02 Nov 2017
EXECUTIVE SUMMARY 2
INTERNAL AND EXTERNAL FACTORS INFLUENCING THE COMPANY AND THE STRATEGIES EMPLOYED 2
Organizational structure: 3
Organizational Culture: 3
Human Resources 4
CRITICAL ASSESSMENT OF THE CHOSEN STRATEGIES 5
SWOT Analysis 5
Porterâ€™s Five Force Analysis: 6
Competitive Rivalry 6
Threat of New Entrants: 7
Bargaining Power of Suppliers: 7
Bargaining power of buyers: 7
Threat of substitute products: 7
CONCLUSION AND RECOMMENDATIONS 7
Some strategic recommendations available to CafÃ© Expresso for the next five years: 8
Changing the Organizational structure: 8
Changing the current Human Resources scenario: 8
More expansion: 8
This Case Study Report aims to discuss the Human Resources strategies adopted by CafÃ© Expresso to regain their market leader position that had gone down from Number one to Number Three. The report also aims to give an in-depth analysis of all the issues faced by Cafe Expresso and how the HR manager dealt with these issues. It also explains the Human Resources strategies that have to be adopted to increase employee retention and critically assess the present strategies. The advantages and disadvantages of the HR dealings of the managers and how this could affect CafÃ© Expresso will be looked into. Further into the report, we will explore why CafÃ© Expresso is unable to effectively retain customers and new strategies for recruitment and selection will be recommended.
Coffee houses are one of the most revenue generating businesses in the world. CafÃ© Expresso had the Number One position among the Coffee house across the globe, which has recently come down to Number Three. This is as the result of increasing number of Coffee house chains, thus increased number of competitors. The main reason for the success of the competitors were that they copied the business strategies of CafÃ© Expresso but introduced and implemented them in a better way. CafÃ© Expresso employees were poached, and the customer loyalty was lost. The new Chief Executive of CafÃ© Expresso realized that the main disadvantage lie in the Human Resources part of the business, and decided to revive the HR department with the help of the new Human Resources manager, Kam Patel.
It is of no argument that all organizations are made up of its people, the employees as well as the customer, and therefore could be thought of as small social entities. In every organization, we can find people from different cultural backgrounds and lifestyles. There can be found varied viewpoints of how to look at an organization â€“ whether to treat it like an entity, a constitution, a collection of people, or a process. To look at it as an entity means to treat the organization as an enterprise or venture. To view it as a collection of people means to define the organization as "a group of people intentionally organized to accomplish an overall, common goal or set of goals" (Bruhn, 2007). In case of seeing it as a structure means that the organization consists of different kinds of people working and interacting at different levels or positions. To explain an organization as a process involves the whole process or organizing people and other aspects of a business. Thus there are different ways to look at an organization, but the ultimate goal for every organization is to achieve the common objective.
The victory of any business or organization depends on innumerable aspects. Some of the most important external and internal factors that results in the success of any organization are an appropriate organizational structure, looking out for competition and learning how to deal with it, the organizational culture of the company, and well organized management and leadership roles. The different internal and external aspects that influenced the CafÃ© Expresso and its business strategy are as below:
According to the online business dictionary, organizational structure is the "formal and informal framework of policies and rules, within which an organization arranges its lines of authority, and communications, and allocates rights and duties.'' In simpler terms it can be explained as all the internal activities in an organization including the different departments and divisions including the Human Resources department, and the link between these departments. The mechanistic and organic structures are the two most common types of organizational structures seen in an organization. In a mechanistic structure the authoritative power is centralized while in an organic structure the authoritative power is not centralized, in other words decentralized.
Another way of classifying organizational structure is into formal and informal divisions. The former is where the organization aims to achieve the laid down goals and objectives, in simpler terms the importance here goes to the job being done and not the person who does it. It is the "the structure of jobs and positions with clearly-defined functions and relationships as prescribed by the top management" (Bose, 2002). Informal organizational structure is "the aggregate of personal and social relationships that arise spontaneously as people associate with one another in the work environment" (Rollinson, 2005).
When looking at CafÃ© Expresso we can see that both the forms of organizational structures existed there, namely formal and informal, although both these were not sufficiently effective or efficient for that matter. The reason that made proper management difficult is the complex organizational structure of the business. Although the founder was successful in creating the coffee house and expanding it worldwide, he was unable to maintain a proper organizational structure that resulted in employee poaching and thus increase in employee turnover.
