Enviromental_Scan

ENVIRONMENTAL SCAN This environment scan conducted is considered an analysis and evaluation of internal conditions and external data and factors that affect Kudler Fine Foods. In order to formulate the strategic plan a good understanding of internal and external environments must be sought to determine whether the business needs of Kudler Fine Foods are coordinated with the availability and competency of its workforce. A common tool used for the strategic assessment is the SWOT (Strengths, Weaknesses, Opportunities and Threats) Analysis. External factors and data analyzed: 1. Economic Conditions – Commercial Property Leasing Prices, Commercial Interest/Lending Rates, Qualified Labor Pools, Average Household Income 2. Weather and Climate - How this has historically affected produce crops 3. Demographics of Current Locations – Have these changed in last 10 years' 4. Governmental Influences – Policies, Laws and Regulations that relate to businesses, employees and taxes. Changes in leadership: President, Governor or Commissioners. 5. Geographic and Competitive Conditions Internal factors and data analyzed: 1. Current Workforce Skill Set – Education, knowledge of product and people skills 2. Demographic Profiles of Current Employees – Age, race, sex ect. 3. Retirement Eligibility – Will people in key positions be likely to leave' 4. Union Issues – Do employee’s fall under an employee union' 5. Organizational Climate – Do staff feel supported and nurtured or overwhelmed and burnt out' 6. Turnover Rate of Employees – Types of turnover and reasons why staff are leaving the company 7. Salaries and Benefits – Will the budget allow changes to salaries and benefits SWOT ANALYSIS | Positives | Negatives | Internal Factors | Strengths | Weaknesses | 1. | 2. Small organization 3. High retention rate of employees 4. Very low percentage of management and specialty staff will be eligible for retirement 5. Strong focus on customers 6. Wide selection of products 7. Good store locations 8. Software system and inventory management system 9. Strong organizational culture 10. Loyal customer base 11. Frequent shopper program 12. Desirable company to work for 13. The current workforce is very racial/ethnically diverse 14. There is a good training program for new employees 15. Strong financial position and credit rating | 1. High percentage of sales is from perishable goods 2. Organizational structure is restricting management from allocating time to work on expansion plans 3. No formalized mentoring program exists 4. No automated system or electronic database for tracking employee time-off 5. Procedural manuals need to be developed or updated 6. Lack of company forms and contracts 7. Bank reconciliations and accountability of funds | External Factors | Opportunities | Threats | 1. | 2. Geographic expansion throughout California 3. Additional product lines 4. Development of KFF brand products 5. Online sales and home delivery 6. Expansion in store services 7. Buying direct from growers 8. Increased buying power on product lines from sales at additional stores 9. The supply of workers in Southern California exceeds the demand for workers 10. There is Federal money available for training new employees as well as subsidized salaries 11. Commercial property vacancy rates are on the rise 12. Contractors more readily available at a lower cost 13. Technology and infrastructure advances in the transportation and storage of perishable goods | 1. Customers disposal income being reduced 2. Competing gourmet shops 3. Weather and climate change 4. Disease outbreaks 5. Increases to business taxes at a State and Federal level 6. Healthcare reform | Strengths 1. Small organization. Kudler Fine Foods is able to control and monitor all activities on a daily and weekly basis. Problems can be addressed quickly and decisions made. 2. High retention rate of employees. In the most part, the workforce is dedicated to the company. They support the same beliefs of eating and enjoying fine gourmet food, as their leader Kathy Kudler and as a result remain loyal to the organization and its values. 3. Very low percentage of management and specialty staff will be eligible for retirement in the next 5-10 years. Kudler Fine Foods should retain most of its key staff and not have to train and fill key positions, which at times can be costly. Strong focus on customers. All staff at Kudler Fine Foods are taught that customer focus is the key to success. Kathy works the counter on occasions to ensure she still has interactions with the customers and understands their needs. Clerks are trained to be friendly and helpful to the customers and ask if they found everything they were looking for. If several customers request the same item, the item will be reviewed and either be added as a stocked item or put on special order for the customer. 4. Wide selection of products. Kudler Fine Foods offer 16 different kinds of apples, wines from eighteen countries around the world, 250 variety of cheeses, and 350 fresh fruits and vegetables. No one, including the major grocery chains, offer such a diverse product range. 