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The success of every business depends on the strategic decisions that the management implements to overcome the operation and market challenges. A company facing declining sales and revenue may evaluate the internal and external environment to identify the weaknesses that deserve improvements. Alternatively, the firm could hire an independent consultant to assess the situation and make improvement recommendations. Skipper's Pizza is one of the businesses that have diversified into different markets, but performance is not per the expectation. Consequently, the firm performed a detailed assessment to identify the causes of declining sales in the Flint market and formulate appropriate solutions. The paper provides the summary, analysis of possible solutions, and the conclusion of Skipper's case.
Skipper's Pizza Pies is a pizza take-out and delivery store with subsidiaries in Ann Arbor, Southfield, and Flint. The owner-manager created a business model where each store makes and sells own pizza and soft drinks through walk-in orders, fax, and telephone. Of the three subsidiaries, the Ann Arbor store performs best since it is located close to Michigan University Campus that supplies numerous customers including students and staffs. The Southfield store has an average performance that is likely to improve following aggressive marketing conducted on several nearby office buildings. On the contrary, the Flint store has experienced unstable performance, which is evident in the low orders from the residential requests. The store manager revealed that the sparse location of the residential neighborhoods contributes to the low sales.
The Flint market is composed of industrial plants, with factory-worker neighborhoods distributed randomly in between the sites. Besides, most of the consumers are extremely time-sensitive and do not tolerate late delivery of orders. One a single delivery run, Skipper's an only serve two to three consumer neighborhoods; this creates a market gap for competitors. In this regard, the Flint market has attracted aggressive competition characterized by firms that conduct heavy brand promotion, point-of-sales offers, and coupons. Therefore, Skipper's Pizza targets to capture the customers in the industrial plants during the three shifts five days a week. Secondly, the store aims to improve service delivery to the customers placing orders by e-mail, Skipper's website, or fax. The store seeks to benefit from the low transportation costs and massive demand that arises from each industrial plant.
However, several factors hinder Skipper's Pizza Pies from adequately exploiting the market gaps in Flint market. The store is located 5-8 miles from the plant sites, and pizza orders have several toppings including pepperoni, double cheese, and mushrooms. Moreover, the delivery drivers' demand tips of $1 to $2 per pizza; these challenges reduce the profits per pizza. On the other hand, Skipper's Pizza has inadequate staff and equipment to prepare and deliver the orders at the right time. As a result, most customers decline to pay for late pizza deliveries; this also leads to inconsistent profits.
Analysis of Possible Solutions
Skipper's Pizza focuses on solutions that would enhance the operations and order processing to enable prompt delivery and customer satisfaction. The objective of capacity improvement is to eliminate the losses arising from delayed deliveries. In this regard, the solution is to increase the workforce and equipment; this would facilitate order processing and delivery services to meet the demands of industrial plant workers.
As Cassidy proposed, the store can increase the capacity from 144 Pizza Units to 300 units, which is the daily demand. However, meeting appropriate capacity required additional delivery car equipped with pizza warmer; this costs $11,000 with five years estimated useful life and annual depreciation of $2,000. Additionally, the store would require a pizza oven worth $20,000 with an expected useful life of 8 years and annual depreciation of $2,250. Expanding the operation capacity would also require recruitment of six delivery and eight preparation personnel at a total cost of $84 per day.
Another possible solution to Skipper's Pizza is to expand the capacity and relocate the store closer to the industrial plants. Relocation would significantly lower the delivery time to 2-5 minutes, which enables the firm to fulfill unmet demands. However, the target store for relocation is larger with a higher rent of $1,600 as compared the current store, plus a relocation fee of $16,000. Alternatively, Cassidy proposed that Flint's store should lower the number of orders accepted per day to enable proper prompt customer service. Besides, it would reduce the losses caused by late deliveries and enhance product quality.
However, considering that Skipper's Pizza Flint's store is suffering from high customer sensitivity to delivery time and product quality, other strategic options would be appropriate. The option to relocate and increase the personnel and equipment is not viable as the demand estimates are conservative or low. In this regard, expanding the store when the demand is shrinking would result in more losses. Therefore, Skipper should invest in improving the customer service system, delivery, and brand promotion.
Upgrading the customer service with modern technology systems allows the customer to place orders at varying periods such as weekly, bi-weekly, or monthly. Besides, the ordering system can be improved to accept all orders, several hours before lunch breaks and change in shifts. As a result, Skipper's would create close relationships with customers and receive requests at the right time to allow prompt preparation and dispatch (Subramanian, Joshi, & Deshmukh, 2017). Changes in the delivery systems involve procurement of a van fitted with pizza oven and customer service system. The van would then park near the industrial plants hours before lunch breaks; this would enable service delivery to customers who failed to place orders at the right time. Besides, the mobile workshop would allow Skipper's Pizza to warm the pizzas on-site without delay from the delivery time (Taylor, 2015).
Similarly, Skipper's Pizza Flint's store could invest in social media marketing, which involves creating accounts on Facebook, Instagram, and Twitter. These platforms enable the firm to have constant communication with the consumers (Andrews & Shimp, 2017). As a result, the store would create brand awareness alongside gathering vital information about the consumers' preferences. Alternatively, the store could produce promotional flyers and distribute in the industrial plants. The brochures inform the consumers of the changes in the distribution system, new technology-assisted customer service, and promote the products.
Skipper's Pizza store in Flint, Michigan could quickly improve the sales and profitability through changing the delivery systems, customer service, and brand promotion. The alternatives that Cassidy proposed on relocating the store and reducing capacity are not meaningful in increasing sales and revenue. However, improving customer service enables the store to communicate appropriately with the clients and enhance efficiency in order placement and processing. Investing in the mobile workshop would allow the store to access the stores at the right time, serve all customers, and eliminate losses for later deliveries (Taylor, 2015). Brand promotion enhances consumer awareness and communicates changes made in the delivery and customer service processes (Andrews & Shimp, 2017). Therefore, the three main strategic changes would salvage Flints' store, improve sales and revenue, as well as create competitive advantage.
Andrews, J. C., & Shimp, T. A. (2017). Advertising, promotion, and other aspects of integrated marketing communications. Nelson Education.
Subramanian, K., Joshi, K. P., & Deshmukh, S. (2017). Improving Forecasting for Customer Service Supply Chain Using Big Data Analytics. Supply Chain Management Strategies and Risk Assessment in Retail Environments, 25.
Taylor, D. G. (2015). Real-Time Service Encounters and Customer Satisfaction: Online Monitoring of Core Service Delivery. In Proceedings of the 2009 Academy of Marketing Science (AMS) Annual Conference (pp. 44-48). Springer, Cham.
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