calveta dining services case study report

7/23/2019 Calveta Dining Services Case Study Report

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Table of Content

Chapter Title Page

1.0 Summary of the Case 2

2.0 Main Issues 2-5

3.0 S!T "nalysis 5-2#

#.0 Solutions 25-2$

5.0 %e&ommen'ations 2$-30

(.0 Con&lusion 30

).0 %eferen&es 31

1.0 Summary of the Case

Calveta was founded by Antonio Calveta and it was built on Antonio’s passion for food and

traditional family values. Calveta was a $2 billion, privately held firm that managed food

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service operations for nearly 1,000 senior living facilities in the nited !tates. "he restaurant

began in 1# as a neighborhood restaurant in %roo&lyn, featuring old family recipes and

subse'uently branched into second and third branch. Calveta was able gain access into the

senior mar&et in 1#(2 through Antonio’s church parish who introduced a nursing home

manager that managed the %ushwic& !enior )ome. Calveta attracted the senior home fol&s as

they offer better food which is not only more nutritious but within their allocated food

budget. !ervices were offered with a higher*'uality food in addition of a more personali+ed

service. Calveta employed 1,000 people which consist of 00 wor&ers that wor&ed in the

company’s %roo&lyn )-. !taff operated all aspects of resident dining facilities including

menu development, meal preparation, service and implementation of special programs such

as themed dinners and family events. After Antonio’s retirement in 200(, succeeding years

of leadership, Antonio’s eldest son, /ran& was nominated as the C. /ran& was entrusted by

his father to double up the company’s revenue within years.

2.0 Main Issues

/ran&, as the new C was re'uested to double the company’s revenues within five years, of

which 2 years have passed without any credible strategy adopted yet. )e did not want to

disturb the special company culture or ris& their reputation for 'uality food services on the

race to double the revenue. ow he finds it difficult to carry out his father’s directives. "he

humanistic and emphatically pro*employee company culture should not be disturbed while

the growth strategy ta&es place. Currently, he is in a dilemma whether to e3pand beyond the

!4/ mar&et and he is worried if he could continue to maintain the 'uality level, for which

Calveta is renowned, in this process. 5n order to increase the revenue as promised to his

father, /ran& has to consider growth strategies for his organi+ation. )e has a few strategies in

his mind and has to wor& on them to see which one brings the ma3imum benefit and fulfils

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his needs aptly. "he strategies that he has in mind are either to continue in the e3isting

situation itself or introduce it to the hospital segment. )e also has thought of ta&ing up 6reat

!outhwest 7ining !ervice 86!79 which was situated in :hoeni3 and bringing a change to the

organi+ation structure as a whole.

i. Continuing the e*isting business

The a'+antages of this strategy are as follo,s

"here is less ris& as their running in the same status as before.

"hey would not be incurring any additional costs.

"he reputation of the organi+ation will not be lost.

"he provision of customi+ed service intertwined with the 'uality of food

remains constant and it will also not be affected. "he organi+ation will be able to uphold its own culture which was being

followed traditionally.

The 'isa'+antages of this strategy are

Any &ind of growth or introducing itself to new mar&ets would be restricted in

choosing this strategy. A very less chance of meeting the targets that are put across.

ii. Sprea'ing its business to hospital segment

The merits on &hoosing this option are mentione' belo,

"he hospital segment presented a more logical fit with Calveta’s core

competencies )ospital administrators might perceive Calveta’s s&ills at cost control as a

means to containing e3penses. "rends toward the provision of fresher, more healthful menu offerings for both

patients and visitors would also wor& in Calveta’s favour. Customers from the hospital segment would accept Calveta 7ining !ervices as

that of the residents of !4/ without much hassle.

The 'emerits on &hoosing this option are mentione' belo,

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"he culture of the company might not be maintained as it gets mi3ed with that

of the hospital demographic. "here are entry barriers in the financial point of view in this segment.

"he organi+ation cannot estimate or forecast its growth beforehand.

5t could also affect the reputation that the company has been having for a long

time.iii. "&uiring /S an' restru&turing the organiation

"he pros of the company on ta&ing up this strategy are as follows; "here are more chances of reaching the targets and obtaining desired mar&et

attraction in this strategy. 5ts geographical coverage did not overlap with that of Calveta, which will

increases its mar&et and also coverage. 6!7 is presently in a good position, when the revenue generation is ta&en into

consideration. Calveta would attain a great deal of customer potential as it was maintained by

6!7. "he organi+ation hierarchy could be restructured so that it could accommodate

significant growth while preserving the company’s core values.

The &ons of the &ompany on taing up this strategy are as follo,s

"hey will have to face a huge ris&.

6!7 had labour problems and substantial turnover in their management ran&s.

!preading the company may reduce the 'uality of service.

"hey will have to bear heavy debts.

6!7 was barely running in a profitable manner but it seemed to have a great

potential.

3.0 S!T "nalysis

%y evaluating Calveta 7ining service, many of the strengths write out as a result of the

Calvetas culture, which focuses on the high standard calibre food and customi+ed services.

