The Douglas Fine Foods is a Douglas family business, which was started in 1929 by Douglas Family in Calgary, Alberta. The business has been selling a number of food and beverage products that have been in demand over the years. The three Douglas brothers now share an equal part of the family businesses, and Matthew Douglas is working as the CEO of the Douglas Fine Foods case study help.
By 2008, Douglas Fine Foods has become the largest privately owned Canadian food services company and provides different services to major industries, including schools, sports arenas, concessions, warehouses, corporations and government offices. The services it provides includes nutritious and healthy business dining, vending machine services, catering, camp food services, residence food services, and also food service equipment and designs.
The company doesn’t only generate its revenues by providing food and beverages, but also offers a full form of appealing value chain services, from designing and constructing to financing and equipping of a facility. It also provides services for staffing and delivery of food service.
The company’s goals and strategies provide the bases for decision-making within the organization and provide direction for the company. The CEO believes that there are important family principles related to customers, employees, community, sustainability, and profitability that has made the company successful.
Current Situation and Alternatives
Since, Douglas has spent very less time being the new CEO of the company, he is worried of how he will be running the company in order to bring it to an international level organization. For this purpose, Douglas is continuously reviewing the operations of the company. While reviewing the operations of the company he is considering three main options for Douglas Fine Foods case study help that are;
Positioning DFF in such a way to exit the business and make it a potential acquisition target for a multinational large business or strategic buyer. Secondly, position the company in such a way in order to compete within the market and large business in the industry by targeting particular segments.
Other than this, by growing the business organically through innovation, introduction of new products so that company can become market leader. Additionally company could also improve the bottom line of the business by introducing operating inefficiencies such as lengthening trade payments and significantly lowering input costs.
However, in order to look forward for these options Douglas should first determine its key strategic issues or problems that it currently needs to overcome so as to foresee the possible options.
The Douglas Fine Foods being the largest private food services company in Canada. The company provides a variety of food services, and is not only a food provider but also provides a range of value chain services to its clients. The company works on the strongly held principles and has firm goals and strategies. The swot case study analysis on the company is conducted to assess its internal environment to determine its strength and weaknesses along with the possible opportunities and threats. This will further assist in figuring out strategic issues of the company.
The Douglas Fine Foods has made its way from $1 million business to $30 million business in about a century. The rate of growth of the company is tremendous and inspiring, and proves the strategic excellence of the company. It provides a diverse range of food services, and maintains its relationships with the customers in order to provide customer satisfaction and sustain growth.
It does that by providing flexible and unique services to the customers, and is able to cater large projects and provides excellent quality food at reasonable prices, making it the first choice of various customers. The company has its lifelong family principles, that it has a strong hold on. The principles, goals and guidelines provides the company with its success and strengths.
The Vending Sector of the company’s services is a declining sector and has slim margins, hence the company should try to focus more on the lucrative areas where growth can be achieved in future.
Douglas Fine Foods has a diversified products and services portfolio. The company provides catering services which works on referrals, and have several opportunities in gaining referrals by providing quality services.
The branded food outlets of the company provide high brand recognition and are a growing sector. The company can compete in this area to gain a high market share and earn revenues. Besides that the company has required expertise to working in the recent trend of food services design. It can generate significant revenues from this area.
One of the major threats for the company is the mature and growing competition of the Canadian food services industry. Since the economy is going down and the consumer and business spending is expected to slow down, the company might face a downturn in sales and growth.
In addition to this, the small competitors including “mom and pop shops” pose a threat to small contracts market share of the company. Besides that, the other larger competitors should be kept an eye on in order to keep them aside.
The company’s customer base requires high quality services and hence, if any compromise is made in quality it might lose its customers. Many of the catering services of the company are based on referrals, and losing one customer means losing others too.
Strategic Issues or Problems
Douglas Fine Foods is currently facing several strategic problems that need to be identified before making any possible recommendations. These are identified below.
Firstly, DFF needs to increase its EBITDA from current level of 1.7 million dollars to 5 million dollars, which will help in achieving the option one, in order to exit the business and position the business that will make the company an attractive acquisition target for large businesses.
Currently, the company is generating about $33 million and a sales profit of $235000, and apart from this the company had built up substantial debt obligations.
Secondly, DFF needs strong leadership and management processes in order to move forward to achieve its options under consideration by Douglas, as there are a lot of leadership problems within the company. Douglas have also found that the employees of the company are resistant to change and are preferring the methods what they were practicing in the past, which means that any changes in the company’s policies would be very difficult for Douglas to implement.
Thirdly, DFF also need itself to transform into a professionally managed multinational company from its previous structure of being an entrepreneurial oriented family business along with the culture of the company which did not match a large professional organization.
Fourthly, Douglas had just a confrontational relationship with most of its senior management team of the company who were nit pleased with Douglas acquiring the role of CEO and hence are not seem to be willing to support new directions for the company. Moreover, it would also be difficult for Douglas to fire these senior managers as they are equipped with company’s important legal information and its clients.
