Table of ContentChapter 1.0 2.0 3.0 4.0 5.0 6.0 7.0 1.0 Title Page 2 2-5 5-24 25-29 29-30 30 31 Summary of the Case Main Issues SWOT Analysis Solutions Recommendations Conclusion References Summary of the Case Calveta was founded by Antonio Calveta and it was built on Antonio’s passion for food and traditional family values. Calveta was a $2 billion, privately held firm that managed food 1 service operations for nearly 1,000 senior living facilities in the United States. The restaurant began in 1966 as a neighborhood restaurant in Brooklyn, featuring old family recipes and subsequently branched into second and third branch. Calveta was able gain access into the senior market in 1972 through Antonio’s church parish who introduced a nursing home manager that managed the Bushwick Senior Home. Calveta attracted the senior home folks as they offer better food which is not only more nutritious but within their allocated food budget. Services were offered with a higher-quality food in addition of a more personalized service. Calveta employed 15,000 people which consist of 500 workers that worked in the company’s Brooklyn HQ. Staff operated all aspects of resident dining facilities including menu development, meal preparation, service and implementation of special programs such as themed dinners and family events. After Antonio’s retirement in 2007, succeeding 35 years of leadership, Antonio’s eldest son, Frank was nominated as the CEO. Frank was entrusted by his father to double up the company’s revenue within 5 years. 2.0 Main Issues Frank, as the new CEO was requested to double the company’s revenues within five years, of which 2 years have passed without any credible strategy adopted yet. He did not want to disturb the special company culture or risk their reputation for quality food services on the race to double the revenue. Now he finds it difficult to carry out his father’s directives. The humanistic and emphatically pro-employee company culture should not be disturbed while the growth strategy takes place. Currently, he is in a dilemma whether to expand beyond the SLF market and he is worried if he could continue to maintain the quality level, for which Calveta is renowned, in this process. In order to increase the revenue as promised to his father, Frank has to consider growth strategies for his organization. He has a few strategies in his mind and has to work on them to see which one brings the maximum benefit and fulfils 2 The disadvantages of this strategy are: Any kind of growth or introducing itself to new markets would be restricted in choosing this strategy. Continuing the existing business The advantages of this strategy are as follows: There is less risk as their running in the same status as before. He also has thought of taking up Great Southwest Dining Service (GSD) which was situated in Phoenix and bringing a change to the organization structure as a whole. ii. They would not be incurring any additional costs. The reputation of the organization will not be lost. Trends toward the provision of fresher. A very less chance of meeting the targets that are put across. more healthful menu offerings for both patients and visitors would also work in Calveta’s favour. Customers from the hospital segment would accept Calveta Dining Services as that of the residents of SLF without much hassle. The provision of customized service intertwined with the quality of food remains constant and it will also not be affected. The demerits on choosing this option are mentioned below: 3 . i. The organization will be able to uphold its own culture which was being followed traditionally. Spreading its business to hospital segment The merits on choosing this option are mentioned below: The hospital segment presented a more logical fit with Calveta’s core competencies Hospital administrators might perceive Calveta’s skills at cost control as a means to containing expenses. The strategies that he has in mind are either to continue in the existing situation itself or introduce it to the hospital segment.his needs aptly. many of the strengths write out as a result of the Calvetas culture. The cons of the company on taking up this strategy are as follows: They will have to face a huge risk. Basically. The organization cannot estimate or forecast its growth beforehand. They will have to bear heavy debts. GSD had labour problems and substantial turnover in their management ranks. when the revenue generation is taken into consideration. GSD is presently in a good position. The organization hierarchy could be restructured so that it could accommodate significant growth while preserving the company’s core values. Calveta would attain a great deal of customer potential as it was maintained by GSD.superior food with more alimental enables the association get high ratings from SLF residents and managers. the high. Spreading the company may reduce the quality of service. which focuses on the high standard calibre food and customized services. 3. GSD was barely running in a profitable manner but it seemed to have a great potential. Its geographical coverage did not overlap with that of Calveta. Acquiring GSD and restructuring the organization The pros of the company on taking up this strategy are as follows: There are more chances of reaching the targets and obtaining desired market attraction in this strategy. the 4 . The culture of the company might not be maintained as it gets mixed with that of the hospital demographic. Considering the health reasons of their customers. There are entry barriers in the financial point of view in this segment. It could also affect the reputation that the company has been having for a long iii. time.0 SWOT Analysis By evaluating Calveta Dining service. which will increases its market and also coverage. Calveta allows their customers to pre. Calveta has a great disadvantage on the organisational body structure caused by the instruction execution of career progression programs. The employees are highly motivated by act of great opportunities to be promoted and receiving generous benefits.drift their menus and personalize service so that the customers feel contented. the frequent change in management teams harms the service quality and efficiency as well as increases the employees’ dissatisfactions on the stressful organizational structure. which results in overall stability within the organization.1 Strength Family business Stability: Family position typically determines who leads the business and as a result there is usually longevity in leadership. 