%asically, the high* superior food with more alimental enables the association get high ratings

from !4/ residents and managers. Considering the health reasons of their customers, the

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older people, Calveta admits fresh ingredients at a disgrace of monetary value, which creates

a vital advantage over competitors who impart canned ingredients. 5n addition, the

customi+ed services and continuous innovations of Calveta satisfy the customer’s need by

building food service teams and a variety of menu offering in each facility. 5n addition,

Calveta allows their customers to pre* drift their menus and personali+e service so that the

customers feel contented. "he third strength is that the uni'ue human resource culture with

the company motivates employees successfully by implementing pay*for*performance plan,

wide*ranging training program, and the career proficiency program and among others. "he

employees are highly motivated by act of great opportunities to be promoted and receiving

generous benefits. Cost*control model helps Calveta indicate the contracts at a low price and

therefore provides a lower price to customers. "his mode yields generous cost which

proceeds to deduce cost of food through deterring wastes. Calveta has a great disadvantage

on the organisational body structure caused by the instruction e3ecution of career progression

programs, which encourages prevalent promotions and <ob positions. ven though the

program is an effective mode to motivate employees and achieve 'uic& development, the

fre'uent change in management teams harms the service 'uality and efficiency as well as

increases the employees’ dissatisfactions on the stressful organi+ational structure. Also,

multiple management levels inward the organi+ation &eeps the managers apart from

customers and frustrates the efficiency of communication, which raises concerns on customer

care.

3.1 Strength

amily business

• Stability /amily position typically determines who leads the business and as a result

there is usually longevity in leadership, which results in overall stability within the

organi+ation.

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• Commitment !ince the needs of the family are at sta&e, there is a greater sense of

commitment and accountability. "his level of commitment is almost impossible to

generate in non*family firms. "his long term commitment leads to additional benefits,

such as a better understanding of the industry, organi+ation and <ob, stronger customer

relationships and more effective sales and mar&eting.

• le*ibility /amily members are willing to wear several different hats and to ta&e on

tas&s outside of their formal <obs in order to ensure the success of the company.

• 4ong-term !utloo ; on‐family firms thin& about hitting goals this 'uarter, while

family firms thin& years, and sometimes decades, ahead. "his =patience> and long*

term perspective allows for good strategy and decision*ma&ing.

• e&rease' Cost nli&e typical wor&ers, family members wor&ing at family firms are

willing to contribute their own finances to ensure the long‐term success of the

organi+ation. "his could mean contributing capital, or ta&ing a pay cut. "his

advantage comes in particularly handy during challenging times, such as during

economic downturns, where it’s necessary to tighten the belt or personally suffer in

order for the business to survive.

mployee e+elopment

• 6n&o+er mployee potential Calveta allows their employees to attend programs that

might help them spot the leaders of tomorrow within the current wor& force. !ome

wor&ers <ust need someone to believe in them, and by developing their s&ills, it will

show them that the company is investing in this belief.

• !ut ,ith the ol'- "raining the employees will give them the chance to understand the

latest developments and trends within the food ? dining industry. @hether it is new

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machinery or new social media tools, the world is constantly developing. 5f Calveta

helps their employees &eep pace with these changes the company will definitely set it

apart from their competitors. 4earning to use new tools and develop new strategies in

developing dining services will allow the staff to ta&e on more challenging wor& and

even higher roles within the business.

• 4ifelong 4earning %y developing the s&ills of their wor&force through leadership

programs they breed within them a spirit of lifelong learning. @ithin the ever changing

world of technology and business there is always something to learn. 4ifelong

4earning will encourage independent learning in the individuals to develop themselves

in a variety of sub<ects and fields it will establish a love for learning and self*

development.

• In&rease' Pro'u&ti+ity 5t is only natural that leadership development and training

will lead to increased productivity. ot only will the staff be able to do more and

understand more, but they will have gained confidence within their tas&s because their

s&ills are developed.

• 6n'erstan' the *pe&tations 7evelopment and training programs will provide the

owner or manager of the company, with some insight into the e3pectations that the

employees might have. "his way, Calveta can minimi+e their feeling of

disappointment and increase their loyalty by managing these e3pectations.

• %e+ise +ision an' goals; 4eadership 7evelopment programs and training

opportunities are also the perfect setting to remind the employees of the long term

goals that the company tries to achieve.

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7igh re+enue

• :rofit can be used to pay higher wages to owners and wor&ers8though if firm has

monopsony power, the profit may not be shared e'ually amongst wor&ers9

• :rofit can be used to invest in research ? development to improve menu ? dining

services. "his investment can potentially benefit consumer.

• :rofit enables the firm to build up savings, which could help the company survive an

economic downturn which is susceptible to ta&e over. 5f profit is low, shareholders

may be disappointed in the low level of dividends and willing to sell to a ta&eover bid.

ffe&ti+e Cost Control Mo'el

4ower 3penses; "he chief benefit of cost controls is that they lower the companyBs

overall e3penses. %y limiting the amount of money employees can spend, the

company places a cap on how much money can go out the door. "his allows the

company to &eep more cash on hand, or to invest larger amounts of money in other

ways, such as in capital e3penses or paying down debt.

4ess Abuse; 5n addition, by placing limits on how much money employees are

allowed to spend, the company is ta&ing steps to limit potential abuse by employees.

5f an employee is given a strict limit as to how much he can spend on a particular

e3pense, he may be less li&ely to spend money on unapproved activities, as he will

not be able to meet his primary tas&s.

%etter ecords; An ancillary benefit of cost control is that it facilitates accounting and

helps financial planning by setting a limit on a companyBs costs. %y &nowing how

much the company will be spending in a particular period, managers can better plan a

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budget. 5n addition, once the money has been spent, it will be easier for accountants

and planners to determine how the money was spent.

Customer fo&us

A customer*centric focus helps throughout the mar&eting process, which includes

product research and development as well as promotional communication. A

customer*centric focus typically leads the company to maintain a closer contact with

core customers. /ocus groups and other research methods are used to maintain

awareness of customer feedbac& on food, services and desires for improvements.

