a1 candies group

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HOCHSCHULE FR TECHNIK UND WIRTSCHAFT BERLINMASTER OF BUSINESS ADMINISTRATION & ENGINEERING

Case Study A1The Great Candies

Diana Montana, Daniella Chacon, Harry Utama, TanvirMahmud, Carlos Soares, Michael Khnlechner

Submitted to Dr. Birgit Hilberger

Strategy, Organization and HR Management

21.01.2013


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Table of Content

1. Executive Summary ........................................................................................................ 2

2. Understanding of the situation and objective .................................................................. 3

2.1 Food Industry ................................................................................................................ 3

2.2 Key Drivers of Food Industry ....................................................................................... 3

2.3 Market Outlook ............................................................................................................ 3

2.4 Competitors Analysis.................................................................................................. 3

2.4.1 Nestl ......................................................................................................................... 4

2.4.2 Kraft Foods Inc .......................................................................................................... 4

2.5 Customer structures ...................................................................................................... 4

2.6 Structured description of the actual situation of the company ..................................... 4

a. Actual organizational problems of The Great Candies to be solved ........................... 4

b. Actual strategic problems to be solved ........................................................................ 5c. Actual HR issues to be solved ..................................................................................... 5

3. Analysis and Insights ...................................................................................................... 5

3.1 SWOT Analysis ............................................................................................................ 5

3.2 Strategic Management ................................................................................................ 11

3.2.1 Derivation of strategies in The Great Candies ........................................................ 11

3.2.2 Corporate strategy.................................................................................................... 11

3.2.3 Business strategy ..................................................................................................... 11

3.2.4 Functional strategy .................................................................................................. 123.2.5 Interfaces and interdependencies ............................................................................. 13

3.2.6 Product portfolio management ................................................................................ 13

3.3 Organizational options for The Great Candies ........................................................... 14

4. Recommendations and Solutions .................................................................................. 20

4.1 Positioning in Market and Strategy of The Great Candies ......................................... 20

4.2 Strategic and Organizational Implementation Plan .................................................... 21

4.2.1 Implementation of Communication ......................................................................... 22

4.2.2 Organizational Change Plan .................................................................................... 23

5. Summary and next steps ................................................................................................... 24

List of Literature ................................................................................................................... 25


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1. Executive SummaryThe present case study is focused on the German company The Great Candies, a supplier

of consumer goods that offers products all over the world. It has a portfolio of candies, milk

products, mainly oil-based food, and some chilled products. Therefore the company is

divided in different segments within the food sector and has many competitors, insegments such as processed and frozen foods, beverages, milk products, and snacks. The

major players in the sector are Nestl and Kraft Foods.

Nowadays, The Great Candies is facing several strategic and organizational problems that

should be resolved to regain its profitability and to increase its revenues. In order to do this,

a SWOT profile was developed by using an external and internal analysis. During this phase

the rivalry among existing competitors and the bargaining power of buyers were identified

as the most important forces according to the model of five forces of Porter. On the other

hand, the development of the companysvalue chain helped to determine the key leverage

points and major cost drivers of The Great Candies. Additionally, a comparison with Nestl

was performed to identify imrpovement opportunities of The Great Candies.

Using the SWOT profile as an input, corporate, business and functional strategies for The

Great Candies were derived. Based on the results of product portfolio management using

BCG matrix, it was found that the company has to disinvest in its yogurt products and to

focus on marketing and product development of chilled food to increase its market share.

In addition, three organizational options such as adjusted functional, divisional and matrix

structure were proposed as possible solutions for The Great Candies. After an evaluation,

the divisional option was selected as the most effective one.

As a part of the strategic planning process for the next five years, the mission and vision,

for The Great Candies were redefined. Furthermore, four key parameters for its market

positioning were identified like premium product offering, closeness to customer,

internationalization, and care for health and wellness. In order to capture growth

opportunity in international market and expand the market share, the company

implemented product-market Ansoff matrix.

Finally, an implementation plan for the strategic and organizational changes based on

change management approach was established, to cover cultural and organizational

behavior aspects was developed. The mentioned plan for The Great Candys was developed

in compliance with the approach of Dr. John Kotter.


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2. Understanding of the situation and objectiveThe Great Candies is a supplier of consumer goods that offers its products all over the

world. The company has in its product portfolio candies, milk products and food, mainly oil-

based, some chilled products. Based on its portfolio The Great Candies is inserted in

different segments in the food sector, so, this case study will analyze each of the segments.

2.1 Food IndustryThe global dairy market is expected to reach almost $371 billion in 2014, representing

nearly 24% expansion over five years, reported by Market Line (1). Furthermore, milk

represents more than 35% of the overall dairy market. The market leader of this industry is

Nestle with 14% market share and followed by Danone with 11% market share (2). The

global chilled food industry has shown 6% growth in 2011 based on chilled food association

(3). This market is expected to expand 19% over five years to exceed $228 billion in 2015

(4). The global chocolate, snack and sweet markets are predicted to reach almost $335

billion by 2015. The main factors of this behavior are income levels, consumer perceptions

and demographics (4). The market is highly fragmented and intensely competitive, with an

abundance of industry players.

2.2 Key Drivers of Food Industry

According to MarketLine, the worlds milk market is expected to exceed $146 billion in

2015, a 21% hike in five years (1). By 2015, the market volume is expected to reach

110,000 million liters, representing nearly 13% growth in five years. Unflavored fresh liquid

milk is the markets leading segment, at almost 47% of overall market value. By 2015, the

worlds cocoa market will reach almost 5 million metric tons. The demand is particularly

strong in developing nations. The market is fuelled by increased coverage of health benefits

from eating certain types of chocolate for advantages such as nutrition content and the

cancer-fighting potential of chocolates with a high cocoa content (5).

