stew leonard case study
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Adviser : En-te Hsu
Association Professor & Chairman
Department of Accounting, Tunghai University
Student: Shang-Hang Chou
Senior Student
Department of Accounting & Business Administration, Tunghai University
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Outline I. Introduction ----------------------------------------------------------------1 A. Game theory From Wikipedia, the free encyclopedia
B. Company background
II. Case Study-----------------------------------------------------------------2 A. STEW LEONARDS DAIRY STORE- Satisfying the Supermarket Customer
1. BEGINNING THE BUSINESS
2. BUSINESS PRINCIPLE:
SUPERMARKET SHOPPING SHOULD BE FUN
3. BUSINESS PRINCIPLE: LISTEN TO THE CUSTOMER
B. Comment on the quality of Stew Leonards Business Strategy
III. Application of Case Study with Co-opetition------------------------8 A. Value Net B. My Plan C. Strengths & Weakness D. Opportunities & Threat
IV. Conclusion-----------------------------------------------------------------13 V. Reference-------------------------------------------------------------------15
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Introduction .Game theory From Wikipedia, the free encyclopedia
Game theory is a branch of applied mathematics that is used in the
social sciences (most notably economics), biology, engineering, political
science, computer science (mainly for artificial intelligence), and
philosophy. Game theory attempts to mathematically capture behavior in
strategic situations, in which an individual's success in making choices
depends on the choices of others. While initially developed to analyze
competitions in which one individual does better at another's expense
(zero sum games), it has been expanded to treat a wide class of
interactions, which are classified according to several criteria. Today,
game theory is a sort of umbrella or unified field theory for the rational
side of social science, where social is interpreted broadly, to include
human as well as non-human players (computers, animals, plants)
(Aumann 1987).
.Company Background Stew Leonards Dairy Store
z Is located at 100 Westport Avenue Norwalk, Connecticut 06851. z Was established in 1969. z beginning as a small dairy store. z Has 2,000 employees. z Has annual sales of $100 million. Stew Leonard has been very successful in the competitive U.S.
supermarket business. In addition to high profits, he has won high praise,
including the Presidential Award for Entrepreneurial Achievement and an
Honorary Doctorate of Business from the University of Bridgeport
(Connecticut). He approaches the often dull but necessary business of
buying and selling groceries with creativity and fun.
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Case Study: STEW LEONARDS DAIRY STORE-Satisfying the
Supermarket Customer 1. BEGINNING THE BUSINESS
In Connecticut, a northeastern state near New York, Stew Leonards
father was the owner of a small dairy. He used to take Stew along when
he delivered milk to families in the morning. From childhood, Stew
Leonard remembers wanting to be somebody, wanting to be noticed and
appreciated. Perhaps it had something to do with being the sixth out of
seven children. After studying dairy manufacturing at the University of
Connecticut, Stew Leonard assumed he would go into a partnership with
his father. But his father died suddenly, and Stew found himself taking
over the family business with his brother.
Fifteen years later, unexpected circumstances caused another
change: The state put a highway right through the land where the dairy
was located. Stew surveyed customers to see what they wanted, and he
visited other small dairies to find out how they were doing. The farmer
who was bottling and selling his milk on the premises, rather than selling
it to a middleman was doing well, while many of the old-fashioned
dairies were going under. Stew Leonard decide to redesign his dairy
business to suit the changing times and his personality.
More than door-to-door service, Stew Leonard found out that
customers wanted good milk prices. So, he ended deliveries and instead
created a factory-outlet dairy store. He bought raw milk from farmers in
huge quantities, processed it in a glass-ended plant in the middle of the
store and sold it in standard half-gallon (1.8 liter) cartons with his name
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and a picture of a cow on them. His slogan was, Youd have to own a
cow to get fresher milk.
As the business grew, he crated more and more of a Disneyland
Dairy Store where customers might come and bring their children to be
entertained. As Leonard remarks, Where children go, their mothers will
follow. Not long after, he began adding to his original list of eight
products and enlarging the building until it became, as proclaimed on the
building, the worlds largest dairy store.
2.BUSINESS PRINCIPLE: SUPERMARKET SHOPPING SHOULD
BE FUN
To Stew Leonard, the distinction between a supermarket and an
amusement park is slight, and not necessarily useful.
