Role of Formal and Informal Networks - Case Study Example

Name: Institution: Course: Date: COFFEEVILLE BUSINESS ISSUE Many companies struggle to gain traction in the market today mainly due to various internal or external matters. There is the critical need that they are identified in time and proper mitigation measures be put in place to control the effects. The case of Coffeeville is no exception. The struggle that the company is currently facing in the market can be identified through the analysis of the various indicators (Soda, Giuseppe &Akbar Zaheer, 751). At the same time, the fact that the business has put in place adequate measures to establish and has been consistent in the market for the last four years implies that it will be easier to rise from the problems currently experienced (Soda, Giuseppe &Akbar Zaheer, 751). This case study takes a critical analysis of Coffeeville with the aim of identifying the main reasons for the reduction in performance that has threatened to cripple its operations. Every business can be said to be having a healthy financial status or having a sustainable business ecosystem if it can manage the costs related to the business while effectively optimizing the performance in terms of profitability and sales (Rozinat, 834). Coffeeville operates in an exciting niche that has unlimited space for growth. The fact that the company has built its reputation on serving high quality and superiorly brewed hot and cold beverages to the customers in the busy Melbourne central business district gives it critical leverage. At the same time, it is important to appreciate the fact that the company has well developed goals and objectives that sum up its vision into the future. The company’s target population is wide and dynamic, and the fact that the company has decided to specifically target them is a critical inclusion in its growth into the future. In essence, the decisions that the company has taken so far such as growing the number of outlets and number of staffs can be seen to be directly related to the objectives such as increasing the revenue. Business Issue(s) From an analytical perspective, the company faces a myriad of challenges that contributes to the overall underperformance of the company. Considering the good market growth in the first few years and comparing to the current position, it is critical to relate the possibility of internal or external factors contributing to the problem. From an internal perspective, while there may be the possibility of them affecting the current performance, there is no strong evidence linking internal factors to the current problems being experienced by the company (Soda, Giuseppe &Akbar Zaheer, 751). In essence, the company has taken some steps to ensure that the internal performance is in tandem with the market expectations. The analysis of the internal environment for the business indicates that the company has had a low staff turnover in the last 18 months. The measures adopted by the firm include adjustments in the menus and drinks, continuously adjusting and improving them to fit the expanding customer needs. The contributor to the company’s problems can largely be attributed to poor performance in the external environment. The company is operating in a stiff environment that presents unfavourable conditions for its growth into the future. Marketing conditions such as high costs of productions, inflation, and government policies seem to have taken a toll on the company’s operations. The negative role that the environment has had on the business can be seen in the way the company has performed dismally in the last six months. As noted in the introduction, the company had great success in the first years of operations, but the recent opening of another store has not yielded the same performance, implying that what is ailing the store is beyond internal competence, an area that the company has put in place adequate effort to improve. At the same time, it has been noted that the levels of productivity have improved as indicated by the increased competence of the staffs (Rozinat, 834). The increase in aspects such as utility expenses over the last few months may be considered beyond the control of the company. At the same time, there exists a robust demand for highly trained and skills staffs in the country, which implies that the highly skilled staffs have to be well compensated. At the same time, another influence that the market has on the company manifests in the increase in the rents paid by the company. This may be influenced by high competitiveness of the spaces leased or market dynamics that demands a hike in the rents. In the same context, the company has no control over the hiking of the coffee beans prices in the market and that it is only left with the option of adjusting the operations in that angle. The same case applies to the red meat prices. The bad state of the market is an explanation why the recently opened stores have faced difficulties gaining traction in the market. Striving to create a decision to change the company’s current state has to put all the factors into consideration (Rozinat, 834). Like in the case above, it can be seen that the externalities have weighed down on the company heavily and hence there is the need for the effort to be put in place to address this aspect. Streamlining the operations of the business to minimize costs, adjustments to the food and drinks and services to fit the new pricing, downsizing, changing suppliers and other similar approaches may be meaningful in addressing some of these challenges and ensuring that the company can go back to the profitability and sustainability witnessed in the company. Data for Decision-Making The above challenges that the business