Kem Chicks free essay sample

The problem was observed around the year 1988 when the management of Kem Chicks learned that the supermarket business in Indonesia was growing especially in Jakarta. II. Viewpoint: Indah Chaidir, Director of PT Boga Catur Rata. The case will be based on the point of view of the director of the three companies of the Kem Group (PT Boga Catur Rata, PT Kem Imbiss and PT Kem Foods), Indah Chaidir. She has the full responsibility for Kem Chicks’ operations and expansions since it is a division under the PT Boga Catur Rata. III. Major Policy Statement Kem Chicks is a family-owned gourmet lifestyle supermarket in the Kemang area of Jakarata, Indonesia that is a division under the management of PT Boga Catur Rata. It is known to serve upper to middle income groups various basic household needs as well as other complementary items. Kem Chicks’ goal is to be known as â€Å"The Meat People† and to successfully educate Indonesians to consume high-quality meat. IV. Current Operational Plans Management The management of the Kem Group of Companies, which Kem Chicks is a part of, has a basic philosophy of â€Å"Saling Asih, Saling Asah, Saling Asuh† which means â€Å"to love each other, to nurture each other, to develop each other†. A family environment and approach is conveyed by the management of the Kem Group of Companies where there is teamwork that creates camaraderie and trust among the managers and employees. Directors and managers of the Kem Group of Companies keep a close monitor on all activities of business. Daily detailed reports to the director, namely Indah Chaidir, are always made and are not uncommon and that is why the directors and managers know the details of what is happening and why to the organization. Marketing The Kem Group of Companies is dedicated in increasing the public, especially the Indonesians’, awareness of their goal to be â€Å"The Meat People†. Marketing efforts are under PT Boga Catur Rata’s guidance and are focused on promoting Kem Group’s high-quality goods, particularly meat. In the Kem Group of Companies, no marketing activities exist within the producers’ and the processor’s respective companies. Marketing attempts of the organization, according to Bob Sadino, must maintain the family atmosphere that he developed during his â€Å"Mom Pop† store phase in the supermarket activities. Finance Kem Chicks’ internally generated funds were fully committed and due to the rising interest rates and investment risks, the Kem Chicks management became hesitant to expand its supermarket by its own investments. Kem Chicks’ management estimated that the funds required for a large supermarket, covering land, buildings, equipment and the miscellaneous costs but excluding working capital, to be about 2. 5 billion rupiahs. The Kem Group of Companies’ supermarket revenues amounts to 16. 5 million rupiahs a day. Kem Chicks’ financing constraints made its management interested in the possibility of franchising. Operations All operating activities and interactions within the Kem Group of Companies are very closely-knitted. The Kem Group of Companies’ business centered on a supermarket, food processing, food distribution, farming and a restaurant. The management of Kem Chicks seek for outside advice and approached IPMI to provide a student field project about Kem Chicks’ franchising problem. Expansion or extension within the Kem Group of Companies involves creating closely related companies that supports the Kem Group’s mission of popularizing good-quality foods, especially meat, in Jakarta. Human Resources The Kem Group of Companies concerns the development of its human resources to its optimal potential. The management of the Kem Group of Companies is comprised of the owner’s family and relatives who attained higher education and have high potential management capabilities. Personnel policies are similar among the Kem Group of Companies, especially in the recruiting system. Certain positions particularly those who deal directly with customers or outsiders are scrutinized directly by Indah Chaidir herself. In terms of human resources development, the director, Indah Chaidir, personally handles the reshuffling of personnel where they are put into various positions until they find their respective niches. V. Statement of the Problem What form of franchising should Kem Chicks offer to maintain its competitive position in the growing supermarket industry in Jakarta, Indonesia? VI. Statement of Objectives Long Range Objectives To develop Kem Chicks’ human resources to its optimal potential that will gain opportunity for their employees’ careers. To gain economies of scale for the existing supermarket. To maintain and develop Kem Chicks’ competitive position in the growing supermarket industry. To occupy and use up more than 1% of the supermarket space in Jakarta, Indonesia. To maximize Kem Chicks’ popularity and increase the public’s especially Indonesians’ awareness of its goal to be known as â€Å"The Meat People†. Short Range Objectives To expand Kem Chicks’ operations by having more than one sales outlet by the end of the year. To increase the number of Kem Chicks’ Indonesian Customers from 6% to at least 15% within one year. To earn at least 2. 5 billion rupiahs for a large supermarket that will help increase Kem Chicks’ market share of 0. 