5. Good store locations. All the stores are in mid- to upper-range economic regions where potential customers can afford to pay a little extra for “gourmet” goods that are considered better quality and healthier. The Del Mar store, which did not do as well as expected closed last year. This tied into the opening of the new Carlsbad location. 6. Software system and inventory management system. Kudler Fine Foods implemented a new software and inventory management system in 2006 that allowed the scanned sales from the cash registers to update inventory levels on a real-time basis. This has made it easier calculate reorder requirements on a daily and weekly basis. Thus keeping inventory at optimum levels. 7. Strong organizational culture. Kathy has a strong personal relationship with the staff. She runs the business similar to a family run company. 8. Loyal customer base. Once customer’s come into the store, they tend to return every seven to ten days to purchase more products. Kudler Fine Foods generally has a great reputation in the neighborhoods it operates in. 9. Frequent shopper program. An initiative that commenced in 2007 with excellence results strengthening the loyal customer base. 10. Desirable company to work for. People working at Kudler Fine Foods are generally happy at work in friendly and supportive work environment. As a result Kudler Fine Foods has built a steady reputation in its neighborhoods as a desirable company to work for. 11. The current workforce is very racial/ethnically diverse. Kudler Fine Foods employs a diverse range of people, which is hopefully viewed favorably in the community and attacks a larger customer base. 12. There is a good training program for new employees. The customers expect to be served by courteous and knowledgeable associates. In order to meet the highest standards it is mandatory that new employees go through the company-training program. This includes: * New employee orientation * Employee handbook review * A three-week on-the-job training program * A sixty-day period of working with an assigned “buddy” co-worker * Supervisors are also required to attend the following training: * Interviewing guidelines * Motivating workers for performance * Preventing EEO claims and sexual harassment in the workplace * Building a positive service environment * Conducting effective performance reviews * Interpersonal skills * Strong financial position and credit rating. Kudler Fine Foods has strong cash reserves with a great credit rating. Weaknesses 1. High percentage of sales is from perishable goods. Kudler Fine Foods do not use any preservatives and as a result approximately 12% of the perishable goods are rotated out of inventory every two or three days. Goods are either thrown away or donated to local charities. Donated food is still in good condition, but not sale quality so it is removed from the shelves on an ongoing basis. 2. Organizational structure is restricting management from allocating time to work on expansion plans. Management at Kudler Fine Foods tend to spend the majority of their time focusing on daily or weekly operational issues and cannot find the time to step back from operational issues and work towards company growth and expansion. 3. No formalized mentoring program exists. Kudler Fine Foods has a good training program for new employees but does not have a formalized mentoring program for existing employees that show initiative and desire to work their way up into a management position. This is something that could greatly help Kudler Fine Foods fill new positions as they look to expand by adding new stores. 4. No automated system or electronic database for tracking employee time-off. It is currently left to individual store managers to keep track of each employee’s time off. 5. Procedural manuals need to be developed or updated. Kudler Fine Foods do have some procedures and policies in place listed on their company intranet. The human resource procedures are the most detailed and only require minor updates. Considerable work is required in developing procedures and policies for operations, accounting, information technology and administration sections. 6. Lack of company forms and contracts. Kudler Fine Foods uses very few custom developed forms, preferring instead to use forms (contracts, order forms, etc.) that are supplied by the parties the company is dealing with. For example, the leases on the stores were contracts supplied by the lessors. The few customized forms the company uses were obtained from "off-the-shelf" computer programs and slightly modified by Kathy or her assistant. As the company expands so should the use of customized tailored forms to meet the business needs of Kudler Fine Foods. 7. Bank reconciliations and accountability of funds. There are no written policies relative to the security of the finance and accounting systems. The system has imbedded security features such as passwords, dollar limits, limited access features. However, there are no formal company policies or audits regarding the same. One employee is responsible for the daily and monthly bank reconciliations. However, this same employee has additional duties, which include backup functions for accounts payable and payroll when other employees are not available to perform their responsibilities. Hence there are some concerns about accountability and traceability. Opportunities 1. Geographic expansion throughout California. The number of potential expansion areas may have been reduced since 2003 with similar stores populating neighborhoods that met Kudler Fine Foods demographic profiles. However, there are still potential untapped locations that have been identified in San Diego, Palm Springs, Santa Barbara, San Jose and San Francisco. 