5 . Calveta admits fresh ingredients at a disgrace of monetary value.older people. which raises concerns on customer care. the customized services and continuous innovations of Calveta satisfy the customer’s need by building food service teams and a variety of menu offering in each facility. 3. wide-ranging training program. In addition. multiple management levels inward the organization keeps the managers apart from customers and frustrates the efficiency of communication. Even though the program is an effective mode to motivate employees and achieve quick development. This mode yields generous cost which proceeds to deduce cost of food through deterring wastes. which creates a vital advantage over competitors who impart canned ingredients. The third strength is that the unique human resource culture with the company motivates employees successfully by implementing pay-for-performance plan. Cost-control model helps Calveta indicate the contracts at a low price and therefore provides a lower price to customers. which encourages prevalent promotions and job positions. In addition. Also. and the career proficiency program and among others. Some workers just need someone to believe in them. Commitment: Since the needs of the family are at stake. Out with the old. stronger customer relationships and more effective sales and marketing. This long term commitment leads to additional benefits. while family firms think years. or taking a pay cut. This “patience” and longterm perspective allows for good strategy and decision-making. This advantage comes in particularly handy during challenging times. Decreased Cost: Unlike typical workers. Long-term Outlook: Non‐family firms think about hitting goals this quarter. Whether it is new 6 . This level of commitment is almost impossible to generate in non-family firms. family members working at family firms are willing to contribute their own finances to ensure the long‐term success of the organization.Training the employees will give them the chance to understand the latest developments and trends within the food & dining industry. and sometimes decades. Flexibility: Family members are willing to wear several different hats and to take on tasks outside of their formal jobs in order to ensure the success of the company. and by developing their skills. This could mean contributing capital. organization and job. it will show them that the company is investing in this belief. where it’s necessary to tighten the belt or personally suffer in order for the business to survive. there is a greater sense of commitment and accountability. such as during economic downturns. such as a better understanding of the industry. Employee Development Uncover Employee potential: Calveta allows their employees to attend programs that might help them spot the leaders of tomorrow within the current work force. ahead. If Calveta helps their employees keep pace with these changes the company will definitely set it apart from their competitors. 7 . Learning to use new tools and develop new strategies in developing dining services will allow the staff to take on more challenging work and even higher roles within the business. Not only will the staff be able to do more and understand more. Understand the Expectations: Development and training programs will provide the owner or manager of the company. but they will have gained confidence within their tasks because their skills are developed. Revise vision and goals: Leadership Development programs and training opportunities are also the perfect setting to remind the employees of the long term goals that the company tries to achieve. Increased Productivity: It is only natural that leadership development and training will lead to increased productivity. Lifelong Learning: By developing the skills of their workforce through leadership programs they breed within them a spirit of lifelong learning. with some insight into the expectations that the employees might have. the world is constantly developing. Calveta can minimize their feeling of disappointment and increase their loyalty by managing these expectations. This way. Lifelong Learning will encourage independent learning in the individuals to develop themselves in a variety of subjects and fields. Within the ever changing world of technology and business there is always something to learn. it will establish a love for learning and selfdevelopment.machinery or new social media tools. as he will not be able to meet his primary tasks. If profit is low. shareholders may be disappointed in the low level of dividends and willing to sell to a takeover bid. Profit enables the firm to build up savings. managers can better plan a 8 . such as in capital expenses or paying down debt. By knowing how much the company will be spending in a particular period. he may be less likely to spend money on unapproved activities. the company places a cap on how much money can go out the door. If an employee is given a strict limit as to how much he can spend on a particular expense. This investment can potentially benefit consumer. Effective Cost Control Model Lower Expenses: The chief benefit of cost controls is that they lower the company's overall expenses. Better Records: An ancillary benefit of cost control is that it facilitates accounting and helps financial planning by setting a limit on a company's costs. the profit may not be shared equally amongst workers) Profit can be used to invest in research & development to improve menu & dining services. by placing limits on how much money employees are allowed to spend. By limiting the amount of money employees can spend. the company is taking steps to limit potential abuse by employees. which could help the company survive an economic downturn which is susceptible to