1.

Summary of the Case

Calveta was founded by Antonio Calveta and it was built on Antonios passion for food and
traditional family values. Calveta is a $2 billion, privately held firm that managed food
service operations for nearly 1,000 senior living facilities in the United States. The restaurant
began in 1966 as a neighborhood restaurant in Brooklyn, featuring old family recipes and
subsequently branched into second and third branch in and respectively. Calveta was able
gain access into the senior market in 1972 through Antonios church parish who introduced a
nursing home manager that managed the Bushwick Senior Home. Calveta attracted the senior
home folks as they offer better food which is not only more nutritious but within their current
food budget. Services was offered with a higher-quality food in addition of a more
personalized service. Calveta employed 15,000 people which consist of 500 workers that
worked in the companys Brooklyn HQ. Staff operated all aspects of resident dining facilities
including menu development, meal preparation and service & implementation of special
programs such as themed dinners and family events. After Antonios retirement in 2007,
succeeding 35 years leadership, Antonios eldest son , Frank was nominated as the CEO.
Frank was entrusted by his father to double up the companys revenue within 5 years.

2.0

Main Issues

Frank, as the new CEO was requested to double the companys revenues within five years, of
which 2 years have passed without any credible strategy adopted yet. He did not want to
disturb the special company culture or risk their reputation for quality food services on the
race to double the revenue. Now he finds it difficult to carry out his fathers directives. The

humanistic and emphatically pro-employee company culture should not be disturbed while
the growth strategy takes place. Currently, he is in a dilemma whether to expand beyond the
SLF market and he is worried if he could continue to maintain the quality level, for which
Calveta is renowned, in this process. In order to increase the revenue as promised to his
father, Frank has to consider growth strategies for his organization. He has around three
strategies in his mind and has to work on them to see which one brings the maximum benefit
and fulfils his needs aptly. The strategies that he has in mind are either to continue in the
existing situation itself or introduce it to the hospital segment. He also has thought of taking
up Great Southwest Dining Service (GSD) which was situated in Phoenix and bringing a
change to the organization structure as a whole.
i.

Continuing the existing business

The advantages of this strategy are as follows:
There is less risk as their running in the same status as before.
They would not be incurring any additional costs.
The reputation of the organization will not be lost.
The provision of customized service intertwined with the quality of food
remains constant and it will also not be affected.
The organization will be able to uphold its own culture which was being
followed traditionally.
The disadvantages of this strategy are the following:
Any kind of growth or introducing itself to new markets would be restricted in
choosing this strategy.
A very less chance of meeting the targets that are put across.

ii.

Spreading its business to hospital segment

The merits on choosing this option are mentioned below:
The hospital segment presented a more logical fit with Calvetas core
competencies
Hospital administrators might perceive Calvetas skills at cost control as a
means to containing expenses.

 Trends toward the provision of fresher, more healthful menu offerings for both
patients and visitors would also work in Calvetas favour.
Customers from the hospital segment would accept Calveta Dining Services as
that of the residents of SLF without much hassle.
The demerits on choosing this option are mentioned below:
The culture of the company might not be maintained as it gets mixed with that
of the hospital demographic.
There are entry barriers in the financial point of view in this segment.
The organization cannot estimate or forecast its growth beforehand.
It could also affect the reputation that the company has been having for a long
iii.

time.
Acquiring GSD and restructuring the organization
The pros of the company on taking up this strategy are as follows:
There are more chances of reaching the targets and obtaining desired market
attraction in this strategy.
Its geographical coverage did not overlap with that of Calveta, which increases
its market and also coverage.
GSD is presently in a good position, when the revenue generation is taken into
consideration.
Calveta would attain a great deal of customer potential as it was maintained by
GSD.
The organization hierarchy could be restructured so that it could accommodate
significant growth while preserving the companys core values.
The cons of the company on taking up this strategy are as follows:

They will have to face a huge risk.

GSD had labour problems and substantial turnover in their management ranks.
Spreading the company may reduce the quality of service.
They will have to bear heavy debts.
GSD was barely running in a profitable manner but it seemed to have a great
potential.

3.0

SWOT Analysis

By evaluating Calveta Dining service, many of the strengths write out as a result of the
Calvetas culture, which focuses on the high standard calibre food and customized services.
First, the high- superior food with more alimental enables the association get high ratings
from SLF residents and managers. Considering the health reasons of their customers, the
older people, Calveta admits fresh ingredients at a disgrace of monetary value, which creates
a vital advantage over competitors who impart canned ingredients. Second, the customized
services and continuous innovations of Calveta satisfy the customers need by building food
service teams and a variety of menu offering in each facility. In addition, Calveta allows their
customers to pre- drift their menus and personalize service so that the customers feel
contented. The third strength is that the unique human resource culture with the company
motivates employees successfully by implementing pay-for-performance plan, wide-ranging
training program, and the career proficiency program and among others. The employees are
highly motivated by act of great opportunities to be promoted and receiving generous
benefits. Cost-control model helps Calveta indicate the contracts at a low price and therefore
provides a lower price to customers. This mode yields generous cost which proceeds to
deduce cost of food through deterring wastes. Calveta has a great disadvantage on the
organisational body structure caused by the instruction execution of career progression
programs, which encourages prevalent promotions and job positions. Even though the
program is an effective mode to motivate employees and achieve quick development, the
frequent change in management teams harms the service quality and efficiency as well as
increases the employees dissatisfactions on the stressful organizational structure. Also,
multiple management levels inward the organization keeps the managers apart from
customers and frustrate the efficiency of communication, which raises concerns on customer
care.
3.1

Strength

Family business

Stability: Family position typically determines who leads the business and as a result
there is usually longevity in leadership, which results in overall stability within the
organization.

Commitment: Since the needs of the family are at stake, there is a greater sense of
commitment and accountability. This level of commitment is almost impossible to
generate in non-family firms. This long term commitment leads to additional benefits,
such as a better understanding of the industry, organization and job, stronger customer
relationships and more effective sales and marketing.

Flexibility: Family members are willing to wear several different hats and to take on
tasks outside of their formal jobs in order to ensure the success of the company.

Long-term Outlook: Nonfamily firms think about hitting goals this quarter, while
family firms think years, and sometimes decades, ahead. This patience and longterm perspective allows for good strategy and decision-making.

Decreased Cost: Unlike typical workers, family members working at family firms are
willing to contribute their own finances to ensure the longterm success of the
organization. This could mean contributing capital, or taking a pay cut. This
advantage comes in particularly handy during challenging times, such as during
economic downturns, where its necessary to tighten the belt or personally suffer in
order for the business to survive.
Employee Development

Uncover Employee potential: Calveta allows their employees to attend programs that
might help them spot the leaders of tomorrow within the current work force. Some
individuals just need someone to believe in them, and by developing the skills of the

workers will show them that the company is investing in this belief.
Out with the old- Training the employees will give them the chance to understand the
latest developments and trends within the industry. Whether it is new machinery or
new social media tools, the world is constantly developing. If Calveta helps their
employees keep pace with these changes the company will definitely set it apart from
their competitors. Learning to use new tools and develop new strategies will allow the
staff to take on more challenging work and even higher roles within the business.