faces can easily be noted through a scrutiny of the financial performance of the company. At the same time, recognizing the many decisions that the company has taken which have been aimed at improving the internal state of the organization is important. It can be seen that the market has been crude in the company and despite the company putting in place mechanisms to ensure internal competence; it has remained vulnerable to the state of the external market (Rozinat, 834). Other indicators that have been analyzed include: • The sales have been on the decline in nearly all the stores in different proportions. • The above indicators such as the rise in the prices of commodities are also important indicators. • There is a general stagnation in the pace at which new customers are acquisition for the firm which holds the risk of affecting the future • Food traffic is down in nearly all the stores that are in operation regardless of the time the firm has had in operations. • The food sales, the beverage sales, the external catering sales and the total incomes have been on the decline for some time • There is a sudden rise in the total expenditures incurred by the company • The profitability has been on a downward spiral too. The above data and key performance indicators are critical in making appropriate decisions in the case given. On the case of increases in the cost of goods for production and the cost of labour which ultimately leads to high production costs, it can be seen that the company has to put in place cost-saving measures to safeguard the company’s position. The validity of the data can be compared with the actual market pricing models and the cost of labour elsewhere in the city (Soda, Giuseppe &Akbar Zaheer, 751). From the analysis of the increases, a decision has to be made on the strategies that can help the company move from the current jeopardy such as reducing the number of staffs to cut costs and to adjust the pricing of the end food and drinks in order to reflect the prevailing market condition. Caution has to be taken in order not to affect the purchasing power of the customers, the loyalty and the ability of the customers as this may result in worse states. The comparison to others especially the competitor's would help. Strategies such as SWOT and PESTLE analysis come in handy in such situations. In the same scenario, understanding customer behaviors and tastes can help to customize the experience further to them as well as enabling the knowledge of the different aspects that shape their ability to purchase. In the case above, the use of surveys aimed at understanding the perceptions of the customer is imperative in understanding the way the experience can be enhanced, and also it helps identify the weak points from the clients’ perspective. From the surveys administered above, it was realized that there was the general feeling in most of the customers that they may lose their jobs due to the financial underperformance of their employer. This implies that the challenges facing Coffeeville are more broad-spectrum and can be attributed to a harsh operating environment (Soda, Giuseppe &Akbar Zaheer, 751). This and many other deductions from the analysis leave the pointer clearly drawn towards the external conditions and not the internal. These sets of data provide a critical overview that is necessary for decision-making in the firm. From the analysis above, the least relevant source of information in the case above is the internal state of the company. As noted, there is little to no correlation between the performance of the company and the internal conditions, leaving us to conclude that the external conditions have had the most profound impact on the business processes than the internal aspects of the enterprise. Most of the decisions to be made have to focus largely on addressing the problems caused by the externalities to the business as discussed above. Role of Formal and Informal Networks From the above analysis of the case of Coffeeville, it can be seen that the decisions have to be undertaken after exhausting all the data and information avenues which guide the decision-making process. An analysis of the formal sequences at the workplace such as the job routines, payments and others and the data related enabled the understanding of aspects such as organizational efficiency and effectiveness or competence (Rozinat, 834). The formal networks, therefore, provide an important aspect in understating what exactly is the problem with the firm and hence they are critical in decision making. The same applies to the analysis of the formal documents and statements such as the financial reports of the firm with the view of understanding the problem so as to craft a robust solution. At the same time, the informal structures in place such as communication and customer feedback played a critical role in formulating a solution to the problem that the company faced. These informal and formal networks have played a significant role in formulating the course of action in the case above and can still apply to any other scenario. It is prudent to consider the due process, and the best practices of decision making to ensure that the decision made is highly relevant and will be critical in addressing the needs into the future. As noted above, Coffeeville should take a course of action that will serve it best in the prevailing circumstances. Works Cited Rozinat, Anne, “Workflow simulation for operational decision support." Data & Knowledge Engineering 68.9 (2009): 834-850. Soda, Giuseppe, and Akbar Zaheer. "A network perspective on organizational architecture: Performance effects of the interplay of formal and informal organization." Strategic Management Journal 33.6 (2012): 751-771 Read More