take over. or to invest larger amounts of money in other ways. Less Abuse: In addition. High revenue Profit can be used to pay higher wages to owners and workers(though if firm has monopsony power. This allows the company to keep more cash on hand. but also see it through to completion. They typically get the process of menu development down to an exact science 9 . Customer focus A customer-centric focus helps throughout the marketing process. as well as which messaging strategies and techniques will have the intended effect. Customized solutions that align well with a particular customer's interests usually carry greater weight than more massmarketed food or services with little direct appeal. it will be easier for accountants and planners to determine how the money was spent. which includes product research and development as well as promotional communication. services and desires for improvements. Tailoring menu and services to fit the strongest desires of the target market helps Calveta establish a more marketable product concept. design and implementation that results in a finished menu that is highly desirable to consumers. A customer-centric focus typically leads the company to maintain a closer contact with core customers. Effective research gives them a better understanding of what food & service features and benefits are most valued. Calveta also have the advantage of experience on their side. Strong familiarity with the needs and desires of their customers helps them better promote Calveta brand's value proposition. once the money has been spent. Calveta often employ large numbers of people who oversee all stages of menu development and ensure the menu's success in the market through a process of conceptualization. Focus groups and other research methods are used to maintain awareness of customer feedback on food. In addition.budget. Innovative By being innovative. Calveta generally employ a large number of creative and competent individuals who can not only introduce new menus. which ultimately leads to increased satisfaction of shareholders.that can repeat over and over again. Following consumers’ feedback for analyzing the strengths and weaknesses is probably the best way to understand the expectations of consumers and adopt successful business strategies. High Quality of Service Quality customer service is the key element required for a successful business. In this customer driven market. Their ability to repeat this process with efficiency generally sets them apart from other companies that try to create new menu & services for the first time. Satisfied Shareholders: Satisfactory response from consumers means increased sales. 3. which can dramatically improve the ROI of Calveta’s business. where competition is becoming stiffer day by day and critical deadlines are rife. one cannot think of business growth without exceptional customer service. Successful Business Strategies: Encouraging consumers for feedback and comments is an integral part of quality customer service. which leads to direct publicity and increased popularity of an organization. They tend to invest more in the organization.2 Weakness Easy entry into market The disadvantages: 10 . Quality customer service can benefit Calveta’s business in countless ways and by observing the importance of customer service measures can be taken to provide consumers with a positive experience as they tend to discuss it in their social network. In this scenario there is contradicting opinion between the CEO. donors and access to essential resources. Decrease in Productivity: When the organization spends much of its time dealing with conflict. which adversely affects their professional and personal lives. Conflict causes employees to focus less on the project at hand and more on gossiping about conflict or venting about frustrations. No Scope for economies of scale because of the high number of firms. the company employees become stressed. or if they feel that their opinions go unrecognized by other employees. Internal Managerial Conflict Conflict within the organization causes employees to become frustrated if they feel as if there’s no solution in sight. organizations can lose money. Jennifer is convinced that preserving the company culture & achieving such aggressive growth was conflicting objectives and she rather save the culture than progress too rapidly into new business. employees may avoid meetings to prevent themselves from experiencing stress and stress-related symptoms. Frank in the other hand is ready by all mean to go against the company’s culture to fulfill his father’s request As a result. With perfect knowledge there is no incentive to develop new technology because of the ability to share in reality it is more about theory rather than practical. As a result. This creates extreme spectrum of market structure. 11 . employees take time away from focusing on the core goals they are tasked with achieving. Frank & his sister Jennifer who is the COO. Lack of supernormal profits may mean the investment of Research and Development (R&D) is unlikely. In some instances. This is especially detrimental when employees are a part of the executive board or heads of committees. In addition. Calveta competency is focused on employee development thus hindering acquisition. core values suffer and threats from competitors are also inevitable besides the fact that there is a need for low cost services in the economic climate. competitors usually use contradicting business structure making the process more difficult. the company struggles to find growth strategies which fit core competencies well because it is pigeon holed. As whole. Calveta is constantly innovating and developing new service features in the menu. Charges are made based on the budgets of the SLF clients and the company. with internal promotion & staff training and employee satisfaction survey. the organization has to recruit new employees and appoint acting board staff. lacks of infrastructure and cash management process is contrary to growth goals. Basically. Not only that.Employees Leave Organization: Organization employees who are increasingly frustrated