Lifelong Learning: By developing the skills of their workforce through leadership

programs

they breed within them a spirit of lifelong learning. Within the ever

changing world of technology and business there is always something to learn.

Lifelong Learning will encourage independent learning in the individuals to develop
themselves in a variety of subjects and fields; it will establish a love for learning and

self-development.
Increased Productivity: It is only natural that leadership development and training
will lead to increased productivity. Not only will the staff be able to do more and
understand more, but they will have gained confidence within their tasks because their

skills are developed.

Understand the Expectations: Development and training programs will provide the
owner or manager of the company, with some insight into the expectations that the
employees might have. This way, Calveta can minimize their feeling of
disappointment and increase their loyalty by managing these expectations.

Revise your vision and goals: Leadership Development programs and training
opportunities are also the perfect setting to remind the employees of the long term
goals that the company tries to achieve.
High revenue

Profit can be used to pay higher wages to owners and workers. (though if firm has

monopsony power, the profit may not be shared equally amongst workers)
Profit can be used to invest in research & development. This investment can
potentially benefit consumer.

Profit enables the firm to build up savings, which could help the company survive an
economic downturn susceptible to take overs. If profit is low, shareholders may be
disappointed in the low level of dividends and willing to sell to a takeover bid.
Effective Cost Control Model

Lower Expenses: The chief benefit of cost controls is that they

lower the company's
overall expenses. By limiting the amount of money employees can
spend, the
company places a cap on how much money can go out the door.
This allows the
company to keep more cash on hand, or to invest larger amounts of
money in other
ways, such as in capital expenses or paying down debt.
Less Abuse
In addition, by placing limits on how much money employees are allowed to spend,
the company is taking steps to limit potential abuse by employees. If an employee is given a

strict limit as to how much he can spend on a particular project, he may be less likely to
spend money on unapproved activities, as he will not be able to meet his primary tasks.
Better Records
An ancillary benefit of cost control is that it facilitates accounting and helps financial
planning by setting a limit on a company's costs. By knowing how much the company
will be spending in a particular period, managers can better plan a budget. In addition,
once the money has been spent, it will be easier for accountants and planners to determine
how the money was spent.

Atmosphere of Thrift
When a company places cost controls, it also indicates to employees that it is actively
seeking to save money. This may help encourage an atmosphere of thrift in other areas of
the company as well. In fact, in some cases, the employees may choose to bring expenses
in below their set limit as a means of helping the company meet its fiscal goals.
Customer focus
A customer-centric focus helps throughout the marketing process, which includes product
research and development as well as promotional communication. A customer-centric
focus typically leads to companies maintaining closer contact with core customers. Focus
groups and other research methods are used to maintain awareness of customer feedback
on products and desires for improvements. Tailoring products and services to fit the

strongest desires of your target market helps you establish a more marketable product
concept.
Promotions
Strong familiarity with the needs and desires of your customers helps you better promote
your brand's value proposition. Effective research gives you a better understanding of what
product features and benefits are most valued, as well as which messaging strategies and
techniques will have the intended effect. Customized solutions that align well with a
particular customer's interests usually carry greater weight than more mass-marketed
products or services with little direct appeal.
Time and Expense
The activities involved in carrying out a customer-focused business operation add time and
expense. Research before, during and after product or service launches takes significant time
and investment. Product-oriented companies are often using this time to further product
research and development. Additionally, customer-focused businesses often invest in
customer care and service activities such as follow up, returns and other efforts to satisfy
customer demands. While the hope is that these efforts garner more customers and greater
loyalty, they take time and money to manage.

4.0 Innovative

Innovation companies generally employ a large number of creative and competent individuals
who can not only introduce a new product, but also see it through to completion. Innovation
companies often employ large numbers of people who oversee all stages of product
development and ensure the product's success in the market through a process of
conceptualization, design and implementation that results in a finished product that is highly

desirable to consumers. For small businesses that wish to stand out in the crowd, finding and
hiring the most creative talent possible is essential for success.
Leadership
The creativity exhibited by innovation companies often puts them in positions of leadership
within their respective industries. Apple, for example, regularly makes the news for its latest
innovations which generally set the bar for other similar products that are later developed by
other companies trying to piggyback off of their success. By the time these companies finally
manage to catch up, Apple and other companies taking a leadership role have generally
created another innovative product to once again lead the way. Although small business are
not generally in a position to take this type of leadership role from the outset, they can
develop their reputation and do so over the course of time, one product at a time.
Experience
Innovation companies also have the advantage of experience on their side. They typically get
the process of product development down to an exact science that can repeated over and over
again. Their ability to repeat this process with efficiency generally sets them apart from other
companies that try to create new products for the first time. For small businesses this
generally involves a considerable amount of trial and error.
Name Recognition
Because they are leaders within their respective industries, innovation companies generally
do not need to do an excess amount of advertising or branding to capture their target market.
Instead, their name alone carries considerable weight in their industry and people await their
products to hit the market. Their name recognition generally sets them apart from other

companies in the market, which means that they need to do very little to promote their
products. This is probably one of the more difficult things for small businesses to establish.
However, with just one truly innovative product, these companies can also begin to carve
their niche in the market and gain that same type recognition.

5.0 High Quality of Service

6.0 Quality customer service is the key element required for a successful business. In this
customer driven market, where competition is becoming stiffer day by day and critical
deadlines are rife, one cannot think of business growth without exceptional customer
service. A number of organizations underestimate the importance of customer satisfaction,
while laying the foundation of their business. They focus on the quality of services,
organizational infrastructure but often overlook the fact that it is consumers who can
make or break a business.
7.0 Quality customer service can benefit your business in countless ways and by observing
the importance of customer service you can take measures to provide your consumers
with a positive experience.
8.0 Here is a quick look at some of the many benefits your business can reap by taking good
care of customers satisfaction and providing them quality customer service:
9.0 Business Promotion
10.0 The best way to promote your business products and services is word of mouth
marketing. When customers receive satisfactory and quality services from an
organization, they tend to discuss it in their social network, which leads to direct publicity
and increased popularity of an organization.
11.0 Satisfied Shareholders
12.0 Satisfactory response from consumers means increased sales, which ultimately leads
to increased satisfaction of shareholders. They tend to invest more in your organization,
which can dramatically improve the ROI of your business.
13.0 Increased Business Growth

14.0

Quality service can boost your business growth. Quality services can help you expand

your client base but great customer service is the key to retain your clients and stand out
of the crowd.
15.0 Successful Business Strategies
16.0 Encouraging consumers for feedback and comments is an integral part of quality
customer service. Following consumers feedback for analyzing the strengths and
weaknesses is probably the best way to understand the expectations of consumers and
adopt successful business strategies.
17.0 Critical Learning Experience
18.0 Customer service can provide business owners a critical learning experience to
understand the dynamics of the corporate world and keep up with the latest business
trends.
19.0 Reduced Risk of Business Failures
20.0 Understating the expectations and mindset of consumers can considerably reduce the
risk of business failures and losses.
21.0 Consumer Satisfaction
22.0 If your customers are happy, your investors and business partners will be happy as
well, and this ultimately leads to higher profits. With a strong client base you can win the
trust of investors and make the most of every viable business opportunity.
23.0 Reduced Employee Turnover
24.0 With increased sales and higher profits, you can offer employees good salary
packages and additional bonuses, thus reducing employee turnover.
25.0 Employee Motivation
26.0 Client satisfaction directly influences the working environment of business
organizations. With decreased pressure of meeting targets and financial stability,
employees can work in a comfortable corporate atmosphere, thus encouraging them to
work to their maximum capacity.
27.0 Increased Efficiency
28.0 The above mentioned benefits lead to overall increased productivity of the
organization.
29.0 Now that you are familiar with the ways through which quality customer service can
benefit your business, implement creative and innovative strategies to value your
customers.

