Business Environment of Yates Grocery Stores - Essay Example

?Introduction: This report is aimed at critically analyzing the business environment of Mr. and Mrs. Yates Grocery stores; they operate a chain of five grocery stores and specialize in selling foreign products. Unlike other super markets they have limited space and business. This report aims to identify the problems in the operations and logistics of the grocery store; it will help to identify the problems that are causing losses and mismanagement, and will give recommendations to correct them. Company overview: The Yates own 5 grocery stores in a region; they are a medium sized grocery stores that specialize in selling international products. They do not hold the store in selling popular products but rather have developed a distinct business differentiation by targeting that population which likes to buy European food items. This gives them a slightly different target market than the other grocery stores and super markets in the vicinity. The grocery stores are medium sized; the profits are dependent upon the number of sales made each day as they cannot be dependent upon a huge variety and array of products as there is limited space in the stores. The Yates believe that they are providing a service rather than just selling grocery to their customers; they believe in being knowledgeable about the grocery they are selling and they are well versed in their specification so that they can provide ample and astute guidance to their customers. In-spite of these fine aspects, the Yates have been suffering huge losses and mismanagement problems, this report struggles to identify the cause of these problems and offer solutions. We are going to analyze the operations, information, and quality management problems that the company is facing. For this we first need to establish what these concepts are: Operations management: Operations management is a branch of management that deals in overseeing and refining the business processes so that they incorporate optimization of resources (minimum use of resources and maximum output) and also make them apt at meeting customer needs. It concerns constructing new processes and redesigning old ones to make them more efficient and optimal. Information management: This concerns the collection and management of information from all the sources available; sorting useful information from the clutter and utilizing it in time to ensure the efficient and effective management of resources. Quality management: Quality management is ensured in any organization by catering to the following aspects: Quality planning Quality control Quality assurance Quality improvement If the organization is adhering to these four aspects, not only in their product/services but also in all their processes and procedures, and ensuring continuous improvement, only then is it a quality organization. Now, this report will aim to find the discrepancies in the Yates grocery stores related to these concepts. The first tools being utilized to analyze the grocery store is: 1. PESTLE Analysis: The environment in which a business operates can be very dynamic and unpredictable; it contains the following aspects: 1.1. Political: The free trade policies that are being adopted by governments are a great benefit to the Yates as they have to import international food items. These no tariff policies greatly reduce the cost of the products. Any change in these policies will be a threat to the Yates. All businesses have to adhere by the rules and regulations established by the government for the working of a business, they include: agreements, MOU’s, charters etc. They are very important and have to be managed in order to maintain smooth running of the business (Kerzner 2009, p. 65-92). 1.2. Economical: Economic factors are a great concern for the Yates as they impact the buying behaviors of customers directly. The recent recession is a great example of how economy affects businesses. If the buying power of people reduces, they give priority to the necessities and do not divulge in unnecessary items such as foreign food products. However, there is a positive aspect of the recession as well; customers have less to spend so they eat out less and eat more at home, which is an upside for the grocery stores as they get more sales. It is also very opportune to note that food is the last thing customers will cut on as it is an absolute necessity. So even if they don’t buy the expensive foreign food, they will buy the local groceries nonetheless. 1.3. Social: The world has become a global village with the help of the internet, as a result of which people are very aware of other cultures and cuisines which makes the demand for international food products very high. The Yates can utilize this demand aspect and explore new areas which also have potential and can be targeted. Another changing social trend is that as information has become abundant, people are becoming more health conscious and this is leading to an increase in the demand for organic food, which the Yates can target as a potential market (Lock 2007, p. 7-34). 1.4. Technological: In this IT based world, technological progression is immense and fast paced; new technologies are cropping up as break through inventions are being made each day, organizations need to remain up to date with these changes and remove obsolete technologies from their processes. This will not only make their systems more efficient but will also increase profits through optimization. Technologically advanced machinery helps in minimizing effort and maximizing output, which results in better and more efficient management of resources. The main reason for the problems that Yates is facing is their obsolete technology and lack of information system. Manually supervising the food orders and other concerns leaves room for greater mistakes, whereas information system reduces effort as well as output. The data from all the 5 branches can be integrated and catered to as per need by the use of an information system. Each branch manager can enter the daily sales into the information system through a computer interface and at the end of the day, Mr. Yates will have all the accurate information about which food to order and when. In addition to that an information system can guide as to which food item is the most popular amongst customers and which is not, so further sales strategies can be developed by this kind of information. 