Developing Tyrrells Potato Chips - Essay Example

Assignment Part 1 Developing Tyrrells Potato Chips: Mr. Chase started this company not out of real entrepreneurial spirit. It was built more out of a necessity to counter the problem of low prices offered by supermarkets like Tesco to potato farmers in the country. His perception in starting and eventually building the business can be analysed using the Ansoff Matrix. (Ansoff Product / Market Matrix). Ansoff classifies marketing strategy into four quadrants: Market Penetration: Market penetration happens when a company tries to market more of its existing products in the same market it operates. For this a company can use many techniques. The company can try to convert occasional buyers into regular buyers and in turn try to convert regular buyers into big purchasers. For this purpose it may resort to more advertising, other promotions, offering discounts and better customer service. It can also try to compete by making its operations more efficient and thus bringing down its costs. Alternatively it can try to increase its economies of scale by more investment. Market Development: Sometimes existing market may become so saturated or uneconomical that companies may enter new markets with existing products. Such a strategy falls under the category of market development. The obvious example is the entry of multinational companies into new markets with existing products they were selling in the home country or other markets. This entry could help the company to transfer loyalties of customers to buy its own products. This is very effective if the product is a well known brand in the world and is being made available for the first time or in large quantities. Product Development: If a new product is manufactured by a company and it tries to sell it in the same market it operates, then it is classified under product development. The company is confident that its new product will be attractive in the existing market itself. Companies try to market the new product to existing customers or even get new customers to buy them. The product could be completely new or can be used as accessories of add-ons to its existing products. “Sell new products or services in current markets. These strategies often try to sell other products to (regular) clients. These can be accessories, add-ons, or completely new products. Cross Selling. Often, existing communication channels are used.” (Product/Market Grid (Ansoff) 2008). Diversification: Product diversification is an instance where a company develops or acquires a new product and market in an entirely new place. There are four ways of diversification that can be used by a company. Horizontal diversification is when a company manufactures or acquires a new product that is in now way related to its existing product lines. The next is vertical diversification where the company becomes a competitor to its own suppliers or customers by entering their market. Concentric diversification is when the company markets new products that are related to its existing ones but one which will be purchased mainly by new customers. Lastly conglomerate diversification is when the company market totally unrelated products for the purpose of getting new customers. Terrlyll Potato Chips obviously is a new entrant into the market and that too with an innovative product. It has no other products. So it can be seen that the strategy that Mr Chase has adopted is product development and in a sense market diversification. The diversification strategy it used was vertical diversification because it entered into the market of its once customer Tesco in selling potato chips. Strategy Employed to take the business forward: The company started by Mr Will Chase, Tyrrell Potato Chips has grown dramatically is poised for further growth. Given below is a strategy that could be followed by the company based on Porter’s Five Forces Model. Michael Porter, a professor at Harvard Business School Created the model in 1973. This tool can be used to assess the profitability that may arise for a business when expanding. This theory explains five forces that exist in the market place by which a company can assess its competitiveness. a. Supplier Power: This is the power the supplier has in the market place by which it can influence prices. One obvious example is a low number of suppliers being chased by a large number of companies. It could also come out of uniqueness of the product which the supplier has and the high cost of switching from one supplier to another. In reality suppler power exists in few situations because of the increased competitiveness among suppliers today. An example where supplier holds immense power is for petroleum because it is found only in certain parts of the world. b. Buyer power: Buyer power can exist in two situations. The existence of a competition among businesses can result in the buyers having power and such a situation is existing in many areas of business today. Another instance is the reverse case where only few buyers or if they are large and powerful they hold power. Also the fear of a buyer switching sources of purchase can also give power to that buyer. c. Competition: The existence of a large number of players in the market will determine how well a company performs in the market. One exception is when the seller has something unique that cannot be copied by the competition. So for competition to exist in a market there should be a large number of companies all selling similar products at nearly the same prices. d. Threat of Substitution: If the product that has been sold by the company is unique, then competition at least for that product does not exist or it is low. But the situation changes when a better product or a substitute product is introduced into the market. If a company that operates a taxi service finds its cost of service going up too much, the obvious choice of its customers will be to take a bus or the subway. e. Threat of new entry: New companies are entering into the market every day and each entry will make a dent in the revenues of the existing companies. This will happen if the cost of entering into a market is low. But a company with large economies of scale or has high technology then it will not be affected too much by new