On the other hand, the growth of chilled food industry has been leveraged by theconsumers need of ready-to-eat meals. Furthermore, the economic recession has fuelled

the market growth as consumers looked for more convenient and cheaper meals.

2.3 Market Outlook

The global dairy industry is very competitive and pushes the market leaders to cut costs

and boost profit margins. Demand is rising due to economic growth in developing nations

and higher incomes coupled with evolving diet patterns, though the industry remains at the

mercy of extreme price volatility. Frozen prepared food manufacturers have the trend to

continue concentrating their efforts on product innovation and packaging. Convenience is

also the key in this segment and the awareness of the consumer concerning the benefits of

a fresh foods diet is an obstacle, according to Ibis World. The EU is the worlds largestcocoa market, with France, Germany and the Netherlands showing high consumption. Asia-

Pacific is expected to show the most rapid growth, led by Malaysia. The world

confectioneries market is expected to exceed $186 billion by 2015 (4).

2.4 Competitors Analysis

In the segments of processed food the great candies have many competitors. Although the

company and others sell similar products, each company has its differences by choosing


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their own sales strategies. This case study highlights some of the competitors strategies

below.

2.4.1 Nestl

The company invested U$2.7 billion in R&D and Advertisement. Nestl is strongly focused

in International Strategy as a global organization, so, International strategy is at the heart

of their competitive focus. When operating in a developed market, the company strives to

grow and gain economies of scale through foreign direct investment in big companies.

Another strategy that has been successful for Nestl involves striking strategic partnerships

with other large companies (6).

2.4.2 Kraft Foods Inc

The company invests $ 81.4 million in R&D and more than U$72.3 million with

advertisement. Kraft Foods have a strong Distribution system with more than 316

distribution centers and depots all around the world. Out of these 316, the Kraft Foods

owns 39 distribution centers and leases 125 distribution centers. Also it owns three depots

and leases 149 depots worldwide (6).

2.5 Customer structures

The general customer structure of the food industry can be defined geo demographics

situation, taking in consideration aspects as climate, tradition, behavioral data, purchase

history, current and future customer behavior. One of the possible segmentation according

to the demographic patterns is: Kids: 4-12 years old; Teenagers: 1317 years old; Adults:

18 44 years old; Elderly: 45 above.

2.6 Structured description of the actual situation of the company

Currently, the company is functioning as a formal organization using a structure which

divides management into several functions which are: Finance, Controlling, HR & Law,

Purchasing, Operations, and Sales & Marketing. There are two reporting levels in the

organization and the New Product Unit is directly coordinated by the Chairman of the Board.

The Great Candies is facing not only structural problems but also strategic and HR issues

that need to be solved in order to improve the organizational efficiency and effectiveness to

meet the markets challenges. In addition the management has to take the opportunity to

review the strategic approach for the international market. In this context, by declining

sales and profitability in the market, the Great Candies has been facing stagnating

revenues. According to the companys life cycle scheme, The Great Candies is in post

maturity stage at the moment. As a result of its poor management, the profitability has

begun to fall.

a. Actual organizational problems of The Great Candies to be solved1stReporting level of The Great Candies:

Centralized organizational structure where the functional managers makedecisions and provides direction for the company.

Lack of organizational efficiency and effectiveness resulting in non-realizingsynergies within the organization.


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The New Products department is stated under the Chairman of the Board but isnot clearly defined as Research & Development department.

There is no flow of information of new product development possible in thisstructure.

2ndReporting level of The Great Candies:

Absence of IT department within the organization. The organizational structure is not internationalized and a regional sales force is

missing.

Lack of coordination between divisions and departments. The organization is working as a single-line-system; the information paths are

too long.

Poorly defined functions for division responsible to international market.b. Actual strategic problems to be solved

Ineffective strategically approach to deal with declining profit by launching newproducts.

Poor internationalization approach characterized by centralized controlling offoreign markets

Cost efficiency, specific distribution channels and precise promotion of productsunder same niche are not differentiated.

Absence of general approach to implement strategies or to coordinateinternational activities

Unsuccessful attempts to launch new productsc. Actual HR issues to be solved

HRs responsibility for wages and salaries instead of also dealing with trainingand personal development of employees.

Recruitment process, which is not, clearly defined along the HR functions. Eightmanagers from second reporting level will retire soon and the companysneed

to solve this matter and prepare transition plan.3. Analysis and Insights

3.1 SWOT Analysis

Taking into consideration the market analysis and the actual situation of The Great Candies

previously addressed, external and internal tools were used in order to identify the

strengths, weaknesses, opportunities and threats of the company.

For the external assessment it was used the P.E.S.T analysis and the Model of Five Forces

of Porter. On the other hand, the value chain and competitor comparison were performed

as internal tools in order to derive The Great Candies SWOT profile.

3.1.1 External Analysis


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P.E.S.T Analysis

The P.E.S.T analysis constitutes a general assessment of the environmental framework where

the company operates by the addressing the following factors: political-legislation, economical,

socio-cultural, and technological.

In despite of its apparent simplicity, this tool provides a first holistic approach to identify

potential elements that might influence The Great Candies as we can see in Table 1.

POLITICS-

LEGISLATION

Advertising legislation.

SOCIO-CULTURAL Nutritional awareness of consumer.

