Sample2 Report Business Assessment


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A comprehensive assessment by S.Gee of a business along with a roadmap for improvements. Primary focus: Intellectual Capital Alignment to Business Strategy. Sample Template (Vol. 1 only)
(Names are Fictitious)

Sample2 Report Business Assessment

  1. 1. ABC Marketplace BUSINESS AND HUMAN RESOURCE ASSESSMENT REPORT Volume 1 Quisque vel justo eget felis sollicitudin adipiscing. Ut enim lorem, Prepared lacinia eget, tristique quis, feugiat eget, turpis. In hac habitasse By Shirley platea dictumst. Morbi non dui ac risus sollicitudin auctor.
  2. 2. ABC MARKETPLACE BUSINESS AND HUMAN RESOURCE ASSESSMENT REPORT Content Page(s) Title Page 1 Table of Content i-iii Introduction 2 Intent of Report 2 Format Used 3 Actual, Theory, and Best Practices 4 The Company 5 Philosophy 5 Business Strategy 8 Exhibit 1 – Balance Scorecard Method 13 Exhibit 2 – Balance Scorecard Elements 14 Goals and Objectives 15 Products and Services 19 Exhibit 3 – Products and Proportions 19 Resources Available 24 Organizational Structure 27 Exhibit 4 – Laurel District Store Organization Chart 30 Exhibit 5 – Dimond District Organization Chart 31 Exhibit 6 – Employment Data 37 Market Environment 38 Local Demographics 38 Exhibit 7 – Ethnic Population 39 Exhibit 8 – Age and Income Demographic Information 39 Exhibit 9 – Miscellaneous Demographic Information 39 Customer Profile 40 Exhibit 10 – Characteristic and Traits 40 Sales and Marketing 41 Exhibit 11 – Marketing Process 43 Exhibit 12 – Activities in Marketing 44 Exhibit 13 – Components of a Marketing Plan 46 Exhibit 14 – Types of Performance Analyses 50 Exhibit 15 – Planning Process 52 Risk & Security 53 Risk 53 Exhibit 16 – Definition of Risk Management 57 Exhibit 17 – Sample Human Resource Risk Mitigation Form 62 2
  3. 3. Content Page(s) Security 65 Exhibit 18 – Sample Elements of Security Management Plan 68 Exhibit 19 – Sample Vulnerability Report 69 Exhibit 20 – Sample Computer Security 70 Contract and Procurement Management 73 Exhibit 21 – Purchases and Acquisitions 77 Exhibit 22 – Contracting 78 Exhibit 23 – Invitation to Sell 79 Exhibit 24 – Select Seller 80 Exhibit 25 – Contract Administration 81 Exhibit 26 – Contract Execution 82 Recordkeeping 83 Payroll System 83 Accounting System 83 Personnel Records 84 Exhibit 27 –Sample List of Personnel Data 88 Quality Assurance 90 Exhibit 28 – Sample Quality Improvement Method - CMMI 95 Exhibit 29 – Sample Quality Improvement Method – Six Sigma 96 Human Resource Program 97 Human Resource Program – All Other Sections 97-179 Policies and Practices 99 Exhibit 30 – Sample Employer Policies 103 Exhibit 31 – Sample Policy on Bereavement 109 Exhibit 32 – Illustration of a Federal Act Covering Employers 110 (Family and Medical Leave Act) Job Definition 112 Exhibit 33 –Cashier Job Description and Announcement 115 Exhibit 34 –Bakery Team Member Description and 117 Announcement Exhibit 35 –Sample Career Description for Cashier 119 (for prospective applicants) Compensation 122 Exhibit 36 – Sample Compensation Plan 125 Exhibit 37 – Sample Compensation Program 127 Exhibit 38 – In-Hire Compensation Roster 130 Hiring and Selection Process 134 Exhibit 39 – Essential Components of Hiring and Selection 135 Exhibit 40 – Hiring and Selection Flowchart 137 Job Description 138 Exhibit 41 – Job Description Form 144 Exhibit 42 – Sample Job Description for Human 149 Resource Assistant Recruitment Plans 150 3
  4. 4. Content Page(s) Exhibit 43 – Convention and Group Selection Process 154 Exhibit 44 – Sample Job Description for Recruitment 155 Selection Process 157 Exhibit 45 – Types of Interviews 159 Exhibit 46 - Sample Interview Questions for Managerial 162 Positions Exhibit 47 – Sample Comparison Rating Form – 168 Managerial Candidates Exhibit 48 – Sample Individual Rating Form – 169 General Positions Post-Selection Activities 176 Exhibit 49 - Sample Letter to Unsuccessful Candidate 179 Human Resource Program - Performance Management 180-206 Exhibit 50 –Staff Evaluation Process 186 Progressive Discipline 190 Exhibit 51 –Sample Progressive Discipline Letter 191 Termination Process 192 Exhibit 52 –Sample Termination Letter 198 Exhibit 53 –Sample Layoff Letter (Abbreviated) 199 Exhibit 54 –Sample Layoff Letter (Extended) 200 Employee Appeals Process 202 Exhibit 55 –Sample Letter from Employee for Appeals Hearing 204 Exhibit 56 –Sample Letter from Hearing Officer After Hearing 205 Human Resource Program – Summary of Assessment 206-208 Training & Development 209 Career Progression 213 Feedback Program 216 Grievance Program 217 Exhibit 57 – Sample Grievance Letter from Employee 219 Notes 245 Caveat and Disclaimer 245 4
  5. 5. Introduction Intent of Report It is the intent of this report to methodically strengths and weaknesses of ABC. evaluate and assess the general health of However, due to distractions and other ABC Marketplace (ABC) with regard to its pressing issues, companies often do not business operation and then its human take a methodical approach to definitively resource program within the context of that identifying those strengths and weaknesses business operation. Observations, nor to create implementation plans to analyses, and evaluations of ABC have address them. This is especially true for been collected and organized by specific small business where employees have descriptive and functional business areas multiple responsibilities. Consequently these (e.g., market environment, procurement, businesses do not exploit their strengths and quality assurance, etc.). Where data was take advantage of their opportunities. More not available, business theory and best problematically, they do not shore up their practices was utilized or offered in order to weaknesses thereby exposing themselves make the report more robust and to higher risk. comprehensive. The business sections are In spite of this, ABC is to be commended for outlined under the heading of “Format recognizing a need to be more “proactive” in Used”. their efforts to improve their business During the course of this assessment, it operation; especially in terms of mitigating was found that many of the principles within their risk and in the human resource area. the company were “intuitively” aware of the By commissioning this report, they are 5
  6. 6. Introduction (con’d) Human Resources as a critical part of the business strategy . . . definitively signaling a desire to exploit smaller business operation, it is important opportunities and to minimize or mitigate for the principles at ABC to understand that their weaknesses. the administrative component and associated requirements have dramatically As is the case in any personalized report, it changed. The business model, therefore, is highly dependent on the data available must change. Simply working harder, for during the course of this assessment. example, will not work. Only when the Complete and accurate information necessary attention and resources are provided by the principles at ABC, including allocated to incorporate the necessary the Owners, is influential to the integrity programs, processes, and systems will and comprehensiveness of this report. ABC achieve an effective and “sustainable” It is the intent of this report to make a fair organization assessment while providing a “working roadmap” to ABC. This roadmap will Format Used assist them in their efforts to improve their The following is a description of the format business operations and, in particular, their utilized throughout the report to address human resource program. Because labor each of the functional areas at ABC cost is the highest, ongoing expense in Marketplace. ABC’s business, increased efficiency and Under each business area, a “Description,” productivity in the human resource area is of ABC’s current situation is provided along key to increasing profit for the business. with information pertaining to that business This report, if applied, will help guide ABC area. This is followed by an assessment of in aligning its human capital with goals and the “Strengths” and “Weaknesses” of ABC objectives within its business operation to within that functional area. Then achieve better efficiency and productivity. “Opportunities” and “Threats” are Moreover, while it is more convenient to run discussed, where applicable. Under a substantially “scaled-up” business with “Threats”, a risk rating is offered based on the same business model used in their 6
  7. 7. Introduction (con’d) ABC’s current situation. Risk rating will be based on both probability and impact. The ratings are high (H), moderate (M), or low (L). For example a risk rating of P=H and I=L means that the probability of risk is high, but the impact on ABC is low. For more detailed information, see section on “Risk and Security”. “Recommendations” then follow to facilitate improvements at ABC. Finally, “Implementation Samples and Plans” are offered which would help realize those improvements. Actual, Theory, and Best Practices In order to make this report more comprehensive, theoretical and “best practice” research information was interwoven throughout the report to augment those business areas that ABC has yet to address in their business operation. Because of the depth and breath of the “holes” in ABC’s business operations, a considerably amount of time was spent on researching solutions to fill these holes. Recommendations and implementation samples outlined in this report were developed with the idea that they would be relatively “timeless solutions” and helpful in guiding ABC when these functional areas are ultimately addressed by ABC. In this way, this report would retain its relevancy over time. 7