entrants. New entrants may also be barred from entering a market through government regulations. But in an era of rising globalization, this barrier is not much an issue now. Applying Terrylls Potato Chips into the current scenario, an analysis is done with each of the above components. a. Supplier Power: The reason that Mr. Chase happened to start this business was because of suppler power. The power of low prices held by supermarket giants like Tesco had bought financial loss to Mr. Chase. But this situation has changed once the company was started and became successful. In this instance and as per the information in the case study, Mr Chase himself produces the main raw material of the business namely potatoes. It is also mentioned in the case study that his farm has the capacity to produce enough potatoes for chips for a few years more. Even fi ihe had to source it from outside he would have willing suppliers who are given poor prices by the supermarkets. b. Buyer Power: Buyer power is comparatively low for the company because it operates in a niche segment of ‘designer’ chips. The company also has the advantage of growing its own potatoes and that too organically. c. Competition: Competition for the present is low for Tyrrells. But it could change in the future since its products are a result of innovation rather than technology. It would be quite easy for other producers of the crop to become competitors. d. Terrylls chips do not face a big problem with the threat of substitution because potato chips are popular in many places around the world. Substitution can come in the form of chips with different tastes or designs. e. Threat of new entry does exist in this case and would probably be the biggest threat to him in the future. If he keeps his running his operation efficiently and without compromising on quality he can reduce some of the threat. Moreover he has the advantage of producing his own raw material. But the threat remains nevertheless. “The Porter’s 5 Forces tool is a simple but powerful tool for understanding where power lies in a business situation”. (Porter’ Five Forces 1995-2008). Assignment Part -2 Human Resources: Tyrrells Potato Chips Company owned by William Chase is growing very quickly. To manage such an operation and its employees, its owner Will Chase has to see that a proper human resources management department is set up as soon as possible. He has to understand the meaning and importance of HR in management especially since he is coming from a farming background and that his company will soon need to be professionally managed. Human Resources Management: HR management is one of the most important aspects of a professionally run business today. “Human resources management - involves the productive use of people in achieving the organization’s strategic business objectives and the satisfaction of the individual employee's needs.” (International People and Reward Solutions 2001). In fact this topic has become so important that HR is relevant for organizations of all types including government departments. What should be involved in a Human Resources plan: It is a fact that ideas can make money, but in the long run people are needed to see that the ideas are implemented. So it can be said that people are the biggest assets of any organization. This is exactly why Tyrrells Potato Chips need to look into setting up a proper HR Department in their organization. Even though the company has found a niche market there is no guarantee that competition can happen. In such a case it will be certain that the company’s competitors will be looking for the best talent to manage their affairs. Their fist choice would be to hire the best from Tyrells because of the fact that its employees are experienced in running this type of business. Even though it cannot be prevented fully, a good HR Department will see to it that it is kept to a minimum. A large organization will have a large mix of employees in terms of age, race and qualification and each of them will have different expectations. A good HR plan should involve the following: a. Manpower Planning: This is an important function of HR. A company should be staffed by the correct number of employees who have the right qualifications for the job. This is applicable to the present situation as well as for the futures. Employees may retire and some may leave unexpectedly and they have to be replaced. Expansion of Business will also require new staff and new positions. Promotion policies have to evolved and put in place. The first step in this direction is taking a complete picture of the existing staff. b. Selection and recruitment of personnel: Tyrrels Potato Chips already has a production and marketing facility with existing staff. But new people will be needed within an year because of the growth of business. Recruitment can be done by promotion of existing staff and appointing new people through advertising and sourcing from other companies. c. Employee Motivation: This is very important for any company. Mr. Chase will have to introduce or modify an incentive plan for his employees. Apart from basic pay and allowances, bonus, productivity pay, holiday and health allowances etc have to be considered. d. Performance Evaluation: Evaluation of employee performance is an ongoing function and a system for the same should be in place. This is necessary to ensure that employees are performing their tasks and they are rightly rewarded. A self assessment sheet could also be given to the employees. e. Good relations: It should be ensured that relationships with trade unions, informal and formal groups within the organization are kept cordial. f. Other services: This includes provisions for sick leave and pay, rehabilitation of injured employees, canteens, emergency financial aid, health, safety and hygiene factors. g. Training and development: training for new and existing employees will have to be taken up. New technology and systems and new jobs or promotions will require training so that staffing can be done efficiently. h. HR Strategy: Finally a practical and efficient strategy should be evolved and put in place. It should be ensured that this strategy is implemented as planned. Regular reviews of the strategy must be done on the basis of results and changes be made