12% to at least 2% by the end of the year. To improve employees’ over-the-counter communication and establish good relationship with Kem Chicks’ customers. VII. SWOT Analysis STRENGTHS WEAKNESSES Internal organization conveys a sense of family unity. Management has a harmonious relationship with employees. Offers high-quality food especially meat products. Flexible management team. One of the ten major supermarkets in Jakarta. Has a broad product mix. Employees experience difficulty with over-the-counter communications. Poor delegation of tasks to employees and lacks internal control. Lacks marketing strategies. Lacks financial knowledge and expertise. In short of sales outlets. OPPORTUNITIES THREATS Supermarket business in Indonesia is growing especially in Jakarta. Improving Gross Domestic Product (GDP) rate. Continuous demand for innovation and integration. Low barrier of entry in the supermarket industry. Increasing aggressive competitors. Price competition in staple products. Capacity expansions undertaken by most supermarkets. Most supermarkets operating in groups and linked with other businesses. Enhanced bargaining positions of consumers. VIII. Alternative Courses of Action 1. Product Distribution 2. Product Licensing 3. Entire Business Format Franchising IX. Analysis of Alternatives 1. Product Distribution ADVANTAGES DISADVANTAGES Promote the sales volume of certain Kem Chicks products. This arrangement creates exposure to Kem Chicks’ products in potentially large retail environments. There would be greater cost efficiency for Kem Chicks. The franchisee may have specialist knowledge of the region or area and customer buying habits. It would not support the expansion of the supermarket as a whole. The franchisee may demand Kem Chicks to lower its prices to fit in with their promotional campaign. The franchisee may add extra layer of profit margins thus increasing total costs. Potential conflicts may arise resulting from different strategic goals and profit-optimization strategies of each franchisee. 2. Product Licensing ADVANTAGES DISADVANTAGES It is a cost-effective route for Kem Chicks to get its products to the market. There is low risk for Kem Chicks to break into a set market. The franchisee will pay for nearly everything including patenting, packaging, engineering, design work, production, sales, promotion and more. If Kem Chicks is to go the royalty route, the continuous payments (royalties) could last for many years depending on the agreement. Kem Chicks could lose control over the management of the business. There is no assurance that the arrangement will provide or accommodate Kem Chicks’ objective to develop its human resources. There is no assurance of success for there is a possibility that Kem Chicks may be manufactured or modified poorly by the franchisee. The franchisee may not have a strong desire to develop Kem Chicks since there are times that the motivation that the franchisee has under this agreement is to develop his existing business. 3. Entire Business Format Franchising ADVANTAGES DISADVANTAGES Kem Chicks will have full control of the business. Kem Chicks will have the ability to exploit and maintain all its strengths. Kem Chicks will have a chance to develop and promote human resources. There will be standardization and uniformity in Kem Chicks’ products, system and operations. Problems may arise in the product manufacturing by franchisee. Kem Chicks will assist in almost everything needed to start the business including the location, size and built-out, furnishings, initial and on-going training, inventory, marketing and more. Geographical variations in market conditions and resource availability may affect the standardization and uniformity of Kem Chicks that may lead to trademark erosion and deterioration of brand quality. The franchisee may become too dependent upon Kem Chicks and fail to produce the personal drive which Kem Chicks’ system provides. X. Decision Statement The final decision or the recommended course of action is for Kem Chicks to offer the entire business format as their form of franchising. This arrangement is likely to be the most appropriate alternative since this type of franchising fits with the objectives of Kem Chicks which is is to gain economies of scale for the existing supermarket and to develop its human resources. By this arrangement, Kem Chicks will have full control of the business, the ability to exploit and maintain all of its strengths and possibly have a chance to develop its human resources. Adopting the entire business format as a form of franchising will help Kem Chicks generate profits that can further contribute to its expansion. By having enough resources, Kem Chicks can achieve its desired growth and maintain its strength and competitive position in the supermarket industry. Furthermore, engaging in an entire business format arrangement can help reduce Kem Chick’s weakness and constraints like having limited choice of land and location. Product distribution and product licensing are not chosen since both of the alternatives do not perfectly fit with Kem Chicks’ objectives of expansion and human resource development. For it is stated that product distribution has a disadvantage of not supporting the expansion of the supermarket as a whole and product licensing has a disadvantage of having no assurance that the arrangement will accommodate for Kem Chicks’ human resources development. XI. Implementation Program Short Range Draw up and prove a comprehensive operations manual that details what the franchisee does, how they do it and to what performance and quality standards. The categories included in an operations manual are the