"ailoring menu and services to fit the strongest desires of the target mar&et helps

Calveta establish a more mar&etable product concept. !trong familiarity with the

needs and desires of their customers helps them better promote Calveta brandBs value

proposition. ffective research gives them a better understanding of what food ?

service features and benefits are most valued, as well as which messaging strategies

and techni'ues will have the intended effect. Customi+ed solutions that align well

with a particular customerBs interests usually carry greater weight than more mass*

mar&eted food or services with little direct appeal.

Inno+ati+e

%y being innovative, Calveta generally employ a large number of creative and

competent individuals who can not only introduce new menus, but also see it through

to completion. Calveta often employ large numbers of people who oversee all stages

of menu development and ensure the menuBs success in the mar&et through a process

of conceptuali+ation, design and implementation that results in a finished menu that is

highly desirable to consumers. Calveta also have the advantage of e3perience on their

side. "hey typically get the process of menu development down to an e3act science

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that can repeat over and over again. "heir ability to repeat this process with efficiency

generally sets them apart from other companies that try to create new menu ?

services for the first time.

7igh 8uality of Ser+i&e

-uality customer service is the &ey element re'uired for a successful business. 5n this

customer driven mar&et, where competition is becoming stiffer day by day and critical

deadlines are rife, one cannot thin& of business growth without e3ceptional customer

service. -uality customer service can benefit Calveta’s business in countless ways and

by observing the importance of customer service measures can be ta&en to provide

consumers with a positive e3perience as they tend to discuss it in their social networ&,

which leads to direct publicity and increased popularity of an organi+ation.

Satisfie' Sharehol'ers !atisfactory response from consumers means increased

sales, which ultimately leads to increased satisfaction of shareholders. "hey tend to

invest more in the organi+ation, which can dramatically improve the 5 of Calveta’s

business.

Su&&essful 9usiness Strategies ncouraging consumers for feedbac& and comments

is an integral part of 'uality customer service. /ollowing consumers’ feedbac& for

analy+ing the strengths and wea&nesses is probably the best way to understand the

e3pectations of consumers and adopt successful business strategies.

3.2 eaness

asy entry into maret

"he disadvantages;

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o !cope for economies of scale because of the high number of firms.

4ac& of supernormal profits may mean the investment of esearch and 7evelopment

8?79 is unli&ely.

@ith perfect &nowledge there is no incentive to develop new technology because of

the ability to share in reality it is more about theory rather than practical. "his creates

e3treme spectrum of mar&et structure.

Internal Managerial Confli&t

Conflict within the organi+ation causes employees to become frustrated if they feel as if

there’s no solution in sight, or if they feel that their opinions go unrecogni+ed by other

employees. 5n this scenario there is contradicting opinion between the C, /ran& ? his

sister Dennifer who is the C. Dennifer is convinced that preserving the company culture

? achieving such aggressive growth was conflicting ob<ectives and she rather save the

culture than progress too rapidly into new business. /ran& in the other hand is ready by all

mean to go against the company’s culture to fulfill his father’s re'uest

As a result, the company employees become stressed, which adversely affects their

professional and personal lives. 5n some instances, employees may avoid meetings to

prevent themselves from e3periencing stress and stress*related symptoms.

Decrease in Productivity: When the organiation s!ends "uch o# its

ti"e dea$ing %ith con&ict' e"!$oyees ta(e ti"e a%ay #ro" #ocusing on

the core goa$s they are tas(ed %ith achieving) *on&ict causes

e"!$oyees to #ocus $ess on the !ro+ect at hand and "ore on gossi!ing

a,out con&ict or venting a,out #rustrations) -s a resu$t' organiations

can $ose "oney' donors and access to essentia$ resources)

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."!$oyees /eave rganiation: rganiation e"!$oyees %ho are

increasing$y #rustrated %ith the $eve$ o# con&ict %ithin *a$veta "ay

decide to end their tenure) his is es!ecia$$y detri"enta$ %hen

e"!$oyees are a !art o# the eecutive ,oard or heads o# co""ittees)

nce e"!$oyees ,egin to $eave' the organiation has to recruit ne%

e"!$oyees and a!!oint acting ,oard sta)

ist ,et%een core co"!etencies gro%th strategy

Core competencies of Calveta’s are based on =Antonio’s @ay> which is by offering

highest 'uality food ? personali+ed service. Charges are made based on the budgets of

the !4/ clients and the company. Calveta is constantly innovating and developing new

service features in the menu. 5n addition, Calveta is very concern on developing every

employee to hisE her potential. As whole, Calveta’s aspiration is to profitably grow and

generate funds for future growth. %asically, it’s important for Calveta to &eep high

standards with ongoing innovation strategy with no debt policy, with internal promotion

? staff training and employee satisfaction survey. )owever, the company struggles to

find growth strategies which fit core competencies well because it is pigeon holed, lac&s

of infrastructure and cash management process is contrary to growth goals. Calveta

competency is focused on employee development thus hindering ac'uisition. ot only

that, competitors usually use contradicting business structure ma&ing the process more

difficult. 5nternal hiring managers are also regularly re*assigned. 7ue to e3pansion, core

values suffer and threats from competitors are also inevitable besides the fact that there is

a need for low cost services in the economic climate.

*&ess Turno+er

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3cessive turnover decreases the overall efficiency of the company and comes with a

high price tag. ach employee who resigns costs the company money. All of the money

invested into that employee through training, education and licensing wal&s out the door

with the employee. @hen they hire a replacement, the company spends money on those

same areas to prepare the new hire for the position. Calveta also pays to advertise the

vacancy and may incur costs for drug testing, physicals and moving e3penses. "he

company could pay 1E of the yearly salary of the new employee in costs.