Rigid control and governmentalregulations.

Growing concern for the environment.

Exportation governmentalpolicies.

Volatility of consumer preferences.

Increasing governmental laborlegislation.

Population growth rate.

ECONOMICS

Global economic recession.

TECHNOLOGICAL

Continuous technological advances alongthe food processing value chain, includingmachinery, processes, R&D, logistics,packaging, marketing, etc.

Changes in tax regulations. Social networking tools.

Free Trade Agreements.

International monetary instability.

Table 1Great Candies - P.E.S.T analysis

Model of five forces of Porter

The five forces of Porter is a practical approach that use an integral view of the industrys

situation where the company belongs to, helping to determine the threads and

opportunities of the environment. The result of this analysis delivers a valuable input to

formulate strategies for the companies profitable growth.

This model was developed as it follows.


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IndustryCompetitors

Rivalry amongexisting firms

PotentialEntrants

Substitutes

Threat of

NewEntrants

Threat ofsubstituteproducts

BargainingPower ofSuppliers

BargainingPower ofBuyers

Suppliers Buyers

Low Threat of New Entrants

High level of capital requirements

Presence of well-positionated brands

Strict sanitary control by govermental

authorities

High level of infraestructure

requirements

High logistics costs

Low threat of substitute products

There are no real substitutes for

food-grocery products.

High Intense rivalry among existing firms

Highly competitive industry

Presence of big competitors: Nestl, Kraft,

Unilever

Strong price competition

Constant marketing wars between competitors

Continuous product introduction by

competitors

Local brands increasingly trusted by consumers

High level of dealers own brands

Medium Bargaining power of

Suppliers

Minimal substitutes in supply

Increasing concentration

amoung suppliers

High Bargaining Power of Buyers

High level of price of sensitivity and

quality demand of customers

High variety of shopping types and

places available

Increasing brand conciousness of

customers

Figure 1 Model of five forces of Porter

3.1.2 Internal Analysis

Value Chain

The value chain, as a tool, provides a general overview of the companys core and support

processes. Furthermore, it helps to identify leverage points, success factors, major cost

drivers, as well as strengths and weaknesses for The Great Candies along the main

activities and/or functions of the chain.

According to Michael Porter (1980) "the value chain" is a simple perspective for assessing

and analyzing the competitive strength and position of a corporation or business

organization. Companies tend to use this tool to have a better understanding of the

activities which develops a competitive advantage (7). Thus, in order for Great Candies to

meet its margin point, both the primary and support activities will need to work as a team

to be able to gain profitability.The value chain of The Great Candies is presented inFigure

2.


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Figure 2The Great Candies value chain

R&D / Design /

EngineeringManufacturing

Marketing /

Sales

Customer

service

Procurement

Human Resources FinanceQuality

Management

Value

Chain

Leverage

Points for

competitive

advantage

Major Cost

drivers

Support

processes

Strategic alliances with

key suppliers.

High quality suppliers

with HACCP (hazardanalysis and critical

control points and GHP

(goog hygiene practices)

certifications.

Lead / delivery time.

Bulk purchasing

discounts.

Storage

Location of suppliers.

Volume order.

Product variety / diversity.

Innovation.

Patents. State of the art.

Rate of new product

development.

Packaging.

Developing

responsiveness to

consumer needs in

different markets.

Productivity

Quantity /Frequency of

change of new products

Number and location of

R&D centers.

Operation under

compliance of the GHP /

HACCP standards

Implementation of leansix sigma, TPM (Total

productive

Maintenance), 5S.

Automation.

Definition and fulfilment

of procedures,

standards and

processes.

Capacity utilization

Location.

Quality control.

Employee conmitment

and motivation

Degree of automation

Utilization of capacity /

resources.

Level of wages.

Degree of rejections.

Number and location of

Production facilities.

High level of Advertising

Customer research and analysis

(needs profile and behaviour)

Promotion

Pricing

Market targeting

Product line selection

Product positioning (local and

worldwide)

High quality sales-marketing

force

Sequence of product

introduction around the world

Strategic alliances with well

known retailers worldwide

Communication

channels with

customers and

consumers

Location of call centers /

outsourcing

Coordination of pricing

(local and worlwide).

Location of production

facilities vs target markets.

Level of wages

Advertising

Recruitment

Training

Rewarding

HR developing

Fulfillment of GHP /HACCP requirements.

Definition and compliance of standards

Quality Checkpoints along the produtive process (raw

materials, machinery, personnel, production conditions,

work in process, finished product, storaging)

Microbiological and physicochemical analysis along the

process


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Comparison with competitor

One way to look at competition is by performing a comparison with the companys m ajor

competitors. By doing this, the Great Candies can identify and develop potential enhancement

improvements and strategies.

InTable 2 it can be seen that The Great Candies was compared against Nestl, using the followingparameters: Companys philosophy and Competitive advantages, Growth drivers, Products/Brands,

Management, Procurement, Engineering, Technology, R&D, Manufacturing, Marketing, Sales &

Distribution, and Customer service.

NESTL GREAT CANDIES

Companysphilosophy and

competitiveadvantages

Good food, good life.Unmatched product and brand portfolio.Unmatched R&D capability.Unmatched geographic presence.People, culture, values and attitude"

Unique in the market with strongemphasis on branding and high-qualityproducts.

Growth drivers

*Nutrition, Health and Wellness.*Emerging markets and PPP (Public-PrivatePartnerships).*Out-of-home leadership.*Premiumisation.

Unclear growth drivers.