  8. 8. The Company ABC Marketplace (ABC) The Company,” section covers the topics of ABC’s philosophy, business strategy, goals and objectives, resources, and organizational structure. Philosophy “ Description of Philosophy The over-arching philosophy with respect to ABC’s business operation is “provide the best quality at affordable prices within a good product mix”. They are committed to maintaining the warm and friendly atmosphere common in smaller stores, where you feel that you know the Owners. Their operation is designed to project a personal, caring image to customers, employees, and the local community. Consistent with this image are the products they carry in the store (e.g., environmentally sustainable) and the approach they take in their buying efforts (e.g., buy from local farms to reduce fuel cost and pollution). To illustrate, ABC’s supports the notion of sustainable growth by maintaining a balance between themselves and the goods that they sell. They offer a wide variety of organic, all natural, and hormone-free 8
  9. 9. The Company Philosophy (con’d) products, many of which are environmentally sustainable. For example, their seafood is responsibly fished, harvested in areas free from pollution, and in alignment with sustainable growth quotas. ABC’s personal commitment extends to encouraging their customers to use eco-friendly products. The earth-friendly products, ranging from toothpaste to laundry detergents, help to promote a biologically healthier future for the environment. ABC sustainable theme carries over on a personal level. By running a “legacy” business, which will be taken over by future generations, ABC is keenly aware of the benefits of taking a longer view in their decision-making and operating in a way that is sustainable. Strengths of Philosophy Under this philosophy, ABC has operated the smaller store in the Berrydale District for over thirteen years and the larger store in the Applecreek District for three years. The strength of this philosophy is reflected in the “good will” garnered by ABC within the local community. Their customer base is loyal and projections for growth in sales seem justified. ABC make continuous efforts to reinforce their philosophy by being an active member of the local community, in which they do business. For example, they regularly sponsor charities, organize neighborhood events, and donate to local schools, churches, and homeless shelters. Even as ABC has expanded and scaled up their operation, they continue to project a “neighborly and accessible” image through their business philosophy. Weakness of Philosophy The ABC philosophy is defined by the personalities of the Owners, Joe and Diana Tam and as a result intimately linked to them. As such, absent the current owners, there is no guarantee the current philosophical approach would be continued. Opportunities Presented by Philosophy There is an opportunity to strengthen ABC’s business operation by incorporating the 9
  10. 10. The Company Philosophy (con’d) philosophy throughout the business model in a more formal way. This is achieved by articulating the philosophy repetitively in all written material and incorporated within the operational processes and systems (e.g., procurement, training and development, etc.). Threats Presented by Philosophy There are no threats associated with having a sustainable business philosophy. Risk Assessment Probability: Low Impact: Moderate Comment: Impact moderate because of affect on ABC Brand Recommendation for Philosophy Convert ABC’s business philosophy from an “owner specific” philosophy to more tangible, formal business values and embed them into the business model and articulate it in writing and in all systems and processes. Implementation Samples or Plan Review all current ABC systems and processes and find formal ways in which to embed this philosophy in those systems. Also review companies with similar sustainable, green philosophies and emulate how they incorporate their philosophy formally, in writing, and throughout their systems and processes. 10
  11. 11. The Company Business Strategy (con’d) Description of Business Strategy While the emphasis of this report is on the human resource program (HRP), it must be reviewed within the context of ABC’s business strategy and operation. With respect to business strategy, ABC does not have a strategy formally articulated. Until this assessment was commissioned, ABC had not given much thought to developing such a strategy. Typically, there are 4 main components to a business strategy; namely: 1. Establish a vision 2. Set goals and objectives 3. Perform a resource assessment 4. Design implementation plans A business intelligence strategy should look to define and accomplish the following: 1. Improving business performance with an integrated application for monitoring, analytics and planning. 2. Driving alignment and accountability across the entire organization. 3. Enabling more decision-makers to impact the performance of the business. 4. Ensuring transparency, security and audit capability through a variety of solutions. During the course of this assessment, ABC generally identified some of the components associated with a business strategy. The most important aspects of the business strategy, however, are non-existent (i.e., resource assessment and implementation plans). The following are some of the details associated with two of the four components that was articulated by ABC’s, which can be incorporated into a business strategy: 1. Vision – Create a successful business that can be passed on to children – geared primarily towards owner’s personal goals. 2. Goals and Objectives – General goals and objectives identified: - Increase Sales Annually - Increase Productivity of Staff - Improve Quality of Business (e.g., presentation) 11
  12. 12. The Company Business Strategy (con’d) - Improve Customer Service It should be noted that none of these goals above have been articulated to staff so they could help implement them. 3. Resource – No resource assessment (which would realize the vision or meet the goals and objectives) has been done. 4. Implementation Plans – None developed or available. Strength of Strategy A business strategy has not been formally articulated within ABC. Weakness of Strategy In the absence of a comprehensive strategy, ABC is is operating primarily on a day-to-day basis. Other than to “make money and keep up with expenses”, there is no over-arching strategy or goal-driven milestones. The flaw in this situation is that this leaves the business without a defined “destination,” “destination,” which is highly inefficient. Moreover, it it leaves the business in the hands of the Owners alone to achieve success instead of mobilizing the staff to help make the business successful. As stated above, two of the main components (resource assessment and implementation plans) typically associated with a business strategy are non-existent. Of the two components that ABC has informally articulated (Vision and Goals), both need major improvements. The following highlights the weaknesses in all of these components. Vision – The vision articulated is limiting and primarily involves familial relationships. While it is okay to articulate a vision of creating a business for legacy purposes, a stronger vision statement may be one that involves both the employees and customer base. 12
  13. 13. The Company Business Strategy (con’d) Goals and Objectives – The goals and objectives identified have not been communicated to staff. In order to achieve the goals and objectives even informally articulated, ABC must begin the process of developing their managerial staff and getting them to involve the staff to help drive performance to meet established goals and objectives. Resource – Resources have not been identified or directed towards achievement of goals and objectives. Implementation Plans – No plans have been developed which would help meet these goals or objectives. Opportunities Presented by Strategy There is an opportunity to deploy the human resources at ABC’s business to make the business more successful. By establishing a business strategy and aligning the human resources to that strategy, ABC can operate at a much more effective and productive manner. Conversely, in the absence of a solid business strategy, the human capital within ABC retains a lot of waste as employees defined what they prefer to do as opposed to having their work effort defined for them in alignment with ABC’s business strategy. Expected results with a strong business strategy include: improved efficiency in use of human resources; better alignment of human resources to tasks which can generate income; and the freeing up of monetary resources which can be re-allocated to areas not currently covered (e.g., hiring efforts, buying more modern equipment, etc.). Threats Associated with Strategy In the absence of a business strategy, companies tend to be chaotic and inefficient. Such inefficiencies are wasteful and often detrimental to the growth of the business. More damaging is the failure to deploy staffing properly and in a way to maximize benefits to the business itself. Having all staff members moving in one direction towards the goal of improving sales or developing the business is much more efficient than having staff all move in different direction attending to their individual aspirations and vision as opposed 13
