to be clearly articulated and communicated to the employees. This is required to create the appropriate buy in from them.
The communication also needs to be planned to the customers of the organisation to share with them how the organisation is changing for the better and aligning to the market and competitive requirements
The partners of the organisation also need to be informed and aligned with the changes so that they too can change their work practices to align with the organisational strategy.
The organisations structure needs to support the new strategy and ensure that the execution is supported by the new organisation
This will also ensure resources are allocated efficiently and minimise the waste
Training and development
Training programs need to be implemented for the new and existing employees to close the information and skill gap required to execute the new strategy
Investments into Systems and Integration
For close integration with the partners and customers of the organisation systems need to be put in place to support this. The organisation will need to invest in infrastructure and work practices to put these systems in place
Contractual Strategy – Serviced Based and Strategic partners
The contractual relationships with the partners may need to be revisited and consolidated in view with the new strategy
Also existing partners may have to revisit the service levels and scope of the contractual relationships.
Task 2(D )
Training and development
Develop vision, mission, objectives and measures of these
Vision statement articulates how the organisation sees itself in the future, in fact it is the long term goal for the organisation which it strives to achieve. Ideally this goal should be such that it can never be achieved by the organisation and it should serve as the drive for the organisation.
A mission statement is more of a goal statement for a fixed tenure of time and is usually derived from the Vision statement. From the mission statement the organisational objectives year on year can be derived.
Value of the organisation defines the principles and ethics that the organisation abides by and holds dear. These could be targeted at doing business in a specific way, or giving high consideration to employees and customers. These are principles that are considered to be above the business objectives and are the fundamentals on which the company envisions it’s future.
There are many ways in which these can be measured. A representative way of doing this is evaluating how customers and employees believe the organisation is doing business keeping in mind the vision, mission and values. Also, employees can be interviewed to determine how their individual values are aligned to organisational values and if they hold the latter close and let it reflect in their working. The prevailing organisational culture also reflects how the vision, mission and values are absorbed by the different stakeholders of the organisation.
Another way of measuring the effectiveness is to determine how the organisations performance management system is aligned to the mission and goals that have been set and how these are supported by the training, development, mentoring and coaching in the organisation.
Gate Gourmet abides a set of brand values and that drives it’s vision of it’s business. The Gate group was established as a master brand to reflect the growing diversity of the business. The shapes making up the outline of a star in the logo symbolize Gate group’s individual companies and their vast range of capabilities.
The points on the star represent the brand values with which we make every effort to serve our customers:
QUALITY – We deliver best-in-class products and services.
INTEGRITY – We pledge an ethical and trustworthy relationship.
RELIABILITY – On-time and with a clear focus on safety.
VALUE – Optimizing value for you throughout the supply chain.
FLEXIBILITY – One size does not fit all. We are attuned to your needs.
PASSION – We lead through innovation and inspiration.
RESPECT – We celebrate the diversity of cultures among our employees and customers.
RESPONSIBILITY – We strive to protect the environment and to be a good corporate citizen in our communities.
The company’s website gives the following information on it’s mission statement: “Customers prefer us because passion shines through everything we do. We measure our success by the success our customers enjoy”. (Refer: Source 2)
The organisation’s cultural and ethical environment provides a mean for realising it’s vision and mission. These are execution ingredients that it requires to attain the vision and mission that it has set for itself. The culture and ethical conditions are determined by how the employees and partners of the organisation have adopted and aligned with the vision, mission and strategy. It is important to note that without these supporting factors, even the most well crafted vision, mission and strategy cannot be implemented.
The stakeholders need to align with these and the McKinsey’s 7-S model reflects how these factors interact with each other and determine how vision, mission and strategy get implemented.
