Differentiating Between Market Structures Essay

Kudler Fine Foods is the brain child of Kathy Kudler. She envisioned a one stop gourmet food store and has grown to three locations to date. She continues to maintain direct control over large bulk purchase order items, stringent customer service policies, and hiring. This paper discusses how the organization competes in the marketplace and the strengths and weaknesses of the company according to the marketing surveys their customers completed. The following also discusses which market structure best applies to the organization and how that structure positively and negatively affects the firm, how the effectiveness of the competitive strategies in the market structure affect the organization’s long-term profitability, and what competitive strategy recommendations may be made. How Kudler Competes Kudler Foods competes on a differentiation strategy. While the advertising is similar to the average grocery stores in the area, the advertising is not built on a â€Å"loss leader† criteria. Kudler Foods is one of only a few competitors in Orange County that offers a complete gourmet shopping opportunity. The company considered the greatest competition is the Cardiff Seaside Market and is in direct competition to the Encinitas and Del Mar locations. If left unchecked and depending on how effective the new managers are at strategic combinations, the competing store could negatively impact Kudler Foods market share. Something like this could decimate Kudler Foods’ customer base. Active assessment of strategy strengths and weaknesses is necessary to mitigate the challenges of this possibility. Strengths and Weaknesses Kudler Fine Foods marketing surveys were a clear indication of their strengths and weaknesses. Customers were happy with the displays and lay-out of the store. Customers were happy with the merchandise they purchased, even though they were not happy with the value they received for their money. Customers were practically split down the middle about how they felt about the customer service they received. That sentiment is not a reflection on how knowledgeable the customer service person was since customers overwhelmingly voted positively when asked that question. Overall, the customers felt good about the organization, how the company is branding itself as a premier gourmet market, the quality of the products and the knowledge level of the service representative. Best Market Structure The best market structure for Kudler Foods is oligopoly. Oligopoly, as defined by Colander (2010), â€Å"A market structure in which there are only a few firms and firms explicitly take other firms’ likely response into account; there are often significant barriers to entry.† Oligopoly requires strategic thinking. A real life company that has the same market structure as Kudler Foods is Whole Foods Market. Whole Foods Market carries specialty, gourmet food items, meats, wines, cheeses, and bulk food stuffs. Whole Foods Market also offers food and wine tastings, and attracts a wealthier clientele who fancy themselves as â€Å"gourmet foodies.† A large portion of their inventory is organically produced. Their customer service levels are a point of great pride as they know it is not just the food but the service that keep customers coming back. (Whole Foods Market, 2013) There are however, positive and negative effects of this market structure. Positive and Negative Effects A negative effect of oligopoly is that it is largely inefficient – economically and in productivity. What this means is that oligopolies do not produce in the most inexpensive manner nor do they produce the right amount of products according to demand. A positive effect of this market structure is the overall profits. These profits, for the growth purposes of Kudler Foods, could be used for technological advances so they may offer improved products, costs, prices, and allow them to stay ahead of the competition now and in the future to maintain long term profitability. Recommendations A firm recommendation is further train employees to enrich operations and increase customer service. Employees are certainly knowledgeable, as per the marketing survey results, but could use some additional training in increasing customer service skills. This could be accomplished by hiring an expert in the field to come in and teach service skills to the employees. To ensure the skills are used, Kudler Foods could tie a small part of the employee’s compensation to good reports from customers. In addition, Kathy Kudler is making plans to introduce new e-commerce capabilities as well as a catering link on the new website slated for launch in June 2004. These steps will add automation to inventory ordering and reach potential customers outside of the geographical area they currently service (â€Å"Kudler Fine Foods | Administration: Strategic Plan 2003†, 2013). The use of e-commerce will showcase strengths and perhaps give sustained competitive advantage. This new automation will also allow cash flows to go to the geographical expansion Mrs. Kudler wishes to achieve rather than operations functions. Conclusion The main point of this paper was to offer a market analysis for Kudler Foods and offer recommendations based on that analysis. Commitment to strategic plan, both in formulation and implementation are vital. â€Å"As with any plan, simply formulating a good strategy is not enough. Managers also must ensure that the new strategies are implemented effectively and efficiently (Bateman & Snell, p. 150, 2011).† Given the current circumstances, Kudler Foods has an excellent opportunity to maintain the positive cash flow it has been earning. If Kudler Foods will accept that strategy formulation, implementation, and technological advances are essential to securing future significant returns, Kudler Foods will ensure continued success by creating a connection between increased customer service, an internet presence, automated ordering, customer buying habit tracking, and customers’ lives. The sustainable competitive strategic advantage that Kulder Foods wishes to maintain and elo ngate will most certainly be realized. References Colander, D.C. (2010). Economics (8th ed.). Retrieved from The University of Phoenix eBook Collection database. Bateman, T. S., & Snell, S. A. (2011). Management: Leading & Collaborating in a Competitive World (9th ed.). Retrieved from The University of Phoenix eBook Collection database Whole Foods Market, Mission & Values (2013) Retrieved from http://www.wholefoodsmarket.com/mission-values Kudler Fine Foods | Administration: Strategic Plan 2003 (2013). Retrieved from https://ecampus.phoenix.edu/secure/aapd/CIST/VOP/Business/Kudler2/intranet/strategic-plan.asp