  14. 14. The Company Business Strategy (con’d) to the business’ needs or direction. This threatens the business’ “bottom line” by diverting resources away from profitability. Business, by definition, is unpredictable and often filled with factors that cannot be anticipated. Because a business strategy is fundamental to the management of a business, failure to have a sound strategy would be an unnecessary “self-inflicted” wound. The threat is often one of “running faster to stand still” because there is no roadmap or sound managerial leadership. Risk Assessment Probability: Low Impact: High Comment: Impact high because of human capital waste Recommendations to Improve Strategy (What?) Establish a strong business strategy for ABC and articulate it to staff (especially managerial staff) so they can be deployed to have “all hands on deck” to make business successful. Make sure all main components are addressed. Implementation Sample or Plan to Improve Strategy (How?) Vision – Articulate a vision that involves the betterment of both employees and customer base. Goals and Objectives – Add more details to the Goals and Objectives (be more specific about how much and by when). - Increase Sales Annually - Increase sales by 10% by end of 2010 - Increase sales by 12% by end of 2011 - Increase sales by 12% by end of 2012 - Increase Productivity of Staff (e.g., by implementing a training program for cashiers, deli workers, and producer workers). - Improve Quality of Business (e.g., by establishing a checklist in all departments and 14
  15. 15. The Company Business Strategy (con’d) Exhibit 1 Balance Scorecard Method The Balanced Scorecard Method can help make vague aspirations to practical application at every business level. This method helps to coordinate all of the departments so they operate as one unifying unit, thereby increasing efficiency. The following elements are needed to use this method (step-by-step): Macro Reviews • Company’s mission statement (Purpose) • Company’s vision and strategic plan (Where Is Company Going and How Does it Plan to Get There) Financial Review • Assessment of Company’s Financial Status Independent Reviews and Assessments: • Review of How Company is Currently Structured and Operating (Review of Internal Business Processes) • Assessment of Staffing Deployed to Achieve Purpose and Realize Vision (Human Resource Alignment Assessment) • Review of Customer Satisfaction Level (Customer Survey of Company) The Exhibit 2 below highlights some of areas, which should be covered when performing some of these reviews and assessments. 15
  16. 16. The Company Business Strategy (con’d) Exhibit 2 Elements of Balanced Scorecard Department Areas Finance Return On Investment (ROI) Cash Flow Return on Capital Employed (ROCE) Financial Results (Quarterly/Yearly) Internal Business Number of activities per function Processes Duplicate activities across functions Process alignment (is the right process in the right department?) Process bottlenecks Process automation Human Resource Is there the correct level of expertise for the job? Employee turnover Job satisfaction Training/Learning opportunities Customer Delivery performance to customer Quality performance for customer Customer satisfaction rate Customer percentage of market Customer retention rate 16
  17. 17. The Company Goals and Objectives Description of Goals and Objectives The following are the short-term and long-term aspirations of ABC over the next five years. • Increase productivity of staff – ABC would like to increase the overall productivity of the staff. This may be facilitated with better efficiency within their operation by avoiding duplicative efforts, need for repetitive instructions, and clearer instructions. • Increase level of professionalism – A major majority of the staff are in entry-level and semi-professional positions with limited skills and abilities. Staff can be better developed to assure uniformity in use of processes and practices. They can also be better developed to adopt a more professional demeanor when in the public view or when dealing with the public. Managerial and the lead staff are more experienced, specialized and professional, but could use some developmental training to assure uniformity in application of policies, practices, and processes. • Develop managerial team so Owner can be less involved – Get the managerial team to the point where they can operate independently while conforming to a universal standard of practice will be extremely beneficial towards this goal. The Owners are looking for really good professionals who can “carry on” in their stead and allow them more personal “down time”. • Keys areas for improvement include: Quality – General overall appearance and quality of goods have to be maintained at all times. Their “brand” is based on the “freshness” of their products and on using products that are “environmentally friendly”. Customer Service and Satisfaction – ABC brand is also about customer satisfaction and care so more emphasis needs to be given in this area. Increased Overall Sales over next 3 years of 34% • 2010 - 10% 17
  18. 18. The Company Goals and Objectives (con’d) • 2011 - 12% • 2012 - 12% How? • Enhance Product Mix • Market Products with Higher Profit Margins (e.g., Alcohol) • Increase productivity and professionalism of staff  How? • Managerial Training and Development on Supervision • Education of Staff • Improve quality (e.g., presentation)  How? • Managerial Training and Development on Store Presentation • Staff Training on Their Role in Appearances • Improved Customer Service to Address Concerns Strength of Goals and Objectives The goals and objectives outlined by the principles are modest and achievable. Weakness of Goals and Objectives The weakness in these goals and objectives is that these have not been incorporated into an overall business strategy. Also, they have not been communicated to those that are responsible for realizing these goals and objectives nor have detailed implementation plans been developed to achieve them. Opportunities in Goals and Objectives The Company has a real opportunity to facilitate real growth in their business by identifying more goals and objectives and setting realistic timetables to achieve them. This is also an opportunity to establish a stronger performance evaluation program at ABC and to develop the managerial staff against established “targets”. Threats Associated with Goals and Objectives The only threat to setting goals and objectives is if they are not realistic, periodically updated, or properly communicated. 18
  19. 19. The Company Goals and Objectives (con’d) Risk Assessment Probability: Low Impact: High Comment: Impact high because it creates a poorly focused and directed effort thereby wasting money Recommendations for Goals and Objectives (What?) • ABC needs to set more refined goals and objectives for increasing the productivity of the ABC staff; increasing the level of professionalism and expertise of the staff; developing its managerial team and holding them accountable for both the development of plans and for achieving results; and for improving the quality of its products (including customer service). ABC may want to apply methods that make goal achievements more possible (e.g., pre-set milestones and dashboards). Implementation Samples or Plan for Goals and Objectives (How?) With respect to existing goals and objectives, the following suggestions may be helpful. • Increase Productivity of Staff - Increase productivity of staff by increasing efficiency within their departments. Find ways to avoid duplicative efforts. Provide clearer instructions. Eliminate situations that necessitate repetitive instructions. For example: 1. Review all documentation generated by ABC between period January 2008 and December 2009 and look for redundancy. 2. Develop a better flow system between delivery and receiving to catch duplicate efforts and repetitive motions. 3. Clean up written directions by providing for more simplicity and clarity in instructions. 4. Develop a time management system for activities and establish tolerance ranges of time for achieving those activities and track. • Increase level of professionalism – A major majority of the staff are in entry-level and semi-professional positions with limited skills and abilities. They can be 19
  20. 20. The Company Goals and Objectives (con’d) developed to assure uniformity in use of processes and practices as well as be developed to adopt a more professional demeanor when in the public view or when dealing with the public. This requires on-the-job away from assigned workstations. The managerial and lead employees are more experienced, specialized and professional, but could use some developmental training to assure uniformity in application of policies, practices, and processes. More training in sales, marketing, and in human resource functions (e.g., hiring, firing, motivation, training, etc.) would also be helpful to achieve a higher level of professionalism. • Set a goal to specifically identify those positions within ABC, which would enable the business to keep running in the absence of the Owners. Then develop or hire the necessary talent to greatly reduce the Owners’ day-to-day activities and which would allow them more personal “down time”. This would involve a better hiring and selection process; a better training and development effort of existing staff; and a better performance evaluation system to hold staff accountable for results. • Other keys areas in need of improvements and suggestions are: Product Mix and Quality – A goal to improve overall appearance and quality of goods. Their “brand” is based on the “freshness” of products. The product mix can be reviewed to assure that “environmentally friendly” are also selling; not just collecting dust. Customer Service and Satisfaction – ABC brand is also about customer satisfaction and care. Recommend that ABC focus on Company as a brand and align employees to that concept. Employee services are a critical part of the product mix being sold to customers. Poor customer service taints the quality of the overall products being offered. More Sales. Develop an annual plan to achieve these goals and results. •2010 - 10% •2011 - 12% •2012 - 12% Alcohol Sale - Use other presentation methods (e.g., hold tasting events; pair wines with cheeses, etc.) 20