Everyone feels supermarket shopping is drudgery, Mr. Leonard said in
an interview in his office overlooking the selling floor. I try to make it
fun.
Mr. Leonard clearly has the most fun greeting customers, and most
are delighted to see him. As he made his way through the produce section
during the interview, Dr. Shelley Dreisman of Westport, Connecticut,
happily shook his hand, but her daughter, Emily, age six, shyly turned
away. She only wants to shake hands with the cow, Dr. Dreisman
explained.
That cow, it turns out, is often Mr. Leonard, too. When the burdens
of running a $100 million business seem too great, he puts on a cow suit
he keeps in his office closet and goes out and hugs customers.
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Outside the store, in the parking lot, there is a petting zoo, a
collection of live barnyard animals including geese, calves, baby goats,
and sheep.
Even the petting zoo serves several purposes. Mr. Leonard talks of
it as an afterthought. When he sought to buy the property twenty years
age, the elderly woman who owned it insisted on keeping her far animals
on it.
Now, farmers lend him baby animals, which he periodically
exchanges for younger models. The farmers like the arrangement, he said,
because the animals come back well fed. Mr. Leonard pays for part of
their diet, but the animals also get food from shoppers, who buy it in the
store.
3.BUSINESS PRINCIPLE: LISTEN TO THE CUSTOMER
Stew Leonard elicits opinions from his supermarket customers
through monthly customer interviews, called focus groups, and a
suggestion box. Every day over 100 suggestions are received, typed up,
and distributed to the appropriate departments. He tries out many of these
suggestions, even if they seem unlikely.
According to Mr. Leonard, two recent successes came from
customer ideas put into the suggestion box.One was to tell strawberries
loose, like tomatoes, in the big flat trays from the farm, not in plastic
one-pint (0.551 liter) baskets.
The produce manager said that if the strawberries were set out
loose, people would eat them and the leftovers would never sell. He
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turned out be right, but customers who can choose strawberries
individually will drop them into plastic bags without watching the total,
Mr. Leonard discovered, and some will buy twelve dollars worth. Sales
tripled.
Then there were the turkey dinners, Mr. Leonard was selling them
with vegetable and stuffing fresh but refrigerated, at $5.95 each, and
roasting just three turkeys a day in the stores kitchens to keep up with
demand. A customers suggested selling them at the hot-food bar, a
growing part of the business, so he did, and demand jumped to
twenty-one turkeys a day.
But some customers said they did not like paying $2.99 a pound for
the gravy mixed in, or that the gravy had too many calories. Others said
there was not enough gravy. So he started putting the gravy on the side,
and demand rose to more than fifty turkeys a day.
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Comment on the quality of Stew Leonards Business Strategy Stew Leonard has managed to make extraordinary profits in the
highly competitive U.S. supermarket industry by redesigning the business
in significant ways. Executives of the company summarize their approach
to business in the name of its founder: S-T-E-W. S stands for Satisfy the
Customer, T for Teamwork, E for Excellence and Quality, and W for
Wow!
S is for Satisfy the Customer, Stew Leonards approach to customer
service is distinctive. One customer, after complaining that the steak was
tough, was given not only a new steak but a bouquet of roses. As the rock
of commitment at the store entrance says, The customer is always right.
T is for teamwork. The first team is the family. The Leonard family
has over twenty of its members working for the company, and over half
of the employees have a relative working for the company. Teamwork
goes beyond family, though, to become a way of working with the
customer and with other employees. In fact, nobody talks about
employees at Stew Leonards; everyone is a team member.
E is for Excellence and Quality. Instead of the typical 12,000-item
supermarket, Stew Leonards Dairy Store inventory includes only about
700 top-selling items. With a state-of the-art computer system,
executives can track individual items and then make adjustments in order
to increase sales. Besides reducing the number of products he sells, Stew
Leonard has brought a factory-outlet model to the supermarket. Produce
is purchased directly form the growers. Such items as milk and bread are
produced and packaged right on the premises. Both of these practices
eliminate costly handling by middlemen and distributors. The store makes
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money because it sells a high volume of each high-quality product at a
competitive price.