ManagementNestl Group is managed by geographies (Europe,Americas and Asia/Oceania/Africa) for most of thefood and beverage business.

Centralized management (Germany)

ProcurementExistence of Nestl supplier code.

Undefined suppliers managementprocedures.

Strategic alliances with suppliers. Absence of alliances with suppliers.

R&D,Technology,Engineering

*Largest R&D network of any food company in theworld (32 R&D centres) network for R&D.

Centralized R&D center.

R&D in a variety of fields from packaging andequipment, to food processing technologies andmanufacturing new production systems

Limited R&D (only for products).

Strong emphasis on consumer needs.Weak strategy for new productsdevelopment and weak emphasis onconsumer needs.

Manufacturing

Manufacturing facilities around the worldOne production site located in centralGermany.

Implementation of operational models ofexcellence: TPM (Total productive maintenance),lean manufacturing, six sigma

*Low definition of manufacturingprocesses*Absence of operational models ofexcellence

High quality standards, fulfillment of HACCP(Hazard Analysis and Critical Control Point, ISO22000:2005/ISO 22002-1).

*Focus on high quality productsApplication of good manufacture practices,including design of equipment, standard operatingprocedures, training, machine maintenance, andhandling of materials.

Development of innovative technologies ofproduction

Use of nine different productiontechnologies for 24 brands

MarketingBrand maintenance and development.

Lack of brand maintenance anddevelopment.

Creation of an emotional approach. Absence of an emotional approach.


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Inyection of new product life cycle.Inexistence of inyection of new productlife cycle.

Customer targeting according to economic,geographic and social factors.

Some of the products are in the sameniche and compete for the same targetgroup.

Strong market orientated company, highly focuson undertanding and fulfilling customer needs.

Product orientated.

High investment in advertising. 100 Mio euros investment in advertising.

Sales &Distribution

Intensive distribution strategy in order to make itsproducts avalilable to a large customer base.

Worlwide products offering.Wide distribution channel and severalmanufacturing units around the world.

Reduction of distribution costs without affectingthe quality and lead times.

Abscense of programs for reducing thedistribution costs.

Customerservice

Existence of Nestl customer care division. Weak emphasis on customer service.

Excellent customer support through differentmechanisms.

Unclear mechanisms for customer service.

Table 2 Comparison with competitor (8)

SWOT-Profile of The Great Candies

Using the internal and external tools previously mentioned, it was possible to draw a SWOT profile

for The Great Candies as Fehler! Verweisquelle konnte nicht gefunden werden.shows. Thisvaluable information will be use as a key input to generate and develop strategies for the company.

Table 3 SWOT profile of The Great Candies

Offer of products all over the world. A formal meeting board does not exist

Strong emphasis on branding and high quality products.Decision making processes are not structured and are based on face to face

discussions.

High investment on TV-advertising.Tasks, functions and processes are not defined in the company, only the process of

introduction of new products is defined in detail.

Market leader in Germany. Some of the products are in the same niche and compete for the same target group

Only one production site (located in central Germany).

Inappropiate organizational structure.

Unclear growth drivers.

Abscense of well-defined alliances with key suppliers.

Abscense of knowledge management.

Weak emphasis on consumer needs.

Sales via retailers grow with a rate of 5 % p.a. since 5

years.Increasing concentration among re tailers.

M&A.Highly competitive industry: strong price competition, presence of huge positionated

companies.

Implementation of operational models of excellence. Local brands increasingly trusted by consumers.

Emerging economies (emerging marke ts) High le vels of dealers own brands.

Improvements in packaging (cost reductions, news

designs)Increasing concentration among suppliers.

Internal

Factors

(IFAS)

Strengths (S) Weaknesses (W)

External

Factors

(EFAS)

Opportunities (O) Threats (T)


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3.2 Strategic Management

3.2.1 Derivation of strategies in The Great Candies

Result of the SWOT analysis, and the four tools from chapter 3 were derived to get core of problems

and objectives to achieve by The Great Candies. Furthermore, from those defined problems and

objectives The Great Candies will divide its strategy into three general parts: corporate, business

and functional strategy. Each of them will be defined in detail together with a proposed method and

in this work it will also be discussed the implication of these strategies in the organization design of

the company.

3.2.2 Corporate strategy

Based on SWOT analysis, PEST and comparison with competitor, value chain and the model of five

forces of Porter, these are corporate strategies proposed to be implemented by The Great Candies:

1) Define clear mission and vision statements together with strategic goals and objectives, so thecompanys growth direction will be clear.

2) The Great Candies will focus on premium product with four different product portfolios.3) Focus on market research to gain optimum information in customer demand and needs, market

trends and competitor condition.

4) Give positive contribution to environment throughout Corporate Social Responsibility (CSR).These strategies will have implication in the organizational design of The Great Candies in term of

structure and process, such as:

1) Standardize food processing throughout every production plant of The Great Candies.2) Strong focus on CSR to build up good customer image and make company closer to customer.3.2.3 Business strategy

Based on SWOT analysis, PEST and comparison with competitor, value chain and the model of five

forces of Porter, these are the business strategies proposed to be implemented by The Great

Candies:

1) Implement differentiation strategy by selling a product at a premium price by providing morebenefits and features to the product so that the premium price is justified.

2) Marketing mix using the 4 P approach: product, promotion, price and place.- Product

The Great Candies has the policy to sell premium product for new country market only and

mix of premium product and regular product in Germany market.

- PromotionExpand market throughout intense marketing, advertising and finding the possibility of

Merger and Acquisition to increase positioning in market.