wherever necessary. “Failure in not having a carefully crafted human resources management strategy, can and probably will lead to failures in the business process itself.” (Human Resources Management 2008). Steps to consider for business growth: In implementing a HR policy in a quickly growing firm like Tyrrells Potato Chips, Mr. Chase may do well to consider certain aspects that will influence his future growth. The company has already started exports of potato chips and may soon plan to expand overseas. In such a situation, Mr. Chase can look at the COPS of Human Relationships Management, namely Culture, Organization, People and Systems. a. Culture (Work): There will be people belonging to different cultures and backgrounds in the company. It should be studied whether the interests of the firm and the interests of the employees are related to each other. The same applies to the relationship with interests of employees with those of colleagues and other employees. There should be team work within the employees and employees should be given the freedom to voice opinions and to innovate within prescribed limits. b. Organization: This refers primarily to the structure of the organization. It should be seen to that the organization is structured to obtain maximum efficiency. The roles of the employees and reporting lines within the organization should also be in sync with the total structure. Care should be taken to see that the structure does not become too complex in comparison to size. c. People: This refers both to the responsibilities and rewards of the people in the organization. Mr. Chase will have to see that the right people are put on the right job, whether the staff has understood and perform their roles well and how they interact with the customers. On the reward side a system should be in place whereby efficient people are identified and promoted and that they are motivated through motivation and monetary rewards. d. Systems: This refers to HR system itself. It should be seen that the whole system actually works to better the performance of the employees. Care should be taken to see that the system is universal for all departments. The system should effectively reward efficiency of the workers so that they are motivated to perform better. Finally a periodic review of the system is done and necessary changes be incorporated. “Being a part of the dynamic environment with rapid changes organizations are required to develop more focused and coherent approach to managing people. Now it is the real time to understand its human power and to convert it into human capital.” (Gupta 2007). Another aspect which is important for the long term growth of Tyrrells Potato Chips will be its staffing policy once the firma goes international. Many companies have performed poorly because of wrong staffing in foreign countries. There are three types of staffing a company can follow for its offices abroad. a. Ethnocentric Staffing: This is a policy whereby the firm fills top positions in the foreign office with people belonging to the home country. “An ethnocentric approach to staffing policy is one in which key management positions in an international business are filled by parent-country nationals.” (Global Human Resources Management). Sometimes the host country may lack the educational qualification and competency to fill such posts. It may also be done so that a certain level of homogeneity is achieved throughout its operations. Another instance of such staffing is when core competencies are needed to be transferred to its office in the host country. This is possible only if staffs from the home country who are familiar with such competencies are sent abroad and holds top positions. Such practice is now being used less often than before. The downside of this type of staffing is that employees belonging to the host country office can never advance above the stage of middle management. Another reason is that the culture of the host country will never be understood, an aspect which is important for smooth relations. Moreover the company will have to pay high salary to such staff transferred from the home country. b. Polycentric Staffing: In this approach key positions in the host country are filled with nationals of the host country itself while top positions in the home country are staffed from people of that country. The advantages are that cultural differences can be understood and sorted out and the company will have to spend a smaller amount for paying salaries. Downsides include the fact that employees of the host country will never get to hold top positions at HQ of the company at home and that a gap in relationships may occur between home and host country offices. c. Geocentric Staffing: In this policy the company finds out the most efficient people working for it in different parts of the world and employs them in suitable positions regardless of nationality and location. The advantage is that the company gets its best staff in key positions resulting in better performance. Moreover, it will create a pool of talent that is comfortable working in different cultures. One disadvantage is that such a strategy is affected by different immigration and other government policies existing in countries where the company operates. It is also expensive to put into practice. Mr. Chase can opt for the ethnocentric approach initially and can change over to a polycentric approach once its foreign operations begin operations fully a polycentric policy can be adopted. It is too soon to think of a geocentric staffing because it is usually followed by companies who expand globally. Bibliography Ansoff Product / Market Matrix. [Online]. Tutor2u. Last accessed 17 April 2008 at: http://tutor2u.net/business/strategy/ansoff_matrix.htm Global Human Resources Management: Chapter 15: Staffing and International Strategy. [Online]. Last accessed 17 April 2008 at: http://www.utdallas.edu/~irem/chap15.ppt#269,4,Staffing and International Strategy Gupta, Dr Saurabh (2007). Developing a HRM Strategy. [Online]. Indianmba.com. Last accessed 17 April 2008 at: http://www.indianmba.com/Faculty_Column/FC506/fc506.html. Human Resources Management: Functional Overview and Strategy for HRM. (2008). [Online]. ACCEL team. 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