Golden_Valley_Microwave_Foods_Case

EXECUTIVE SUMMARY Jim Watkins, president and COO of Golden Valley Microwave Foods (GVMF) began operations in 1978 in Edina, Minnesota. Being somewhat of a visionary, Watkins’ main focus was on the fledgling microwave foods industry and the belief that every family would want to “cook entire meals in a few minutes.” However, he lacked the “clout” necessary to produce microwavable dinners, and was unable to find suitable distribution channels because of the competitive nature of the supermarket arena. Watkins turned to vending machines. In 1984 his “shelf stable” popcorn, ACT II, began distribution through vending machines and mass merchandisers. Watkins held two patents (PatentStorm, 2004) in the microwave bag technology. By the end of 1990 GVMF was the “largest manufacturer of microwave popcorn in the United States.” In 1991 ConAgra acquired GVMF and gained the leading edge in microwavable foods research. ConAgra also acquired Beatrice Inc., and Amour Foods which included such brand labels as Butterball turkey, Orville Redenbacher popcorn, Peter Pan peanut butter, and Armour luncheon meats. One strategic element not expressed in the case study was the marketing of Orville Redenbacher and Act II popcorns which could appeal to both the price conscious and gourmet consumer markets, successfully squeezing out Diamond Food’s PopSecret brand popcorn (Britt, 2011). As a division of ConAgra, GVMF was in a position to carry out their strategic plan. New product possibilities could include arenas in food inputs and ingredients, refrigerated foods, and grocery diversified products. The expanding markets for GVMF included ConAgra Asia Pacific, ConAgra Latin America, and meat and chicken processing in Europe in addition to GVMF’s line of popcorn already marketed in Eastern Europe. VISION AND MISSION The vision statement for GVMF’s from the case study is to “link technology, quality, convenience and price into a product that the consumers would buy on a regular basis” (Crittendon Case Study, 2000). An example of this vision being put into place can be seen when GVMF sold popcorn, looked for the type of corn that popped the best overall, and developed a bag that would allow all the kernels to pop while introducing them into vending machines. The primary mission of GVMF is to provide quick ready to eat quality meals and snacks at an affordable price (Case Study). Using Porters five business level strategies it can be seen that GVMF uses an integrated cost leadership differentiation (Hitt, Ireland, & Hoskisson, 2009). Price is a very important part of how the company plans on extending its market share. The company introduced advertised specials on “two for the price one” deals to promote new products (the purchase of fries came with a pack of free pancakes). This reduces the overall cost to the consumer and seeks to expose customers to the company’s new products. In addition though, GVMF seeks to differentiate its products from competitors by using technology to provide quality meals in a short period of time. As the case study mentions a customer will try anything once but if it’s not of great quality then they won’t buy it again. A core competency for GVMF Microwave Foods Inc, is its management team based on foresight and intuition that microwaves would become cheaper and more available throughout the United States which would allow for a sales increase in microwavable popcorn. As a result GVMF selected the best popping popcorn kernels and the most innovative popcorn bag which allowed all the popcorn to pop thus ensuring a quality product (Case Study). GVMF TARGET MARKET The size of GVMF’s target market in the United States is approximately 60% and 40% internationally. The size is dependent upon GVMF’s internal core competencies as mentioned above, and opportunities in the external environment as outlined below. EXTERNAL ENVIRONMENT “The general environment is composed of dimensions in the broader society that influence an industry and the firms within it. Firms cannot control the general environment’s segments and elements.” (Hitt et al., pp. 35) GVMF has several environmental factors that it should be aware of as the firm seeks to remain profitable with a competitive advantage. Demographic Segment: The trend for healthy snacks is steadily rising for both men and women in 1996. GVMF reports the following, “worth about $2.4 billion by 1996, the low-calorie, low-fat, low-sodium frozen dinner entrée market [is] one of the hottest areas of competition. A Consumer Reports test, however, revealed that most of the 800 frozen meals/entrees in the “light” category fell short of consumers’ traditional expectations for foods either prepared at home or purchased at a deli or coffee shop.” (Case study pp. 