  21. 21. The Company Products and Services Description of Product and Services ABC’s original focus was on freshness in their fruits and vegetables with groceries being secondary. With the opening of their flagship store in the Appletree District, ABC became equally focused on fruits and vegetables and their grocery product mix. A delicatessen and floral section was added to round out their offerings and to provide a more complete “one-stop” shop experience for customers. While not as widely publicized, a key ABC product is their “brand”, which denotes a community-oriented business with products that are part of the sustainable cycle (i.e., either organic or hormone-free, eco-friendly, harvested responsibly or humanly breed and treated). A “positive” shopping experience is also part of their brand and ABC is dependent on its workforce to convey the message that ABC cares and is responsive to the needs (and wants) of their customers. ABC offers the following products in the approximate proportion listed below: Exhibit 3 ABC Products and Proportions Product/Services Share ~ Share All other food 5% Meat, fish, poultry and 15% delicatessen items All other non-food (including 5% customer service) Drugs and health products 5% Fruit and vegetables 20% Dairy (including cheeses) 15% Beverages (includes alcohol) 20% Frozen foods 15% Note: Estimate Only 21
  22. 22. The Company Products and Services (con’d) Strength of Products and Services Offered The selection of produce is one of the highlights of the products and services offered by ABC. Responses from the internal survey among ABC employees indicate that they believe that ABC has a good product mix and that customers have a wide choice at a good value. They also commented on the uniqueness of the products offered and ABC’s focus on bio- and eco-friendly products and its products and services being consistent with the philosophy articulated by ABC. Weakness of Products and Services Offered The employees’ view of the product mix is not shared by the managerial side of ABC. They view the product mix as poor and consider the produce and service end, in particular, as weak. It is noted that the method for selecting products is not particularly methodical and at times random and subject to personal whims. What products are offered and discontinued are sometimes based on the buying behavior of the customers rather than on quantitative data (e.g., historical sales data or based on analytics which might give clues to customer buying patterns) tied to both internal and external factors. This contradiction of views is problematic and needs reconciliation. Another weakness is that the products and services offered are not supported by a strong marketing effort. For the most part, ABC simply brings products in and hope customers buy them. Other than sale signage to encourage purchases of certain products while customers are in store, there is no effort to systematically influence customer purchases. One area that repeatedly comes up is “presentation”. Although this has been addressed numerous times, there are instances where the freshness of the products is questioned (e.g., due to existence of rotting fruits or produce in bins). Cashiers have also commented that customers often complain that certain items are missing even after returning numerous times to find them. More serious is the absence of items that are considered standard (i.e., not ‘exotic’ items). During the employee survey, comments like, “shelves 22
  23. 23. The Company Products and Services (con’d) and bins are not fully stock all the time,” demonstrated concerns internally for both the appearance and the availability of products to customers for sales. This, of course, can seriously hurt the “brand” of ABC for freshness and its image as a professionally run company. Another area of weakness is ABC lack of “affirmative response” to the notion hat employees are ‘part and parcel’ of the products and services being offered. In the same way that a bad physical product (e.g., an apple, a quart of milk, etc.) may be viewed as an inferior product, so too can the service provided by ABC employees. It could be argued that the customer experience with respect to the interaction between buyer and seller and between employees and customers will determine the level of product sales and whether there is “repeat” business. Repeat business, of course, is absolutely essential to have a sustainable business. The language barrier and lack of initiative by many of the cashiers was often cited as examples of poor customer service. Opportunities in Products and Services Offered ABC has an opportunity to improve its products and services offering and influence the trajectory of sales upwards. It is a well-known fact that customers who are engaged with ABC staff and who are delighted by them tend to stay longer and buy more products. Getting the staff to engage its customer at the point of contact (e.g., when they are cashing out) can improve sales. By making these improvements in an affirmative rather than reactive way, ABC has an opportunity to create a well- supported and sustainable business even in the midst of direct competition. ABC continues to have an opportunity to be a “niche” business; unique in service (and in shopping experience) and in product offerings. 23
  24. 24. The Company Products and Services (con’d) Threats in Products and Services Offered One of the main threats associated with products and services is the development of a reputation for poor quality, spoiled products, or the inability to provide desired products. Because ABC’s brand is associated with freshness, good variety, and at a fair price point, anything that undermines that would hurt its business. It does not matters that the product is organically growth if it is absent from the bin. It does not matter if the product was bought from local farmers thereby saving gas consumption, if the product is poorly handled or is left rotting along side of fresh products. The presence of other stores (e.g., Trader Joe’s, Whole Food, etc.) in the City of Mayfield is a constant and direct threat to ABC long-term viability. It is important for ABC to assure that it can compete “head to head” in all of the standard areas: customer service, product mix, and quality products. It should also take a serious inventory of what it can offer that is “not” being offered by its competitors. The inability of ABC to compete in the standard ways (e.g., to at least match customer service, product mix, and in good quality) and to find ways to differentiate itself from its competitors can threaten ABC’s long term survivability. At present, some of these threats are somewhat mitigated by ABC’s “mom and pop” image, but such mitigation tend to be temporarily and should not be relied upon especially if “mom and pop” begins to mean it is an unprofessional operation. Risk Assessment Probability: Moderate Impact: High Comment: Probability is moderate because of day-to-day exposure and impact is high because of perpetual brand erosion Recommendations for Products and Services It is recommended that ABC get in the habit of using quantitative data to help make product selection decisions to avoid waste and to help develop a better product mix. This 24
  25. 25. The Company Products and Services (con’d) requires the development of data that would be useful for decision-making (e.g., inventory records, sales information, market trends, etc.). It is also recommended that ABC begin the process of training and developing their employee; especially as it relates to their understanding of how important it is that they help protect and preserve the ABC’s brand. More to the point, employees need to understand the correlation between having excellent product and services and their continued employment. At present, there are no consequences for not meeting this fundamental expectation and no performance management system to evaluate employees and to hold them accountable for improvement. This should be done professionally using people who have expertise in training staff. It is further recommended that these training sessions cover an understanding of the products and services being offered so each employee can be a “product ambassador” and help encourage sales. It is noted that most employees seem somewhat disengaged with respect to the products and service offered and cannot speak authoritatively about them. Assisting customers in their product choices is often one of the most effective ways to promote sales and ABC should teach all of their employees to become product ambassadors to improve the profitability of ABC. Implementation Samples or Plan for Products and Services There are professional services available that can customize and provide the training needed for ABC. ABC will need to allow these services an opportunity to get to know ABC and its business operation so it can properly develop a customized training program for the employees (similar to the interviewing workshop). There are also software companies that can provide on-line tutorials specifically customized to the grocery business. 25
