Business Expansion Decision Analysis Through Case Study

Decision related to business expansions are crucial as they require proper planning across different strategic areas including decisions related to marketing mix, HR strategy and financial planning as well. Let’s understand this through the case study of Fresh Delights.

Fresh Delights Case Study on Business Strategy And Planning

Fresh Delights is a bakery chain that sells a variety of freshly baked breads, cakes, muffins, and warm beverages to its customers. Fresh Delights has been operating in the bakery business for the past 6 years, and the firm has managed to open 25 branches across different towns and cities. The company started as a limited liability partnership between two college friends, but recently got incorporated as a corporation. Recently Fresh Delights’ appeal for a long-term bank loan got approved by the bank, and the firm intends to deploy the borrowed funds in expanding the bakery’s product range. They want to produce a greater variety of muffins and types of breads. Typically, the bakery chain is known for its fresh croissants and coffee. However, with the new capital injection, they want to open a new sandwich line, anddifferent flavors of coffee-related drinks, smoothies, and milk shakes. Fresh Delights believes that this will potentially attract the younger customers as well.

In order to widen its product range, renegotiations must be made with the 40% current suppliers as new ingredients may have to be purchased in bulk. Although bulk buying will offer discounted prices, the purchasing and procurement manager is worried about the reliability of the delivery of supplies. Lately, there have been numerous delivery delays due to road traffic and vehicle breakdowns. The problem has magnified as Fresh Delights now has outlets in different cities across the country. Moreover, certain complains regarding the quality of some of Fresh Delights’ baked breads have also been prevalent. Keep these in mind, the bakery is  considering backward vertical integration by buying out one of the main suppliers.

In addition, Fresh Delights believes that opting for a new, divisional organizational structure might be useful as its type of product categories is set to be increased.
However, there has been an ongoing internal debate between the management regarding which organizational structure to choose.

Newer products mean more employees will also have to be hired. For instance, Fresh Delights will have to recruit experienced and skilled chefs who can design a new menu with appealing food choices, and then guide theothers in terms of how the new products can be baked or prepared on a regular basis. Recruitment has not typically been a huge concern for Fresh Delights because the bakery follows a strict code of ethics and offers constant training to prepare the staff. Likewise, incentives such as bonuses during profitable months, sick pay, adequate holidays, and provident fund benefitsare offered. Along with the new staff, new machines and equipment will also be required to prepare the new dishes. The finance manager has always been conservative and has accounted for high depreciation figures for all the existing equipment and intends to do the same for the new equipment. Moreover, the operations manager is intent on purchasing expensive equipment that can last longer, enable batch production of products such as muffins, and save costs in the long run.

Read the Case Study Carefully and Answer the Following Questions. Please Refer to the Frameworks and Concepts Covered in the Subject:

1. Basic Business Management Fresh Delights started off as a limited liability partnership and then became a corporation. Using your own words, explain what a limited liability partnership is, and how is it different from a normal partnership, and a corporation. [10]
2. Define a value chain and explain how Fresh Delights’ new expansion plan will change its position in Porter’s value chain model.
3. Fresh Delights has decided to particularly focus on the launch of a new product: a gluten free, white chocolate chips and blueberry muffin. Discuss how the marketing mix can be applied for this product and explain each of the elements of the marketing mix. Also explain how social media can be
   used to promote this specific type of muffin. [20]
4. Do you agree with Fresh Delights’ decision to switch to a divisional organizational structure? What are its benefits and drawbacks? Search the internet and pick a company that uses a divisional organizational structure, and how it has affected that company. [15]
5. Where (which department or unit) in Fresh Delights’ new product expansion strategy do you think new staff will be required? What are the factors that Fresh Delights’ HR team must consider in order to select the rightly skilled staff? [15]
6. The new product expansion strategy will lead to multiple changes in Fresh Delights’ liabilities, fixed assets, cash flow, and predicted revenues. How do you think these changes will shape the different segments of the balance sheet, the income statement, and the cash flow statement? [15]
7. Search the internet and pick any company of your choice in any part of the world. Perform a thorough SWOT analysis of the company you have chosen, and discuss its condition in the four perspectives that underlies a strategic plan. [10]

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Business Management Sample Answers: Fresh Delights Case Study on Expansion

1. Limited liability partnership is a partnership whereby the liability of partners is limited and it is different from normal partnership and corporations in the sense that in normal partnership, the partners liability is unlimited and corporation is a separate legal entity offering limited liability.
2. A value chain is defined as a Process that is responsible for adding values starting from sourcing materials to delivering the final product. The expansion decision of Fresh Delights would require the company to consider new suppliers, more equipment to manage its operations, increased marketing activities to promote its products, additional training and development requirements for human resources and procurement at large scale.
3. The marketing mix to the new Muffin can be applied by charging premium prices, offering gluten free muffin, promoting through influencers and utilising trained employees. Social media can be utilized to promote using Instagram and Tik Tok visuals.
4. Divisional structure is good in case of product diversification as it helps in faster decision making, achieving specialisation by products, but it leads to higher cost as well.
5. Departments including product development, sales and marketing, operations and procurement would require new staff and HR functions like compensation management, training and development needs to be considered.
6. The impact on the balance sheet, income statement and cash flow statement could be positive as the expansion would positively affect all these statements.
7. The SWOT analysis can be performed considering the strengths, weaknesses, opportunities and threats faced by a company.

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