- PriceThe Great Candies are proposed to develop pricing strategy based on competitor price and

customer perspectives. Furthermore, by utilizing these methods The Great Candies will be

able to balancing their profitability and fulfilling customer demand.


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- PlaceThe Great Candies will use intensive distribution so that the company can sell the product

through the maximum number of retailers and wholesalers, which will lead to more

competitive price. Furthermore, products of the company will have special spot in each of

supermarket to sell its products.

3) Implement three dimensional market definition by Abbel (9) to avoid releasing productscompeting in the same niche and customer group.Figure 3 was developed based on it.

4) Build up long term contract agreement with raw material supplier to gain advantage of volumebased discount.

5) Problem of increasing of concentration in retailer can be solved by making special agreementwith retailer, such as help retailer to obtain market access and in return get better pricing (10) ,

cooperation between suppliers of food to increase bargain power against retailer (10)

Figure 3 Functional organizational structure for The Great Candies

These strategies will have implication in organizational design of The Great Candies in terms of

structure and process, such as:

1) Decentralization of sales and marketing division to get more focus and intense closeness withmarket.

2) Creation of a new centralized function for innovation technologies and R&D in corporate center.3) Creation of a new centralized function for logistic in corporate center and implement global

supply chain management throughout supplier until retailer.

3.2.4 Functional strategy

Based on SWOT analysis, PEST and comparison with competitor, value chain and the model of fiveforces of Porter, these are functional strategies proposed to be implemented by The Great Candies:

1) Optimization process management in company by introducing IT as main driver.2) Optimization of sales by increasing customer satisfaction level.3) Optimizing flow of information and procedures for new product development.4) Develop excellent and continuous training and skill development to replace recruitment of more

staff. Because skill and experiences have a huge positive impact in term of productivity rather

than adding more people.


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These strategies will have implication in organizational design of The Great Candies in term ofstructure and process, such as:1) Establishing new function of IT for company under corporate center.2) Establishing new function for customer services under sales and marketing.3) Establishing new function for training and employee development under HR and Law.4) Create organization structure which will facilitate link of information chain from new product

division to sales and marketing division.

3.2.5 Interfaces and interdependencies

Interfaces and interdependencies between strategies can be found from several points:

1) Development of new product in R&D should fulfill target for differentiation market in premiumproduct.

2) Sales and marketing should develop their promotion strategy to differentiate The Great Candiesas premium product from other product in market.

3) Strategy of marketing orientated business should be follow by intense market research to getfull coverage of customer requirement.

4)

Intensive marketing campaign in new market should follow by high quality control in foodprocessing in production plant.

3.2.6 Product portfolio management

In this work, product portfolio was made by adapting Boston Consultant Group in portfolio

management (11). As it can be seen in the Table 4, The Great Candies has five major products

portfolios and comparison of revenues main competitor with market volume is taken. This case

study took data from global market share and analyzes it per each product segment to gain better

accuracy in calculation. For example, in portfolio yogurt, this work only considered global yogurt

market in 2010. To develop BCG product portfolio matrix, this work calculated market share relative

of each product with (11):

Market share relative =

(In this case, market growth was collected from official website of each correspondence industry

sector).

Product Revenue TheGreat Candies

Revenuecompetitor

Marketvolume

Marketshare

relative

Marketgrowth

Averagemarketgrowth

Drink Milk 595.00 2,319.62 53,101.89 0.26 2% 6%

Yoghurt 168.00 978.18 48,909.00 0.17 3%

Chocolate Bar 802.00 2,103.85 56,659.49 0.38 13%

Impulse food(snack)697.00 752.41 2,508.03 0.93 6%

Chilled food 383.00 2,633.58 75,245.00 0.15 6%

Table 4The Great Candies competitor database (In million EUR)(12) (13) (14) (15) (16)

The product portfolio shown in figure 4 was developed using the data ofTable 4.


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Figure 4 Product portfolio of The Great Candies

From table 4, it can be concluded that the market share relative of The Great Candies is smaller

than main players in each product portfolio. This problem is one of BCG matrix limitation, where

product with low market share doesnt mean its not profitable to company (17). Thats why this

work proposed to combine contribution margin data from company to adjust BCG matrix.Furthermore, this work proposed to adjusted market share line from 1 into 0.2 (dotted line) which is

separates yogurt and drink milk which has negative and positive contribution margin. This

assumption will bring more clear pictures of BCG matrix in The Great Candies product lines, as

shown in figure 4.

Based on figure 5, different strategies are derived from each of product portfolio:

1) Questions markBased on market research (18) , this food sector increasing 6% for the next years. This work

recommended The Great Candies to invest more in R&D of chilled food and also in advertising,

so that this product will get high quality and result on increasing of market share.

2) StarThese two products resulting 57% of total revenue of The Great Candies and its recommended

to this company to mainly increase their market share through market penetration and marketdevelopment (based on Ansoff strategies in previous sub chapter).

3) Cash cowsDrink milk has become The Great Candies cash cows and resulting 22% of total revenue this

company. Strategies for this product is to making cost efficiency production cost, so that

revenue from drink milk can be maximize and allocated to finance question mark products.

4) Poor dogsThe market growth forecast for this product is only 2.5% (19). That is why this company should

disinvest in yogurt product and deleting milk fat reduction production technology to avoid more

losses. Resources that are related to this product will be allocated to empowering question mark

products.

3.3 Organizational options for The Great Candies

As it was stated in the previous section, The Great Candies has been facing some strategic and

organizational problems which must be solved in order to overcome its current situation and have

success in the competitive food industry.

