Topic: Organisational Management – Case Study
Subject:Business
Volume: 5 pages
Type: Case study
Format: MLA
Description
Case Study –
Grace Foods UK, is a rapidly growing food distribution and wholesale
company located in Sunderland. It was founded by Mr. Wright, who started
the business back in 2005. They are primarily involved in supplying raw
materials and packaging to an extensive range of fast food outlets mostly
within the North of England.
Between 2005 and 2008, Grace Foods UK, experienced tremendous growth
in sales volume. In order to meet the increasing demand for its services, an
ambitious expansion plan commenced in 2009. In order to fund this, Mr.
Wright joined forces with three other major investors. As part of the plan, the
company’s operations were relocated to a much bigger and significantly more
expensive site in an industrial estate on the outskirts of Sunderland.
Grace Foods UK, subsequently employed more staff and a new functional
organisational structure was adopted. Expansion work was completed
towards the end of 2011, and the “new” company became one of the largest
suppliers of material and packaging for food suppliers and distributors in
England.
Since 2012, the four significant owners have all remained as major
shareholders. Each holds the same proportion of ownership at 25%. Of the
four of them, two are involved in the day-to- day running of the company as
Co-Managing Directors (Mr. Wright being one of them) and the other
shareholders contribute as they deem necessary to intervene.
The business is not unionized and the operative jobs are highly sought after.
Employee turnover and levels of absenteeism are low.
Grace Foods UK, is seen as a good employer, a well-established brand with a
healthy turnover but things are changing.
Competitors in the Market
The fast food supply and distribution market within the North of England is
currently dominated by Grace Foods UK. Competitive pressure was relatively
low originally, with limited numbers of competitors supplying to fast food
outlets (i.e. local fish & chip shops, burger bars, pizza outlets, Indian &
Chinese takeaways). This was despite the steadily growing number of fast
food outlets in the area. The couple of strong competitors, both wellestablished,
but with a smaller local market Share operated quite
independently, each with their own “list” of fast food outlet customers.
However, over the last couple of years, they have become more aggressive in
their expansion, especially in trying to capture market share. Another
significant development that is also of concern to Grace Foods UK, is the fact
that many new competitors have started to enter the market. This increasing
market pressure both from current and new competitors is presenting Grace
Foods UK, with some challenges.
One of the biggest newcomers has adopted a highly aggressive market entry
strategy. It is offering pricing their goods much lower than the break-even
margins (i.e. at loss-making prices) so that it is able to sign up new customers
quickly and has started to entice some Grace Foods UK customers. The
overall quality of their service is poor, especially in terms of on-time delivery
and flexibility. Grace Foods UK, on the other hand, still retains the strategy of
differentiating itself from competitors by providing excellent quality and good
customer service to keep its competitors at bay, but this is changing. Fast
food outlets have to source cheaper raw materials and packaging as they are
coming under increasing pressure. Intense competition through frequent
discounting by bigger chains and the popularity of “meal deals” from retailers
has reduced smaller fast food outlets’ profit margins considerably.
Financial Position
Given the intense competition, there is concern regarding the company’s
increasing overhead costs. Of particular note is the use of polystyrene as the
primary packaging material, favoured for its insulating and protective qualities.
As this damages easily and is bulky, any waste is financially and
environmentally expensive to send to landfill.
Current salary levels within the business (for all roles) are considered to be
higher than the average market rate and, although the current numbers of
staff are justified in respect of current workload. If market share reduces,
these numbers may need to be reduced and/or there will have to be attention
paid to more effective performance management systems.
The typical approach to budgeting that the company takes is to simply add a
small increment to each department’s actual spending based on the previous
financial year (to account for inflation), this does not take into account any
specific cost increases or reductions.
At a recent board meeting, Mr. Wright expressed concern about the company
budgeting process and felt that a harder line should be taken by managers
measuring performance and rewarding employees appropriately if Grace
Foods UK, was to remain competitive. He stated the shareholders felt the pay
bill was simply too high, pay and performance arrangements inadequate and
so has sought your advice as a business consultancy to address his and the
shareholders concerns.
TASKS: Presentation Preparation and Delivery
1. Analyse and present what I believe are the key issues identified
in the Case Study of Grace Foods UK, (Please note: Mr. Wrights concerns are
only some of these!)
2. Calculate and present the cost of the current pay bill that should be
budgeted for (clearly showing your calculations).
The current numbers of employees within the business with their existing
levels of remuneration are as follows:
Co-Managing Directors (2) £140,000 + bonuses of up to 30% of salary
Other Directors (2) £90,000 + bonuses of up to 30% of salary
Managers (4) £40,000-£55,000
Supervisors (4) £25,000-35,000
Operatives (45) £8.50 per hour (for a 40-hour week)
In addition, the Company has to contribute 10% of base salary to the pension
scheme for each employee. This is classed as a component of the playbill.
3. In order to significantly reduce the company’s high pay bill, the
shareholders are looking for a 10% reduction this year. Analyse how this
could be undertaken and then calculate and present the projected new pay bill
and proposed changes with appropriate justification (clearly showing your
calculations).
4. Propose a system to reward employees based on performance for future
consideration by the shareholders.