29.1Weakness
30.0

Easy entry into market

The disadvantages:
1. No Scope for economies of scale because of the high number of firms in there
2. Undifferentiated products- all homogeneous. Important in industries like clothes and
cars
3. Lack of supernormal profits may mean the investment of Research and
Development(R&D) is unlikely. Important for industries like pharmaceuticals.
4. With perfect knowledge there is no incentive to develop new technology because of
the ability to share information.- FREE RIDERS of info.
HOW REALISTIC IS THE PERFECT COMPETITIVE MODEL?
In reality it is more about theory rather than pratical. This the extreme spectrum of market
structure.
However it is said that being perfectly competition is the position that firms should be or
similarly in due to the efficiencies it can bring to the economy. Scarce resources would be
allocated well.
It is said it doesnt have to be perfectly competition but in real life competition should have
similar characteristics like:

Many firms in the market

Few barriers of entry and exit

Incentives to cut costs

profits will be lower compared in markets than monopoly power

31.0
32.0

Internal Managerial Conflict

33.0 Mental Health Concerns

34.0

Conflict within an organization can cause members to become frustrated if they feel

as if theres no solution in sight, or if they feel that their opinions go unrecognized by

other group members. As a result, members become stressed, which adversely affects
their professional and personal lives. Organization members may have problems sleeping,
loss of appetite or overeating, headaches and become unapproachable. In some instances,
organization members may avoid meetings to prevent themselves from experiencing
stress and stress-related symptoms.
35.0 Decrease in Productivity
36.0

When an organization spends much of its time dealing with conflict, members take

time away from focusing on the core goals they are tasked with achieving. Conflict
causes members to focus less on the project at hand and more on gossiping about conflict
or venting about frustrations. As a result, organizations can lose money, donors and access
to essential resources.
37.0

Related Reading: Differences Between Destructive & Constructive Conflict

38.0 Members Leave Organization

39.0

Organization members who are increasingly frustrated with the level of conflict

within an organization may decide to end their membership. This is especially detrimental
when members are a part of the executive board or heads of committees. Once members
begin to leave, the organization has to recruit new members and appoint acting board
members. In extreme cases, where several members leave or an executive board steps
down, organizations risk dissolution.
40.0 Violence
41.0

When conflict escalates without mediation, intense situations may arise between

organization members. Its unfortunate, but organizational conflicts may cause violence
among members, resulting in legal problems for members and possibly the organization.
42.0 Inspire Creativity
43.0

Fortunately, some organization members view conflict as an opportunity for finding

creative solutions to solve problems. Conflict can inspire members to brainstorm ideas,
while examining problems from various perspectives.
44.0 Share And Respect Opinions
45.0

As organization members work together to solve conflict, they are more willing to

share their opinions with the group. Conflict can also cause members to actively listen to
each as they work to accomplish the organizations goals.
46.0 Improve Future Communication

47.0

Conflict can bring group members together and help them learn more about each

other. From learning each others opinions on topics relevant to the organizations growth
to understanding each members preferred communication style, conflict within an
organization can give members the tools necessary to easily solve conflicts in the future.
48.0 Identify New Members
49.0

Within organizations members actively participate in each meeting, enjoy serving on

multiple committees and have an opinion on each topic the group discusses. There are
also members who seemingly contribute little to the group and observe more than talk.
Conflict within an organization can inspire typically silent members to step up and
demonstrate their leadership skills by offering meaningful solutions to the problem the
group is facing.
50.0
51.0

Misfit between core competencies & growth strategy

52.0

Excess Turnover

53.0

Employee turnover is a natural part of business in any industry. Excessive turnover

decreases the overall efficiency of the company and comes with a high price tag.
Understanding the effects of losing a high number of employees serves as a motivator to
work toward reducing the turnover rate for higher profits and a more appealing work
environment.
54.0 Cost
55.0

Each employee who resigns costs your company money. All of the money invested

into that employee through training, education and licensing walks out the door with the

employee. When you hire a replacement, the company spend money on those same areas
to prepare the new hire for the position. The company also pays to advertise the vacancy
and may incur costs for drug testing, physicals and moving expenses. The company could
pay 1/3 of the yearly salary of the new employee in costs.
56.0 Time
57.0

High turnover rates cost the company time in addition to money. Managers or human

resources staff spend time conducting exit interviews, advertising the job, recruiting
candidates and interviewing. Supervisors and colleagues are often left to cover until a
new employee is hired and begins working. The new employee may take several months
to fully learn the job and achieve competency in the position.

58.0 Team Dynamics

59.0

When the staff changes frequently, the employees who stay have a difficult time

building a positive team dynamic. A group of employees learns to work well together,
only to have one or more members leave. This leaves the staff in limbo until a new
employee starts. The personality and work ethic of the new employee may vary
significantly from the previous employee. High turnover can hurt overall morale of
employees.
60.0 Productivity
61.0

The overall productivity of the workplace tends to decrease with high turnover. Since

a new employee has a period of adjustment, he won't complete tasks as quickly as the
person he replaces. Group projects that rely on the new team member may slow down,

which affects experienced employees' productivity levels. The loss of momentum when
an employee resigns may also affect morale.
62.0 Continuity
63.0

A high turnover rate affects the continuity of service to clients and other employees.

This is particularly difficult in an industry that relies heavily on relationships with clients.
For example, a client who purchases products from your company on a regular basis may
grow tired of getting a new salesperson or customer service contact every few months.
Consistent relationships with clients help build a stronger loyalty to your company. Your
company is also better able to provide consistent, high-quality service with well-trained
staff that doesn't change often.