Three organizational options have been proposed as possible solutions as it can be seen in Figure 5,

Figure 6 andFigure7.The company is going to partially migrate from its existing organizational functional structure to a

decentralized one that gives our newly reorganize business divisions more direct lines of


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responsibilities. This will involve an enormous undertaking from the concept point of view as well as

the implementation. The proposed model solutions will involve changing reporting lines, structures

and business divisions. This process will constitute the first phase of a larger change initiative that

will involve operational modifications for building up the companys sales as well as development of

products capabilities, among others.

3.3.1 OptionsThe first alternative is shown in Figure 5. The model consists of a functional structure partially

decentralized of the current Great Candies organizational structure. Themain features are:

- The Finance and Controlling departments were joined together under the same responsibilities.- The HR collar salary and the HR blue collar wages within the Human Resources and Law

department were combined. Additionally, Recruitment and Training were added to this

department.

- Innovation Technology and R&D will replace the staff unit of new products in the corporatelevel.

- Elimination of the manager and sales position.- The functions of the Media department were reallocated to the Advertising/Market Research

department.- The Marketing I and II departments were joined together under the Marketing and Sales

department which was decentralized by regions (Europe; Asia, Africa and Oceania; and the

Americas).

- A decentralized Customer Service department was created according to the same regions as theMarketing and Sales department.

The second option is shown in Figure 6. The model consists of a divisional structure partiallydecentralized.

- The divisions were created according to the existing product lines which are: Milk Products,Chocolate Bars, Impulse Food and Chilled Food.

- Each product division is headed by its own manager which reports directly to the CEO.- The Management Board is constituted by CEO, CFO, COO, CTO and the CMO; as well by 4

managers for the four product divisions.

- In a Corporate Center were centralized the following centralized functions: HR & law,Controlling, Accounting, Innovation Technology and R&D, Purchasing and Logistics. A

centralized IT function was added within the Corporate Center.

- The department of Sales and Marketing was decentralized. For the Milk and Chocolate divisionsit was done for the Europe and Asia, Africa and Oceania regions. For the Chilled Food and

Impulse Food divisions it was done for the three regions (Europe, Americas, Asia, Africa and

Oceania).

- The Marketing and Sales department includes: Advertising and Marketing Research andCustomer Service.

- The operation department includes: Production, Quality, Engineering, Safety and Environment.Finally, theFigure7proposed the last option, which consists of a matrix organizational structure. Thedivisions were defined according to regions (Europe; Asia, Africa and Oceania; and the Americas).

On the other hand, the functions are: Purchasing, Operations, Sales and marketing and Logistics.

Each of these functions is common for the three regions.- The Management Board is constituted by the Chairman of the Board and six managers, three

for each region (Europe; Asia, Africa and Oceania; and the Americas) and three for the following

functions: Finance & Controlling, HR & law and Innovation Technology and R & D.


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3.3.2 Evaluation of the options

The criteria used to evaluate the previously describe organizational options is: Effectiveness of

communication, Internationalization readiness, Cost saving, Efficiency decision making, and

Closeness to market. The weighting given to each parameter according to their level of importance

was: 20%, 25%, 10%, 20% and 25%, respectively. The evaluation scale was set from 1 to 5 where

1 is very good, 2 is good, 3 is satisfactory, 4 is sufficient and 5 insufficient The score given bycriteria for each of the described options is presented inTable 5.The justification of the scores given

per criteria for each alternative is shown in the following tables.

Criteria Score ArgumentEffectiveness ofcommunication 3

Communication not sufficiently promoted due to singleline organization.

Internationalizationreadiness

3Only Sales & Marketing is internationally segmented.

Cost saving (resources)3

Additional management staff needed for regionalsegmentation.

Efficiency decision making3

High number of interfaces compared to divisionalmodel (but still less than matrix organization)

Closeness to market 2 Marketing & Sales and Customer Servicesdecentralized by regions.

TOTAL 2,75Table 5Evaluation of adjusted Functional OrganizationCriteria Score ArgumentEffectiveness ofcommunication

3Possible conflict of interests within Corporate Centerand Product Managers.


2Sales & Marketing for each product and decentralizedby regions.

Cost saving (resources) 2Cheaper due to Centralized Functions

Efficiency decision making 1Fast, simplified decision making due to focus on

products.Closeness to market 1

Responsibilities are divided by products and differentregion.

TOTAL 1,75Table 6Evaluation of Divisional OrganizationCriteria Score Argument

Effectiveness ofcommunication

2Communication adequately ensured due to crossconnections.


2

Each section (Sales, Operations, Purchase, andLogistics) is covered for each region.

Cost saving (resources) 4Double coverage of management function.

Efficiency decision making 4Delay of decisions

Closeness to market 1All departments are represented in all regions.

TOTAL 2,35Table 7Evaluation of Matrix OrganizationAccording to the evaluation process applied, the divisional organizational alternative is the most

suitable option for The Great Candies compare with its actual organizational structure.