with the level of conflict within Calveta may decide to end their tenure. it’s important for Calveta to keep high standards with ongoing innovation strategy with no debt policy. Calveta’s aspiration is to profitably grow and generate funds for future growth. However. Due to expansion. Once employees begin to leave. Excess Turnover 12 . Calveta is very concern on developing every employee to his/ her potential. Misfit between core competencies & growth strategy Core competencies of Calveta’s are based on “Antonio’s Way” which is by offering highest quality food & personalized service. Internal hiring managers are also regularly re-assigned. Since a new employee has a period of adjustment. The company could pay 1/3 of the yearly salary of the new employee in costs. physicals and moving expenses. The new employee may take several months to fully learn the job and achieve competency in the position. The loss of momentum when an employee resigns may also affect morale. When the staff changes frequently. education and licensing walks out the door with the employee.Excessive turnover decreases the overall efficiency of the company and comes with a high price tag. the employees who stay have a difficult time building a positive team dynamic. only to have one or more members leave. advertising the job. which affects experienced employees' productivity levels. All of the money invested into that employee through training. Managers or human resources staff spends time conducting exit interviews. Supervisors and colleagues are often left to cover until a new employee is hired and begins working. Little risk tolerance 13 . High turnover can hurt overall morale of employees. The personality and work ethic of the new employee may vary significantly from the previous employee. When they hire a replacement. High turnover rates cost the company time in addition to money. Each employee who resigns costs the company money. he/she won't complete tasks as quickly as the person replaced. the company spends money on those same areas to prepare the new hire for the position. This leaves the staff in limbo until a new employee starts. Productivity: The overall productivity of the workplace tends to decrease with high turnover. recruiting candidates and interviewing. Group projects that rely on the new team member may slow down. Calveta also pays to advertise the vacancy and may incur costs for drug testing. A group of employees learns to work well together. provides a higher degree of comfort that. but since they are attracting lots of high cost customers. which. they will both improve risk mitigation effectiveness and contribute to achieving Calveta’s strategic goals. Risk tolerances will naturally develop from the company’s overall risk appetite.Risk tolerance is an important component in business. Calveta might define a very low tolerance for customer dissatisfaction. Inefficient internal communication The majority of internal problems in the organization are directly related to poor internal communication management. When risk tolerances are aligned with both overall risk appetite and strategic goals. Operating within risk tolerances provides the management greater assurance that the company remains within its risk appetite. in turn. Not solving them in time ends up affecting other areas of the organization and can result in bad feeling and weak relationships among the 14 . but they also need to be in line with their goals. Calveta should have a realistic understanding of its ability and willingness to stomach large swings in the value of its business. then this policy isn’t in line with a discount business model. Calveta’s risk tolerance generally is driven by its objectives and stakeholder expectations. ranging from value protection (generally lower tolerance levels) to value creation (generally higher tolerance levels). the company will achieve its objectives. It may be more averse to market fluctuations and greatly influenced by legal and regulatory requirements. Tolerances are also highly dependent on how well capitalized or financed the organization is. Growing a loyal customer base is the best way to achieve stable and growing profits over time. When Calveta adds new menus to their portfolio or move into new markets. Operating in multiple markets or in many areas also allows them to 15 . more sustainable foodservice for patients and their families. Expansion into other regions New Customers: A primary benefit of business expansion is the ability to attract and retain new customers. Cleaning Services for Hospitals and SLFs can be potentially run as an outside subsidiary. as hospitals are making great progress toward establishing healthier. If the company does not communicate properly. but capturing them for long-term relationship building is primary. If the employees feel that they are not informed about what is happening and that their opinions and ideas don’t matter. and support any hospital or health system can adapt to develop sustainable foodservice programs. Reaching out to these new customers with expansion is one thing. a national campaign to improve environmental health and sustainability in the health care sector. Many of these green efforts are influenced. insight. If there isn’t good communication among employees. Economies of Scale: If Calveta expands their business they will spread the risks of doing business and reduce the potential of one menu or one poor decision damaging their business. they will lose interest and passion for what they do.employees. Healthier food is one of six challenges that form the basis of the HHI’s campaign.3 Opportunity Hospital Market The sustainability movement has hit health care. at least in part. by the Healthier Hospitals Initiative (HHI). and this will make them less productive. each will understand things in their own way and the lack of a common discourse will confuse the employees. providing resources. they can bring in previously untapped customer markets. discourse is lost and the strategic lines become unclear. 