Management of River Road National Chain Supermarkets - Case Study Example

Name: Course: Tutor: Date: Individual Report Table of Contents 1 Executive summary 3 2 Introduction 4 3 Price allocation 6 4 Purchasing for resale 7 5 Ethics in business 10 6 Recommendations 13 7 Conclusion 13 1 Executive summary The managers at River Road national chain supermarkets asked me to address some issues concerning the merge that they want to establish with a regional chain of supermarkets. As a consultant of Mergers and Acquisitions, I intend to address those issues and present the report to the best of my knowledge for the use and success of the company. The managers made me to understand that they had the intention of merging but the problem arises in deciding which policies to adopt that is deciding to go the regional way or the national way. The objectives of the report is generally to address specifically the issues that the managers raised in regard to pricing if their products and customer loyalty, how and when to purchase the goods for resale and finally relay of information with regard to the ethics that guide businesses and specifically River Road. The scope of the report revolves around purchasing and supply that is the main activities of the business. Some concepts however are related to other businesses but still focus on this National chain of supermarkets to ensure that it is successful when the merge takes place. As a trained Mergers and Acquisitions consultant, I base my decision making on the business knowledge that I have. The company has also provided me with some information that I will use to write the report about the solutions to the various problems. Finally I will use scholarly sources to help me come up with the best advice and the best report for the benefit of this business. I have outlined the various findings from the study and made recommendations from my own point of view. The company managers have the obligation to select what to use for the benefit of the national chain of supermarkets. I have tried my best to align this report to the company’s values even as I tried to address the issues that the managers asked me to address. The merge between the regional chain of supermarkets and the national chain of supermarkets can be a successful venture provided the parties involved agree on the best decisions to run the business operations. 2 Introduction The managers at River Road national chain supermarkets asked me to address some issues concerning the merge that they want to establish with a regional chain of supermarkets. The regional supermarkets include: Australian United Retailers Limited (AURL), Farmer Jack's, Fresh Provisions , Leo's Fine Food & Wine, Macro Wholefoods , Maxi Foods , NQR , Supabarn , Valuemart , and Costco. As a consultant of Mergers and Acquisitions, I intend to address those issues and present the report to the best of my knowledge for the use and success of the company. The managers made me to understand that they had the intention of merging but the problem arises in deciding which policies to adopt, that is, deciding to go the regional way or the national way. The objectives of the report is generally to address specifically the issues that the managers raised in regard to pricing if their products and customer loyalty, how and when to purchase the goods for resale and finally relay of information with regard to the ethics that guide businesses and specifically River Road. I have addressed these issues just as I have outlined them. The scope of the report revolves around purchasing and supply that is the main activities of the business. Some concepts however are related to other businesses but still focus on this National chain of supermarkets to ensure that it is successful when the merge takes place. As a trained Mergers and Acquisitions consultant, I base my decision making on the business knowledge that I have. The company has also provided me with some information that I will use to write the report about the solutions to the various problems. Finally I will use scholarly sources to help me come up with the best advice and the best report for the benefit of this business. I have outlined the various findings from the study and made recommendations from my own point of view. The company managers have the obligation to select what to use for the benefit of the national chain of supermarkets. I have tried my best to align this report to the company’s values even as I tried to address the issues that the managers asked me to address. The merge between the regional chain of supermarkets and the national chain of supermarkets can be a successful venture provided the parties involved agree on the best decisions to run the business operations (Bruner 59). I recommend the merge because it is an opportunity for the business to expand its operation and generate more sources of revenue 3 Price allocation One of the problems facing the company at the moment is the debate on whether the national chain should adopt the regional system of operations where it would support price differentiation rather than retaining the same price for their products regardless of whether the company sells the product to different kinds of customers. As a consultant, I would advise the national chain store to adopt this practice of price discrimination. Although the process of changing the national chain IT operations to fit the regional chain operations is expensive, it is worth it because it will be putting the customer interests at heart. The customers are part of the stakeholders in the company and therefore, if the company maintains the customer loyalty it would lead to increase in sales as the customers can send referees. The customers also assure the company of a constant source of income. As the regional report stated, the price differentiation product mainly contributes to retain customers. For instance, the regional chain store had initially undertaken that program but later abandoned it for some time. The consequences of abandoning the price differentiation program, was loss of customers to the company’s regional competitors. Winning the customers back to the company after that was hard. The company’s national chain stores should therefore