Organizational culture heavily influences the daily management of an organization and how smoothly it runs. This is even more important when we look at organizations in hospitality industry. According to Gareth Morgan, organizational culture is "the set of beliefs, values, and norms, together with symbols like dramatized events and personalities that represents the unique character of an organization, and provides the context for action in it and by it.'' While introducing new policies into the company or while changing its existing policies, the management has to be very careful. It has to inform all of its employees about these changes and explain to them why and from when these changes will be implemented. This might help in lessening any friction that may arise as part of the policy changes from the employees.
CafÃ© Expresso is similar to a family-run business. The employees here, since the beginning, were considered as the members of this family. The organizational culture of CafÃ© Expresso was a good one. They consulted the employees during all major company policy changes and decision making processes. As a result the employees felt wanted and this maintained the loyalty of the employees. As the business grew, it became difficult to maintain this culture. The various international recruits who were employed on temporary basis, with bare minimum wage, resulted in high employee turnover. This also affected the image of the business adversely.
Online business directory defines Competition in business viewpoint as, "a rivalry of two or more businesses that target the same customers." This can result in positive and negative effects. Positive effect is that the competitive firms will try to improve efficiency to regain or maintain the business leader position. The negative impact is that competition can result in the duplication of business strategies and efforts. This can result in copying of business strategies and poaching of employees.
Since the coffee house business is the second most valuable business worldwide, it is of no wonder that there is immense competition in this field. CafÃ© Expresso used to be the market leader in coffee houses but increased competition, and the outdated and less effective business strategies, brought CafÃ© Expresso down to number third position in the market. The competitors copied CafÃ© Expresso's business strategies and poached their employees to grow in the market. This made it essential for CafÃ© Expresso to introduce new business strategies and improve employee relations so as to regain their market position as number one.
Human Resources can be defined as, "the design of formal systems in an organization to ensure the effective and efficient use of human talent to accomplish the organizational goals." Human Resources Department is the most important department in any business. According to Ulrich (1998), "Human Resources should be defined not by what it does, but by what it delivers." The Human Resources faces a very challenging environment, and these can be classified briefly into "economic and technological change, workforce availability and quality concerns, demographics and diversity issues, and organizational restructuring."
CafÃ© Expresso started off with very effective Human Resources strategies. The employees had freedom of action and this motivated them to work hard and also take initiatives in implementation of business policies (Grant, 2005). Later on the Human Resources policies started becoming ineffective. The bare minimum wage offered attracted international employees who worked on a short term basis, which resulted in high employee turnover. They had to bring in new business and Human Resources strategies to revive the HR department and improve the business.
An effective and properly implemented business strategy is key for the success of any business organization. To analyze these strategies, we use different analytical tools like SWOT analysis and Porterâ€™s Five Forces Analysis in this report. SWOT Analysis look at the internal and external factors of business environment while Porterâ€™s Five Forces Analysis helps the management to identify the competitive environment of the market.
The external and internal environments of a business undertaking have to be scanned thoroughly. This is an important criteria for planning any business strategy. These factors can be classified as strengths and weaknesses, which are the internal factors, and opportunities and threats, which are the external factors. This manner of analysis in the strategic business management setting of an organization is called SWOT analysis. "A SWOT analysis will provide an idea about various resources of the organization and how it can be potentially used in the external environment (Hill, 2009)."
The most important strength of CafÃ© Expresso is the brand name that it has. It had retained the number one position in the market for 15 years and this has immensely helped it to gain a high brand value. The effective leadership of Ben Thompson, the Chief Executive of the company, is also its strength. The flexibility in business operation and the opportunity given to the employees to take part in making business policies has helped immensely in the overall initial development of the coffe chain.
Even though the Company enjoys its strengths, it also has various weaknesses that have resulted in bringing down the Company to the position where it is right now. Some of these are the recruitment policies of the company, the minimum wage and the short term contracted employees who fail to remain loyal to the company. The copying of the business strategies and the poaching of the employees has also adversely affected the company. As mentioned earlier the organizational structure and organizational culture have suffered a setback too.