64.0

Little risk tolerance

The degree of variability in investment returns that an individual is willing to withstand. Risk
tolerance is an important component in investing. An individual should have a realistic
understanding of his or her ability and willingness to stomach large swings in the value of his
or her investments. Investors who take on too much risk may panic and sell at the wrong
time.

an organizations risk tolerance generally isdriven by its objectives and stakeholder

expectations, ranging fromvalue protection (generally lower tolerance levels) to value
creation(generally higher tolerance levels). Tolerances are also highly dependenton how well
capitalized or financed the organization is.companies with lower risk appetite generally are

more risk averse as their focus is on stable growth and earnings. They may be more averse to
market fluctuations andgreatly influenced by legal and regulatory requirements. company that
says that it is does not accept risks that could result in a significant loss of its revenue base is
expressing appetite. When the same company says that it does not wish to accept risks that
would cause revenue from its top 10 customers to decline by more than 10% it is expressing
tolerance. Operating within risk tolerances provides management greater assurance that the
company remains within its risk appetite, which, in turn, provides a higher degree of comfort
that the company will achieve its objectives. Risk tolerances will naturally develop from your
overall risk appetite, but they also need to be in line with your organizations goals. Your
organization might define a very low tolerance for customer dissatisfaction, but if youre
attracting lots of high cost customers, then this policy isnt in line with a discount business
model.When risk tolerances are aligned with both overall risk appetite and strategic goals,
they will both improve risk mitigation effectiveness and contribute to achieving your strategic
goals.

65.0

Inefficient internal communication

66.0

The majority of internal problems in organizations are directly related to poor internal

communication management.

Not solving them in time ends up affecting other areas of the organization and can
result in bad feeling and weak relationships among your employees.
For that reason, detecting the main problems in internal communications is essential
in stopping them from growing out of control.

But what are the most frequent problems?

1. Confusion: When your company does not communicate properly, discourse is lost
and the strategic lines become unclear. If there isnt good communication among
employees, each will understand things in their own way and the lack of a common
discourse will confuse your employees.
2. Culture based on distrust: If no one is certain what the reality is, you will
generate a climate of distrust, a lack of connection and credibility.
3. Demotivation and a loss in productivity: If your employees feel that they are not
informed about what is happening and that their opinions and ideas dont matter, they
will lose interest and passion for what they do; and this will make them less
productive.
4. Deterioration in the work climate: If you dont let your employees speak and
dont listen to them, the slightest thing can end up in negativity, secretism and gossip.
spite of having many advantages vertical communication, there are some disadvantages
which are given below:

Delay process: Vertical communication system is a delay process. It maintains long

chain of command in large organization to exchange information.

Disturbing discipline: In this communication, if the bosss role of direction is seen

by doubtful eyes by the subordinates, the chain of command and discipline may be
broken.

Efficiency reduces: Downward direction of vertical communication is commanding

in nature. So, there is no opportunity of the workers to become efficient.

Loss or Distortion of information: Information may be fabricated by the employees

to maintain lengthy channel. So, through his communication information may lose its
originality.

Reduces relationships: By this communication system relationship between superior

and sub-ordinate may be reduced due to inability and inefficiency.

Slowness system: Vertical communication is the slowest communication method

because it requires passing through the various levels of an organization. For this, it may
become ineffective.

Negligence of superiors: In this communication superiors can neglect to send

message to their subordinates.

66.1Opportunity
Hospital Market

The sustainability movement has hit health care, as hospitals are making great
progress toward establishing healthier, more sustainable foodservice for patients and
their families. Many of these green efforts are influenced, at least in part, by the
Healthier Hospitals Initiative (HHI), a national campaign to improve environmental
health and sustainability in the health care sector. Healthier food is one of six
challenges that form the basis of the HHIs campaign, providing resources, insight,
and support any hospital or health system can adapt to develop sustainable
foodservice programs.Current US economy is still struggling growth at 1.75%.USA
Healthcare will take cuts up to $155 billion over the next 10 years. Missed entry point
into market due to competitors already locking in contracts.Viable option within the

coming years. Cleaning Services for Hospitals and SLFs Potentially run as an outside
subsidiary. Low margins, Claveta will struggle to operate profitably.Again, will not
achieve target of doubled revenues in 5 years.

Expansion into other regions

New Customers
A primary benefit of business expansion is the ability to attract and retain new customers. When
you add new products to your portfolio or move into new markets, you can bring in previously
untapped customer markets. Reaching out to these new customers with expansion is one thing, but
capturing them for long-term relationship building is primary. Growing a loyal customer base is the
best way to achieve stable and growing profits over time.

Economies of Scale
When you expand your business, you often spread the risks of doing business and reduce the
potential of one product or one poor decision damaging your business. Operating in multiple
markets or in many product areas also allows companies to spread the costs of doing business
across more markets or customers. This makes the costs of doing business less on a per-customer
basis, which improves the potential to profit by adding new customers.

Capital Requirements
A drawback of business expansion is that when a company invests money and other resources to
expand, it has less capital available for other business transactions. This makes it especially
important that you carefully weigh the market potential of expansion before making the
investment. Consider the potential return on investment from each product or new market you
could expand into before investing your capital into a path of expansion.

Spread Too Thin

Another risk of business expansion is that you could spread your company's resources and
expertise too thin. Often, company leaders think they have to expand if things are going well.
However, getting involved in too many markets or products can cause the company to spread its
abilities out to the point that it does not perform well in any area. Business expansion only makes
sense if your company has adequate people and resources to cover the new area with expertise.
Perhaps the most common way to expand into new markets is geographically. Cape Cod Potato
Chips is a perfect example. The company started in Massachusetts and expanded westall the way
to California. Today, this once-small business has its product in 42 states and five countries. How
were its managers able to accomplish this? Simple. They had an overall understanding of what
their product was and a clearly defined business strategy for geographic expansion.
While your goal may be to take your company immediately to a national level, it is important to
exercise some restraint. Cape Cod Potato Chips didn't take on the world overnight. Instead, they
started slowly, venturing into their immediate backyard, which happened to be New England. Once
successful in New England, the next obvious move for themor so they thoughtwas Manhattan.
If they could make it there, they could make it anywhere, right? Perhaps, but they suffered a
setback. They couldn't find a distributor in Manhattan and, for a while, they thought it was over.

New England would be as far as they would go. It was then that they went back to their original
marketing strategy.
Cape Cod Potato Chips had decided two important things up front. First, they weren't going to try
and be a chip that was all things to all people. They were a high-end potato chip, which cost more
but tasted better. Second, their goal was to build a loyal customer base; to accomplish this, they
knew they had to get their product into the hands of as many potential customers as they could.
But how was this little mom-and-pop company going to do this? Well, they may not have had a lot
of money, but they were extremely rich in creativity, and it paid off. They began to hand out
samplesnot just random samples, but calculated ones. For example, they got their product on
airlines so that people all over the country would have the chance to try them. Thus, these
potential customers would already be aware of the great-tasting chips when the company entered
their geographic region. They also partnered with other businesses, such as beer companies, as an
inexpensive way to get their product out to new regions. In states with beaches, they hired interns
to pound the sand and hand out their product. In short, they created a buzz, and soon, they were
on the shelves in Florida. From there they took off to other geographic regions, including their
dream market: Manhattan.
As you attempt to expand geographically, think of Cape Cod Potato Chips, and don't try to take on
too much territory at once. It is better to expand slowly from region to region than to attempt too
much at once. Also, when setbacks happen, don't automatically give up. Just because one region
says "no thanks" doesn't mean other regions will do the same. If Cape Cod Potato Chips had
stopped at the New York border, they would not be half the company they are today. While your
goal may be to go national immediately, it is important to exercise some restraint.
When thinking in terms of geographic expansion, remember the world can be your oyster. While it
is definitely easier to expand across America, don't feel compelled to stop at the U.S. border if you
truly believe there is a global need for your product or service. Depending on what you are
offering, you may feel there is a greater need for it in a city like London vs. a city like Lincoln,
Nebraska. For obvious reasons, expanding internationally can be a lot more complicated, but if
done correctly, it can also be quite lucrative. For more information, see How to Expand Your
Business Globally.
Self-Assessment:
The following questions are designed to help you determine if you are ready to expand
geographically. Ask yourself:
1.