1.5. Legal: Legal issues are the rules that the business must follow or otherwise face penalties. The legal aspects the Yates must face are the payment of taxes, rents, bills, and any change in policies etc. 1.6. Environment: As awareness increases among people and governments about the hazards of environmental pollution, environmental friendly activities are being promoted. People are becoming more conscious about protecting their environment and prefer those businesses which are pursuing environment friendly activities as well. The Yates can introduce green grocery carrying bags, reducing wastage of food, introducing organic food product line etc. These activities will attract new customers, making the Yates an environment conscious business, in turn earning higher revenues. 2. SWOT analysis: Strengths 1. Differentiated target market 2. Providing service rather than just grocery 3. Self owned business (no conflicts) Weaknesses 1. Inventory mismanagement 2. Staff mismanagement 3. Inefficient use of resources 4. Wastage of resources 5. Obsolete technology 6. Information mismanagement in supply chain 7. Limited floor space 8. Increasing customer complaints Opportunities 1. Opening up new stores in other potential markets 2. Identifying and targeting new differentiated segments of the target market (vegetarians, meat lovers, exotic foreign foods etc) Threats 1. Threat of competition 2. Threat of losing customers due to poor service 3. Value Chain Analysis: Value chain is the link that joins all primary activities (key value adding) and their interface to all other secondary activities. Value chain is considered as a strategic tool as it can discover the strengths and weaknesses of all the activities taking place in a process. With the help of value chain management, management can assign values to each activity and remove the ones which are not indispensable. It helps in identifying wasteful activities and how they can be eliminated to make the process more competent. Using value chain analysis will identify touch pints with customers, capture pain points, and identify opportunities for process improvements. It will identify which processes are vital and lead to customer satisfaction, and which are the ones un-necessary leading to negative customer relations (Kerzner 2009, p. 65-92). (Waters 2000, p. 41-56) The value chain has the following parts: 3.1. Inbound logistics: On the whole the targets of logistics can be divided into performance related and cost related. The apt management of all the resources and looking after the planning, controlling, recognizing and monitoring are a part of logistics, guaranteeing most advantageous utilization of resources. The inbound logistics focus on the inbound movement of materials, purchasing and arranging materials, inventories check, and getting supplies from suppliers to manufacturing plants or retail stores (Curtis 2008, p. 405-464). The inbound logistics system of the Yates grocery stores is seriously in need of revision. The management of inventory is very poor which results in a wastage of time as well as resources. The grocery stores get under or over supplied at times due to mismanagement of supply traffic. Miscommunication is also a result of this and often the Yates get a wrong delivery, food has to be thrown away as it passes the expiry date, and there is no system to manage this information. As each activity adds value to the whole process, any weak link will result in a negatively impact of the whole process. 3.2. Operation management: As discussed earlier, operations management is the branch of management related to designing new processes and improving upon existing ones to ensure efficient and effective working. Continuous improvement upon processes results in higher costs and lower use of resources; it paves new ways of doing things and doing them more efficiently. Sadly, the Yates’ are mishandling their operations management; they have aspects which could become their competitive edges and yet they are forgoing the chance just by mismanagement. The processes at the Yates’ grocery stores need to be standardized so that a strict procedure is followed by all employees in doing all activities. This will ensure minimum error chances, and will increase the efficiency of performance as well (Lock 2007, p. 7-34). IT systems, such as information systems can be adopted to make the system speedy and error free. They can also use ERP (enterprise resource planning) which is an integration of the external and internal resources of the retail store guiding the enterprise in proficient management of resources (Waters 2000, p. 41-56). 3.3. Outbound logistics: Outbound logistics cater the need of management of the processes related to storage of products, information flows, and movement of the final product to the end user. They certify correct management of products as they reach the customers and storage of products until the time they are needed. A medium sized enterprise such as the Yates could adopt ‘Just In Time’ (JIT) concepts which entitle purchasing the products when they are needed in turn saving the cost of storing (Waters 2000, p. 41-56). 3.4. Marketing and sales: Marketing is defined as the set of processes that create, communicate, deliver, and exchange offerings which have value for customers. The Yates need to promote their offerings and the value they are giving to their customers. They need to highlight their unique selling points which differentiate them from other grocery stores and capitalize on their core strengths. Effective marketing always results in increasing sales (Kerzner 2009, p. 65-92). 3.5. Services: Customer service is always a key point in any business; homogeneous products are offered by all grocery stores but it is the services that really differentiate one from competitors. Mr. Yates believes that they are offering a service rather than just mere products. With this mindset, the Yates can espouse information providing services, quick services in serving customers, and directed promotional services (coupons, club membership etc) so that customers become loyal to the retail store as 80% of the profits are earned by 20% of loyal customers. Creating lasting relationships and loyal customers is the target of any company. 