3. Hence demand for dining services will increase as well. Capacity rates of SLFs are up to 87. Consider the potential return on investment from each new market they could expand into before investing their capital into a path of expansion. Business expansion only makes sense if the company has adequate people and resources to cover the new area with expertise. To begin identifying these potential markets. Capital Requirements: A drawback of business expansion is that when the company invests money and other resources to expand. but providing that service may be much more difficult than it sounds. According to Medicare & Medicaid Services.By percentage. The company must logistically provide a same-day service. Often. it has less capital available for other business transactions. 66% of the facilities are operated 16 . there were roughly 18. This makes it especially important that they carefully weigh the market potential of expansion before making the investment.000 nursing homes in US in 2008. the company should identify who is currently buying the service. Spread Too Thin: Another risk of business expansion is that they could spread the company's resources and expertise too thin. which improves the potential to profit by adding new customers. This makes the costs of doing business less on a per-customer basis. it is important to thoroughly think about what adding new benefits or features would mean to the company. Market expansion can also occur when they identify new groups of target customers in their current region. When looking to expand into different markets by generating new customers. Same-day service seems like a great idea on the surface.spread the costs of doing business across more markets or customers. getting involved in too many markets or products can cause the company to spread its abilities out to the point that it does not perform well in any area.9%. This shows an increasing trend. Aging population Aging population of the Baby Boomers is increasing and by 2030 expected to be 70 million which equates to 20 % of the US population. socially conscious consumption will likely become more main stream over time. perceptions or knowledge. social. A number of integrated factors will drive this trend forward: a growing volume of national and international legislation regarding environmental and social standards. They can act on their consciences in positive or negative ways.profit7 % were government owned and Out of these facilities. 55 % were run by large chains. Calveta which is interested in being competitive in this market need to build trust with their customers by providing reliable and relatable information about the health. and environmental benefits of their products and services that can be verified by an independent source.as for non. greater public awareness of how purchase behavior links to social issues. and the growing need for consumers to express their personal values through their buying patterns. such as the environment or method of production. Recent health trends and concerns Socially conscious consumers use their purchasing power to try and improve the world around them. It is important to understand consumer behavior in a potential market to take advantage of any opportunities based in this trend. These SLF facilities clearly provide a vast market for Calveta to acquire dining service business. more companies enacting corporate social responsibility policies as a way to differentiate themselves and their products. Their decisions are based on whether a product's positioning on issues. actual buying patterns in the marketplace indicate that the percentage of consumers acting on their beliefs is smaller than what is reported. Any While this demonstrates a definite change in attitude. generally keeping socially conscious products in niche categories.for profit27% . aligns with their values. either buying a product that meets their beliefs or boycotting a product or company that doesn't meet their standards. Given the traction already gained in the marketplace. Labeling will continue to be the most apparent explanation of why a product's production 17 . If they are smaller than Calveta. will have to be used to promote both the product attributes and the company's approach to corporate social responsibility to successfully attract consumers interested in making purchases from this perspective. or economies of scale if existing competitors are large operations. they can reduce inventory and seek substitutes for the most expensive items. If they can lock in the supplier costs with long-term contracts while the suppliers charge the new entrant higher prices. they have to react. However. If the Calveta invests heavily to compete. footprint. they have to take into account the strengths of the new entrant when forming a strategy to keep their customers. Typical barriers for a market entry are high capital costs to establish facilities. or ingredients are more socially responsible than those of the competition. they have to examine whether they have extensive capital resources or whether the investment has stretched their capacity. 3. The new entrant needs the same materials and components Calveta does to offer the same kinds of products in the market. they will not have the same economies of scale and will not be able to compete on price.systems. When a new buyer enters a market. particularly social media. the variables that influence the performance of the business will change and Calveta has to react to maintain their position. As the market changes. customer loyalty resulting from special product features. a variety of other marketing techniques. suppliers often can raise prices because of higher demand. The entry of a new competitor in a market tends to reduce the market prices. When there are more companies competing 18 . If the suppliers raise prices.4 Threat New Entrants When new companies enter the market. If the competitors introduce a product similar to Calveta. packaging techniques. they can maintain their pricing structure and compete on quality and unique features. If no competitor has inherent cost advantages.for the same market share. although this is good for the companies involved in the takeover) Likelihood of job cuts Cultural integration/conflict with new management