Does my business operate with strict processes, guidelines and standards that are easily
reproduced in different locations?

2.

What changes will I have to make to my business to successfully expand into a new
market?
o

Staffing?

Budget?

Operations?

Resources?

Marketing Program?

Marketing Materials?

Sales Staff?

Sales Materials?

Capabilities?

3.

Do you need to have a physical presence in the location you are considering? Or could
establishing an Internet presence or mail-order process eliminate the need to physically
move into a new market? If yes, what will that mean to your business?

4.

How is the geographic market different from the one you are in now?

5.

Can your operations to expand financially support additional office space, new staff,
equipment, etc.?

Aging population
Believe it or not, it is also possible to expand into new markets without ever leaving your own
backyard. How? Market expansion can also occur when you identify new groups of target
customers in your current region. To begin identifying these potential markets, look at who is
currently buying your product or service. Ask yourself why they are buying. What need are you
filling? Now do some brainstorming. Ask yourself what other groups might benefit from your
product or service. Get creative and dig deep. Are there changes you could make in packaging
your product or service that might appeal to different customer groups? For example, if you own a
dry-cleaning business, what services could you add to make yourself more appealing and attract a
different clientele? You could offer same-day service, for example, that would be extremely
attractive to busy executives who are always racing around doing things at the last minute. Or you
could add a tailoring service. Or how about a weekly discount to attract a less affluent clientele?
Do you see a theme emerging here? The trick is to attract new customers while at the same time
keeping existing ones.
McDonald's is a perfect example of a company that expanded by targeting new customers. When
you think of this fast-food restaurant chain, what images come to mind? A family restaurant with
lots of screaming kids running around? Ronald McDonald, the company clown, Happy Meals and
playgrounds in the parking lot? The truth is, at first McDonald's target customers were children.
But research showed that even though they had been hugely successful with this campaign, they
were in fact missing a much larger customer base: adults. Research proved that adults consume
more burgers than children do, so McDonald's decided to go after two new groups of target
customers: teenagers and adults. They unveiled new ad campaigns that were much slicker and
sophisticated than previous ones, while at the same time promising potential new customers a
burger for adults called an "Arch Deluxe." But look carefully and you will see, despite the new
name, what changed here was not so much the burger, but rather to whom the burger was being
sold.
A word of caution: When looking to expand into different markets by generating new customers, it
is important to thoroughly think about what adding new benefits or features would mean to you.
Same-day service seems like a great idea on the surface, but providing that service may be much
more difficult than it sounds. Ask yourself how you will logistically provide a same-day service. Will
you farm out the task to a larger firm and simply take a percentage, or will you have to add
equipment and manpower to your current operation? In contrast, adding a tailor a couple of days a
week or offering discounts seems much easier.
Self-Assessment:
The following questions are designed to help you understand if you are ready to venture into new
markets. Ask yourself:
1.

How well is my product or service doing in its current market? If your business is going as
planned, what are the contributing factors? Will these factors be present if targeting a new
market? If your business is not going as planned, what are the barriers prohibiting growth?
Will these barriers be present in targeting a new market? Will there be new barriers that
arise when targeting a new market?

2.

How is the target market you wish to enter different than the one you are in now? What
are the positives? What are the negatives?

3.

What changes will I have to make to my business to successfully expand into a new
market?
o

Staffing?

Budget?

Operations?

Resources?

Marketing Program?

Marketing Materials?

Sales Staff?

Sales Materials?

Capabilities?

4.

Have I completely researched my new customers? What will they expect from my
business?

5.

Have I thoroughly investigated my new competitors?

Back to Outline

4. Identify Potential Markets

The first step to identifying potential markets is to first determine precisely who the market is. To
whom do you wish to sell your product or service? What are the demographics? Male or female?
Wealthy or middle class? What is the age range? Are you selling to housewives or women who
work outside the home? Do they live in a particular geographic location? Does the market have
seasonal or annual needs? You must have answers to all of these questions before you can begin
to move forward.
Once you have established a potential new market, you must determine their needs and desires.
You must not only discover what your prospects want, but why they want it. Thenand this is
crucialyou must find out if your product or service meets those wants and needs.
Market Assessment:
Do your company and your potential new market have a perfect fit? The following questions should
help you discover if the potential in the markets you are pursuing really exists.
1.

What are consumers in this new market looking for?

2.

Why are they looking for it?

3.

How does my product or service meet their needs and desires?

4.

Do I consider my product or service to be a perfect fit with what I know about this new
market? Why or why not?

5.

Now take out a piece of paper and list the specific reasons that your product or service fills
the need of that particular market. If the paper is more than half blank, you should
probably consider other options.

( Demographic)

Acquire more of the SLF market

Aging population of the Baby Boomers is increasing and by 2030 expected to
be 70 million which equates to 20 % of the US population. Capacity rates of
SLFs are up to 87.9%. Showing increasing trend. Hence demand for dining
services will increase as well.However will not reach target of doubled revenues
in 5 years.
Recent health trends and concerns

Socially conscious consumers use their purchasing power to try and improve the world
around them. Their decisions are based on whether a product's positioning on issues, such as

the environment or method of production, align with their values, perceptions or knowledge.
They can act on their consciences in positive or negative ways, either buying a product that
meets their beliefs, or boycotting a product or company that doesn't meet their standards. Any
Internet search will result in many examples of support for the socially responsible
consumption theme from media reports, blogs, research papers, economic studies and nongovernment organizations. Surveys and interviews with consumers from around the world
report that individuals rely significantly on their social values and belief structure when
making purchasing decisions. While this demonstrates a definite change in attitude, actual
buying patterns in the marketplace indicate that the percentage of consumers acting on their
beliefs is smaller than what is reported, generally keeping socially conscious products in
niche categories.
Of the types of products included under the "ethical" umbrella, food and beverages have seen
some global growth, particularly in the United Kingdom. The Cooperative Bank's Ethical
Consumerism Report for 2010 found that spending on products classified by industry as
"ethical food and drink" in the United Kingdom increased by 27% in the previous two years
to reach 8% of all food and drink sales. Fair trade food sales increased by 64% to 749
million, and sales of Freedom Food certified products more than tripled, from 28 million to
122 million. Organic foods, however, declined by 14% to 1.7 million (Cooperative Bank,
2010).
Given the traction already gained in the marketplace, socially conscious consumption will
likely become more mainstream over time. A number of integrated factors will drive this
trend forward: a growing volume of national and international legislation regarding
environmental and social standards; more companies enacting corporate social responsibility
policies as a way to differentiate themselves and their products; greater public awareness of
how purchase behaviour links to social issues; and the growing need for consumers to express
their personal values through their buying patterns. It is important to understand consumer
behaviour in a potential market to take advantage of any opportunities based in this trend.
Factors to consider include:

Consumer purchase behaviour is complex, involving numerous trade-offs of the

attributes desired on that specific shopping occasion. Rarely is a purchase made based
on any single characteristic, particularly on the social issues related to the product.
Social consciousness must correspond with the functionality and price of the product
in order to appeal to the consumer.