  26. 26. The Company Resources Available Description of Resources ABC resources for their business is the Owner’s personal monetary equity, Owner’s credit worthiness (to acquire business loans), Owners knowledge and skills, and ABC’s work force, capital equipment, and computer equipment (hardware and software). No assessment was made to the adequacy of the Owner’s personal monetary equity and credit worthiness. Owners’ knowledge and skills is extensive in the grocery business especially in the produce area and basic groceries. Their knowledge and skills, however, on the managerial side of the business including human resource management, business strategy, operational structure, sales and marketing, product mix and demographics, and basic recordkeeping and analytics in support of ABC is weak and could be augmented with either more training or supportive expertise. The primary resource for generating sales, and ultimately profits, for ABC is the company’s workforce. It is, by far, the biggest ongoing expense associated with the business. At present, ABC’s workforce is not adequately managed and, therefore, not deployed correctly leading to under-performance. This, in turn, creates waste and inefficiencies throughout the business. While the workforce is working well together and morale seems high, ABC’s workforce is not universally applied towards specific goals and objectives. It was noted that ABC’s hiring practices was weak and does not contribute to ABC’s goal of increasing professionalism, improving managerial oversight, or improving ABC’s brand. Currently, employees are managed more on a “crisis” basis and typically in response to Owner’s personal concerns or due to customer complaints. A preferred model would be to manage these resources through a defined, performance metrics system and tied to individual employee performance evaluations. 26
  27. 27. The Company Resources Available (con’d) In order to achieve sustained improvements in productivity and efficiency, ABC will have to convert to a performance-based model and to create the necessary infrastructure, which would allow it to monitor individual progress against company-wide goals. There is no other way to protect human capital and its use. Capital equipment seems to be well matched to the business needs. Computer and computer-related equipment and software could be upgraded to improve recordkeeping, provide for better metrics and analytics, and to increase accuracy in their accounting, shipping and receiving, and inventory control. At present, documentation associated with ABC seem more labor- intensive rather than technologically efficient. Everything is by hand and via paper rather than through the electronic system (e.g., paperless systems). Strength of the Resources Capital equipment appears well matched to the businesses needs. Owners have very strong background in the grocery business and a solid, positive presence within the community (good will). Owners are very hardworking and are very engaged in their business. Weakness of the Resources Owners model of success is to work harder rather than work smarter. They are very “hands on” and consequently will do the work themselves rather than manage more effectively. ABC’s weak managerial team is a byproduct of the Owners lack of knowledge and skills in the human resource management arena and their general reluctance at delegating responsibilities and authorities downward and then holding lead people and managers responsible for results (as a condition for continued employment). 27
  28. 28. The Company Resources Available (con’d) This situation is complicated by the absence of a strong performance evaluation and management system and a general lack of understanding of best practices for human resource management and the inter-relationship and integration of these systems into a business. It is noted that the grocery and produce side of their produce has been the Owners’ focus as they expanded. The human resource side of the business equation, however, has not been “scaled up” with the same degree of attention and focus. Also the Owners’ tendency to manage people as opposed to managing their work effort puts them at a constant disadvantage. There appears to be an over-reliance on “personal relationships” for their success as opposed to “best business practices” to achieve the same success. This philosophical tendency hampers their ability to manage effectively and to make the decisions necessary (e.g., termination of inefficient and unproductive employees) and to improve the productivity and efficiency within their business. This situation is further complicated by the Owner’s familial relationships. There appears to be a bias in favor of these employees even though they may not be performing to the level needed to meet the “added value” definition. Furthermore, any employee allowed to subvert the performance standards will ultimately create a lower standard for performance that management will have to follow to preserve equity. This creates an inferior resource that is not fully deployed, which is wasteful; especially if the employee’s pay is not re- aligned to the performance. Opportunities Presented by Resources ABC has an opportunity at this point in their business to improve computer-related equipment to improve productivity directly (purchase of printers, business-related software) and to take existing resource (workforce) and to re-align or re-train to maximize productivity and output. Threats Presented by Resources 28
  29. 29. The Company Resources Available (con’d) A major threat to ABC is the mismanagement of its workforce, thereby, sustaining waste or worse, enforcing it through poor hiring or performance evaluation practices. Risk Assessment Probability: Low Impact: Moderate Comment: Impact moderate because of inability to optimize human capital usage Recommendations for Resources It is recommended that ABC start the process of applying “best practices in their human resource area and to hire more managerial staffing to assume a significant portion of the “hands-on” activities currently carried by the Owners and to simultaneously put into place a stronger performance management system to demand performance for continued employment at ABC. Implementation Samples or Plans for Resources Review the Human Resource section or this report for samples and information on best practices and incorporate into ABC. 29
  30. 30. The Company Organizational Structure Description of Organizational Structure ABC has two stores; namely, the store in the Appletree District (flagship) and the store in the Berrydale District (original). The Appletree District Store is the larger of the stores and employs about 100 employees (part- and full-time employees) and is approximately three times the size of the Berrydale store. The two stores are approximately 2 miles apart and serve the same demographic groups described below. The Appletree District Store location was originally occupied by the Safeway’s grocery chain and when vacated, the Owners renovated the store and created a much larger space for fresh produce, meats and seafood. A bakery, deli, and floral section was added to generate foot traffic and to expand their product mix. The two Owners, Chuck and Pat Wells, are a husband and wife team and are the only executive staff members in the Company. While there are some overlaps, Chuck Wells is responsible for the grocery, produce, and dairy operations and Pat Wells is responsible for the rest including the administrative side of the business (e.g., personnel, accounting, etc.). Both owners are major decision-makers within ABC and are involved at a highly, detailed level in the management of their business. It is observed that there is not enough time in the day or week to do everything that needs to be done at ABC and often things just don’t get done unless it rises to a critical level. Their managerial style seems to have been historically casual and personable, highly geared towards working really hard and handling “crisis” as they occur in the workplace, and having expectations that employees will follow their lead in tone and hard work. It is noted that while ABC is taking advantage of “economy of scale” to achieve more profitability, their administrative operation has been insufficiently “scaled up” to support the expanded operation. Their response to the additional hiring of staffing, increased customer relations issues, vendor contracting has produced mixed results. ABC has yet to fully recognize the need to scale up on the human resource management side of their business operation and to put the necessary resources to respond to this deficiency. 30
