Since Catherine Horton is not happy about the way things are going in the Catherine’s Confectionaries, it is necessary to implement changes that could enhance company profitability and make the business more enjoyable for Catherine. It is also important to give the company a sense of direction and to make it easier for Catherine to control her business.
The first step in organizing business activity is defining its core strategy and focus. Catherine’s Confectionaries has been always developing spontaneously and engaged in activities without profound consideration of their compatibility with the firm’s strategy and focus. Although such approach may help to explore new opportunities, it also leads to an uncertainty in strategic direction and prevents the company from specializing. The size of Catherine’s Confectionaries does not allow her to handle the complexity of a multibusiness structure that the firm currently represents. Therefore, the first question that Catherine may ask is the strategic direction she would like to follow for her company. It should be identified in terms of target audience and company positioning in terms of price, place, promotion and product. (Boone and Kurtz, 2012). It should also consider company’s resources and capabilities, which create a foundation for building a sustainable competitive advantage (Hitt, Ireland, and Hoskisson, 2011). As the main area of Catherine’s expertise lies in her ability to prepare original and creative desserts, she should not be competing in the high volume and low margin market for business customers. Thus, the exit from the B2B business would eliminate the need for renting additional kitchen space as well as give Catherine more time for preparing sophisticated and original desserts that have always been the core product of the company.
The complexity of the walk-in business and the need for a completely different model to run it also created a misalignment with the capabilities and resources of the company. However, if this segment proves to be lucrative for Catherine’s Confectionaries, it is possible to run it in cooperation with an established store or a restaurant, in order to reduce the need for additional personnel and operations, while capturing the walk-in market and using this sales channel as an opportunity to promote business further and to enhance the word-of-mouth that has traditionally been the main advertizing channel for Catherine’s Confectionaries.
The second step in reorganizing Catherine’s Confectionaries concerns the profitability of the company. In this case it is necessary to investigate its financial statements and to analyze revenues and costs over the years. This could provide a significant input for strategic orientation of the company and its further expansion, as it can identify the businesses that are no longer profitable, while highlighting the potentially lucrative segments that require further development (Dorsey, 2008).
The cost aspect of the business also requires significant reconsideration. Firstly, Catherine might consider the efficiency of the resources used by the company and their marginal utility. Thus, if the rented kitchen does not bring as much profit as it costs, this expenditure should somehow be reduced or eliminated. Staff costs are also a significant burden for Catherine’s Confectionaries. Since walk-in business requires most of the personnel, while it is also the one responsible for the highest employee turnover, it may be reasonable for Catherine to reconsider the benefits of this business in the company’s portfolio. Catherine may still participate in the walk-in business by joining an existing point-of-sales, as it has been suggested above. If Catherine does not exit the B2B business, it is also necessary to evaluate the possibility of cost reduction associated with scale economies. Thus, it may be possible to restructure company’s purchasing in order to get discounts from suppliers, and to automate production in order to reduce per unit cost of the desserts produced by Catherine’s Confectionaries.
References
Boone,L. E. and Kurtz, D. L., 2012. Contemporary Marketing. Mason, OH: South-Western
Cengage Learning.
Dorsey, P., 2008. The Little Book That Builds Wealth: The Knockout Formula for Finding
Great Investments. Hoboken, NJ: John Wiley & Sons.
Hitt, M. A., Ireland, D.R. and Hoskisson, R.E., 2011. Strategic Management:
Competitiveness and Globalization, Concepts. Mason, OH: South-Western Cengage
Learning.
