Introduction
This paper is a strategic case analysis of Calveta Dining Services, a US based catering and cooking services that is specialized in providing various culinary services to nursing homes around the United States. The company commenced as a small family business and has grown into a major entity. This paper critiques trends in the business by applying principles of strategic management and strategic planning to the case at hand
Maintaining the current market by restructuring the organization to ensure that the organizational culture is entrenched and spread throughout the Calveta &
Diversifying and expanding either in the SFS industry or growing into another line(s) of business
These two pointers come with major obligations that are going to affect the entire Calveta Dining Services. They will ensure that the current revenue base is maintained and new revenue pointers are created to double the existing revenue base of $2 billion.
Moreover, if these two issues are deduced and resolved appropriately, Calveta can formulate an appropriate corporate strategy. And from there, they can formulate a philosophy and a set of principles that can be applied in dealing with the problems and issues in the various strategic business units.
Porter’s Five Forces and Calveta
In the quest to expand into other markets and departments, there is the need for Calveta to be sensitive to the realities on the ground. And this can be done by examining the current Senior Foods Service (SFS) market and then formulate a logical decision about how best to deal with it. The Porters’ five force model states that there are five main forces that influences the structure and interactivity of a given market within which a firm operates and these are:
Threat of new entrants;
Threat of substitutes:
Bargaining power of buyers;
Bargaining power of suppliers &
Competitive rivalry
The threat of substitutes involves the possibility of consumers acquiring the same service of a firm through a different approach or system. In theory, the possibility of senior facilities acquiring catering services from other sources could happen. However, this remains a remote possibility because firms have built a strong preference for specialized SFS service providers like Calveta.
The threat of buyers integrating in the SFS food industry is limited because most of these senior facilities will have high overhead costs if they decide to create their own foods. Threats of suppliers is also limited because suppliers will need to build a reputation that can take years to become like Calveta Dining Services.
Therefore, the only real threat that is posed to Calveta is the threat of Competitive Rivalry which is about the key SFS service providers who provide services to nursing homes in the United States. As presented by the scenario, Calveta runs services to 976 out of the 18,000 nursing homes in the country which is about 10% of the industry. It is ranked fourth so the first three and the other firms in the top ten pose a great risk. Calveta has to hold on to the 10% market share to maintain its revenue stake and try to expand, possibly through acquisitions and new contracts.
Focal Company Strategy of Calveta
The strategy of Calveta includes the following:
Providing high quality foods that is personalized and fits the needs of the nursing homes they serve;
Organic growth of the company by reinvesting revenue and cutting down costs;
Continuous innovation and improvement of their methods to stay ahead of the competition;
Human resource development and enhancement through continuous training and internal recruitment to build long-term relationships with employees;
Focus on the east of the United States with a vision of specialization and customer satisfaction
Strengths and Weaknesses of Calveta
Competitive Advantage of Cavelta
The main source of competitive advantage for Cavelta is their strong and long-standing relationships and connection with the hospitals they serve. This includes the different companies in the industry. Their ability to also deliver high quality services that fits the exact needs of people in these nursing homes has culminated in a positive reputation that has created goodwill for them and for their partner firms. This has made them highly specialized and focused in their industry.
Cavelta is also an company that hires and trains its staff members to meet the highest levels of service delivery. That makes them unique and competent in terms of controlling human capital and competent staff members and operators. There is a high level of experience and ability of their staff members and that makes them a first choice for most entities and organizations in the industry.
Cavelta also controls innovative and responsive technological systems and processes that makes them a major contender in the industry. This is a source of competitive advantage and competency that is rare and most people cannot compete.
Finally, Cavelta controls a huge capital base that gives it the ability to expand and grow significantly. The control of financial assets and purchasing power makes Cavelta a major contender in the industry and gives them a lot of competency to launch different projects and services.
Strategic Recommendations
Obviously, the SWOT Analysis table above shows that there is the threat of losing market share in the existing industry and also, there is the risk of losing control from the top on the part of Frank Cavelta and the other executives. Therefore, there are three main recommendations that must be taken seriously by Cavelta Dining:
Consolidate its hold in the industry and maintain market share by acquisitions;
Carefully expand and grow other lines of revenue to complement the existing revenue base;
Reasons for Strategic Recommendations
It is apparent that there is competition in the industry and the industry is choked. This is because the entities in the industry have long-term contracts and deals. Therefore, there is the need for Cavelta to consider acquiring other firms and other entities in the industry that operates within its scope. This way, they can use their culture and competencies to grow and enter other markets in other parts of the United States. From the failed acquisition plan of the company because of the high cost of operations of a rival firm, it is clear they have to consider a firm that is operating on a profit margin level that is similar to Cavelta. This way, they can acquire such a firm and institute their organizational culture and practice to achieve optimal results and also expand their market share. Through this, they will be assured of getting closer to their goal of expanding and growing to improve and enhance their market share.
With their market share secured and achieved, Cavelta can consider expanding and growing into other industries that are related and linked to their current operations. From the previous efforts made by the company, there were significant failures due to the fact that they expanded into markets and services that are not linked or connected to their core operations and functions. Therefore, the company will have to come up with a series of options in an industry similar to what they operate within. This can be done by debating on similar industries and providing similar services like home-care and hospital cleaning services that can utilize the resources Cavelta currently has. From there, the company can expand to other markets and other industries that might be unfamiliar but profitable.
Finally, the expansion of the company has led to major departures from organizational traditions and practices. To offset this, there will be the need for the formulation of new corporate governance systems. This must be the basis for the drawing up of a new organizational chart that will complement the new corporate governance systems and processes. This will include amongst other things, new regional leaders who will ensure that the traditions are carried out. The people at the top of the organization must meet with regional leaders and other business leaders and train them well. After that, they should monitor and supervise the new entrants and new leaders and continue to train them and give them further guidance to ensure that the organizational cultural values are preserved and maintained.
Financial Performance Implications of Recommendations
The acquisition of new SFS industry businesses that provides catering services will have medium to long-term consequences. This is because the firms that will be acquired will be operational. However, Cavelta will have to invest some money into the acquisitions. And once the acquisition is done, there will be the need to commit more attention to the firms and make them profitable. This might take 3 – 7 years on the average to make profits and payback what was invested.
Entry into new markets and new lines of business might take a bit longer. This is because it will require entering a completely new sector and investing capital into a completely new unit and department. This might come with major outlay issues and matter that might take 7 – 10 years to recover. However, this will add up to the revenue significantly, depending on the kind of industry Cavelta branches into.
Corporate governance changes will come with higher costs of training new managers and directors and this might make the cost of operating Cavelta higher than it previously was.
Works Cited
Henry, Anthony. Understanding Strategic Management. New York: Oxford University Press, 2011. Print.
Porter, Michael. Competitive Advantage. New York: Free Press, 2010. Print.