following: Organization Marketing / Sales People Technology Capital Develop an initial and continuing training program that ensures the â€Å"know how† contained in the operations manual. Formulate a fair and comprehensive franchise agreement. The following are the terms discussed in the agreement: Contract Explanation – outlines the type of relationship a franchisee is entering with the franchisor. Operations Manual – details the guidelines that the franchisee must legally follow in operating the business as outlined by the franchisor. Proprietary Statements – outlines how the franchise name is to be used as well as the marketing and advertising procedures in place that the franchisee be required to follow. Ongoing Site Maintenance – outlined are the types and timeframes regarding various maintenance items and upgrades that the franchisee that must be made in the franchisee’s location. Finance the franchise. Estimate the initial costs and the initial financial prospects. Initial fees to franchisees should be kept as low as possible to maximize chances of a successful business entry. Prepare a â€Å"prospectus† or a formal written offer for the potential franchisees know what business they can expect to do and how profitable it can be. Long Range Recruit Franchisees and develop marketing, sales and advertising strategy by using recruitment mechanisms. The recruitment mechanisms to be used are as follows: Newspaper Advertising Franchise Exhibitions Franchise Centers and Brokers Establish a central management function and possibly, field support staff to support the franchise network, and set up a system to monitor the performance of franchisees. Establish balanced, integrate, successful franchise relationships with qualified individuals who supports Kem Chicks’ goal and image. XII. Proposed Operational Plan Management Kem Chicks having a paternalistic style of management with Bob Sadino as the business’ â€Å"father figure† should progress from informal, subjective and paternalistic styles of leadership to more formal, objective and professional. This could be done by use of outside consultants, advisors and professional services. This could lead to better decision-making for Kem Chicks. Another aspect that needs improvement is the distribution of decision-making authority in the business. It is evident that the decision-making in Kem Chicks is centralized and it is advisable to use team management rather than autocratic decision-making. Team management involves all managers in Kem Chicks having equality and participative involvement in making important business decisions. Marketing With Kem Chicks being a family-owned business should use its advantage in going all-out in marketing and promotional efforts and building loyal client/customer relationship in a family-owned business can be a powerful strategy for success. It will allow Kem Chicks to maintain a range of contact and interaction which will generate top-of-mind awareness for Kem Chicks as a favoured and trusted business. Finance As Kem Chicks matures, it is suitable if it will use more sophisticated financial management tools since growing and moving into subsequent generations will make the business more engaged in more sophisticated forms of budgeting, forecasting, cash flow analysis and modelling. Operations Since Kem Chicks is growing and maturing it is suggested that their top managers look beyond the present operational aspects of the business and consider the broader directional alternatives available to the firm and make long-term strategic choices. Human Resources To develop Kem Chicks’ human resources it is advisable if Kem Chicks will establish employee assistance programs, seminars and trainings. This helps in refreshing and upgrading the skills of Kem Chicks’ employees. XIII. Other Problems and Recommendations PROBLEM RECOMMENDATION Indah Chaidir having problems in delegating certain responsibilities to her managers and employees. In order for Indah Chaidir to effectively delegate, she needs to train, coach, empower and trust her subordinates. With proper training and coaching, one can take on more important and complex tasks. Kem Group of Companies management team and employees having difficulty with over-the-counter communication. One smart way to improve employee and customer communication is to teach and train employees on how to communicate effectively with customers. Try to make them understand and share with them details on customer profiles. XIV. Management Lessons Learned Delegation of Authority – one should not underestimate the importance of delegation of authority for it contributes to efficient management. Delegation of authority saves time, increases morale, confidence and productivity of employees, develops team spirit and allows development for management. Furthermore, delegation of authority maintains harmony between superiors and subordinates. Human Resource Development – for businesses human resources or personnel function can be helpful for much more than simply processing payroll. Human resources play an essential role in developing a company’s strategy as well as handling employee centered activities of an organization so it is advisable that an organization gives concern for the development of its human resources to its optimal potential. Franchising in franchising a business, a business needs to think through the process of precisely how its business works. Franchisees will need exact details and guidelines to get their business up and running.