Finally, prior to Douglas becoming CEO of DFF, the company bid and won a contract with Canada Auto Corporation (CAC) which resulted in the biggest client of DFF. The contract eventually resulted in about 20% of the entire EBITDA of DFF. However, it was questionable that whether the contract should be continued forward, as it had substantial liabilities associated with it and was also outside the core competencies of the company.
The issues that are being analyzed will now be evaluated for their possible solutions, these are recommended below.
The first issue identified that is to improve EBITDA of the company from $1.7 million to $56 million or above in order to be an attractive target for the company. It is recommendable that company having a positive EBITDA which means it is profitable under its current business structure, so the company should continue to operate in its current structure and Douglas should continue to run the business as family style organization without making any changes.
The second issue which related to the leadership and management style at DFF and the resistance to change by the employees. Douglas should use different change management techniques such as Lewin’s Change Management Model, etc. This will help Douglas to make the employees of the company aware of the benefits that the company as well as its employees will gain and other benefits like, future growth, company’s position, etc. that will be achieved by changing the existing methods of operations. Once, they are well prepared for the pros of changes then Douglas could take steps to make changes in operations of the company. Finally after the change has been implemented he should look forward to make these changes as the norm of company’s operations.
The third problem identified above regarding the structure of the company to a professionally managed company. It is recommendable that Douglas should grow the business organically and then transform the company on continual basis to a professionally managed company. However, this would require a change in culture of the company and quick implementation of new procedure and information systems.
The possible solution for the fourth problem identified above should be to arrange regular meetings with the senior managers of the company in order to evaluate their ideas and to make them feel the sense of their involvement in the decision making of the business. This will tend to motivate them and may help to change their views regarding Douglas as CEO of the company or else it might create huge hindrance to the long-term success of the company.
Finally the issue related to the newly acquired major customer Canadian Auto Corporation (CAC), although it is agreeable that CAC it outside the core operations of the business and the exit strategy that Douglas is planning for DFF, it should be evaluated for its financial feasibility in relation to company’s value.
In order to communicate and convince the board and other senior managers of the future vision of the company the vision of the company need to be clarified to the senior manager before convincing them towards resolving the key strategic issues. The vision of the company can be written as ‘adopting organizational change in relation to multi-billion businesses and to increase profitability targets of the company’. This vision when kept in front of the senior management team of the company, which depicts that the company’s main target will be to make the organizational changes in order to reflect those of multi-billion companies. Along with this the achievement of the vision through increasing profitability targets will define the managers about the importance of the company’s operations which should be planned in such a way that will lead to cost reductions and increase in efficiencies.
The five strategic issues identified above can be ranked in terms of their importance, with relation to the above vision of the company. Firstly, to develop a healthy relationship with the senior management of the company, secondly to improve the EBITDA of the company above $5 million, thirdly to take steps for an effective leadership and management system, and finally to evaluate the feasibility of its major customer, CAC, in order to achieve company’s strategic objectives.
It can be observed that whatever the possible solution is selected by Douglas, the company needs to be transformed significantly from its existing level of operations towards a more professionally managed company that will help in maximizing the chances to achieve company’s strategic objectives.
As CEO, Douglas will need to evaluate and direct the vision set for the company in order to move forward with the shift. The direction will include a strategy on where to focus efforts including a plan on how to differentiate themselves from the increasing competition, and hence improving profitability of the company. Once the plan is solidified, the CEO should work toward further processes such as creating mission statement that will outline the future vision of the company.
The first issue to resolve will be the relationship issue between the CEO and the senior managers of the company. As the company cannot succeed in achieving its strategic objectives without the collaboration of entire management team with their full devotion. Therefore, Douglas should seek to proceed with the implementation with full involvement of these senior managers which will also help him in achieving the company’s objectives successfully.
The second issue to resolve will be improving the company’s profit margins in term of EBITDA. This will be assisted with the implementation of the first solution, as the execution of new strategies will tend to reduce costs by increasing efficiency of the operations and hence resulting in greater EBITDA. Furthermore, taking steps to analyze the changes in EBITDA by creating scenarios, as done in excel sheet.
The forecasts 1 is made to analyze the changes in the COGS that can result in the desired EBITDA, which portrays that by decreasing the COGS from 43% to 29%, which might be due to economies of scale can help the company to achieve $5 million earnings.
On other hand, forecast 2 depicts the change in the operating costs of the company that will result in achieving the targeted EBITDA. The reduction in operating costs from 56% to 41% of the sales revenue is resulting in EBITDA of $5 million. Similarly, other scenarios can also be made in order to find out the mix of cost reductions that will achieve the desired EBITDA. This is how Douglas can implement the budgeting technique in order to achieve the new vision of the company.