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Chairman of the

Board

Manager Finance

and Controlling

1)

Manager

HR & Law 2)

Manager

Purchasing 1)

Innovation

Technology and

R&D

Manager Sales &

Marketing 1)

Manager

Operations 1)

Data processing

Banks,

Insurance,

Tax

External accounts

Operating

Controlling

Operating

Accounts

Controlling Sales

Recruitment

HR Salaries and

wages

Law

Raw Materials

Packaging

Special Projects

Quality

Engineering

Production

Marketing &

Sales

Advertising /Market Research

Controlling

Marketing

Controlling

Logistics

Milk

Safety and

Environment

Management Board

(1. Reporting level)

2. Reporting level)

1) Member of Management, 2) Deputy Member of Management Board

Training

Europe

Asia, Africa,

Oceania

Americas

Customer service

Asia, Africa,

Oceania

Americas

Europe

Planning and

Logistics

Transport

Technology

Figure 5Adjusted functional organizational structure for The Great Candies


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Figure 6 Divisional organizational structure for The Great Candies

CEO

Manager

Milk products

Division

Manager

Chocolate bars

Division

Manager

Impulse food

Division

Manager

Chilled food

Division

Operations

Sales &

Marketing

Operations

Sales &

Marketing

Operations

Sales &

Marketing

Operations

Sales &

Marketing

COO

CFO

CTO

CMO

Asia, Africa,Oceania

Europe


Europe


Americas

Europe


Americas

Europe

Management Board

Corporate center:

centralized functions

HR & Law

Innovation,

Technologyand R&D

Purchasing

Accounting &

ControllingIT

Logistics


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Chairman of the

Board

Manager

HR & Law

Manager Finance

& Controlling

Manager Innovation,

Technology and R&D

Management Board

Corporate center /Centralized functions

ManagerRegion Asia,

Africa, Oceania

Manager

Region Americas

Manager

Region Europe

Purchasing

Operations

Sales &

Marketing

Logistics

Figure 7 Matrix organizational structure for The Great Candies


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4.Recommendations and SolutionsBased on the the results of the analysis, recommended solutions are derived in terms of Great

Candies positioning in the market and the implementation of the evaluated options.

4.1 Positioning in Market and Strategy of The Great Candies

As a part of the strategic planning process for the next five years, Great Candies has defined its

mission and vision as follows:

Mission: We are a company that provides a wellness, nutritional and delightfulexperience through premium food products that goes beyond our customers

expectations and creates value to our stakeholders!

Vision: By 2018 we will increase our global market share up to 15% by providingexceptional premium food products, strongly focus on customers needs.

Great Candies has therefore established four key parameters regarding its market positioning:

premium product offering, closeness to customer, internationalization, and care for health andwellness. The company will apply a product-market matrix according to Ansoff to capture

opportunity for growth in international markets and to increase market share within existing

markets.

Market

Products lines

Existing Market New Market

Existing product Market Penetration Market development

New Product Product development Diversification

Table 8Ansoff Matrix for Great Candies

a)Market PenetrationThis will be realized by increasing customer base in the existing markets, by winning

over the customer base of competitors for further growth by means of open exclusive

The Great Candies stores in shopping center, advertisements, promotion, price cutting

and loyalty scheme through membership.

b)Market DevelopmentThis is done throughout differentiating marketing campaign based on culture of each

country, aggressive price penetration and also collaboration with local retailer to access

market easier. Potential new markets for The Great Candies are Asian countries, North

America and South America.

c)Product developmentDevelopment of new products is vital for the sustenance of Great Candies as it is

essential for the growth of the company. In order to develop a successful product, the

company must have an understanding of its customers, the markets in which they

operate and its competitors. Due to high growth on chocolate bar market and potential

market growth in chilled foods, the company is recommended to focus Innovation and

R&D effort into these products.


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d)DiversificationThis step includes diversification of product portfolio and branding to get full customer

profiles and segment. Market growth in chocolate bar segment is highest compared to

other segments. Thus, its recommendableto also focus on diversifying this product. In

addition, The Great Candies is recommended to make seasonal premium chocolate bar

in based on certain special day in different countries to get attention of new market

(for example: thanksgiving chocolate bar).

4.2 Strategic and Organizational Implementation Plan

The implementation of Great Candys renewed strategy and its desired divisional structure is

conducted in compliance with the holistic approach according to Dr. John Kotter. By applying the

8-step model, Great Candies executives will ensure that all employees are well informed about

the necessity for change and the associated implementation procedure, thereby increasing their

chance of a successful implementation (20).

1. Creating a Sense of UrgencyIn order to emphasize the urgency of Great Candys change of direction, the board of

management develops an action plan including a precise explanation for the intendedchange. The basic idea is to point out the true status of business characterized by the

stagnation of sales figures and the unsuccessful attempts to increase those numbers

throughout previous years. To support the indicators, General Managers commissioned

a market survey to find out customers need and to learn about their buying

behaviour. Beyond this, a competitor analysis is also intended to endorse this

reasoning. However, the major argument for implementing the new strategy and for

structural change is supposed to demonstrate the potential for future growth of Great

Candies. Therefore, the Board of Management plans to make use of the promising

result of their investigation on important future markets within their initial

announcement.

2. Forming a Guiding CoalitionDriven by the idea of getting every employee involved into the implementation

process, each Functional Manager is required to identify willing and moreover

influential employees in order to form a team which is responsible for managing the

change initiative. Also the Department Managers are encouraged to ensure that

potential team members are capable to motivate and convince their co-workers that

changes are necessary and the implementation is conducted properly. According to the

Board of Management, the coalition has to consist of employees from different

departments and levels within Great Candies.

3. Developing a change vision and missionThe Great Candies develop new vision and mission to synchronize with strategic goals

of company to cope new challenges in market by maintaining the established cores

values of company.

4. Communicating the visionTo manifest the vision into the day-to-day business, the Marketing and Salesdepartment creates an initiative to improve the communication of the companys newvison. This measure mainly affects Great Candies corporate design which has totransport the statement not only throughout the whole company, but also to


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customers and suppliers. On this account, email signatures, corporate presentationsas well as advertising appearances contain the vision statement.