W is for Wow! Stew Leonard is the first to tell you that he has
learned a lot about business from Disneyland. The founder of the store is
a showman at heart whose motto is Show and Sell. From the beginning,
he wanted to blend entertainment with shopping and eliminate the
drudgery. There is Wow! In the huge displays, the entertainment, and in
the crowds of happy customers.
Despite its success, few supermarkets have imitated the S-T-E-W
model so far. The factory-outlet specializing in one type of merchandise
is transforming other industries, however. Toys R Us, for example, has
overtaken a big share of the toy market with this approach. If you ask
Stew Leonard why so few supermarkets imitate his, he will say that
running this kind of business takes a lot of hard work.
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Application of Case Study with Co-opetition Value Net
Stew Leonard
Customers: housewives, schools,
corporations and parents.
Competitors: Traditional
supermarkets, Wal-mart,
Grocery stores
Suppliers: dairy farmers,
meats, fish, produce, bakery, cheese and wine business.
Complementary: Other milk
producers, Cows, Machines, Food
In the Value Net, we can regard the competitors as a customer, a
supplier, a competitor and a complementary. Obviously, each of them
has strong relationship which relays on each others. Stew Leonard
offers the product and the service to customers, and then a supplier offer
the material to Stew Leonard. In the flow of cash, on the contrary, the
chain is from the customer to the company, and then from the company to
the customer. After deliberating ourselves position in the game, we
could analyze ourselves by the value net.
1. Stew Leonards customers.
From this part, we have to think about who is our master customer?
The answer is the customer, for example, housewives, schools,
corporations and parents. Especially, the other group of customer is
the children, when they want to buy something or feed the animal in
somewhere, they will buy forages.
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2. Stew Leonards suppliers.
The chief supplier is the dairy farmers, because the factory that
produces the remark of the jar also is the part in this conceptual
market.
3. Stew Leonards competitor.
Those factories that produce the milk are regarded as competitors, and
also including of the government in account of infrastructure may
make your factory be enforced to move or the products quality
doesnt achieve the criterion of the bureau of public health so that you
need to review and improve it. From the Tactical part, we develop
the better taste and guarantee the freshness that builds the customers
loyalty to our company. From the supplys part, we need to have a
good relationship with animal husbandries. From the sales part,
how to achieve the maxima benefit by efficient promotion and
advertisement strategies is vital, too.
4. Stew Leonards complementary.
Although from other companies to the milk producer is the type of
competition, and reverse the traditional way, the value net makes each
others become complementary. Let me take some examples, the
agriculture activities of government allow you access easily or help the
farm become the scenic spot. Moreover, the government broadens roads
brings convince to customers. On the other hand, the government could
play the rules of the customerthe supplierthe competitor at the same time like the customer and the supplier plays the symmetrical parts, and
the complementary and the competitor plays the role of pirate. The
company exists the win-win situation as well as the lose-lose situation in
the relationship of the customerthe supplierthe complementaryand the competitor so that co-petition strategy is worthy of deliberating.
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My Plan
Strengths and Weakness 1. Always keep the food fresh. 2. Good customer-service. 3. Low cost 4. the culture of organization 5. Reputation.
Opportunities and Threats 1. The same competitive business. 2. Complementary Ex: Traditional Market, Convenient storesetc. 3. Supply of forward intergration.
Rule Rule #1-The Customer is Always Right. Rule #2-If the Customer is Ever Wrong, re-read Rule #1.
Strategic Choice Business strategies: z Cost leadership z Differention Corporate strategies:
Mission 1. Our mission to create happy customers. 2. The customer who complains is our friend. 3. Its five times harder to find a new customer than it is to keep an old one.
Strategies implement z Using RFID, ERP, EDI can help the
business operate efficiently. z Supermarkets parking lot, there is a petting
zoo. Let people feel shopping is a fun thing.z Build own brand. z Contribute to the society. z Create win-win situation.
z Vertical Integration z Strategic Alliance z Diversification
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Strengths & Weakness 1. Always keep the food fresh.
For the dairy product, how to keep the food fresh is primarily. Like
the company get the milk from the farm, sending it to the market
immediately. Stew Leonard's claims "Hello, from over 3,000 cows in
Ellington, CT!" (their own farm) on its milk cartons.