Gate Gourmet operations can be described as extremely complex requiring optimized efficiencies and responsiveness at the same time, where it must be able to achieve very stringent operational objectives in an extremely competitive, dynamic business environment. Some of its operations objectives are listed and evaluated below along with relative importance of criteria selected for evaluation, conflicts with other objectives and how Gate Gourmet accommodates these changes
Driving lower costs through economies and processes – Due to the nature of the competition in the industry, and where customers are always looking drive costs lower to increase their profitability, the cost per meal that Gate Gourmet charges to its customers would directly impact the amount of business that it is able to generate from its existing and new customers.
Flexibility, responsiveness to changing customer needs and ability to operate in an dynamic environment – Though the company has to offer very competitive pricing, it is also very important that the company that it is very flexible to the constantly changing customer requirements and is able to deliver the product and service that are closely aligned with customer expectations. As can be seen from the case, the final requirement for a particular flight is not known till hours before the flight and even that could change due to last minute cancellations or new booking, due to which they have to operate in a just in time fashion, of being able to come up with delivery at the moment the customer requires it.
Maintenance of highest quality standards – As Gate Gourmet’s customers are airlines that are extremely conscious of offering the best to their passengers and also ensuring that they have good branding as a company offering the highest quality experience, they would want to ensure that the food that is served on their flights is of the highest standards and that various processes are followed for maintaining quality and consistency. [Critical success factors for Inflight Catering services: Singapore Airport Terminal Services’ practices as management benchmarks , Type: Article, Case study, Author(s): Zeph Yun Chang, Wee Yong Yeong, Lawrence Loh, Source: The TQM Magazine; Volume: 9 Issue: 4; 1997]
Reliability and service guarantee – In addition to the above discussed factors, a very important operational objective for the company to achieve would be the ensure very high reliability in the services that it provides and also providing very high service levels that would ensure its customer’s business work as smoothly as possible. [Critical success factors for Inflight Catering services: Singapore Airport Terminal Services’ practices as management benchmarks , Type: Article, Case study, Author(s): Zeph Yun Chang, Wee Yong Yeong, Lawrence Loh, Source: The TQM Magazine; Volume: 9 Issue: 4; 1997]
Seamless communication and working with a vast array of partners in a global supply chain – As discussed above, the operation of the company, due to the scale at which it operates is very complex where it has to coordinate multiple aspects and work with multiple partners and customers to deliver the required level of service, it is a very important operational objective that there is a very high amount of information sharing and close working together across the entire value chain that would allow for planned service delivery. This is again an important objective and is aligned with the other objectives that ensure that the company is able to deliver.
Explore the implications of changes in the general and marketing environment for organisations
Let us start by analysing the typology of Gate Gourmet which will then set the context for relevant objectives for Gate Gourmet. This is the key to understanding operations and any gaps in their performance:
Volume: Clearly Gate Gourmet completes a high volume of daily transactions across it’s supply chain with 534 thousand meals a day worldwide, on average 195 million every year. It has 115 flight kitchens in 30 different countries, in locations as diverse as Hawaii, Los Angeles, Buenos Aires, New York, Madrid, London, Bangkok, Sydney and Tokyo. Also, it emphasises working in unison with cleaning staff, baggage handlers and maintenance crews to ensure that the aircraft are prepared quickly for departure.
Variety: Gourmet Gate faces variety across its airline customers and also within it’s customers due to the geographical spread of the airline operations, the customer needs differ. Creating a high variety situation for Gate Gourmet. To summarise we the following drivers for variety:
Geo disperses airline organisation
Geo dispersed end customers
Customizations of the end product required based on airline/geo
Variation in demand: Gate Gourmet faces mediocre variation in demand that typically emerges from the change in booking status of passengers – which is the nature of the airline industry. While demand variation can be high during emergency situations – as had been the case during the aftermath of September 2001.
Visibility: The Gate Gourmet operations are not customer facing while they supply a product and service that impacts the end customer experience for their airline customers.
Give the 4 V analysis, we need to look at the implications for Gate Gourmet:
High transaction volume would mean capital intensive operations for Gate Gourmet which will help it drive high repeatability and lower it’s unit costs as the volumes increases and economies of scope kick in. Gate Gourmet will also pay attention to introduce specialisation in it’s operations and allocated it’s resources as per the areas of specialisation – these will be in terms of the geographic operation of the airlines and the airline itself.
