Introduction
The case study is based on Harvest Farm Foods Inc. The company has been facing declining or stagnant sales and dwindling shareholder’s profit. Therefore, the company top management had been changed in order to bring forth fresh air to the operations and increase profit. The new president, Patrick Webb is trying to find out what problems ail the company and how it can be solved. This case study analysis aims at finding the competitive position, strength, and weaknesses of the company in order to be in a position to provide valid recommendations. First, the analysis will provide the present situation of Harvest Food and then provide recommendations based on the analysis done on the company. The data on the company is deduced from the case study and industry condition of packaged food industry in the US is derived from secondary sources. Based on the analysis recommendations will be provided to the management.
Problem
What measures can be taken by Patrick Webb to do to improve Harvest Farm Foods profits?
Alternative 1
First option is to aim for vertical integration and lessen its horizontally increased product line.
Alternative 2
Change its line-forcing sales/distribution policy in order to distribute its product even to small sellers.
Critical issues
- Increase profit
- Selling through small retailers
- Reduce product line Motivate sales force
- Marketing research
- Cost effectiveness
- Obtaining a competitive advantage
- Just-in-time delivery
- Distribution policy
- Using excess capacity
- The competitive environment
- Adopting the marketing concept
Alternative 1
Harvest Farm Food has been facing low levels of profit for several years. According to the case, in the last 13 years, Harvest Farm Food’s competitors have provided an average profit return on shareholders’ investment of 5 to 9%, while it had provided an average of just 1.5%. In addition, the company’s profits have not increased since 1987. Given this, it is imperative to evaluate the competitive environment of the company.
In order to a competitive analysis of the firm, Porter’s Five Forces model is employed to see the competitive forces that the firm faces. The company operates in a highly competitive market. From the information provided in the case, it can be intuitively deduced that the company operates in a market, which is highly competitive with the firms operating in the market having little or no power of the price at which they offer their product. Further, the power of buyers –here we considers the buyers to be the superstore chains through whom Harvest Store supply their product – is also high as they can stress on the product they want and on the price at which they intend to buy it. Further there is little or brand loyalty for packaged food. The reason is provided in the case as the increasing paucity of time among customers. If the customers do not find one product available, they readily switch to another accessible brand. Supplier power is high too, as Harvest Food buys them from other manufacturers. Here suppliers are agricultural product suppliers, manufacturers of packets and packagers, etc. These suppliers have a great degree of power over the price they offer their products. Entry is low, as the overall industry has not shown any expansion of the market in the past few years. The products are easily substitutable as they are standard products available with other brands too.
Given this situation, it can be deduced that Harvest Food has no competitive advantage over its competitors and does not have a generic strategy. Their products do not enjoy any specific differentiating character. On the contrary, the competitors sell exotic products in the market, which according to the company marketing department has a low sales volume. On the other hand, Harvest Farm Food has a wide range of product lines – containing 65 items. Therefore, the products offered by Harvest Food were easily substitutable and did not enjoy any competitive edge over the competitor’s products. Competitors were doing vertical integration in order to grow their raw materials and do their own packaging. This strategy is expected to reduce the cost of production, as it will substantially do away with pressure from suppliers. Further, this strategy will help increase brand value as marketing and branding activity will be based on promotions highlighting these characters of the product.
Presently Harvest Farm Food is in a no integration situation. Presently the company does freezing and distribution of the product. Packaging and raw materials are derived from suppliers. However, the company has the excess capacity with which the company can integrate backward and forward to do the whole chain from raw material, manufacturing, packaging, as well as distribution. This integration will provide them better cost advantage and will help them maintain their product line at a competitive price, even when their sale volume is low. The benefits that will be derived from vertical integration are lower cost of transportation and improve coordination of the supply chain. This will also help in acquiring upward and downward profit margins, increase entry barriers for competitors.
Alternative 2
Harvest Farm Food has a strategy of push selling its products. It sells all its product line to the retailers. Therefore, small sellers cannot take in the products. Such push selling reduces the profit as it reduces the scope of the distribution as has been observed in case of Harvest Farm Food. The company had to rely only on large chain retailers while the smaller retailer could not take up the products, as the company policy required all of their products to be displayed. This deliberately reduced the distribution of the company. In this case the, the firm should do a market research and find out which of their products are more in demand and which of theirs are not and distribute their product accordingly to all. The mandatory policy should also be removed in order to increase their distribution channel. When there is little scope for differentiation of the product, the distribution channel of the product must become more efficient in order to reach a larger segment of the market.
Further, the customers of Harvest Farm Food are retailers, and they are not the end customers. They must increase their collaboration with them in order to keep doing business with them. Therefore, personal selling also has an impact on the distribution channel.
Recommendations
Harvest Farm Food should adopt the first alternative i.e. integrate vertically. This will enable the company to capture their source of raw materials and reduce the profit foregone to the suppliers. This will also help the company reduce cost. Along with this, the company should concentrate on increasing its personal selling to the retailers in order to maintain relationship. Marketing strategy should be based on this new strategy and their brand positing should be based on this.
Reference
Basic Marketing 17e; A Marketing Strategy Planning Approach, by Perreault,Cannon, and McCarthy.