Hidden liabilities of target entity The monetary cost to the company Lack of motivation for employees in the company being bought. Possible takeovers Cons: Goodwill. Calveta can compete on price. any government tax policy of allowing for deduction of interest expenses but not of dividends has 19 . In a sense. often paid in excess for the acquisition Culture clashes within the two companies causes employees to be less-efficient or despondent Reduced competition and choice for consumers in oligopoly markets (Bad for consumers. Takeovers also tend to substitute debt for equity. If there is an inherent cost advantages because of factors such as location. menu design or low labor costs. customers choose those with lower pricing. they can compete on price if the financial resources are higher than those of some competitors. and the general price level goes down. causes companies to develop new products. because only a fraction of the effort might become successful. This can create substantial negative externalities for employees. according to the theory. the intense competition for new menu development & to offer unique & exceptional dining services may inspire Calveta to make substantial investments for enhancement which some might not be recouped. It can punish moreconservative or prudent management that do not allow their companies to leverage themselves into a high-risk position. The negative effects on the business are the following: Customers: In any market there are a limited number of customers that businesses are competing for. Business takeover can have a positive or negative impact on the labor force. which would give consumers greater selection and better products. Strong Competition Competition. compared to what the price would be if there was no competition (monopoly) or little competition (oligopoly). For example.essentially provided a substantial subsidy to takeovers. but can lead to catastrophic failure if circumstances do not go favorably. The greater selection typically causes lower prices for the products. 20 . so the more businesses there are the lesser the market share. while one that is initiated by creditors and is unexpected can have a detrimental effect. A takeover that is friendly and planned has the potential to benefit the existing workforce. High leverage will lead to high profits if circumstances go well. However. suppliers and other stakeholders. competition may also lead to wasted (duplicated) effort and to increased costs (and prices) in some circumstances. services and technologies. This is because sometimes. With all the competition springing up. and price factors. as has probably a significant increase in investments in agricultural derivative markets. at times. Consequentially. this also affects Calveta’s revenue stream. As these employers cope with the increased costs of a mandated wage raise. and it has negative effects. Rising employment & ingredients cost When the government imposes a higher minimum wage. Calveta will have to compete to acquire those limited resources making the resources more and more expensive. raw materials and other resources that might be needed will become more expensive when there is more competition. There are many struggles that Calveta will face due to competition within business. Competition can drastically harm Calveta through various labour costs. production. they often respond by cutting the jobs available to less-experienced and less-educated employees. competition can be so competitive that it can damage the economy and that particular society in a severe way. resources like skilled employees. A low and declining level of stocks has added to the price rise. The risks associated with the business that offers incentives include offering so much that they wind-up losing money in the process. This is a potential risk of harming both the business offering these incentives and its competitors.Resources: Also limited in supply. 21 . Not only that recent steep price increases of major crops (cereals. employers face higher labor costs and are forced to respond by decreasing other expenses. lower their prices just to strike a profit. They have to face more and more businesses and markets and have to worry about trying to beat out their competition. Calveta has to. oilseeds) were triggered by a combination of production remaining somewhat below trend and strong growth of demand. therefore dividends decline and shares become less attractive. Hence. Then. firms will experience a decline in profitability. Even though Calveta doesn’t resort to increase the food price. This is because there is a tendency for price wars to develop in a recession.As sales revenues and profits decline.Increased ingredient prices will directly force Calveta to increase the food prices which were eventually result in dissatisfaction among its customers. Rising commodity costs are threatening to destroy Calveta‘s opinion that they were climbing out of the nation’s economic woes.recession An economic decline in the United States is pretty much guaranteed to reduce the income of the business sector. Low sales encourage firms to cut prices and falling sales will lead to lower revenues. If the US enters into recession. The customers of the company that owe it money may pay slowly. with reduced revenues. This will further depress the company's stock price.When the company's stock falls and the dividends decline or stop. Lower growth leads to lower profits. Nonetheless. the employers will cut back on hiring new employees. the company might need to compromise on the quality or the quantity of the ingredients in the menu. or freeze hiring entirely. Economic downturn. late. These cost-cutting efforts will impact Calveta’s business which provides goods and services . Calveta will pay its own bills more slowly. late. Expenditures for marketing and advertising may also be reduced. they might resource for services from other dining services that suit their budget. this might also lead to customer being unhappy and frustrated with Calveta’s food & services. institutional investors who hold that stock may sell and reinvest the proceeds into better-performing