58) The market demand and the results of the Consumer Reports test indicate that GVMF has a huge opportunity in this market by coming out with new and improved “light” meals that appeal to the consumers but quality/taste concerns need to be addressed. Economic Segment: GVMF has to consider the fact that they have an obligation to provide their products in easy and fast packaging at a low cost to appeal to more consumers. Technological Segment: GVMF needs to ensure that the firm continues to have a competitive advantage in product differentiation. Additionally, GVMF should develop an edge by improving on the quality of packaging. The quality of the packaging should be microwave friendly which means that it does not collapse during cooking and it should not burn the consumer. Global Segment: GVMF will need to focus on international markets and ensure that the firm is adjusting its products to fit the culture. As discussed in our Wal-Mart coursepack, GVMF would not want to make the same mistake as Wal-Mart by not taking into account cultural preferences and differences. International consumers have different tastes than consumers in the US market. The firm will need to identify with all markets and make sure the product is tweaked accordingly. Sociocultural Segment: Since consumers are trending towards healthier snacks, GVMF should focus on providing healthier snacks in the rapidly growing vending machine market. If the company is able to obtain a competitive advantage here then it will secure its ability to remain profitable in the future. SWOT ASSESSMENT The strengths and weaknesses portion of SWOT analysis is relatable to the Resource Based View (RBV) strategy model because both incorporate the internal resources of a corporation in order to create a competitive advantage. In the case of GVMF, the company’s internal strength concerning differentiation of product offering is relatable to Michael Porter’s Business Strategy. Industrial Organization (I/O) model of strategy, which utilizes external environmental analysis, strategizes by evaluating the opportunities and threats of an organization through the use of “…scanning, monitoring, forecasting, and assessing (Hitt et al., pp. 37-39).” In the case of GVMF the external threat of new entrants paired with substitute products are viable threats to the organization, according to Michael Porter’s five forces model of competition. Appendix A depicts a detailed listing of GVMF’s SWOT Analysis (strengths, weaknesses, opportunities, and threats). Overall, GVMF has viable strengths and opportunities within the industry which will allow the company to gain success as an industry leader given the fact that it is able to recognize and address its current internal weaknesses and external industry threats. STRATEGIC PLAN Current Situation: GVMF is currently at a crossroads. The microwave food industry is experiencing ups and downs and the current strategic thought is to continue to introduce new products into the market. GVMF’s chief competitors are Keebler and Frito Lay; introducing new products annually and have millions of dollars to invest. Frito Lay is targeting the reduced fat and gourmet market while Keebler has attracted 40% of the salty snack market. GVMF’s foray into the “foods cooked in the microwave” segment had not panned out as they had hoped. The problem was twofold and rested on (1) quality and (2) packaging. According to David Britt, then Senior Vice President of North American Sales for ConAgra, the problems centered on different brands, wattages and sizes of microwaves and be able to create matching or suitable cooking instructions. The other difficulty was minimizing or eliminating contamination issues. This made it difficult to develop value added meals. However, GVMF popcorn sales were strong and the industry overall had experienced annual growth rates of 25%. GVMF expected to see annual growth rates of 15% for their own brand of popcorn. Future Outlook: GVMF cannot compete in the snack food and “raw” entrées market as it had thought. The majority of GVMF’s microwavable foods are considered underperformers. GVMF cannot gain a reasonable or profitable “repeat business,” a key challenge in the consumer market because they have failed to meet consumer expectations. GVMF needed to look toward (1) new markets for their current products that do perform well and, (2) GVMF will need to introduce new quality products to their current market and look toward creating future markets. Strategic focus: GVMF’s strategic focus will be on the technology (specifically packaging) needed to produce quality microwavable products that meet consumer expectations. The marketing strategy would be targeted toward three markets: international, vending machine distribution, and frozen dinners.