4. Supply Management: Supply management is the method of corporate or institutional buying, which may accommodate the indirect purchase, that is, purchasing materials for internal use of it may be the methods involved in buying products for the distribution or resale. As in our case, it will be the methods adopted for buying inventory and reselling it to end users. Managing supply is a crucial aspect in business, it manages: Inventory management Implementation of technologies, policies and procedures that assist the management of supplies and support procurement activities. Relation with supplier(s); and Quality supplies It is a systematic business approach that integrates and co-ordinates the internal and external logistics and manages inventory. Supply management deals in the maintenance of the inputs required and the timely purchase of these products at need. An efficient supply management system not only saves the company huge amounts of money, but also saves time and incorporates overall efficiency (Lock 2007, p. 7-34). So there are no bottle necks and stoppages due to unavailability of inputs. There are many software that assist the supply management process; they are: e-solutions, spend analysis, and supply base management etc. 5. Information Management: (Curtis 2008, p. 405-464) Management of information is of utmost importance; misinformation and miscommunication results in bottlenecks, slacks, and stoppages which are costly for the business. The information, from all the five Yates grocery stores, has to be managed effectively, and in time, to ensure proper communication and integration of all branches, so that they are in sync and no mismanagement issues occur. The mismanagement of information between the branches is the cause of many problems for the Yates, such as: miscalculation of the supplies needed, over supply, shortages, financial analysis, and employee management etc. If the information systems are improved upon and a standard procedure and process is adopted, it will greatly help in removing all information creeps and bottlenecks (Curtis 2008, p. 405-464). 6. Fish bone diagram: Key problems: 1. Wastage of resources 2. Increased customer dissatisfaction 7. Recommendations: In the light of the above information and analysis, the following recommendations will be helpful for the Yates grocery stores: 1. Adopting standardized procedures, policies, and processes 2. Using up to date technologies for handling information and supply management, and to facilitate correspondence with the suppliers and other branches. These could include information systems, tools, and software for supply management etc. 3. Endorse standard HR procedures to motivate the employees, analyze the need of employees per store, and ensure that they meet the quality standards established. 4. Establish quality standards as per the vision and mission of the company. That will be the source of development of all procedures and processes 5. Ensuring continuous quality improvement methods such as six sigma Environmental factors are a great influence in the making and breaking of any business; change is the only thing permanent, so organizations also have to change with the change in the environment. All change is not necessarily evil, the environment also presents great opportunities for growth and development and it is by the assessment of environment and the need it presents that businesses are born (Kerzner 2009, p. 65-92). If a local property developer wants to build 400 new residential properties in the vicinity of the Yates shop, it presents a lucrative opportunity of growth to the Yates. Yet, expansion is a risky business and needs to be closely monitored and judged to check if it will be a feasible and profitable venture for the business. The risk which any business faces in exploring a new endeavor can be minimized by ensuring the following: Precise analysis of the market need: The Yates have to survey the target area to assess the potential of the market, whether the residential areas will be occupied at once, how many families will be residing, and what are their taste patterns? Will they be requiring groceries or not? As grocery is a fundamental aspect of any family, it is very likely that the results will be in favor of the Yates. Furthermore they have to assess the market need; whether the families in the residential area demand foreign food products? What are the other products high in demand? Does the target market comprise of families or bachelors? What is the average age group? All this can be appraised through market survey, observations, and questionnaires etc. Assessment of the target segments: To move into the market, a business must develop segments of the macro target market and then position itself in one or two target markets according to their potential. A target segment should have the following characteristics: It should be: Sufficient Accessible Measurable And differentiable. Segmentation is done on the basis of demographical factors (age, sex, income, education etc.), psychographic factors, behavioral factors, and geographic factors, and on the basis of seasons or occasions. In our case, the Yates should consider the buying patterns of the segment, the gender, marital status, income, social status, and education level of the people living in new residential areas. This will give ample information regarding whether expansion of the stores is feasible or not (Lock 2007, p. 7-34). This will also inform the management about new ideas, and popular products in the market, which could be added to extend the product line in the retail store. Analysis of the market trends: The market trends change with time and so do the eating and buying patterns of the consumers along with these changes. The current market trend is of environment consciousness and eco-friendly approaches, people are adopting organic foods and are going vegan, this new way of lifestyle carries potential for grocery retails, like the Yates, to differentiate their stores from competitors and evoke customer loyalty by offering differentiation. Astute market positioning and targeting: A venture fails when it is not implemented at the current time and location; the positioning of the venture is also very important for its success. The expansion of the store should be made at a correct time and place so that the Yates can enjoy first mover advantage and