stocks. partially or not at all. or in smaller increments than the original credit agreement required. Late or delinquent payments will reduce 22 . The business may cut employees. Debt will have to be restructured and/or refinanced. further damaging the firm's credit rating and preventing further borrowing. but morale may suffer as hours become longer. and thus the desirability. work becomes harder. As the effects of a recession ripple through the economy. perpetuating the recession as consumer spending drops. management and labour may meet and agree to mutual concessions. or it may go out of business completely. This may manifest itself in a variety of ways and is a common reaction of many big businesses in a steep recession. Productivity per employee may increase.0 Solutions 23 . As the recession increases in severity and length. then bankruptcy may ensue. and more work will have to be done by fewer people. of its products. The company will then be protected from its creditors as it undergoes reorganization. the company may compromise the quality. both to save the company and to save jobs. In an attempt to further cut costs to improve its bottom line. eventuating in defaults on bonds and other debt. The concessions may include wage reductions and reduced benefits. wage increases are stopped and fear of further layoffs persists. If the company's debts cannot be serviced and cannot be repaid as agreed upon in the lending contract. Secondary aspects of the goods and services produced by the recession-impacted company may also suffer. The company's ability to service its debt (pay interest on the money it has borrowed) may also be impaired. meaning new terms will have to be agreed upon by creditors. consumer confidence declines. bonds and ability to obtain financing. 4.the valuation of the corporation's debt. Even though it has to bear huge risks. The calculations are given below as follows: Current Ratio = Current Assets/Current Liabilities = 0. even though it had less risk. The problems in taking up the other strategies are cleared out below: If the company continues in the existing status. As they have had a previous experience of spreading their company into the educational segment which turned out to be a failure. On using the cost-control system of Calveta. they could increase their net profit. indirect expenses and administrative expenses were high in GSD. The company’s debt is more than equity as the supposed ratio to be is 1:1. it can be derived that the third alternative is comparatively worth enough to be used rather than the others. Every strategy has got its own pro and cons from which a decision had to be made. it would not earn much of revenue as such which therefore would make it unable to cover the desired target of doubling the revenue. reputation and quality of service. Since it was barely profitable.50:1 It is evident from the above that the company’s ability to meet short term liabilities is low as the required ratio for the current ratio is 2:1.It is understood that Frank is liable to choose any one of the mentioned strategies.22% Debt Equity Ratio = Total liabilities / Total Shareholders’ Equity = $272 million / $181 million = 1. It also includes huge risks. it produced annual revenue of $1. As all the options have been analysed. so that Calveta is able to double its revenue by the end of the year 2011. It’s better to increase the share capital than going for bank loan as the shareholders equity in the organization is low.993:1 Profit Margin Ratio = Net Income Sales = $65 million / $2021 million * 100 = 3.5 billion and has a growth in revenue. no additional cost. it seemed to be having a great customer potential if it could retain its customer accounts. When GSD is taken into consideration. 24 . it would be better not to expand them into the hospital segment. Analysis The United States Census Bureau’s survey showed that only 25% of the total SLF’s in USA had contracted to food services. GSD has got geographical coverage which would enhance their strategy and it could also use the core values of Calveta. Few reasons why Frank should extend to other segments are. The employees of GSD have to be provided with training and they also have to recruit few into the company and restructure the organization by shifting managers from Calveta to GSD.From the case analysed. the third option is chosen wherein Calveta has to acquire General Southwest Dining Services (GSD) as: GSD does not generate revenue in a smooth or good manner for which they need Calveta to join them so that they could use Calveta’s cost-control system. A new organizational structure has to be made that accommodate significant growth while preserving the company’s core values. 1. and just because he failed once it does not mean that he will not be successful in the same sector with better 25 . this survey alone shows that there is a great potential for growth in the SLF’s segment and therefore it would have been meaningful for Frank to buy Great South West Dining but the eye popping debt figures that came before him alone are sufficient to say that it would not be a feasible solution and it would be much better decision for Frank to diversify Calveta Dining Services by extending to other segments. because the company’s financial position is bad. It is also better to increase the share capital than going for a bank loan. Frank considered moving into the Education Sector. like providing food services to the hospitals. creating additional regions and districts. and eliminating management levels. so that they could increase the reputation of the company as a whole. It has to consider in dividing the sales and operations functions completely. this could be easily resolved by hiking the salaries of outstanding employees and still keep them motivated rather than promoting job rotations. and 26 . Calveta dining promoted their front line employees to higher ranks if they showed outstanding work skills and dedication which was motivating the employees. The reason for a few customer dissatisfaction was in the promotion from within concept of Calveta Dining Service.preparations to make potential clients believe