  31. 31. The Company Organizational Structure Consequently, there remains a level of risk for ABC. This assessment is ABC’s first attempt at being proactive and having a more efficient operation that does not respond to crisis after crisis, but rather anticipates them before they can have a negative impact on their business. At present, many of the sections in the store are not running as efficiently as desired and ABC lacks the in-house expertise to make the necessary improvements. This review noted that the responsibilities for improvement in various areas have been assigned, but the people who hold the assignments are not sufficiently knowledgeable or positively inclined to perform the duties (e.g., the Human Resource responsibility is assigned to the Grocery Department Head, but he has no background in human resource management). Generally, the administration side of ABC’s operation needs the most help in order to minimize general risk; have better control over quality, and to better manage their human resources. The technical aspect of the business operations is in much better shape (e.g., how much produce to buy, the scheduling and assignment of workers, etc.). Organizationally, it is the “box” just under the Owners (General Managers) and the assignment of “real” managers in each of the boxes at the next tier that needs the most help. The “over-extension” of existing staff and “over-lap” of duties to cover all of the vacant areas is not a very efficient or sustainable model. 31
  32. 32. The Company Organization Structure (con’d) Berrydale District Store (Original) Description of Berrydale District Store The Berrydale District Store is the original store and was established over ten years ago. It is located at the corner of Rosemount Drive and Main Street location and is staffed by approximately 25 employees (part- and full-time). The following is the organization chart for the Berrydale District store: Exhibit 4 32
  33. 33. The Company Organization Structure (con’d) Appletree Store (Flagship) Description of Appletree District Store The Appletree District Store location was originally occupied by theS afeway’s grocery chain and when vacated, the Owners renovated it and created a much larger space for fresh produce, meats and seafood. A bakery, deli, and floral section were added to this location. There is approximately 70 employees (more part-time, then full-time) at this store. The following is the organization chart for the Appletree District store. Exhibit 5 33
  34. 34. The Company Organizational Structure (con’d) Strength in Organizational Structure ABC has a solid and simplified organizational structure. This structure is separated by the different departments (e.g., Produce, Grocery, etc.), with the administrative function supported near the top (just under the Owners/General Managers). Weakness in Organizational Structure One of the weaknesses in the organizational structure is the obvious absence of a strong managerial staff. Most of the people who have managerial responsibilities are really lead people and do not perform the full complement of duties associated with a manager (e.g., hiring and firing, performance evaluations, strategic planning, etc.). A review of the organization chart confirms this. Those who are considered managers are typically familial relations of the Owners. While this is arrangement is personally comforting to the Owners, it is probably not the best organizational model because it is the selection of employees is not based on the job requirements and challenges associated with each job. Moreover, this arrangement does not lend itself to the ability to manage managers based on merit since familial employees are seldom disciplined or terminated for failure to meet organizational goals. According to interviews with ABC, attempts to develop managers or to bring managers on board who are qualified to meet the organizational challenges have not been successful. At present, the human resource area is contained in the Special Projects area on the organization chart and handled by the Grocery Department Head. The organizational structure reflects the emphasis (or lack thereof) placed on human resource which may explain why ABC is experiencing some difficulties in this area. Also missing in this organizational structure is a strategy unit to create goals and objectives (e.g., sale targets) or to provide oversight on their achievement. It is not at the very top or immediately under. At present, it appears the organizational model is “everybody should work hard” and increased sales will hopefully occur. For example, 34
  35. 35. The Company Organizational Structure (con’d) there is no department that draws a direct correlation between sale targets and marketing efforts. No one is assigned to regularly measure sales results and to make recommendations in marketing efforts, for example, to improve sales. This lack of planned oversight produces somewhat haphazard and random results and prevents the proper deployment of resources in one or another direction. Opportunities in Organizational Structure ABC has an opportunity to re-structure the organization to be more reflective of the oversight functions needed within the business. The improved management of human resources, sales, and marketing, for example, are all functions that contribute to higher profits and the organization can reflect their importance by embedding it within the structure. Threats Associated with Organization Structure The primary threat to the organization chart is that it is unsustainable and that the current organization places too heavy a reliance on the Owners to literally “do everything”. Since the Owners’ cannot possess all of the necessary expertise and be everywhere, it is important that they seriously consider bringing in experts (at least temporarily) to help them set up the necessary infrastructures and systems and then to have the experts train the current and prospective managerial team to maintain them. The current business organization has lots of managerial “vacancies” and, if not quickly filled, will overtime result in higher turnover and more human relation problems. The few staff members who are at ABC are doing “double duty” and the Owners’ expectation that this can be maintained is unrealistic. Moreover, an organization that has this many vacancies (or holes) not only stifles growth and profit-making, but it tends to formalizes waste and creates unnecessary risk to the business. 35
  36. 36. The Company Organizational Structure (con’d) Risk Assessment Probability: Moderate Impact: Moderate Comment: Probability and impact moderate because of formalized inefficiencies and the over- extension of existing staff. Recommendations for Organizational Structure It is suggested that ABC consider using Business Process Model (BPM) to improve its business activities. It is a methodology that is increasingly applicable to all sorts of organizations including small businesses. The focus of the improvements is typically on 'value added' actions that make the customer service and experience better and on reducing wasted time and effort. It is further recommended as part of solidifying the organizational structure that ABC create and maintain a system by which each employee (past and present) can be tracked throughout their employment history at ABC. Exhibit 6 below identifies the headings, which should be used to maintain these personnel records. Implementation Samples or Plan for Organizational Structure In deploying the BPM described above, there are two main types of Business Process Models: • the 'as is' or baseline model (the current situation) • and the 'to be' model (the intended new situation) The aim of BPM is to illustrate a complete process, enabling managers, consultants and staff to improve the flow and to streamline the process. The outcomes of a business process modeling project are essentially increased profits which comes from: • added value to the customer, and 36
  37. 37. The Company Organizational Structure (con’d) • reduced costs for the company. BPM is commonly a diagram representing a sequence of activities. It typically shows events, actions and links or connection points, in the sequence from end to end. Diagrams - essentially 'flow diagrams' - are a central feature of this methodology. SWOT Analysis, Balanced Scorecard and Project Management methods are further examples of “change” management tools, and Business Process Modeling can work alongside these methods. Other secondary consequences arising from the successful use of BPM can include increased competitive advantage, market growth, and better staff morale and retention. Before committing lots of resources to BPM, however, proper consideration should be given to the usefulness and focus of the exercise. The answers to the following questions would be helpful in making this determination: • Does the modeling have the potential to produce gains that will justify the time and effort? • Will the modeling be structured so that people will understand the outputs (not too big and complex as to be self-defeating)? • Do people understand why we are doing it, and "what's in it for them"? Sequence is significant and essential to most aspects of BPM. BPM identifies where and when activities are strung together and how to make work flow more efficient. BPM focuses on processes, actions and activities. Resources are featured within BPM depending on how they are processed. People (teams, departments, etc) are featured in BPM in terms of what they do, to what, and usually when and for what reasons, especially when different possibilities or options exist, as in a flow diagram. 37