5. Removing BarriersAn external consultancy, specialized on implementation processes, is engaged to

identify risks and potential obstacles which are impeding the change processes.

6. Creating short-term winsA rewarding system is introduced to maintain employees motivation to participate

actively in the companys change processes. Outstanding achievements are rewarded

with premiums or additional paid days off.

7. Consolidating and ProceedingTogether with external consultants and the members of the internal implementation

team, the Management Board meets on a weekly basis to check the progress of the

change procedure and to identify the lessons learned. Based on this information, new

goals are defined and the status updates are reported via company newsletter.

8. Anchoring Changes in Corporate CultureSince some members of the guiding coalition may leave the company, a rotation

system is applied in order to avoid a loss of knowledge. The change team is also

responsible for training new employees in terms of ongoing chances.

4.2.1 Implementation of Communication

Management

All changes regarding the companys strategy and its organizational structure have to becommunicated company-wide by the Chairman of the Board. This is supposed to happen duringan extraordinary employee meeting after all Functional Managers have finally approved the

implementation procedure.

Operations

Additionally, all Functional Managers have to meet with their responsible Department Managersto clarify the implementation procedure.

Functional Managers have to provide an implementation guideline document containing allessential measures which are necessary for a successful implementation. Each DepartmentManager must then forward individual plans by email to every member of the respectivedepartment and clarify the procedure within next department meeting. The implementationprogress has to be tracked by every Department Manager and directly reported to the GeneralManagers on a regular basis.

Externals

All major clients as well as supplier will be informed about the significant changes by letter rightafter final decisions have been made and all employees have been informed. Based on the newproduct portfolio, existing contracts will be adjusted.


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4.2.2 Organizational Change Plan

Creation of Change Management Project TeamThe company has to set up a change management team dedicated to take care of the

organizational restructuring. Based on the 27 currently existing departments, the change

management team will be set up on just as much internal employees who will work full-time on the restructuring process. The team is required to establish the new structure

within 7 month.

1. Renewal of Role and Job DescriptionsThe Human Resources & Law department was appointed to entirely recreate all relevant

job descriptions which are affected by the organizational restructuring. By doing so,

Great Candies intends to guarantee that all future roles and responsibilities are clarified

and documented upfront. In addition, the department elaborated updated competency

requirements, policy charters and employee grades, before the actual change process is

conducted (21).

2. Revision of staffing processSince new jobs and responsibilities are created, staffing process needs also to be revised.

Therefore, functional managers, together with the HR & Law department, are responsible

for creating new requirement profiles for new jobs which have to be filled by internal

employees, or if necessary- by external applicants. In analogy to the job description,

profiles are also required to be prepared before the changing procedure takes place.

Execution

1. Restructuring Board of Management: Chairman of Board will remain in current position Functional Managers will form the corporate officer level (Manager Finance CFO;

Manager Operations COO; Manager Sales & Marketing CMO; Manager of NewProducts CTO)

Divisional Managers are elected by c-Level executives (Manager Purchasing ManagerMilk products Division, Manager Sales (deputy) Manager Chocolate bars Division,

Manager Controlling Manager Impulse Food, Manager Chilled Food Division)

2. Creation of Corporate Centre with Centralized Functions: HR & Law will include Wage & Salary department (combined out of blue/white collar),

a Recruiting & Training department will also be established Accounting & Controlling: Operating Accounts will remain, Controlling Sales,

Controlling Marketing, Controlling Logistics, Operating Controlling combined

Innovation Technology and R&D: New Products, Technology out ofQuality/Technology combined with Engineering out of operations

Purchasing will completely be shifted and new Department Manager elected Logistics will be created based on Planning an Logistic IT: created upon new employees

3. Creation of Divisional Departments Operations: Production, Quality, Safety & Environment according to previous

specialization on different products, departments are divided into the four divisional

lines. Additional employees have to be recruited


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Marketing & Sales: consisting of Customer Service and Sales and Marketing fortargeted region. Additional employees need to be hired.

4. Senior Manager Retirement and Knowledge Management: Creation of training programs for young managers directed by the managers who are

going to leave the company within the next six years.

Implementation of Knowledge Management along the organization. Recruitment of retired managers as consultant.

5. Summary and next steps

This case study mainly discussed challenges faced by the Great Candies as food supplier in the

global market. Problems of this company are taken into consideration by dividing solution into

strategy perspectives and organization perspectives.

Based on strategy perspectives, the Great Candies has several critical problems to solve, such as

declining profit and poor definition of market for each product portfolio. During this work a SWOT

analysis was performed to define more details inside the company as its environment. After that,product portfolio management by BCG is used to define product position in market and Ansoff

matrix is carried out to define growth strategy based on existing and new market with existing

and new product.

Based on organization perspectives, the Great Candies is suggested to change their

organizational structure into divisional organization to resolve problem in coordination and

communication between innovation division and sales and marketing division during development

of new products. Furthermore, this new organization structure will transform companys business

into internationalization of market and make them closer to market and customer.

After defined two solutions above, this work proposed implementation plan to execute both

solutions smoothly. This is done by considering change management plan, cultural and

organizational behavior.

This work proposed to apply more tools and methods in The Great Candies case study, so that

each of problems can have deeper analysis and solutions. Tools such as balance score card for

implementation phase, analysis of competitive dynamic, forecast analysis for internationalization

and many more is suggested in this case.


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