)igh turnover rates cost the company time in addition to money. Fanagers or human

resources staff spends time conducting e3it interviews, advertising the <ob, recruiting

candidates and interviewing. !upervisors and colleagues are often left to cover until a

new employee is hired and begins wor&ing. "he new employee may ta&e several months

to fully learn the <ob and achieve competency in the position. @hen the staff changes

fre'uently, the employees who stay have a difficult time building a positive team

dynamic. A group of employees learns to wor& well together, only to have one or more

members leave. "his leaves the staff in limbo until a new employee starts. "he personality

and wor& ethic of the new employee may vary significantly from the previous employee.

)igh turnover can hurt overall morale of employees.

Productivity: he overa$$ !roductivity o# the %or(!$ace tends to

decrease %ith high turnover) ince a ne% e"!$oyee has a !eriod o#

ad+ust"ent' heshe %ont co"!$ete tas(s as uic($y as the !erson

re!$aced) ;rou! !ro+ects that re$y on the ne% tea" "e",er "ay s$o%

do%n' %hich aects e!erienced e"!$oyees !roductivity $eve$s) he

$oss o# "o"entu" %hen an e"!$oyee resigns "ay a$so aect "ora$e)

/itt$e ris( to$erance

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<is( to$erance is an i"!ortant co"!onent in ,usiness) *a$veta shou$d

have a rea$istic understanding o# its a,i$ity and %i$$ingness to sto"ach

$arge s%ings in the va$ue o# its ,usiness) *a$veta=s ris( to$erance

genera$$y is driven ,y its o,+ectives and sta(eho$der e!ectations'

ranging #ro" va$ue !rotection >genera$$y $o%er to$erance $eve$s? to

va$ue creation >genera$$y higher to$erance $eve$s?) o$erances are a$so

high$y de!endent on ho% %e$$ ca!ita$ied or nanced the organiation

is) @t "ay ,e "ore averse to "ar(et &uctuations and great$y in&uenced

,y $ega$ and regu$atory reuire"ents) !erating %ithin ris( to$erances

!rovides the "anage"ent greater assurance that the co"!any

re"ains %ithin its ris( a!!etite' %hich' in turn' !rovides a higher

degree o# co"#ort that' the co"!any %i$$ achieve its o,+ectives) <is(

to$erances %i$$ natura$$y deve$o! #ro" the co"!any=s overa$$ ris(

a!!etite' ,ut they a$so need to ,e in $ine %ith their goa$s) *a$veta

"ight dene a very $o% to$erance #or custo"er dissatis#action' ,ut

since they are attracting $ots o# high cost custo"ers' then this !o$icy

isn=t in $ine %ith a discount ,usiness "ode$) When ris( to$erances are

a$igned %ith ,oth overa$$ ris( a!!etite and strategic goa$s' they %i$$

,oth i"!rove ris( "itigation eectiveness and contri,ute to achieving

*a$veta=s strategic goa$s)

Ineffi&ient internal &ommuni&ation

"he ma<ority of internal problems in the organi+ation are directly related to poor internal

communication management. ot solving them in time ends up affecting other areas of

the organi+ation and can result in bad feeling and wea& relationships among the

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http://www.investopedia.com/terms/s/swing.asp



employees. 5f the company does not communicate properly, discourse is lost and the

strategic lines become unclear. 5f there isn’t good communication among employees, each

will understand things in their own way and the lac& of a common discourse will confuse

the employees. 5f the employees feel that they are not informed about what is happening

and that their opinions and ideas don’t matter, they will lose interest and passion for what

they do and this will ma&e them less productive.

3.3 !pportunity

7ospital Maret

"he sustainability movement has hit health care, as hospitals are ma&ing great

progress toward establishing healthier, more sustainable foodservice for patients and

their families. Fany of these green efforts are influenced, at least in part, by the

)ealthier )ospitals 5nitiative 8))59, a national campaign to improve environmental

health and sustainability in the health care sector. )ealthier food is one of si3

challenges that form the basis of the ))5’s campaign, providing resources, insight,

and support any hospital or health system can adapt to develop sustainable

foodservice programs. Cleaning !ervices for )ospitals and !4/s can be potentially

run as an outside subsidiary.

*pansion into other regions

:e, Customers A primary benefit of business e3pansion is the ability to attract and

retain new customers. @hen Calveta adds new menus to their portfolio or move into

new mar&ets, they can bring in previously untapped customer mar&ets. eaching out

to these new customers with e3pansion is one thing, but capturing them for long*term

relationship building is primary. 6rowing a loyal customer base is the best way to

achieve stable and growing profits over time.&onomies of S&ale 5f Calveta e3pands their business they will spread the ris&s of

doing business and reduce the potential of one menu or one poor decision damaging

their business. perating in multiple mar&ets or in many areas also allows them to

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spread the costs of doing business across more mar&ets or customers. "his ma&es the

costs of doing business less on a per*customer basis, which improves the potential to

profit by adding new customers.

Capital %euirements A drawbac& of business e3pansion is that when the company

invests money and other resources to e3pand, it has less capital available for other

business transactions. "his ma&es it especially important that they carefully weigh the

mar&et potential of e3pansion before ma&ing the investment. Consider the potential

return on investment from each new mar&et they could e3pand into before investing

their capital into a path of e3pansion.