Research techniques, such as surveys and focus groups, rely on people reporting their
own purchasing habits or intentions, which generally does not reflect the types of
decisions consumers have to make at retail. Also, there is a bias inherent in questions
based on values and beliefs as people respond to what they ideally would like to do.
True market-based experiments that realistically create these trade-offs and access to
retail sales data are required, to get more accurate predictions of actual purchases.

Consumers have very diverse social preferences, but actually paying for a product
makes individuals even more selective in terms of which social preference carries the
most importance. This diversity is further complicated by the fact that consumers may
unexpectedly shift their preferences from time to time due to influences such as
media, friends and family, or personal experience. This makes marketing using
traditional consumer segmentation more of a challenge.

Companies that are interested in being competitive in this market need to build trust with
their customers by providing reliable and relatable information about the health, social, and
environmental benefits of their products and services that can be verified by an independent
source. Labelling will continue to be the most apparent explanation of why a product's
production systems, footprint, packaging techniques, or ingredients are more socially
responsible than those of the competition. However, a variety of other marketing techniques,
particularly social media, will have to be used to promote both the product attributes and the
company's approach to corporate social responsibility to successfully attract consumers
interested in making purchases from this perspective

66.2Threat
67.0 New Entrants
68.0
a new company enters your market, the variables that influence the performance of your
business change and you have to react to maintain your position. How the new company
overcomes the existing barriers to entry can guide you in your strategic reaction to the new
situation. As the market changes, you have to take into account the strengths of the new
entrant when forming a strategy to keep your customers.
69.0
70.0
71.0
72.0

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73.0 Barriers
74.0
Typical barriers to entry for a market are high capital costs to establish manufacturing or
retail facilities, customer loyalty resulting from special product features, or economies of scale
if existing competitors are large operations. If the new entrant invests heavily, you have to
examine whether they have extensive capital resources or whether the investment has
stretched their capacity. If they introduce a product similar to yours, you have to react. If they
are smaller than your company, they will not have your economies of scale and will not be able
to compete on price. How the new company enters the market tells you what its strengths are.

75.0 Costs
76.0
When a new buyer enters a market, suppliers often can raise prices because of higher
demand. The new entrant needs the same materials and components you do to offer the same
kinds of products in the market. If you can lock in your supplier costs with long-term contracts
while the suppliers charge the new entrant higher prices, you can maintain your pricing
structure and compete on quality and unique features. If your suppliers raise prices, you can
reduce inventory and seek substitutes for the most expensive items.
77.0

Related Reading: Business Letter Introducing New Features

78.0 Prices
79.0
The entry of a new competitor in a market tends to reduce the market prices. When there
are more companies competing for the same market share, customers choose those with lower

pricing, and the general price level goes down. If you have inherent cost advantages because
of factors such as location, product design or low labor costs, you can compete on price. If no
competitor has inherent cost advantages, you can compete on price if your financial resources
are higher than those of some competitors. In that case, you can accept losses until they go
out of business or you can purchase weaker competitors. If you have higher costs, you must
compete on non-price factors such as quality, special features or customer service.

80.0 Competitors
81.0
How the new entrant chooses to compete is a key factor in how the entry affects your
business. Competing in a new market is attractive if a company can identify a market segment
that is not well-served by existing competitors. When the new entrant targets the new market
segment, you can broaden your own strategy to cover the same target and prevent the new
company from getting a foothold. If the new company develops a strong position in the target
segment, you may want to withdraw from it and strengthen your own position in the market
segments where you are strongest.

82.0
83.0

Possible takeovers

Cons:
1. Goodwill, often paid in excess for the acquisition
2. Culture clashes within the two companies causes employees to be lessefficient or despondent
3. Reduced competition and choice for consumers in oligopoly markets (Bad
for consumers, although this is good for the companies involved in the
takeover)
4. Likelihood of job cuts
5. Cultural integration/conflict with new management
6. Hidden liabilities of target entity
7. The monetary cost to the company
8. Lack of motivation for employees in the company being bought.

Takeovers also tend to substitute debt for equity. In a sense, any government tax policy of
allowing for deduction of interest expenses but not of dividends, has essentially provided a
substantial subsidy to takeovers. It can punish more-conservative or prudent management that
do not allow their companies to leverage themselves into a high-risk position. High leverage
will lead to high profits if circumstances go well, but can lead to catastrophic failure if
circumstances do not go favorably. This can create substantial negative externalities for
governments, employees, suppliers and other stakeholders.

84.0 business takeover can have a positive or negative impact on your labor force.
A takeover that is friendly and planned has the potential to benefit the existing
workforce, while one that is initiated by creditors and is unexpected can have a
detrimental effect. The way a small business owner notifies and prepares workers
of the change in ownership can play a big role in smoothing the transition.
85.0
86.0
87.0

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88.0

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89.0 If you decide to retire, or you get an exceptional offer on your business, you
will likely have the ability to negotiate the terms of the takeover. In this instance,
you should be able to inform your employees of your plans well ahead of time.
Provide a takeover timeline and let them know what their employment status will
be after the deal is finalized. If workers will be retained by the new business
owner, they will have the opportunity get accustomed to the new corporate
culture, receive training and be a positive force in the takeover. If the labor force
is not to be retained, you will be able to give employees enough notice that they
can begin looking for new jobs.
90.0

Court-Ordered Sale

91.0 If you go into bankruptcy and are forced into a court-ordered sale, there might
be little notice for your labor force. In this instance, the effect on them could be
unexpected unemployment. A court-ordered sale in which the bank takes over
your operation has the harshest impact on your workers because of the
immediacy of the action.
92.0

Merger

93.0 A business takeover in which another small business absorbs or merges with
your company can have a variety of effects on laborers. If the merged company
maintains the workforces of both operations, the impact on employees should be
minimal. If the acquiring business decides to downsize your labor pool, workers
might find themselves competing for the remaining jobs while adjusting to a new
workplace dynamic.
94.0

Change of Ownership

95.0 A change of ownership that results from circumstances other than an

intentional sale -- such as death or incapacity -- can have a number of effects on
your laborers. A new owner might opt to hire, fire or change the employment
status of any of your workers for any reason. The most significant effect of this
type of take-over is uncertainty, as employees might not be familiar with the new
boss or his plans for the business. If the new owner decides to carry on with

business as usual, the existing labor pool can be a great asset in helping to make
the transition smooth.
96.0
97.0
98.0

99.0

Strong Competition

Rising employment & ingredients cost

But with income equality a political issue and with some studies challenging the

notion that minimum-wage increases damage small businesses, there are also business
owners who support the increases. These owners suggest that businesses actually benefit
from paying higher wages because of reduced turnover and the additional money that
goes into local economies.
Even a small increase could hurt capital expenditure and increase the cost of production for
goods businesses.
anything over this figure can reduce the value of money, both for individuals and businesses.
Larger corporations are generally better positioned to bear the brunt of inflation, as it can be
offset by savings generated by economies of scale. Small firms, however, often take a direct
hit on margin.
High inflation can also have unexpected side effects: it can negatively affect currency
exchange rates and bring about an export slump.For now, there is little cause for alarm.
Slowing demand from emerging economies is helping to reduce pressure on commodity
prices and the cost of physical inputs is falling back, helping to control the rise in SME cost
inflation.

