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

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

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.

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

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.

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

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.

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

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.

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.

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.

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

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.

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.

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

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.

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