High variety in it’s business would mean Gate Gourmet operations to be flexible and aimed to meet the customer needs. The complexity that this introduces in the operations increases the unit costs.
Variation in demand is though mediocre, but the Gate Gourmet needs to be in touch with demand and have the ability to anticipate the demand fluctuations and flexibility to cater to these demand variation. Capacity redundancy may not be crucial as there is no regular high variation in the demand. This factor also drives the unit costs upwards.
Visibility of operations for Gate Gourmet is low for the end customer, therefore is a delay between the production and consumption of the product of Gate Gourmet. This allows for higher standardisation and staffing with resources with low contact skills. This allows high staff utilisation and centralisation of production therefore driving the unit costs down.
The analysis and implications leads us to the objectives that will be key for meeting Gate Gourmet’s customers and end customer expectations:
Dependency of delivery – Order Qualifying criterion
Speed of response – Order Qualifying criterion
Cost – Order Qualifying criterion
Quality Focus – Order Winning criterion
Flexibility- Order Winning criterion
While the high volume and low visibility of the operations help Gate Gourmet standardise the operations and resourcing driving down the unit costs through economies of scope. They have also reduced the number flight kitchens by 10% from 115, when the case was published, to 97 currently and also their daily volumes have gone up by 10% – hinting at strong economies of scope driving their unit costs lower. While the need for high variety and medium variation require it’s operations be flexible and integrate with the customer demand scenario. This drives the unit costs upwards and creates a challenge for gate Gourmet in this low margin and low cost business.
Gate Gourmet advocates the concept that the organisational structure should reflect the core processes undertaken by the business, with a manager given responsibility for each process. Under the traditional structure, if there is a problem with servicing a flight, no one manager would be responsible-the fault might lie with the purchasing manager for not ordering supplies, the equipment manager for not having the right equipment, the production manager, or the transportation manager. So, some caterers have now organised their production units based on core processes. Gate Gourmet in Geneva (Emad, 1997) identified these as Equipment Handling, Customer Management, and Goods Supply and Preparation
Speed of Response:
Gate Gourmet integrates tightly with it’s upstream and downstream supply chain partners through transparent and real time information sharing through the SCALA and e-gatematrix ensuring that the same information is available to all the partners at the same time; demonstrating backward and forward integration for creating competitive advantage. They have integrated the SC partners giving the last mile reliability to their end-customers, though they function as different organisations the information sharing couples then tightly and helping them reach rapidly to changes in their environment. It has created standardised menus in SCALA to ensure consistency and repeatability in it’s menus.
For quality Gate Gourmet’s global team of talented and accredited chefs is ready to serve your catering needs and deliver on your vision. (Source: http://gategourmet.gategroupmember.com/index.php/culinary)
Gate Gourmet has instituted a total quality management initiative that is aimed at inculcating process quality than relying on inspection quality. This initiative is called Airline Catering On The Move “Global Service Excellence” and has been implemented internationally across it’s network of operations. This program was developed through the expert support of Dr. Donald Fisher, a globally-acknowledged expert in the quality management field. Dr. Fisher, of the Mid-South Quality Productivity Center (MSQPC). Dr. Fisher has been acting as an external consultant and has been instrumental in this initiative by bringing in his global experience and expertise. This alliance has been particularly valuable as Gate Gourmet operates in an international context as well. (Source: http://www.msqpc.com/Newsletters/Spring2003.pdf)
(Source: Title: High flyer Author(s): Bettye Wells Miller Journal: Managing Service Quality)
Customer requirements of Gate Gourmet are such that it needs to assemble meals as per the specific guideline provided. Also, the packing and loading onto the service trolleys are as per specification. These service trolleys are loaded onto huge coolers and into loader trucks to send to the aircraft galley’s just before the take off. Gate gourmet operates nearly 1700 of these vehicles and many of these are already equipped with cooling systems, cameras and state of the art engines to meet with the strict FDA regulations and also comply with the environmental guidelines.