Sprea' Too Thin "nother ris& of business e3pansion is that they could spread the

companyBs resources and e3pertise too thin. ften, getting involved in too many

mar&ets or products can cause the company to spread its abilities out to the point that

it does not perform well in any area. %usiness e3pansion only ma&es sense if the

company has ade'uate people and resources to cover the new area with e3pertise.Far&et e3pansion can also occur when they identify new groups of target customers

in their current region. "o begin identifying these potential mar&ets, the company

should identify who is currently buying the service. @hen loo&ing to e3pand into

different mar&ets by generating new customers, it is important to thoroughly thin&

about what adding new benefits or features would mean to the company. !ame*day

service seems li&e a great idea on the surface, but providing that service may be much

more difficult than it sounds. "he company must logistically provide a same*day

service. "ging population

Aging population of the %aby %oomers is increasing and by 200 e3pected to be (0

million which e'uates to 20 G of the ! population. Capacity rates of !4/s are up to

H(.#G. "his shows an increasing trend. )ence demand for dining services will

increase as well. According to Fedicare ? Fedicaid !ervices, there were roughly

1H,000 nursing homes in ! in 200H.%y percentage, G of the facilities are operated

16



for profit2(G ,as for non* profit( G were government owned and ut of these

facilities, G were run by large chains. "hese !4/ facilities clearly provide a vast

mar&et for Calveta to ac'uire dining service business.

%e&ent health tren's an' &on&erns

!ocially conscious consumers use their purchasing power to try and improve the

world around them. "heir decisions are based on whether a productBs positioning on

issues, such as the environment or method of production, aligns with their values,

perceptions or &nowledge. "hey can act on their consciences in positive or negative

ways, either buying a product that meets their beliefs or boycotting a product or

company that doesnBt meet their standards. Any @hile this demonstrates a definite

change in attitude, actual buying patterns in the mar&etplace indicate that the

percentage of consumers acting on their beliefs is smaller than what is reported,

generally &eeping socially conscious products in niche categories.6iven the traction already gained in the mar&etplace, socially conscious consumption

will li&ely become more main stream over time. A number of integrated factors will

drive this trend forward; a growing volume of national and international legislation

regarding environmental and social standards more companies enacting corporate

social responsibility policies as a way to differentiate themselves and their products

greater public awareness of how purchase behavior lin&s to social issues and the

growing need for consumers to e3press their personal values through their buying

patterns. 5t is important to understand consumer behavior in a potential mar&et to ta&e

advantage of any opportunities based in this trend. Calveta which is interested in

being competitive in this mar&et need to build trust with their customers by providing

reliable and relatable information about the health, social, and environmental benefits

of their products and services that can be verified by an independent source. 4abeling

will continue to be the most apparent e3planation of why a productBs production

17



systems, footprint, pac&aging techni'ues, or ingredients are more socially responsible

than those of the competition. )owever, a variety of other mar&eting techni'ues,

particularly social media, will have to be used to promote both the product attributes

and the companyBs approach to corporate social responsibility to successfully attract

consumers interested in ma&ing purchases from this perspective.

3.# Threat

:e, ntrants

@hen new companies enter the mar&et, the variables that influence the performance

of the business will change and Calveta has to react to maintain their position. As the

mar&et changes, they have to ta&e into account the strengths of the new entrant when

forming a strategy to &eep their customers. "ypical barriers for a mar&et entry are high

capital costs to establish facilities, customer loyalty resulting from special product

features, or economies of scale if e3isting competitors are large operations. 5f the

Calveta invests heavily to compete, they have to e3amine whether they have e3tensive

capital resources or whether the investment has stretched their capacity. 5f the

competitors introduce a product similar to Calveta, they have to react. 5f they are

smaller than Calveta, they will not have the same economies of scale and will not be

able to compete on price. @hen a new buyer enters a mar&et, suppliers often can raise

prices because of higher demand. "he new entrant needs the same materials and

components Calveta does to offer the same &inds of products in the mar&et. 5f they

can loc& in the supplier costs with long*term contracts while the suppliers charge the

new entrant higher prices, they can maintain their pricing structure and compete on

'uality and uni'ue features. 5f the suppliers raise prices, they can reduce inventory

and see& substitutes for the most e3pensive items. "he entry of a new competitor in a

mar&et tends to reduce the mar&et prices. @hen there are more companies competing

18



for the same mar&et share, customers choose those with lower pricing, and the general

price level goes down. 5f there is an inherent cost advantages because of factors such

as location, menu design or low labor costs, Calveta can compete on price. 5f no

competitor has inherent cost advantages, they can compete on price if the financial

resources are higher than those of some competitors.

Possible taeo+ers

Cons;

6oodwill, often paid in e3cess for the ac'uisition

Culture clashes within the two companies causes employees to be less*efficient or

despondent

educed competition and choice for consumers in oligopoly mar&ets 8%ad for

consumers, although this is good for the companies involved in the ta&eover9

4i&elihood of <ob cuts

Cultural integrationEconflict with new management

)idden liabilities of target entity

"he monetary cost to the company

4ac& of motivation for employees in the company being bought.

"a&eovers also tend to substitute debt for e'uity. 5n a sense, any government ta3

policy of allowing for deduction of interest e3penses but not of dividends has

19

https://en.wikipedia.org/wiki/Goodwill_(accounting)

https://en.wikipedia.org/wiki/Oligopoly

https://en.wikipedia.org/wiki/Dividend

https://en.wikipedia.org/wiki/Goodwill_(accounting)


https://en.wikipedia.org/wiki/Dividend



essentially provided a substantial subsidy to ta&eovers. 5t can punish more*

conservative or prudent management that do not allow their companies to leverage

themselves into a high*ris& position. )igh leverage will lead to high profits if

circumstances go well, but can lead to catastrophic failure if circumstances do not go

favorably. "his can create substantial negative e3ternalities for employees, suppliers

and other sta&eholders. %usiness ta&eover can have a positive or negative impact on

the labor force. A ta&eover that is friendly and planned has the potential to benefit the

e3isting wor&force, while one that is initiated by creditors and is une3pected can have

a detrimental effect.

