Operations Management
Starting and managing a business is a complicated task that entails high risks, but also promises high returns. It demands flexibility and an open-mind in combination with strategic and operational planning (De Wit and Meyer, 2010). Since Catherine does not enjoy running Catherine’s Confectionaries, while her business no longer resembles the original company, it is necessary to reevaluate the current state of the business and to make changes in order to make it both profitable and enjoyable.
Strategic orientation is the first step that has to be defined by any entrepreneur in order to develop subsequent actions and to make sure that the business does not lose its focus. However, Catherine’s Confectionaries was created spontaneously and developed without a clear strategic direction. This approach created a sense of uncertainty about the future and the present direction of the business, which has become especially prominent when the company started to expand.
Business strategy can be developed only after clearly defining the positioning in the market, which is often summarized in 4Ps or 7Ps of the marketing mix, i.e. the four core characteristics (product, price, promotion and place) as well as three additional ones (processes, people, physical evidence) (Singh, 2010). In order to define the marketing mix, it is important to segment the market and to identify potential customers. Once the marketing mix is developed, the company should remain focused and to target only the customers, who are attractive for the company. At first, Catherine serviced only special occasions organized by private customers, who demanded creative and quality products, but were not cost-sensitive and placed their orders in advance. Over time, Catherine started to work with few and consolidated business clients in the B2B market, which was characterized by high price-competition; short lead times and cost pressures. Finally, Catherine’s Confectionaries expanded into the walk-in business that addressed the clients who could buy desserts directly in the restaurant. The choice of the segments was not determined by a clear strategic planning, but by the external environment, often without the consideration of internal capabilities. Thus, Catherine’s Confectionaries traditionally operated in the niche high-margin market for quality desserts, where its competitive advantage was the design and superior taste of the confectionaries. The transition into the B2B market made Catherine compete based on price and reduced product sophistication in order to meet volume requirements. Catherine was not prepared for this change and had no advantage in this highly competitive market, especially considering the small scale of her business. Therefore, this strategy was not appropriate for the business and should be reversed. By focusing only on one customer segment, specifically on the private buyers and special events, Catherine can reduce the complexity of positioning and focus only on one marketing mix. This approach will reduce the possibility to remain “stuck in the middle”, i.e. neither achieving cost leadership, nor differentiating or focusing (Porter, 1985). Thus, Catherine should concentrate on delivering desserts for special occasions and addressing the needs of the final consumers. B2B activity should be restricted to occasional collaboration with catering services that are hired to organize private events. This strategy will reflect the initial business orientation and incorporate the strengths of Catherine’s Confectionaries in the market for high quality desserts, which has longer lead times. Moreover, by targeting only final consumers the company can maintain its current promotion strategy that used word-of-mouth and small advertisements in the Yellow Pages. However, the main benefit of the focus strategy is that it capitalizes on Catherine ability to create original desserts, and gives her an opportunity to do what she really loves.
The second issue to address in Catherine’s Confectionaries is poor management of business operations. Since value creation and profitability are key to company’s survivals, Catherine should pay more attention to revenues and costs, as well as set targets for financial and operational performance. This task requires a through market analysis, which can help to evaluate the sustainability of the business model and the possibility of future growth and expansion. Thus, walk-in business could be developed as an extension of the core business. The room can be used for displaying products and welcoming customers, who are planning to order desserts for special events and would like to try some samples.
References
De Wit, B. and Meyer, R., 2010. Strategy Synthesis: Resolving Strategy Paradoxes to Create Competitive Advantage. 3rd ed. Andover, UK: Cengage Learning.
Porter, M. E., 1985. Competitive Advantage: Creating and Sustaining Superior Performance. New York, NY: The Free Press
Singh, D. A., 2010. Effective Management of Long Term Care Facilities. 2nd ed. Sudbury: Jones and Barlett Publishers