"The sustained period of economic growth has eased cost pressures and with demand
growing, the business environment has significantly strengthened in comparison to the past
few years.
While, on the surface, the impact of inflation is relatively minor, business insolvency
statistics remain a worry. The number of companies entering liquidation is falling, but only
slowly. In order to ensure they are making the best out of the bad situation, businesses need to
be proactive and shop around for accounts and other products that offer the best interest rate
possible.
However, as long as inflation rates remain steady and the economy continues to recover,
100.0 Economic downturn- recession
An economic decline in the United States, is pretty much guaranteed to reduce the income of
the business sector. The recent falls in the US stock markets are largely due to expectations
of a future downturn in the economy. Lower growth leads to lower profits, therefore
dividends decline and shares become less attractive. If the US enters into recession, firms will
experience a decline in profitability. This is because:
1.

Tendency for price wars to develop in a recession. Low sales encourage firms to cut
prices

2.

Falling sales will lead to lower revenues.

Some firms will be affected more by the downturn. Firms producing luxury goods (Income
elasticity of demand >1) will experience the biggest % fall in demand. This is likely to
include manufacturers of luxury cars, 5 star hotels. Firms producing basic necessities will be
more insulated from the effects of a recession.

As sales revenues and profits decline, the manufacturer will cut back on hiring new
employees, or freeze hiring entirely. In an effort to cut costs and improve the bottom line, the
manufacturer may stop buying new equipment, curtail research and development and stop
new product rollouts (a factor in the growth of revenue and market share). Expenditures for
marketing and advertising may also be reduced. These cost-cutting efforts will impact other
businesses, both big and small, which provide the goods and services used by the big
manufacturer.
Falling Stocks and Slumping Dividends
As declining revenues show up on its quarterly earnings report, the
manufacturer's stock price may decline. Dividends may also slump, or
disappear entirely. Shareholders may become upset. They and the board of
directors (B of D) may call for a new CEO and/or an entirely new senior
management team. The manufacturer's advertising agency may be dumped
and a new agency hired. The internal advertising and marketing departments
may also face a personnel shakeup.

When the manufacturer's stock falls and the dividends decline or stop,
institutional investors who hold that stock may sell and reinvest the proceeds
into better-performing stocks. This will further depress the company's stock
price. (Learn how understanding the business cycle and your own investment
style can help you cope with an economic decline in Recession: What Does It
Mean To Investors? and Recession-Proof Your Portfolio.)
The sell-off and business decline will also impact employer contributions to
profit-sharing plans or 401(k) plans if the company has such programs in
place.

Credit Impairment and Bankruptcy

Also impacted by the recession is the accounts receivable (AR). The
customers of the company that owe it money may pay slowly, late, partially
or not at all. Then, with reduced revenues, the affected company will pay its
own bills more slowly, late, or in smaller increments than the original credit
agreement required. Late or delinquent payments will reduce the valuation of
the corporation's debt, bonds and ability to obtain financing. The company's
ability to service its debt (pay interest on the money it has borrowed) may
also be impaired, eventuating in defaults on bonds and other debt, further
damaging the firm's credit rating and preventing further borrowing. (Debt
Reckoning can teach you how a company's debt is an indicator of financial
health.)
Debt will have to be restructured and/or refinanced, meaning new terms will
have to be agreed upon by creditors. If the company's debts cannot be
serviced and cannot be repaid as agreed upon in the lending contract, then
bankruptcy may ensue. The company will then be protected from its creditors
as it undergoes reorganization, or it may go out of business completely. (For
related reading, see An Overview Of Corporate Bankruptcy, Profit From
Corporate Bankruptcy Proceedings and Taking Advantage Of Corporate
Decline.)
Employee Lay-offs and Benefit Reductions
The business may cut employees, and more work will have to be done by
fewer people. Productivity per employee may increase, but morale may suffer
as hours become longer, work becomes harder, wage increases are stopped

and fear of further layoffs persists. (Read about how employment statistics
influence corporate confidence in Surveying The Employment Report.)
As the recession increases in severity and length, management and labor
may meet and agree to mutual concessions, both to save the company and
to save jobs. The concessions may include wage reductions and reduced
benefits. If the company is a manufacturer, it may be forced to close plants
and discontinue poorly performing brands. Automobile manufacturers, for
example, have done this in previous recessions.

Cuts to Quality of Goods and Services

Secondary aspects of the goods and services produced by the recessionimpacted manufacturer may also suffer. In an attempt to further cut costs to
improve its bottom line, the company may compromise the quality, and thus
the desirability, of its products. This may manifest itself in a variety of ways
and is a common reaction of many big businesses in a steep recession. (Learn
about the importance of production levels in Understanding Supply-Side
Economics.)
Airlines, for example, may lower maintenance standards. They may install
more seats per plane, further cramping the already squeezed-in passenger.
Routes to marginally profitable or money-losing destinations may be cut,
inconveniencing customers and damaging the economies of the cancelled
destinations.
Giant food purveyors may offer less product, for the same price, in the same
size package in which the larger amount was previously sold. Quality may

also be reduced. Coffee, for example, may be cut with lesser-quality beans,
compromising flavor and driving away cost-conscious consumers with little
brand loyalty who have noticed the change. (Read about the importance of
standing out from the competition in Competitive Advantage Counts.)
Reduced Consumer Access
As firms impacted by the recession spend less money on advertising and
marketing, big advertising agencies which bill millions of dollars per year will
feel the squeeze. In turn, the decline in advertising expenditures will whittle
away at the bottom lines of giant media companies in every division, be it
print, broadcast or online. (Read about successful marketing strategies in
Advertising, Crocodiles And Moats.)
As the effects of a recession ripple through the economy, consumer
confidence declines, perpetuating the recession as consumer spending drops.
(To learn more, read Economic Indicators: Consumer Confidence Index (CCI).)