Opportunities point at the external environment of an organization. There are tremendous opportunities for CafÃ© Expresso within UK as well as outside of it, where the other coffee house giants are yet to reach. The coffee house chain has to utilize the history and the brand image that they have all over the continent as well as other parts of the world. Since the brand name is popular everywhere, this expansion would not be a very difficult task. They should also depend a little more on the social media and IT sector for marketing since the internet era is growing at a high speed and no business should be unaware of that.
This is another external factor. The changes in the external environment cannot be controlled by business and so it poses as a major threat to the business. To overcome competition and regain their market position, CafÃ© Expresso has to introduce new and effective promotional strategies. Even though CafÃ© Expresso was the market leaders, the situation has changed now. New and more effective business and promotional strategies have been employed by the competitors and they are seeing the results too (Dransfield, 2004)
As mentioned earlier, Porter's Five Force Analysis aids the marketing manager to understand the competitive environment of the business market. It is a widely accepted theory that "Michael Porterâ€™s Five Force Analysis is a powerful tool in marketing" (Cheverton, 2004).
This can diagrammatically be depicted as follows:
(Five Forces Analysis- marketingteacher.com)
It can be noted that the competitors hold the important central position in this type of analysis. The other four factors are the influential factors in the analysis.
This simply refers to the number of competitors in the market, the relative size of the competitors, their growth rate in the industry, the diversity, and strategic stakes. "The companies that are able to control the market face less rivalry" (Nelson, 2007). The competitive rivalry that CafÃ© Expresso faces is rather high. In short, we can say that the current business strategy followed by the company is ineffective. They have to adopt new and revised strategies; otherwise the survival in such a competitive environment will be extremely difficult.
The factors that influence the barriers to entry are economies of scale and purchasing, product differentiation, capital requirements, switching costs to buyers, access to distribution channels, government policies, and other cost advantages. Access to the current technology and marketing techniques are other factors that have to be considered. It has to be understood that any new business that posses and understands these factors can enter the market and pose a threat to the existing businesses. CafÃ© Expresso faces a threat from such new entrants. They have to revive their business strategies in order to carry on holding on to their market leader position.
The factors that affect supplier power are supplier concentration, availability of substitute inputs, supplier's product differentiation, supplier's threat of forward integration, and buyer's threat to backward integration. If the number of suppliers is large and varied, the company can select the suppliers depending on different factors like cost, quality and the pace of delivery. CafÃ© Expresso is not majorly threatened by suppliers as they always had a large number of suppliers to depend on.
The factors affecting the buyer power are the number of buyers relative to that of sellers, product differentiation, and profit margin, use of multiple sources, buyer volume and importance of the product to the buyer. Since CafÃ© Expresso concentrates on one area of business, providing high quality coffee, the buyer facto is limited. Only factor they have to concentrate here now is how loyal the buyers are to them.
The factors affecting this are the relative price, quality and delivery of substitutes. This is where the brand name comes into play. CafÃ© Expresso has to regain their market position and the number one brand name among the coffee houses, because its brand positioning and brand value ensures that the buyers will prefer its products in relation to the substitute products available in the market.
To conclude, without a new business strategy the survival in the market is going to be difficult for CafÃ© Expresso. This Human Resources strategy should be designed based on the analytical tools like SWOT Analysis and Porterâ€™s Five Force Analysis. The SWOT Analysis will help build a strategy based on the external and internal environments of the market and the Porterâ€™s Five Force Analysis helps in recognizing the competitors and their role in affecting the business of CafÃ© Expresso.
If CafÃ© Expresso continues the present strategies, it will continue to decline in the market, as a result affecting the growth of all the other coffee houses in the chain. Following are a few strategic options available to the management.
One of the main reasons why the company declined in the market is the present organizational structure of the business. A well defined and less complex organizational structure is essential for CafÃ© Expresso in the present scenario to decrease confusion. This structure should help employees know their job, their supervisors and line managers, their roles and responsibilities, and it should define the minimum skills or qualifications required to do the job.
The Human Resources strategies have to be considerably changed. Bare minimum wage should be increased so as to motivate the employees and encourage loyalty. Instead of short term contracts, long term contracts must be introduced so employee turnover is less and employee retention increases. This will also help improve the image of the business.
In spite of just concentrating on main business centers where competitors are high, CafÃ© Expresso should expand to other areas where the competition is less and where there is more scope of growth. This can be done within the UK as well as worldwide. As discussed earlier, since the history and brand name of CafÃ© Expresso is well known, this expansion should not pose a problem.
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