Strong Competition

Competition, according to the theory, causes companies to develop new products,

services and technologies, which would give consumers greater selection and better

products. "he greater selection typically causes lower prices for the products,

compared to what the price would be if there was no competition 8monopoly9 or little

competition 8oligopoly9.

)owever, competition may also lead to wasted 8duplicated9 effort and to increased

costs 8and prices9 in some circumstances. /or e3ample, the intense competition for

new menu development ? to offer uni'ue ? e3ceptional dining services may inspire

Calveta to ma&e substantial investments for enhancement which some might not be

recouped, because only a fraction of the effort might become successful.

"he negative effects on the business are the following;

Customers; 5n any mar&et there are a limited number of customers that businesses are

competing for, so the more businesses there are the lesser the mar&et share.

20

https://en.wikipedia.org/wiki/Leverage_(finance)

https://en.wikipedia.org/wiki/Negative_externalities

https://en.wikipedia.org/wiki/Stakeholder_(corporate)


https://en.wikipedia.org/wiki/Cost

https://en.wikipedia.org/wiki/Leverage_(finance)

https://en.wikipedia.org/wiki/Negative_externalities

https://en.wikipedia.org/wiki/Stakeholder_(corporate)


https://en.wikipedia.org/wiki/Cost



esources; Also limited in supply, resources li&e s&illed employees, raw materials and

other resources that might be needed will become more e3pensive when there is more

competition. Calveta will have to compete to ac'uire those limited resources ma&ing

the resources more and more e3pensive.

"here are many struggles that Calveta will face due to competition within business,

and it has negative effects. Competition can drastically harm Calveta through various

labour costs, production, and price factors. "hey have to face more and more

businesses and mar&ets and have to worry about trying to beat out their competition.

Conse'uentially, this also affects Calveta’s revenue stream. @ith all the competition

springing up, Calveta has to, at times lower their prices <ust to stri&e a profit. "his is

because sometimes, competition can be so competitive that it can damage the

economy and that particular society in a severe way. "his is a potential ris& of

harming both the business offering these incentives and its competitors. "he ris&s

associated with the business that offers incentives include offering so much that they

wind*up losing money in the process.

%ising employment ; ingre'ients &ost

@hen the government imposes a higher minimum wage, employers face higher labor

costs and are forced to respond by decreasing other e3penses. As these employers

cope with the increased costs of a mandated wage raise, they often respond by cutting

the <obs available to less*e3perienced and less*educated employees. ot only that

recent steep price increases of ma<or crops 8cereals, oilseeds9 were triggered by a

combination of production remaining somewhat below trend and strong growth of

demand. A low and declining level of stoc&s has added to the price rise, as has

probably a significant increase in investments in agricultural derivative mar&ets.

21



5ncreased ingredient prices will directly force Calveta to increase the food prices

which were eventually result in dissatisfaction among its customers. )ence, they

might resource for services from other dining services that suit their budget. ven

though Calveta doesn’t resort to increase the food price, the company might need to

compromise on the 'uality or the 'uantity of the ingredients in the menu. onetheless,

this might also lead to customer being unhappy and frustrated with Calveta’s food ?

services. ising commodity costs are threatening to destroy CalvetaIs opinion that

they were climbing out of the nation’s economic woes.

&onomi& 'o,nturn- re&ession

An economic decline in the nited !tates is pretty much guaranteed to reduce the

income of the business sector. 4ower growth leads to lower profits, therefore

dividends decline and shares become less attractive. 5f the ! enters into recession,

firms will e3perience a decline in profitability. "his is because there is a tendency for

price wars to develop in a recession. 4ow sales encourage firms to cut prices and

falling sales will lead to lower revenues.As sales revenues and profits decline, the

employers will cut bac& on hiring new employees, or free+e hiring entirely.

3penditures for mar&eting and advertising may also be reduced. "hese cost*cutting

efforts will impact Calveta’s business which provides goods and services .@hen the

companyBs stoc& falls and the dividends decline or stop, institutional investors who

hold that stoc& may sell and reinvest the proceeds into better*performing stoc&s. "his

will further depress the companyBs stoc& price. "he customers of the company that

owe it money may pay slowly, late, partially or not at all. "hen, with reduced

revenues, Calveta will pay its own bills more slowly, late, or in smaller increments

than the original credit agreement re'uired. 4ate or delin'uent payments will reduce

22

http://www.investopedia.com/terms/r/revenue.asp

http://www.investopedia.com/terms/p/profit.asp

http://www.investopedia.com/terms/d/delinquent.asp

http://www.investopedia.com/terms/r/revenue.asp

http://www.investopedia.com/terms/p/profit.asp

http://www.investopedia.com/terms/d/delinquent.asp



the valuation of the corporationBs debt, bonds and ability to obtain financing. "he

companyBs ability to service its debt 8pay interest on the money it has borrowed9 may

also be impaired, eventuating in defaults on bonds and other debt, further damaging

the firmBs credit rating and preventing further borrowing. 7ebt will have to be

restructured andEor refinanced, meaning new terms will have to be agreed upon by

creditors. 5f the companyBs debts cannot be serviced and cannot be repaid as agreed

upon in the lending contract, then ban&ruptcy may ensue. "he company will then be

protected from its creditors as it undergoes reorgani+ation, or it may go out of

business completely.