Struggle to find growth strategy which fits core competencies well. Pigeon holed.
Lack of infrastructure.Cash management process is contrary to growth goals.
Calveta competency is focused on employee development is hindering acquisition.
Competitors use contradicting business structure.Internal hiring- managers regularly
re-assigned. Due to expansion- core values will suffer.Threats from competitors
inevitable. Need for low cost services in economic climate.Budget cuts and hospital
facilities are closing down.
101.0 Solutions

It is understood that Frank is liable to choose any one of the mentioned strategies, so that
Calveta is able to double its revenue by the end of the year 2011. Every strategy has got its
own pro and cons from which a decision had to be made. As all the options have been
analysed, it can be derived that the third alternative is comparatively worth enough to be used
rather than the others. Even though it has to bear huge risks, it seemed to be having a great
customer potential if it could retain its customer accounts. The problems in taking up the
other strategies are cleared out below:

If the company continues in the existing status, it would not earn much of revenue as
such which therefore would make it unable to cover the desired target of doubling the
revenue, even though it had less risk, no additional cost, reputation and quality of

service.
As they have had a previous experience of spreading their company into the
educational segment which turned out to be a failure, it would be better not to expand

themselves into the hospital segment. It also includes huge risks.

When GSD is taken into consideration, it produced annual revenue of $1.5 billion
and has a growth in revenue. Since it was barely profitable, indirect expenses and
administrative expenses were high in GSD. On using the cost-control system of
Calveta, they could increase their net profit. The calculations are given below as
follows:
Current Ratio = Current Assets/Current Liabilities = 0.993:1
Profit Margin Ratio = Net Income Sales = $65 million / $2021 million * 100 = 3.22%
Debt Equity Ratio = Total liabilities / Total Shareholders Equity =
$272 million / $181 million = 1.50:1
It is evident from the above that the companys ability to meet short term
liabilities is low as the required ratio for the current ratio is 2:1. The companys debt
is more than equity as the supposed ratio to be is 1:1. Its better to increase the share
capital than going for bank loan as the shareholders equity in the organization is low.

From the case analysed, the third option is chosen wherein Calveta has to acquire
General Southwest Dining Services (GSD) as:

GSD does not generate revenue in a smooth or good manner for which they need

Calveta to join them so that they could use Calvetas cost-control system.
GSD has got geographical coverage which would enhance their strategy and it could
also use the core values of Calveta, so that they could increase the reputation of the

company as a whole.
It is also better to increase the share capital than going for a bank loan, because the

companys financial position is bad.

The employees of GSD have to be provided with training and they also have to recruit
few into the company and restructure the organization by shifting managers from

Calveta to GSD.
A new organizational structure has to be made that accommodate significant growth
while preserving the companys core values. It has to consider in dividing the sales
and operations functions completely, creating additional regions and districts, and

eliminating management levels.

Analysis
The United States Census Bureaus survey showed that only 25% of the total SLFs in
USA had contracted to food services, this survey alone shows that there is a great
potential for growth in the SLFs segment and therefore it would have been
meaningful for Frank to buy Great South West Dining but the eye popping debt
figures that came before him alone are sufficient to say that it would not be a feasible
solution and it would be much better decision for Frank to diversify Calveta Dining
Services by extending to other segments, like providing food services to the hospitals.

Few reasons why Frank should extend to other segments are.

1. Frank considered moving into the Education Sector, and just because he failed once
it does not mean that he will not be successful in the same sector with better

preparations to make potential clients believe that Calveta Dining can also cater to the

needs of a young generation.

2. The financial challenges of getting into the hospital segment was there but it was

always achievable.
3. The greatest positive to Calveta Dining Services was the working culture by which

they could prosper in any segment.

Interpretation
The interpretation that can be derived from the above analysis is that it would be
better for Frank to think about diversifying the business rather than acquiring GSD.
Even Frank knew that it was a huge risk to acquire GSD considering the heavy debt
the business would be in after the acquisition, besides Calveta Dining would find it
difficult to train GSD employees to the work culture of Calveta Dining. Frank should
not make this decision only with the purpose of meeting his fathers goal because this
may harm the firm in the long run. Frank had his own problems organizational
restructuring to do for Calveta Dining and in such a circumstance if Frank acquired
GSD then his problem would grow from bad to worse because it would not be an easy
task to change the entire work culture of GSD within a short span of time, and apart
from the debts of acquiring GSD Frank would also need to generate funds for the
training of the staff teaching them Antonios way. The reason for a few customer
dissatisfaction was in the the promotion from within concept of Calveta Dining
Service, Calveta dining promoted their front line employees to higher ranks if they
showed outstanding work skills and dedication which was motivating the employees,
but it also meant that they would be rotated from one place to another which
displeased few of the SLF residents, this could be easily resolved by hiking the
salaries of outstanding employees and still keep them motivated rather than promoting
job rotations, and also a minor restructuring of Calveta Dinings organizational
structure with dedicated management representatives and area managers for a client.

Synthesis
If Frank were to come up with new strategies for growth only with the intention of
meeting his fathers goal, then in the long run it would harm the business. Considering
the dedicated staff and employees of Calveta Dining, it would be better for Frank and

the business to diversify rather than acquiring GSD

Conclusion
Frank should consider the reviews given by his sister and not make decisions clouded
by his ego and jeopardize the reputation of the company and the special work culture

of Calveta dining Service, Inc.

Analysis of GSD deal specifically cultural concerns:
1. The size of the company would almost double (75% of the current revenue from $2
Billion to $3.5 Billion). With this size company, the current organizational structure
would be untenable (assuming GSD has a similar structure).
2. Company culture has already deteriorated: Calveta has grown so big that their training
program does not instill the basic goals (Antonios Way) in the new trainees effectively.
To highlight this, over the years, Calvetas President and CEO met with every new
employee. By 2009, with 1,000 management trainees joining the company in just 12
months, this was no longer possible.
3. Frank already had a growing concern regarding the diversity of skills of area and
account managers.

Recent college and business school graduates who entered the

business lacked the industry experience of counterparts who had worked their way up
through the ranks.
4. Jennifer also acknowledged it was becoming harder to find operations managers who
fully embraced Antonios Way.
5. GSD does not have great reputation and has had issues with labor and management
turnover.
6. Career growth opportunities alienate customers.
7. Within Calveta there seems to be a power struggle between Frank and His sister Jennifer.
Recommendations:

1. Combine SG&A and eliminate redundant positions. This would include combining supply
chain, customer service, accounting and IT. All SG&A savings would be diverted to
cultural training in Calvetas 5 basic goals (see step 4).
2. Hand over day-to-day operations of Calveta to Jennifer and have Frank take care of the
GSD operations.

Integrate and significantly reduce current combined organizational

structure by addressing GSDs high management turnover with an influx of Calveta

middle and senior leadership.
3. Use GSD as a growth platform for internal Calveta promotions. This will be a good way
to spread Calveta culture into GSDs operational environment. Bring over qualified staff
from Calveta into GSD operations as temporary (short term) assignments to help spread
the Calveta culture from within. Selected GSD staff is likewise sent and trained in a
Calveta operation, with the plan being that they eventually return to GSD.
4. Create the concept of Calveta University to help train and integrate GSD employees
and help prevent the erosion to Calvetas culture. This would include a robust program
centered around continuous improvement training such as a curriculum of: new hire (3
days), 90-day orientation (1 day), and annual retreats (1 day). This can also be used to
train new hires for both GSD and Calveta as well as future growth. Instill the need for a
Division President or above to meet the trainees as a way to replace the CEO greeting of
new employees, which is no longer feasible to maintain.

5.0 Conclusion