the loyalty of customers (Meredith 2012, p. 45-69). Executive information system (EIS): An executive information system (EIS) is a type of management information system intended to assist and sustain the information and decision-making needs of senior executives by providing easy access to both internal and external information, which is relevant to meeting the strategic goals of the organization. It is considered as a specialized form of decision support system. An EIS is an easy to use interface that facilitates the senior management by displaying information via graphic representations. It highlights important variables and their correlation with other variables, throws into light the possible opportunities and problems, and guides the decision making of the management based on future predictions and trends. An EIS could assist the Yates in determining what course of action they need to take; it will reduce risk by displaying an array of possible outcomes. The Yates can thus choose the best possible course available. The following diagram will depict how an EIS can help in deciding whether to expand or not. Inputs Projects are specific targets or goals which are constrained by time and resources and are usually achieved by planning, organizing, managing, and securing resources. They are temporary and goal specific, ending with the accomplishment of the desired objective. The advantage of a project based activity is that it is completed within the least amount of time and resources, which ensures optimization. If the Yates are considering opening a new branch of the grocery store, then apart from the market survey and analysis (which is mentioned above) to assess the market need and demand, they can also benefit from opting to use project approach. The opening of a new retail store will be the target or goal of the project. An advantage of the project approach is the: Work Breakdown structure (WBS): As the name implies, work break down structure is the decomposition of work activities into smaller and more manageable components. These smaller components are easier to manage and achieve the overall goal bit by bit. Work activities can be decomposed on the following bases: Using the phases of the project life cycle as the first level of decomposition Using the major deliverables Using sub projects Project Teams: A project team consists of members which are from different departments or technical backgrounds, and are assigned to work together on a specific goal. They are for a specific period of time, until the time the project finishes. Project teams can be divided into sub teams as per need. A project team can also be defined as an interdependent collection of individuals who work together towards a common goal, and who share responsibility for specific outcomes of their organizations. Mostly, project teams are cross functional teams comprising of a project manager, a facilitator, mediator, speaker, and team members. The Yates can develop teams to assist them in achieving the project goal of opening a new retail store; they can make target specific teams such as feasibility team, design team, and marketing team etc. Teams work better; they are more motivated to work and achieve better results than traditional structures. To ensure optimization of resources and to complete the project within the time and resource constraints, a Critical Path Method (CPM) is developed by the management so that all activities are performed optimally and there are no slack variables and wastages. The CPM determines the optimal time of doing a task; the pessimist and optimist time and the realistic time. It is an algorithm for scheduling project activities. The essential technique for using CPM is to construct a model of the project that includes the following: 1. A list of all activities required to complete the project (typically categorized within a work breakdown structure), 2. The time (duration) that each activity will take to completion, and 3. The dependencies between the activities. Utilizing these values, the CPM determines the longest path or the longest time duration the activities will take to complete. This process determines which activities are important or critical, and which are not that important and can be delayed without compromising the project. The shortest possible time for the completion of an activity determined by the CPM is called crash time. It involves using more resources and completing the project in the shortest possible time. The Yates can develop a CPM for the work activities displayed in the WBS above. This will give them a time duration estimate and a clear idea of future proceedings. Many other tools are also used to illustrate and graph the path of activities on the chart such as PERT, event chain methodology and Gantt chart (Meredith 2012, p. 45-69). Gantt chart: A Gantt chart is a type of bar chart that illustrates a project schedule. Gantt charts exemplify the start and finish dates of the terminal elements and summary elements of a project. Terminal elements and summary elements comprise the work breakdown structure of the project. Some Gantt charts also show the dependency (i.e., precedence network) relationships between activities. The Yates can utilize the Gantt chart to graphically depict the work breakdown structures and the starting and finishing time allotted to each activity. This will help in projecting and predicting future forecasts and also in demonstrating what needs to be done and when. Advantages of using project management tools: The project management tools and techniques develop a road map which helps in completing the project efficiently and in achieving all the goals of the project. They also help in enhancing customer satisfaction and gaining a competitive edge through systematic and standard procedures. References: Curtis, G. (2008). Business Information Systems: Analysis, Design and Practice. 8th ed. London: Pearson Education. 405 - 464. Kerzner, H. (2009). Project management: a system approach to planning, organizing and controlling. Hoboken: john Wiley & sons Inc. 65-92  Lock, D (2007). Project management. 9th ed. Burlington: Gower publication limited. 7-34. Meredith, J. (2012). Project management: a managerial approach. 8th ed. USA: john Wiley & sons Inc. 45 - 69. Waters, D. (2000). Operations Management. Oxford: Kogan page publishers. 41-56 Read More