  38. 38. The Company Organizational Structure (con’d) BPM is cross-functional, usually combining the work and documentation of more than one department in the organization. In more complicated situations, BPM may also include activities of external organizations' processes and systems that feed into the primary process. In large organizations operations BPM tend to be analyzed and represented in more detail than in small organizations, due to scale and complexity. BPM is to an extent also defined by the various computerized tools or software, which are used in applying its methods. These methods and the standard features within them continue to evolve, which means that we should keep an open and curious mind as to how BPM can be used, and what people actually mean when they refer to it. The following is a diagram of BPM: BUSINESS PROCESS MODELING 1. Has a Goal; 2. Has Specific Inputs Goal 3. Has specific Outputs Information Resource 4. Uses Resources 5. Have Activities that are Performed 6. May Affect Organizational Units (Vertical & Horizontal) 7. Creates Value for Customers (Internal and External) Event Business Process Output 38
  39. 39. The Company Organizational Structure (con’d) Exhibit 6 Headings for Employment Data ABC Employee ID Store Location (Laurel or Fruitvale) Last Name First Name Middle Initial Title Title Code Depart. Assigned Depart. Code Employment Eligibility Proof Eligibility Restrictions Exempt or Non-Exempt (FLSA) Supervisor (1) or Non-Supervisor (0) Full or Part-time (% Time) Hire Date Employment Status (Active, Past) Separation Date In-Hire Pay Current Pay % Change since Hired Job Change Date Description of Change Last Date for Performance Rating Employer Intervention Dates Employer Intervention Action 39
  40. 40. Market Environment Laurel and Dimond Districts Description of Market Environment ABC’s two stores are located in the Berrydale (original store) and Appletree (newer store) Districts in the City of Mayfield. They are in a very culturally diverse neighborhood on two busy streets; namely, Rosemount Drive and Sunset Road, which is intersected by another busy street, Main Boulevard. Both the Appletree and Berrydale Districts have been in flux for last ten years as older homeowners move away and younger families move in with higher incomes. With the renovation of older homes and more community involvement cleaning up "troubled" areas, the neighborhood surround ABC is improving. ABC presence is helping to revitalize and support this transition. The Local Demographics To market ABC’s products and services effectively, Exhibits 7-9 may be useful. According to the U.S. Census Bureau's 2006-2008 American Community Survey where 90,000+ respondents participated, Mayfield’s demographics and population are as follows: 40
  41. 41. Market Environment Local Demographics (con’d) Exhibit 7 Exhibit 9 Ethnic Population Miscellaneous Demographic What Population % White 46.9% African American 19.8% What Households % Native American .6% (150,000 Surveyed) Asian American 15.6% Children(Under18 28.6% Pacific Islander .5% years old) Hispanic or Latino 25.2% Married Couples 34.0% Other Races 12.9% Single Female 17.7% Two or More Races 3.7% Non-families 42.7% Individuals 32.5% Exhibit 8 65+ years old 8.6% Age and Income 18-24 years old 9.7% Demographic 25-44 years old 34.0% 45-64 years old 20.0% Miscellaneous Home Ownership 41.0% Figures Unemployment Rate 17.5% Median Age 33 years old (as of August 2009) Median Income $40,055 Median Income for $44,384 Family Male Median $37,433 Income Female Median $35,088 Income Female to Male 100 females (18+ Ratio age) to 93.2 males Source: U.S. Census Bureau’s 2006-2008 American Community Survey (90,000 (18+ years old) Respondents) – City of Mayfield 41
  42. 42. Market Environment The Customer Profile Based on its history, ABC has identified its customer profile according to the characteristics and traits outline in Exhibit 10 below. Accordingly, most of the product mix and services offered by ABC have been geared towards this customer profile. Exhibit 10 Characteristic and Traits Caucasian Married with children Professional 35+ years old Middle to higher income level Higher Educational level Community-oriented Conservation conscientiousness Environmentally conscientious Reside in local area (within 10 miles of ABC stores) 42
  43. 43. Market Environment Sales and Marketing Sales within ABC is generally the responsibility of all employees although there are no specific targets set by the Owners. To date there are no systems or processes for gathering or disseminating sales information regularly to managers or employees so it can be used to improve sales. Marketing is generally the responsibility of one person who does not appear to have formal training in marketing. This individual is also responsible for running the grocery department and the human resource function, both of which are being learned “by rote and by doing”. The marketing function by all measures is highly dependent on the random availability of the assigned individual. Strength of Market Environment The target customer base that has been developed over the years at ABC is consistent with the demographic characteristics of residents in the City of Mayfield. For example, 35+ years old account for about 65% of ABC’s customer base and ~54% of the city-wide population is between the ages of 25-65 years old. The median income of Oakland residents is $44,284, which is consistent with the affordability range of products offered at ABC. A majority of the ABC customers are Caucasians and Latinos and they accumulatively account for ~72% of the total population in the City of Mayfield . There are also a healthy percentage of other demographic groups (e.g., married couples, single females, homeowners) in Mayfield that can be accessed in the market environment by ABC. Because ABC is positioned more as a “neighborhood” marketplace as opposed to a “corporate” marketplace, they have a high loyalty rating, which helps with their customer retention value. Weakness of Market Environment An area of weakness in the market environment is the difficulty with which to access the rest of the population (e.g., Asians and African Americans) in the immediate, geographic location where ABC operates. Asians in the immediate vicinity tend to be immigrant 43
  44. 44. Market Environment (con’d) families with a preference for ethnic foods, which is highly specialized and more easily serviced in Mayfield’s specialty grocery stores. With respect to the African American residents in the immediate area, it appears most of them prefer to shop at their local supermarkets (e.g., Safeway’s). The product mix offered at ABC does not appear to entice the patronage of this community either. Another area of weakness in the market environment is whether there are enough customers to support ABC’s and all the other “like” competitors within the City of Mayfield. For example, there is “crossover” between the customer base of ABC and those for Whole Food and Trader Joe’s. The presence of Safeway and the various weekly produce markets in the neighborhoods also cut into sales at ABC. This presents a real challenge for ABC to distinguish itself from all of the other offerings in the city. Opportunities with Market Environment ABC has an opportunity to differentiate itself from the rest of the competition via its community involvement, improved professionalism and brand image, and through its distinctive customer service. The people on the “front line” and critical to making this distinction will be ABC’s employees. Threats Associated with Market Environment The principle threat to ABC will be the migration of their customer base to their competitors; especially Trader Joe’s, which has a high level of professionalism and consistency in their brand image. Trader Joe employees are consistently engaging, friendly, and efficient which goes a long way to providing a positive customer experience. ABC has some work to do before it can achieve the same positive customer experience. Part of the problem is the ABC staffing, which does not view itself as part of the product offering that insures a good quality brand image. Until ABC institutes a program that trains the staff to view themselves as part of ABC’s brand, the threat of losing customers and the prospect of having to continuously find new customers will forever be present. Having a positive customer experience is as important as buying a fresh peach from a merchant; especially when there are other outlets for fresh peaches. 44
  45. 45. Market Environment (con’d) Risk Assessment Probability: Moderate Impact: High Comment: Probability is moderate but Impact is high because of lack of marketing plan and failure to aggressively distinguish itself among competitors. Recommendations for Market Environment ABC may want to invest in a good strategic marketing plan covering a 3-5 year period with a solid implementation plan to go with it. However, before embarking on this, it is recommended that ABC make a concerted effort to get the staff to recognize that they are as much a product as the items sold in the store. Improving ABC’s brand should be a high priority exercise and only after this has been accomplished can ABC and its product and service be successfully marketed. Implementation Samples or Plan for Market Environment Exhibit 11 Marketing Process A. Define the Aims and Objectives for Marketing Plan B. Identify all of the Contents of the marketing plan C. Detail the plan (and sub-plans and programs that go with them) D. Establish the means by which progress can be measured (e.g., pre- and post-sales figures) E. Examine all performance analyses to tweak marketing plan 1. Sales analysis 2. Market share analysis 3. Expense analysis 4. Financial analysis 45