adjust its IT programs to support the use of two prices for the same good. Regardless of the charges involved in the process of transforming the IT program to fit the regional design, there are other reasons that support the decision to go for price differentiation for the company, these reasons are: the customers in the loyalty program have a lower price elasticity of demand compared to the other customers who are not in the loyalty program. The company has the ability to ensure that the customers who purchase its products at both the lower prices and the higher prices get unique services that the company offers. This will help the company to ensure that the customers do not get the products from other suppliers, who in this case may be the buyers in the program who may buy the product at the low price and take advantage to supply the product to the other customers, not in the program at a lower price compared to what the company is selling. Price discrimination will not only serve as a method to attract and retain customers, it will also help the company earn a regular source of income. The consumers who are in the program are at the advantage of getting the company’s products at a lower price. However, some disadvantages, though minimal, may be attached to the use of two prices; for instance, some of the customers may take advantage of the lower prices to act as suppliers for those who are not in the program at a lower price compared to the actual higher price offered by the company. 4 Purchasing for resale The second crisis is whether the company should leave the right to purchase in the hands of the category managers or allow the store managers to take advantage of the offers available. Use of the category management may only be successful if the management intends to gain the following from the company: if the company desires to add value to all its products, for instance, not to concentrate on one product at a time but focus on purchasing and selling all the products at the same time. This would mean, regardless of whether there is an offer or not, the company would still need to incur the inbound logistics for all the products as a whole. Second, the company could have realized that even if they purchase in bulk, the company can only get a specific amount of income from its sales each year. It would be therefore appropriate that the company just undertakes category buying. If the company has signed an agreement with a supplier who supplies the product at relatively cheap prices, the company may not rush for products on offer because, just as the company would wish to have and retain its customers, the suppliers also need to have and retain the company as its reliable customers. The process of category management or the steps that the company could take to ensure effective management re as follows: the company has to define what each category will consist of. Then, for each category, the company will have to decide what role it will play to ensure the success of the company. The company can then asses its performance in the previous periods with or without the categories. From there it will have to allocate targets that each category will have to meet for the company to experience success. The company can then come up with an overall or general strategy to apply to all categories after which it will implement the categories. The company does not just stop at implementation of the categories but can ensure a systematic periodical review of each category to study its performance. Although the company may consider categorical management it should consider the laws that its government has put in place concerning categorical management. For many governments, categorical management seems to have many disadvantages than advantages and thus many governments do not encourage it. On the other hand, the company could decide to continue with the process of giving authority to stock managers to purchase goods in bulk when there are offers. In times where there are offers, the prices of goods are low (Benton 58). The quality of the products are the same, just that the producers are giving these offers in order to attract more customers. Buying the goods on offer in bulk could lead to saving. This is because buying in bulk comes with a little reduced cost on each unit that a manager purchases and in the long run could lead to a realizable saving for the company. It can then sell the products at a higher price and lead to many more profits for the company. Buying goods in bulk will also reduce the company’s frequent purchase of goods for sale. This reduces transportation costs and also accounts for ensuring that the goods do not easily run out of stock. If the company decides to buy the goods on offer in a bulk, it could end up incurring the following drawbacks: the company may incur expenses in terms of paying upfront expenses to obtain the goods. Second, some of the products on offer may be perishable, this would mean that the managers are to buy and resale has to take place as first as possible, if not, the goods may get spoiled which means a loss for the company (Sherman 77). For the purpose of storage, the company may require extra space to store the goods. This may be an extra cost especially if the company’s store are not in an appropriate design to carter for storage of extra goods. As much as the company may focus to buy the goods in bulk, failure to put into consideration the exact quantity that the company needs would lead to a situation where the company would purchase more than it needs. Disposal of these items would lead to losses especially when the company will also have to offer discounts in order to encourage its customers to buy its products. This company in particular may suffer the problem of excess inventory because the managers are rushing for as many offers as possible in order to get the company to increase their pay. Therefore these managers will only focus on purchasing and not the inventories. Finally, because the manager’s salaries are not fixed but depend on offers, the managers could feel discouraged in an instance when their salaries drop because the offers in that season were few. As the consultant for this company, I would suggest that if the company has the ability to modify the national chain to adopt the regional system of purchasing, where the stock managers are in charge of purchasing the goods when the goods are on offer. The company should however set the maximum and minimum range within which a stock manager’s salary should lie (Batra, Satish and Kazmi 102). The company should also ensure that they keep proper records of inventories to ensure that the purchases do not exceed what it needs. The company will also have to adjust the national store to be like the regional stores in order to allow for storage space. In terms of purchases, store managers need to concentrate mainly on non-perishable goods. For perishable goods, their demand and supply should determine the quantity to be stored and put on the shelves of the supermarkets. 