that Calveta Dining can also cater to the needs of a young generation. but it also meant that they would be rotated from one place to another which displeased few of the SLF residents. Interpretation The interpretation that can be derived from the above analysis is that it would be better for Frank to think about diversifying the business rather than acquiring GSD. besides Calveta Dining would find it difficult to train GSD employees to the work culture of Calveta Dining. The greatest positive to Calveta Dining Services was the working culture by which they could prosper in any segment. Frank should not make this decision only with the purpose of meeting his father’s goal because this may harm the firm in the long run. Frank had his own problems organizational restructuring to do for Calveta Dining and in such a circumstance if Frank acquired GSD then his problem would grow from bad to worse because it would not be an easy task to change the entire work culture of GSD within a short span of time. Even Frank knew that it was a huge risk to acquire GSD considering the heavy debt the business would be in after the acquisition. 2. and apart from the debts of acquiring GSD Frank would also need to generate funds for the training of the staff teaching them Antonio’s way. 3. The financial challenges of getting into the hospital segment were there but it was always achievable. 2. Synthesis If Frank were to come up with new strategies for growth only with the intention of meeting his father’s goal.” 5.5 Billion). Inc. it would be better for Frank and the business to diversify rather than acquiring GSD Conclusion Frank should consider the reviews given by his sister and not make decisions clouded by his ego and jeopardize the reputation of the company and the special work culture of Calveta dining Service.” 4. Frank already had a growing concern regarding the “diversity of skills of area and account managers. Calveta’s President and CEO met with every new employee. the current organizational structure would be untenable (assuming GSD has a similar structure). Considering the dedicated staff and employees of Calveta Dining. To highlight this. with 1. Company culture has already deteriorated: Calveta has grown so big that their training program does not instil the basic goals (“Antonio’s Way”) in the new trainees effectively. The size of the company would almost double (75% of the current revenue from $2 Billion to $3.” 3. 27 . then in the long run it would harm the business. “over the years. Analyses of GSD deal specifically cultural concerns: 1. Jennifer also acknowledged it was becoming harder to find operations managers who fully embraced “Antonio’s Way. this was no longer possible. GSD does not have great reputation and has had issues with labour and management turnover. Recent college and business school graduates who entered the business lacked the industry experience of counterparts who had worked their way up through the ranks. By 2009.also a minor restructuring of Calveta Dining’s organizational structure with dedicated management representatives and area managers for a client.000 management trainees joining the company in just 12 months. With this size company. 90-day orientation (1 day).0 Recommendations: 1. 3. This will be a good way to spread Calveta culture into GSD’s operational environment. Combine SG&A and eliminate redundant positions. This can also be used to train new hires for GSD and Calveta as well as future growth. 2. which is no longer feasible to maintain. Use GSD as a growth platform for internal Calveta promotions. with the plan being that they eventually return to GSD. This would include combining supply chain. Career growth opportunities alienate customers. Create the concept of “Calveta University” to help train and integrate GSD employees and help prevent the erosion to Calveta’s culture. Bring over qualified staff from Calveta into GSD operations as temporary (short term) assignments to help spread the Calveta culture from within. Instil the need for a Division President or above to meet the trainees as a way to replace the CEO greeting of new employees. Hand over day-to-day operations of Calveta to Jennifer and have Frank take care of the GSD operations. Within Calveta there seems to be a power struggle between Frank and His sister Jennifer. 5. customer service. Integrate and significantly reduce current combined organizational structure by addressing GSDs high management turnover with an influx of Calveta middle and senior leadership. 7. 4. Selected GSD staff is likewise sent and trained in a Calveta operation. All SG&A savings would be diverted to cultural training in Calveta’s 5 basic goals (see step 4). accounting and IT. This would include a robust program centred on continuous improvement training such as a curriculum of: new hire (3 days).6.0 Conclusion 28 . and annual “retreats” (1 day). 6. Frank is trying to do what is best for his father and not his business. Resources for your business-Putting the focus on your customer(2010)Retrieve from:www.businessinsider.org/trade/agricultural-trade/40847088.chron.pdf 29 .work.uk Employee Development(2012) Retrieve from:www.com Business-Competition-The-Good-and-Bad-Effects-for-Businesses-Large-and-Small (2012) Retrieve from: http://www.Restructure the organizational structure in order to improve internal communication. Pursue differentiation focus strategy. 7.shrm.com/ikeas-reputation-has-taken-abeating-2013-3.oecd.pdf Rising Food Prices: Causes and Consequences-OECD (2012).fas. Build sustainable competitive advantage by focusing on core values.org/sgp/crs/misc/R40545. An Asian Perspective. Consumers and Food Price Inflation-FDA(2013) Retrieve from: https://www.marketingdonut. It is for this reason that Calveta should stay within their niche and continue to do what has made them successful to date as 75% of the market is still uncontracted. Marketing management.co. Retrieve from: http://www.org Four requirements for Effective Cost Control. 6th edition. Retrieved from www.0 References Philip Kotler et al.org Employee Development(2012) Retrieve from:www.shrm.
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