Using the virtual organization of Kudler Fine Foods, evaluations will be made to determine market structure and competitiveness. Kudler Fine Foods current strategic plan for 2003, marketing overview, and market surveys will provide information to evaluate how Kudler competes in its market and where its strengths and weaknesses are located. Based on the evaluation of Kudler Fine Foods an applicable market structure will be determined and the structures effects on the organization and its long-term profitability. Recommendations will be made for Kudler Fine Foods while comparing real-world organizations.
Kudler Fine Foods
Located in the San Diego area, Kudler Fine Foods has three locations offering imported and domestic specialty foods. Founder, Kathy Kudler found the joy of gourmet cooking to be a business opportunity and opened the first store in 1998. The first year of business was profitable and paved way to the opening of two additional stores. Shopping the world for the finest of products allows Kudler Fine Foods to offer the finest of wines, foods, and related goods. It is Kudler Fine Food’s mission to provide these fine selections coupled with knowledgeable, experienced, and helpful staff to create a pleasing shopping experience (Virtual Organization Portal, 2007).
Strategic Plan 2003
To provide Kudler Fine Foods mission while staying competitive, profitable, and delivering the goods known for, strategic plans are necessary. In 2003 a strategic plan was generated, within the plan traditional supermarkets were thought of as competition. Albertsons, Vons, and Ralphs advertised specialty foods similar to Kudler Fine Foods in the area of meat and produce. However, Kudler stays competitive by attracting specific customers cooking gourmet. While competitive stores offer similar food, they do not offer the same customer service, gourmet accessories, and foods Kudler offers. Whole Foods and Trader Joe’s offer similar product but aim to gain customers focused on healthy lifestyles not the gourmet experience.
Foreign food stores are not a large competitor, they to do not focus on the gourmet experience. While foreign food stores may have particular ingredients, they lack the competitive advantage of selection, service, expertise, or tools Kudler Fine Foods provides. According to 2003s strategic Plan Kudler Fine Foods customers are less price conscious than competitors (Virtual Organizations Portal, 2007). There is no direct competition although there are competitors trying to gain Kudler’s customer base. The combination of services and goods Kudler Fine Foods offers sets it apart from competition. Kudler Fine Foods uses its differentiated goods, atmosphere, knowledgeable services, intimate customer loyalty, and expansion of goods and services to stay competitive within the market. Ultimately it is the gourmet experience that makes Kudler Fine Foods a competitive force in the market.
Experiencing significant growth, Kudler Fine Foods looks to increase the profitability and loyalty of consumers and expand services. Kudler is strategically increasing profitability and loyalty of its customers by increasing internal efficiency, enacting a frequent shopper program, and expanding the services offered. Using a frequent shopper program customer purchases shopping behaviors are tracked and refined so applicable products can be offered to valued customers. Frequent shoppers will be offered points for shopping to redeem rewards to maintain store loyalty. To expand services Kudler offers exclusive upscale events in the store and in the comfort of customers own homes, which increases word-of mouth marketing, customer loyalty, and social networking.
In addition to expanding services and offering frequent shopper programs to increase revenue Kudler Fine Foods focuses on reducing costs by increasing efficiency. Using a large department store to benchmark, Kudler is engaging in developing employees through training programs and upgrading software systems. Costs are reduced by minimizing purchases while maintaining adequate amounts of stock. Using information retrieved form the frequent shopper program and the “dollar value and profit margin per transaction” orders are placed to best capture customers needs while tracking sales data for better forecasting, merchandise selection, and inventory management (Virtual Organizations Portal, 2007, para.5).
The store advertises the same sales and merchandise for the three stores and coordinates to maintain enough inventories within each store location to maintain a customer service level of 95% (Virtual Organizations Portal, 2007). Like other retail stores customer satisfaction is a prime marketing tool but so is the ever changing gourmet items offered in the stores. New items are introduced regularly into the store; Kathy looks to competitors for pricing strategies and product comparison to market the new goods. While Kathy looks to competitors her customer differs from other markets in the area, they look for a gourmet experience. Market Surveys
Kudler Fine Foods conducted market surveys in 2010 and 2011to collect data from consumers. The surveys help to identify opportunity, measure success, and identify strengths and weaknesses within the organization. The 2010 survey indicated that there was not a good selection of products present in the store. This was an area of weakness and an opportunity to improve; the 2011 survey showed an increase of satisfaction in the selection of products presented in the store. Once a weakness, the surveys measure success in the increase of product selection from 2010 to 2011. Surveys identify store hours, atmosphere, merchandise satisfaction, and knowledgeable service representatives as Kudler Fine Foods strengths. Weaknesses include merchandise displays and in 2010 selection and overall store satisfaction. The marketing surveys show improvements from 2010 to 2011 in both strengths and weaknesses indicated by customers (Virtual Organizations Portal, 2007).
Kudler Fine Foods Market Structure
Kudler Fine Foods is a monopolistic competition market structure. Within a monopolistic competition market structure there come both positives and negatives effects for Kudler Fine Foods.
While there are many similar organizations Kudler Fine Foods goods and services are differentiated. Kudler Fine Foods offers physical product differentiation in the service offered. For example, customers look to Kudler Fine Foods for a gourmet experience that cannot be found elsewhere. Kudler Fine Foods overall performance creates an experience. This experience is different from competitors accounted for in the strategic plan. Another positive of a monopolistic competition is that they are price makers, because Kudler Fine Foods offers differentiated products and services they are able to set their own prices. Kathy uses competitors as a price guideline but sets her own prices. In a monopolistic competition market large profits are possible in the short run.
Negatives Kathy easily entered the market and so will other individuals because there are no barriers to entry in the monopolistic competition market. The fewer barriers to entry in a market the more competition arises. The low barriers to entry in this market mean one must have an opportunity to differentiate; Kudler Fine Foods has this opportunity by offering different goods and services from its competitors. To stay actively competitive Kudler Fine Foods must engage in advertising to let customers know the difference between Kudler Fine Foods and their competitors. Advertisement costs time and money and can be difficult to make advertisements stand out against competitors.
As mentioned above in the short run profits are possible but because there are no barriers to entry many firms are attracted to the market, which increases in the long-run. As new firms enter the market Kudler Fine Foods products and services will become more elastic shifting the demand curve to the left, prices will be driven down reducing profits. In the long run these reduced profits will continue until Kudler Fine Foods reaches long run equilibrium, economic profit is impossible in the long run.
A personal recommendation for Kudler Fine Foods is to stay in the short run to continue making the most profits. They can do this by furthering product differentiation. For example, Kudler Fine Foods can look to competitors to make sure they are not selling the same products and offering the same services. Kathy already frequently introduces new products and should continue to do this. Staying innovative will also be beneficial, introducing online sells may help keep Kudler Fine Foods in the short run longer.
Real-world comparisons In the real-world there are many monopolistic markets like that of Kudler Fine Foods. Taylors Market is an example, like Kudler Fine Foods they offer gourmet options. Taylors Market finds its competitive edge by offering specialty items, including an onsite butcher. Both Kudler Fine Foods and Taylors Market are one of many firms in a monopolistic competition market structure. They stay competitive by offering differentiated goods and services. While both firms start out inelastic in the short run, in the long run they become more elastic. Below is an example of how Taylors Market and Kudler Fine Foods monopolistic competition market structure compares and differs from other market structures.
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