5 Ethics in business Another crisis for the company is that, the national IT chain specialists have to modify their barcodes to ensure that it incorporates some of the things or benefits that go with the regional chain barcode. The problem however is that the person in charge of the barcodes has lost important information regarding barcodes which would be useful in the process of modifying the national barcode reader to make it more efficient. The person in charge does not want the management to know about the loss of information and therefore prefers that I do not reveal this information for his sake, that is, so that he may retain his position in the company. This is a question of ethics. For any company, the main goal is to benefit itself, its employees and the society at large. Therefore both the managers and the managed have a role to conduct their business in a socially responsible manner, and in an ethical way. The main outcome from the company should therefore be to take care of the environment and safeguard it from any destruction, to ensure that it protects the rights of the people working, and to ensure that it follows the rules that the government has set for its operations as a corporate person under the law. Allowing the person in charge of the barcode not to make adjustments for the sake of his job will go against some of the core values of the company as listed below: Integrity, this is because the people working in the company need to be honest in their dealings with one another (Sherman 54). Allowing him or her to continue using the old barcode for the sake of his job is lack of integrity because I know the company needs to modify the barcode for its own good, and he or she also knows the importance of modifying the barcode. Trust, this is because the company has entrusted matters relating to barcode readers to that person. It is therefore his or her duty to safeguard the interests of the company. As much as he or she protects his or her job, the company’s operations need to run efficiently. On my part as the consultant, I the company trust that I will do a good job and therefore, since I have identified a solution to a problem, I should let the managers of the company to know because they will pay me for that service (Auerbach 67). Lying to them would be unethical. Being diverse is also a value that the company upholds. The person in charge of the barcode reader should therefore be ready to accept the idea of modification of the system regardless of whether it will favor or not favor him. The idea to change the barcode reader is a new idea that may be beneficial to the company and therefore I should let the management know in order to diversify its techniques of inventory control. Because the company seeks to add value, one of its ethical drives is ingenuity, which is the company is ready to go miles to, make discoveries and find new and better opportunities. That could be the reason why the company hired me as their consultant. I should therefore be in a position to relay important information such as this to them. Maybe it could help them design a better way of storing the information on barcodes. To make the decision on whether to reveal every detail about the barcode, as the consultant, I will apply the following criteria and help the person in charge of the information on the barcodes understand the reasons for revealing the information. I will ask myself if the decision to modify the barcode reader is legal, if legal I will go ahead to let the managers know, if not legal, I will abandon it. Second, I will check if the decision is in line with the company’s goals and ambitions and if the decision, ones applied will safeguard the rights of the workers in the company: If yes, I will go ahead to reveal the information to the managers. Third, if the community or the public will accept the decision if they were to be aware of it. Accepting it means it is the right thing to do and therefore I will relay the information to the managers (Blythe 32). For any company therefore, it is easy to establish and maintain ethical standards if each person in the company remains responsible, if the people in authority know their roles and work towards the success of the company and if the members of the company are ready to comply with the procedures of the company. The people in the company who violate its rules and procedures should not go unpunished. This is to the benefit of the company as in this way it upholds its ethical standards. 6 Recommendations The managers of River road can apply what I have highlighted in the report to test its efficiency. They can then evaluate the results to decide whether it is the right thing to do. 7 Conclusion In conclusion, a merger and acquisition may lead to increased returns and efficiency. However it requires critical decision making on the processes to undertake. Managers should therefore focus on the business rather than their own personal interests as they make decisions in order to ensure the success of the merge. Works Cited Auerbach, Alan J. Mergers and Acquisitions. Chicago: University of Chicago Press, 2006. Batra, Satish K, and S H. H. Kazmi. Consumer Behaviour: Text and Cases. New Delhi: Excel Books, 2008. Benton, W C. Purchasing and Supply Management. Boston: McGraw-Hill Irwin, 2007. Blythe, Jim. Consumer Behaviour. London: SAGE, 2013. Bruner, Robert F. 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