2. Additional product lines. Customers are always making suggestions about new items or products. If several requests are received then a request can be sent to one of the wholesalers Kudler Fine Foods utilizes to provide the product on a trial basis. 3. Development of KFF brand products. Kudler Fine Foods can develop and market a range of gourmet products for sale in stores as well as online. 4. Online sales and home delivery. Kudler Fine Foods launched an online website in 2004 that allowed customers to purchase products online that would be shipped directly too them. To date this only produces a small revenue stream and hasn’t grown due to a lack of resources dedicated to the project. This is an area that can be expanded. 5. Expansion in store services. Kudler Fine Foods has trailed a deli section in the new Carlsbad store with encouraging feedback from customers. Other recommended services would include juice bar and café. 6. Buying direct from growers. Many in state growers have approached Kudler Fine Foods to supply them directly with fresh produce. This will cut out the wholesalers in some ranges of products, which will result in lower prices being offered to customers and higher margins for Kudler Fine Foods. Buying direct from producers should be handled with caution as too not upset existing wholesalers that will still be required to supply many exotic and international items of produce. 7. Increased buying power on product lines from sales at additional stores. As Kudler Fine foods increases its number of stores it should be able to negotiate better product pricing based on economies of scale. These savings can be passes onto the consumer. 8. The supply of workers in Southern California exceeds the demand for workers. Due to the state of the current economy the unemployment rates in California are in excess of 10 percent. This will result in Kudler Fine Foods being able to fill positions in new stores with qualified individuals with relative ease. 9. There is Federal money available for training new employees as well as subsidized salaries. The federal government has a number of grants and programs available to try and get people back into the workforce in an effort to tackle the high unemployment rates. They are offering to train new employees and subsidize their salaries for up to 12 months. Kudler Fine Foods can capitalize on these programs when opening new stores. Hence reducing labor costs. 10. Commercial property vacancy rates are on the rise. The residential property market has suffered large losses over the last 18 months. Some of this has flowed into the commercial property sector with businesses shutting their doors and vacating leased properties. Economists are still predicting the commercial property market to suffer further losses in the next 12 months. Therefore, Kudler Fine Foods can capitalize on locking in low lease rates for new stores. 11. Contractors more readily available at a lower cost. When the economy is booming this generally means new construction is high and construction contractors are difficult to book and demand high rates. With the sudden decline in the economy over the last 18 months new construction has subsided and as a result many contractors are desperate for work, which means they are readily available are cheaper prices. 12. Technology and infrastructure advances in the transportation and storage of perishable goods. This has allowed additional items as well as longer shelf lives for the international selection of fresh produce stocked at Kudler Fine Food stores. Threats 1. Customer’s disposal income being reduced. The economy appears to have opened many opportunities for Kudler Fine Foods but if people’s income is reduced they may not be able to afford the more expensive gourmet products or may buy fewer items. 2. Competing gourmet stores. New stores specializing in the gourmet product sales opening nearby could have a significant affect on sales. 3. Weather and climate change. Extreme or abnormal changes in weather such as lack of rainfall, frost, snow or high temperatures can have a negative impact on crops that will affect the availability and price of produce. 4. Disease outbreaks. In 2008/2009 we witnessed a Salmonella outbreak across the United States. It was traced back to tomatoes from Mexico. However, it took considerable time to trace back the source of the outbreak and as such many people were hesitant in purchasing or consuming fresh produce. Incidents like these could significantly affect sales. 5. Increases to business taxes at a State and Federal level. Both the State and Federal Budgets are suffering from the current state of the economy. As a result they may be forced to increase the business tax rates. The Californian Governor position is up for election in 2010. 