Gate Gourmet also follows aggressive HR policies to manage its human resources and ramping down based on changes in it’s customer demand. It also got into union issues due to these practices in the UK in 2005. (Source: http://www.itfglobal.org/solidarity/gategourmet.cfm) Gate Gourmet is also looking at moving from permanent employee base to flexible staffing practices again in an attempt to be flexible and responsive. (Source: http://news.bbc.co.uk/2/hi/business/4153366.stm) It is reported to making losses globally and trying to revamp its operations to stay profitable. (Source: http://www.nytimes.com/2005/08/15/business/worldbusiness/15iht-gate.html?_r=1)
Gate Gourmet is consolidating its partnerships and acquiring logistics companies to allow it to backward integrate focussing on driving it’s unit operational costs lower. It is also looking at longer term contracts with it customers to assure a business volume over time.
It is also innovating and getting into new lines of business to improve utilisation of its supply chain & reduce it’s cost of operations and also drive top line growth. Gate Gourmet has entered into an alliance with ARINC Inc. (leader in onboard retail management). They are working together to promote on board sales programs for the world’s airlines and rail systems as well. This is helping Gate Gourmet improve utilization of it’s resources and reduce idle time. (Refer: http://www.arinc.com/news/2008/04-30-08.html)
Gate Gourmet has also diversified into non-airline catering where it can use it’s existing supply chain to service on-land and train passengers as well e.g it has teamed up with Starbucks and railways in Portugal. (Source: http://gategourmet.gategroupmember.com/index.php/culinary/non-airline-catering)
(Source: Title: Developing new products and services in flight catering Author(s): Peter Jones
Journal: International Journal of Contemporary Hospitality Management)
Plan for the implementation of a general or marketing strategy.
The mission and goals will help determine the business objectives that the organisation needs to achieve. Also, timelines for achieving these objectives can be set based on the mission and macro environmental factors of the organisation.
The objectives and the timeliness can then be broken down into lower level objectives and activities with shorter timelines. Each of these activities will be assigned to individuals with responsibilities and also resources required to complete these activities. Each of these activities will have outcomes outlined and linked to the key performance indicators. These can then be established as milestones and linked to the key performance indicators that can be used to review the milestones and activity status.
Therefore the timetable will consist of the following key elements:
High Level objectives
Low Level Objectives
Low Level Activities
Estimated duration of completion
Responsible individuals and departments
Resources required to complete the activities
KPI’s to be used to evaluate milestone status
While crafting a strategy, key performance indicators can be determined at the time of planning. A balanced scorecard typically helps determine the required KPI’s along the different areas of strategic importance. Also, targeted values for these KPI’s can be established during the planning process and how these need to be re-visited with time.
The data required for these KPI’s can be collected regularly and published as per a pre-determined schedule. These KPI’s can then be compared to the target and a root cause analysis be done for those KPI’s that are off the targets. Corrective action can then planned based on the root causes determined.
Post the difficulties that the customer airlines of Gate Gourmet were facing, Gate Gourmet decided to go with an approach of flexibility and to be able to match it’s cost structure with the changing financial situation of it’s customers. It decided to model it’s workforce requirement to this strategy as well and laid off workers in UK and US. However, there was an immediate backlash of these lay off specially in the UK leading to major business disruptions in Heathrow airport leading to grounding and delay of several flights prominent airlines. This had not been factored in by gate Gourmet management and they had to go for significant damage control measures post this fiasco. This indicates why Gate Gourmet should have monitored proactively the effects of it’s flexible strategy.
The decision of the Coca Cola company to expand it’s operations in India as ap art of it’s Asian strategy was faced with issues when it’s expansion in Southern India was faced with stiff resistance from the local population and community on the detrimental effects of the factories on the ground water table. This again demonstrated the need to the company to monitor and factor in the community aspects of a strategy.
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