"he business may cut employees, and more wor& will have to be done by fewer

people. :roductivity per employee may increase, but morale may suffer as hours

become longer, wor& becomes harder, wage increases are stopped and fear of further

layoffs persists. As the recession increases in severity and length, management and

labour may meet and agree to mutual concessions, both to save the company and to

save <obs. "he concessions may include wage reductions and reduced benefits.

!econdary aspects of the goods and services produced by the recession*impacted

company may also suffer. 5n an attempt to further cut costs to improve its bottom line,

the company may compromise the 'uality, and thus the desirability, of its products.

"his may manifest itself in a variety of ways and is a common reaction of many big

businesses in a steep recession. As the effects of a recession ripple through the

economy, consumer confidence declines, perpetuating the recession as consumer

spending drops.

#.0 Solutions

23

http://www.investopedia.com/terms/d/debt.asp

http://www.investopedia.com/terms/r/refinance.asp

http://www.investopedia.com/terms/b/bankruptcy.asp

http://www.investopedia.com/terms/r/reorganization.asp

http://www.investopedia.com/terms/p/productivity.asp

http://www.investopedia.com/terms/c/cci.asp

http://www.investopedia.com/terms/d/debt.asp

http://www.investopedia.com/terms/r/refinance.asp

http://www.investopedia.com/terms/b/bankruptcy.asp

http://www.investopedia.com/terms/r/reorganization.asp

http://www.investopedia.com/terms/p/productivity.asp

http://www.investopedia.com/terms/c/cci.asp



5t is understood that /ran& is liable to choose any one of the mentioned strategies, so

that Calveta is able to double its revenue by the end of the year 2011. very strategy

has got its own pro and cons from which a decision had to be made. As all the options

have been analysed, it can be derived that the third alternative is comparatively worth

enough to be used rather than the others. ven though it has to bear huge ris&s, it

seemed to be having a great customer potential if it could retain its customer accounts.

"he problems in ta&ing up the other strategies are cleared out below;

• 5f the company continues in the e3isting status, it would not earn much of revenue

as such which therefore would ma&e it unable to cover the desired target of

doubling the revenue, even though it had less ris&, no additional cost, reputation

and 'uality of service.

• As they have had a previous e3perience of spreading their company into the

educational segment which turned out to be a failure, it would be better not to

e3pand them into the hospital segment. 5t also includes huge ris&s.

• @hen 6!7 is ta&en into consideration, it produced annual revenue of $1. billion

and has a growth in revenue. !ince it was barely profitable, indirect e3penses and

administrative e3penses were high in 6!7. n using the cost*control system of

Calveta, they could increase their net profit. "he calculations are given below as

follows;Current atio J Current AssetsECurrent 4iabilities J 0.##;1

:rofit Fargin atio J et 5ncome !ales J $ million E $2021 million K 100 J .22G7ebt 'uity atio J "otal liabilities E "otal !hareholders’ 'uity J $2(2 million E $1H1 million J 1.0;15t is evident from the above that the company’s ability to meet short term liabilities is

low as the re'uired ratio for the current ratio is 2;1. "he company’s debt is more than

e'uity as the supposed ratio to be is 1;1. 5t’s better to increase the share capital than

going for ban& loan as the shareholders e'uity in the organi+ation is low.

24



/rom the case analysed, the third option is chosen wherein Calveta has to ac'uire

6eneral !outhwest 7ining !ervices 86!79 as;

• 6!7 does not generate revenue in a smooth or good manner for which they need

Calveta to <oin them so that they could use Calveta’s cost*control system.• 6!7 has got geographical coverage which would enhance their strategy and it

could also use the core values of Calveta, so that they could increase the

reputation of the company as a whole.

• 5t is also better to increase the share capital than going for a ban& loan, because

the company’s financial position is bad.

• "he employees of 6!7 have to be provided with training and they also have to

recruit few into the company and restructure the organi+ation by shifting

managers from Calveta to 6!7.

• A new organi+ational structure has to be made that accommodate significant

growth while preserving the company’s core values. 5t has to consider in dividing

the sales and operations functions completely, creating additional regions and

districts, and eliminating management levels.

• Analysis• "he nited !tates Census %ureau’s survey showed that only 2G of the total

!4/’s in !A had contracted to food services, this survey alone shows that there

is a great potential for growth in the !4/’s segment and therefore it would have

been meaningful for /ran& to buy 6reat !outh @est 7ining but the eye popping

debt figures that came before him alone are sufficient to say that it would not be a

feasible solution and it would be much better decision for /ran& to diversify

Calveta 7ining !ervices by e3tending to other segments, li&e providing food

services to the hospitals. /ew reasons why /ran& should e3tend to other segments

are.

• 1. /ran& considered moving into the ducation !ector, and <ust because he failed

once it does not mean that he will not be successful in the same sector with better

25



preparations to ma&e potential clients believe that Calveta 7ining can also cater to

the needs of a young generation.

• 2. "he financial challenges of getting into the hospital segment were there but it

was always achievable.• . "he greatest positive to Calveta 7ining !ervices was the wor&ing culture by

which they could prosper in any segment.