6. Healthcare reform. If this is approved it can increase overhead benefits that must be paid to employees. Trends 1. Society is focused on eating healthy. Many organizations are promoting a “eat healthy” lifestyle to tackle obesity. 2. Local neighborhoods believe in supporting local shops. With large media attention on superstores like Wal-Mart driving out the “mom and pop” stores coupled with the downturn in the economy. There is been a push from people to support their local neighborhood stores and keep the money in the region. 3. Fresh produce is exempt from sales tax. Sales tax in San Diego County has increased from 6.5 percent to 8.75 percent since 2003. Thus making the purchase of processed goods and restaurant meals more expensive to the consumers, which has encouraged more people to eat healthy (fresh produce) as well as cook and prepare meals at home. STAKEHOLDER ANALYSIS The key stakeholders at Kudler Fine Foods were also analyzed. Stakeholders are those entities, internal or external, which could affect Kudler Fine Foods or be affected by the organization. The following list is details the key stakeholders: Employees – There are currently 127 people employed across the three stores and in the administrative office at Kudler Fine Foods. All employees in the organization are considered valuable assets to the team. The team of clerks and shelf-stock individuals who may be at the lower end of the pay scale are seen as critical to the operation. These people have the most day-to-day contact with the customers and can have a great influence on customer satisfaction. Shareholder - Kathy Kudler remains the sole shareholder and owner of Kudler Fine Foods. Kathy Kudler not only has the vision of the organization, she has established the culture and is the main management person. She still handles a lot of the day-to-day operations. However, in order to focus on the companies’ growth strategy it is recommended that the store managers report directly to the Director of Store Operations instead of Kathy Kudler to free up more of her time. Customers – Happy customers are the key to Kudler Fine Food’s success. Their suggestions and input is highly regarded. Clerks are encouraged to keep track of comments or requests, and share them with Kathy when she comes into the store. If a customer requests a product, it is reviewed to see if it is feasible to stock that item. If it is not feasible, a special order can be placed. Complaints about a product or a service are taken very seriously and every effort is made to address any and all problems quickly. Wholesale Suppliers – The product comes to Kudler Fine Foods from local, national and international suppliers. Fresh, organic fruits and vegetables are purchased locally from distributors who ensure that the product is of the highest quality. However, the option of dealing direct with some of the local growers is currently being investigated. The dairy products are offered locally and meats are received from all over the country. Some of the wine and cheese is imported through national and international wholesalers. Kudler Fine Foods has good financial terms with suppliers and even though orders are placed on a weekly basis, most allow payment within 30 days. Banks – Kudler Fine Foods is on good standing with Bank of America and has a great credit rating. Credit terms can be extended when launching a new store and around the holiday season when the stores need to purchase more product than normal. The business credit line is also utilized sometimes during the summer slow months to help carry the stores through. Due to Kudler Fine Foods long established credit history, the changes in the economy and resulting credit crunch has not affected their terms with Bank of America. Competition – A few new gourmet stores have recently opened up in the vicinity of Kudler Fine Food stores. However, competition locally is still minimal and consists of a few specialty shops, major supermarket chains and some online gourmet shops. COMPETITIVE ANALYSIS The following table lists all known competitors in or around the cities that Kudler Fine Foods have stores. The companies are listed in order of level of competition. Company | Locations | Market Segment |  Comments | Bristol Farm | La Jolla | Gourmet food, wines & deli | New store opened in 2006 | Cardiff's Seaside Market | Encinitas | Gourmet food & seafood | | Henry's Farmer Market | Carlsbad | Gourmet food, wines & deli | | Jonathan's Market | La Jolla | Gourmet food and restaurant | Owned by Dallo Enterprises | Harvest Ranch | Del Mar, Encinitas | Gourmet food, wines & deli | Owned by Dallo Enterprises | Whole Foods | La Jolla | Organic Food. Higher priced | | Trader Joes | La Jolla, Encinitas | Organic Food. At low cost | | Girard Gourmet | La Jolla | Deli, bakery & restaurant | | Frazier’s Farm | Vista | Gourmet food, wines & deli | 18 miles away from Encinitas store | Vons | Carlsbad (2), Encinitas (2), La Jolla | Groceries. Some Organic Foods | | Ralphs | Carlsbad, Encinitas, La Jolla | Groceries. Some Organic Foods | | Albertsons | Carlsbad (2) | Groceries. Some Organic Foods | | Kitchen Witch | Encinitas | Cooking utensils and cooking class | | Fresh and Easy | N/A | Low Priced Organic Foods | No stores in current locations |