2. Good customer-service.
Stew Leonard establish an suggestion box to receive any customer s
opinions or complaints about the company, moreover, they emphasize
the one of strategies of the customer is always right, If the
customer is ever wrong, re-read rule
3. Low cost
According to the information, Stew Leonard's is not only the world's
largest dairy store; it is also in the Guinness Book of World Records for
having "the greatest sales per unit area of any single food store in the
United States." Stew based on the economies of scale to achieve the
volume of production and minimizing the cost, like using the
specialized machines, the process manufacturing, and specialization.
Besides, they can get the low-cost access to productive inputs because
they have own dairy farm.
4. the culture of organization
the managers treat their employees as their friends or family like
managers memorize the name of every employees or have a lunch
with operational employees that could reduce the barrier of
communication and enable the top manager receive the employees
perception about Stew which could boost the employees s loyalty and
commitment.
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5. Reputation.
A firms reputation is a socially complex relationship between the
customers and a firm. After the Stew developed it, its reputation can
last a long time, even of the basis for that reputation no longer exists.
Opportunities & Threat 1. The same competitive business. Please refer to value net pictures and
contents.
2. Complementary. Please refer to value net pictures and contents.
3. Supply of forward intergration.
He bought raw milk from farmers in huge quantities, processed it in
a glass-enclosed plant in the middle of the store and sold it in standard
half-gallon (1.8 liter) cartons with his name and a picture of a cow on
them. His slogan was, Youd have to own a cow to get the freshest
milk. He built his own brand.
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Conclusion Deciding the decision has to consider many interactive factors and
the situations which are related. It is definitely effective to use the
Game Theory to deal with the complicated problems. Mr. Leonard made
an agreement with farmers. Farmers lend him baby animals which he
periodically exchanges for younger models. The farmers like the
arrangement because the animals come back to get a well fed. Mr.
Leonard also pays for part of their diet, but the animals also get food from
shoppers, who buy it in the store. We certainly found out that this is
right the win-win situation between the suppliers, the customers, and the
firm.
Later, Mr. Leonard expanded the business lager and larger and
also found the unique supermarket. Just like written by
William Shakespeare, All the worlds a stage, And all the men and
women merely players; They have their exits and their entrances; And
one man in his time plays many parts.
To change the game theory, you need to change one or more factors
that is to say to change the Player (P), the Added value (A), the Rule(R),
the Tactic (T), and the Scope(S). PARTS not only have the function of
urging you to break the ponder pattern, but also provide you to find out
the method. Once you participate in the game, youll change it. You dont
make any decisions at the event, and the game will be new one because of
joining in it. The way of changing game is joining in it, but the
intelligent way is to get the returns and then join in the game again.
The operated way of Stew Leonard changed is changing players
and creating own added value. It can increase own added value through
limited supplies when monopoly. The advantage of limited supplies is
that you can get more benefits and it might bring about symbolic effects
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and it might offer free promotion, and it might guide customers to buy the
products which sold slowly in the standby period. In original Stew
Leonards company ran the milk business, but now it adds other
businesses-supermarket as well as the Petting zoo which be loved by
children. As we can see it, the diversity business let us create more values
in this market.
Every dairy is a player originally, but Stew Leonard changed the
game. He decreased players, using the tactic to enhance his position of
the market. The tactic is taking some action to produce other players
realization. Persons realization leads his behavior, so every thing is
involved in realization. Changing the persons realization, the Game will
be changed, too. In the case, Stew Leonard listened for customer and
then changed their shopping behavior, for example, customers bought
fruits which were packed a bag before. After Stew Leonard facilitated
the traditional ways, customers could choose fruits individually will drop
them into plastic bags without watching the total. Therefore customers
consumed more money. It is Mr. Leonards tactic which are satisfying the
customer and getting the benefit from them.
Switching over to operate, changing rules and tactic might bring
out good effect, and the game will be better. When you want the game
to be better, dont get into a rut, but to change it.
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Reference 1. /
/ 2. Making Business Decisions :FRANCES BOYD (American
Language Program, Columbia University) :Longman 3. Free encyclopedia in Yahoo Internet
4. www.wretch.cc/blog/dreamslover&article_id=2429174
5. mail2.scu.edu.tw/~cpfan/gm_index.htm
6. www.publish.com.tw/new/hotissue/20060227.htm
7. http://www3.nccu.edu.tw/~jthuang
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