• 5nterpretation

• "he interpretation that can be derived from the above analysis is that it would be

better for /ran& to thin& about diversifying the business rather than ac'uiring

6!7. ven /ran& &new that it was a huge ris& to ac'uire 6!7 considering the

heavy debt the business would be in after the ac'uisition, besides Calveta 7ining

would find it difficult to train 6!7 employees to the wor& culture of Calveta

7ining. /ran& should not ma&e this decision only with the purpose of meeting his

father’s goal because this may harm the firm in the long run. /ran& had his own

problems organi+ational restructuring to do for Calveta 7ining and in such a

circumstance if /ran& ac'uired 6!7 then his problem would grow from bad to

worse because it would not be an easy tas& to change the entire wor& culture of

6!7 within a short span of time, and apart from the debts of ac'uiring 6!7 /ran&

would also need to generate funds for the training of the staff teaching them

Antonio’s way. "he reason for a few customer dissatisfaction was in the

promotion from within concept of Calveta 7ining !ervice, Calveta dining

promoted their front line employees to higher ran&s if they showed outstanding

wor& s&ills and dedication which was motivating the employees, but it also meant

that they would be rotated from one place to another which displeased few of the

!4/ residents, this could be easily resolved by hi&ing the salaries of outstanding

employees and still &eep them motivated rather than promoting <ob rotations, and

26



also a minor restructuring of Calveta 7ining’s organi+ational structure with

dedicated management representatives and area managers for a client.

• !ynthesis

• 5f /ran& were to come up with new strategies for growth only with the intention of

meeting his father’s goal, then in the long run it would harm the business.

Considering the dedicated staff and employees of Calveta 7ining, it would be

better for /ran& and the business to diversify rather than ac'uiring 6!7

• Conclusion

• /ran& should consider the reviews given by his sister and not ma&e decisions

clouded by his ego and <eopardi+e the reputation of the company and the special

wor& culture of Calveta dining !ervice, 5nc.

"nalyses of /S 'eal spe&ifi&ally &ultural &on&erns

1. "he si+e of the company would almost double 8(G of the current revenue from

$2 %illion to $. %illion9. @ith this si+e company, the current organi+ational

structure would be untenable 8assuming 6!7 has a similar structure9.2. Company culture has already deteriorated; Calveta has grown so big that their

training program does not instil the basic goals 8=Antonio’s @ay>9 in the new

trainees effectively. "o highlight this, =over the years, Calveta’s :resident and

C met with every new employee. %y 200#, with 1,000 management trainees

<oining the company in <ust 12 months, this was no longer possible.>

3. /ran& already had a growing concern regarding the =diversity of s&ills of area and

account managers. ecent college and business school graduates who entered the

business lac&ed the industry e3perience of counterparts who had wor&ed their way

up through the ran&s.>#. Dennifer also ac&nowledged it was becoming harder to find operations managers

who fully embraced =Antonio’s @ay.>5. 6!7 does not have great reputation and has had issues with labour and

management turnover.

27



(. Career growth opportunities alienate customers.). @ithin Calveta there seems to be a power struggle between /ran& and )is sister

Dennifer.

5.0 %e&ommen'ations

1. Combine !6?A and eliminate redundant positions. "his would include combining

supply chain, customer service, accounting and 5". All !6?A savings would be

diverted to cultural training in Calveta’s basic goals 8see step L9.2. )and over day*to*day operations of Calveta to Dennifer and have /ran& ta&e care of

the 6!7 operations. 5ntegrate and significantly reduce current combined

organi+ational structure by addressing 6!7s high management turnover with an

influ3 of Calveta middle and senior leadership.3. se 6!7 as a growth platform for internal Calveta promotions. "his will be a good

way to spread Calveta culture into 6!7’s operational environment. %ring over

'ualified staff from Calveta into 6!7 operations as temporary 8short term9

assignments to help spread the Calveta culture from within. !elected 6!7 staff is

li&ewise sent and trained in a Calveta operation, with the plan being that they

eventually return to 6!7.#. Create the concept of =Calveta niversity> to help train and integrate 6!7 employees

and help prevent the erosion to Calveta’s culture. "his would include a robust

program centred on continuous improvement training such as a curriculum of; new

hire 8 days9, #0*day orientation 81 day9, and annual =retreats> 81 day9. "his can also

be used to train new hires for 6!7 and Calveta as well as future growth. 5nstil the

need for a 7ivision :resident or above to meet the trainees as a way to replace the

C greeting of new employees, which is no longer feasible to maintain.

(.0 Con&lusion

28



estructure the organi+ational structure in order to improve internal communication.

:ursue differentiation focus strategy. %uild sustainable competitive advantage by

focusing on core values. /ran& is trying to do what is best for his father and not his

business. 5t is for this reason that Calveta should stay within their niche and continue

to do what has made them successful to date as (G of the mar&et is still un*

contracted.

).0 %eferen&es

• :hilip Motler et al, Far&eting management, An Asian :erspective, th edition.

• Resources for your business-Putting the focus on your customer(2010)etrieve

from;www.mar&etingdonut.co.u&

• Employee Development(2012) etrieve from;www.shrm.org

• Employee Development(2012) etrieve from;www.shrm.org

• /our re'uirements for ffective Cost Control. etrieved from www.wor&.chron.com

• Business-ompetition-!he-"oo#-$n#-B$#-Effects-for-Businesses-%$rge-$n#-&m$ll

(2012) etrieve from; http'.businessinsi#er.comi*e$s-reput$tion-h$s-t$*en-$-

be$ting-201+-+.

• onsumers $n# ,oo# Price nfl$tion-,D(201+) etrieve from;

https;EEwww.fas.orgEsgpEcrsEmiscEL0L.pdf

• ising /ood :rices; Causes and Conse'uences*C7 820129. etrieve from;

http;EEwww.oecd.orgEtradeEagricultural*tradeEL0HL(0HH.pdf

http://www.work.chron.com/

http://www.businessinsider.com/ikeas-reputation-has-taken-a-beating-2013-3


http://www.work.chron.com/



calveta dining services case study report

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