  46. 46. Market Environment (con’d) Exhibit 12 Activities in Marketing 1. Review of the marketing environment. A study of the organization's markets, customers, competitors and the overall economic, political, cultural and technical environment; covering developing trends, as well as the current situation. 2. Review of the detailed marketing activity. A study of the company's marketing mix; in terms of the 8 Ps - (see below) 3. Review of the marketing system. A study of the marketing organization, marketing research systems and the current marketing objectives and strategies. The last of these is too frequently ignored. 4. Portfolio planning. In addition, the coordinated planning of the individual products and services can contribute towards the balanced portfolio. 5. 80:20 rule. To achieve the maximum impact, the marketing plan must be clear, concise and simple*. It needs to concentrate on the 20 percent of products or services, and on the 20 percent of customers, which will account for 80 percent of the volume and 80 percent of the profit. 6. 8 P's: Product, Place, Price and Promotion, Physical Environment, People, Process, Packaging. The 8 P's offer a framework from which to build action plans. 1. Price - The amount of money needed to buy products 2. Product - The actual product 3. Promotion (advertising)- Getting the product known 4. Placement - Where the product is located 5. People - Represent the business 6. Physical environment - The ambiance, mood, or tone of the environment 7. Process - How do people obtain your product 8. Packaging - How the product will be protected 46
  47. 47. Market Environment (con’d) *Ingredients of a Good Marketing Plan Clear - They should be an unambiguous statement of 'exactly' what is to be done. Quantified - The predicted outcome of each activity should be, as far as possible, quantified, so that its performance can be monitored. Focused - The temptation to proliferate activities beyond the numbers which can be realistically controlled should be avoided. The 80:20 Rule applies in this context too. Realistic - They should be achievable. Agreed - Those who are to implement them should be committed to them, and agree that they are achievable. The resulting plans should become a working document, which will guide the campaigns taking place throughout the organization over the period of the plan. If the marketing plan is to work, every exception to it (throughout the year) must be questioned; and the lessons learned, to be incorporated in the next year's planning. 47
  48. 48. Market Environment (con’d) Exhibit 13 Components of a Marketing Plan (Developing the Marketing Plan) I. Title Page II. Executive Summary III. Current Situation – Macro-environment a. economy b. legal c. government d. technology e. ecological f. socio-cultural g. supply chain IV. Current Situation - Market Analysis a. market definition b. market size c. market segmentation d. industry structure and strategic groupings e. Porter 5 forces analysis f. competition and market share g. competitors' strengths and weaknesses h. market trends V. Current Situation - Consumer Analysis a. nature of the buying decision b. participants c. demographics d. psychographics e. buyer motivation and expectations f. loyalty segments Vi. Current Situation - Internal a. company resources i. financial ii. people 48
  49. 49. Market Environment (con’d) Exhibit 13 Components of a Marketing Plan (Developing the Marketing Plan) (con’d) iii. time iv. skills b. objectives i. mission statement and vision statement ii. corporate objectives iii. financial objective iv. marketing objectives v. long term objectives vi. description of the basic business philosophy g. corporate culture VI. Summary of Situation Analysis a. external threats b. external opportunities c. internal strengths d. internal weaknesses e. Critical success factors in the industry f. our sustainable competitive advantage VII. Marketing research a. information requirements b. research methodology c. research results VIII. Marketing Strategy - Product a. product mix b. product strengths and weaknesses i. perceptual mapping c. product life cycle management and new product development d. Brand name, brand image, and brand equity e. the augmented product f. product portfolio analysis i. B.C.G. Analysis ii. contribution margin analysis 49
  50. 50. Market Environment (con’d) Exhibit 13 Components of a Marketing Plan (Developing the Marketing Plan) (con’d) iii. G.E. Multi Factorial analysis iv. Quality Function Deployment IX. Marketing Strategy - segmented marketing actions and market share objectives a. by product, b. by customer segment, c. by geographical market, d. by distribution channel. X. Marketing Strategy - Price a. pricing objectives b. pricing method (e.g., cost plus, demand based, or competitor indexing) c. pricing strategy (e.g., skimming, or penetration) d. discounts and allowances e. price elasticity and customer sensitivity f. price zoning g. break even analysis at various prices XI. Marketing Strategy - promotion a. a. promotional goals b. promotional mix c. advertising reach, frequency, flights, theme, and media d. sales force requirements, techniques, and management e. sales promotion f. publicity and public relations g. electronic promotion (e.g., Web, or telephone) h. word of mouth marketing (buzz) i. viral marketing XII. Marketing Strategy - Distribution a. geographical coverage b. distribution channels c. physical distribution and logistics d. electronic distribution XIII. Implementation a. personnel requirements 50
  51. 51. Market Environment (con’d) Exhibit 13 Components of a Marketing Plan (Developing the Marketing Plan) (con’d) i. assign responsibilities ii. give incentives iii. training on selling methods b. financial requirements c. management information systems requirements d. month-by-month agenda i. PERT or critical path analysis e. monitoring results and benchmarks f. adjustment mechanism g. contingencies (What if's) XIV. Financial Summary a. assumptions b. pro-forma monthly income statement c. contribution margin analysis d. breakeven analysis e. Monte Carlo method f. ISI: Internet Strategic Intelligence XV. Scenarios a. Prediction of Future Scenarios b. Plan of Action for each Scenario XVI. Appendix a. pictures and specifications of the new product b. results from research already completed 51
  52. 52. Market Environment (con’d) Exhibit 14 Types of Performance Analyses (after Marketing Plan is Implemented) 1. Performance analyses To track marketing performance, the following analyses are performed and reviewed: 2. Sales analysis Most organizations track their sales results. Tracking the sales variances (i.e., deviation from targeted figure) provides a more immediate picture of sales effort. `Micro-analysis' can then be done to investigate the underlining reason (individual products, sales territories, customers, etc.) for success or failure to those sales figures. 3. Market share analysis Tracking market share is an important metric. Though absolute sales might grow in an expanding market, a firm's share of the market can actually decrease which bodes ill for future sales when the market starts to drop. Where such market share is tracked, there may be a number of aspects which will be followed: a. overall market share b. segment share - that in the specific, targeted segment c. relative share -in relation to the market leaders d. annual fluctuation rate of market share 4. Expense analysis The key ratio to watch in this area is usually the `marketing expense to sales ratio'; although this may be broken down into other elements (advertising to sales, sales administration to sales, etc.). 52
  53. 53. Market Environment (con’d) Exhibit 14 Types of Performance Analyses (after Marketing Plan is 5. Financial analysis The "bottom line" of marketing activities should at least in theory, be the net profit. There are a number of separate performance figures and key ratios, which need to be tracked:  gross contribution<>net profit  gross profit<>return on investment  net contribution<>profit on sales Performance Analysis 53
  54. 54. Market Environment (con’d) Exhibit 15 Sample Flowchart for Marketing Planning Process 54
  55. 55. Risk and Security Mitigation and Protection Risk Description of Risk Program Areas which have potential for creating a negative event with financial consequences to ABC (e.g., lawsuits, regulatory violations, etc.) is the subject of this section. ABC does not have a formal risk assessment program. The Owners seem to be generally aware of some of the risk associated with their business, but not specifically. In the absence of a risk assessment program at ABC, this section will deal primarily with what a risk assessment program consist of and the risk rating system used in this report in each of the sections. We start with a definition of risk measured in terms of the probability it will happen and the level of impact to the company if it does happen. Managing risk is among one of the most important aspect of managing a business. One way of defining risk is by defining the likelihood (probability) that a business will either suffer a negative event or fail to achieve a planned outcome. Probability Probability is the chance that a particular negative event will occur.  High – More likely than not that the negative event will occur. Event has not yet happened, but the statistical odds are in favor of it happening (particularly true if 55