Running head: IBC CASE 1
IBC CASE 5
James Elser views challenges as the opportunities for growth. He believes that all difficulties that company faces indicate the weak points that should be eliminated. Hence, through dealing with the challenges, the CEO makes the company stronger and more resistible to future challenges. Hence, all decisions and actions that Elser took were oriented on the companys restructuring. If the methods that were used earlier led the company to the edge of the financial bankruptcy, it means that they are not applicable.
Interstate was trying to provide some innovations in order to save the company from bankruptcy. In 2003, the organization announced the implementation of the program known as SOAR. The goal of the platform was the optimization of the companys system and re-engineering. SOAR included the following targets:
To become more efficient and multi-direction company;
To reduce the infrastructure costs;
To review the investment policy in order to minimize loss;
To search for new opportunities and strategies to cope with demographic shifts;
To implement culture changes.
Some of the improvements were successful, such as the wide-direction strategy and new opportunities for coping with demographic problems, while others were not. For instance, the reducing of infrastructure costs by closing plants led to the decreasing of costs, but not to the expected degree. The numerous complaints from the employees resulted in pay compensation of 40 million dollars by the company. In addition, the entity had problems with union employees, who compose 80 percent of the staff. The aforementioned factors created a barrier, which made the full restructuring impossible.
Interstate should use its new markets and growing demand to overcome the upcoming challenges. A Value Chain analysis shows that the extending of the market will increase profit, which helps to cope with the recent financial problems. Moreover, the company implements new culture principles. The cultural competence will help to overcome the problems that the company has with its employees. The issue with human resources has already been raised before several times, and some employees are not satisfied with the companys attitude to its workers. The new corporate culture may help to establish better relations and prevent the unnecessary spending as it happened when the company had to compensate 40 million dollars to its employees. Hence, taking into consideration a Value Chain analysis, one may outline the Interstates core competences of diversity, openness to changes, searching for better opportunities and implementation of new strategies.
According to SWOT analysis, Interstates strengths include embracing of changes, operating as a team, implementing delivery and making fact-base decisions. Among the weaknesses are low debt rate, low profitability and bad relations with employees, which are evident from numerous claims. The companys opportunities are the extending of the market, growing demand and new acquisitions. The biggest threats for the company are demographic shifts and price increase. Taking into consideration the SWOT analysis, one may identify the following challenges. First, the problems with leadership and providing the effective management cause problems. Second, the ignoring of opportunities for extending and developing is the mistake. Third, the decreasing of revenue, though the company has a strong brand name, presents a challenge.
The Space Matrix illustrated below shows what strategic options Interstate Bakeries have.
Figure 1. The space matrix for Interstate Company
If the company uses the aforementioned strategic options, it will change its general wellbeing and bring some significant positive changes. The matrix illustrates what effect each of the options will have on the companys profitability and whether the shifts will have a serious impact on the companys development.
Acquisitions and bankruptcy have both positive and negative effect on Interstate Bakeries, but there is some connection between them. On the one hand, the relative advantages and disadvantages of bankruptcy and acquisition have positive effect on the companys development. Bankruptcy motivates CEO to identify the weak points, while acquisitions indicate the companys strong sides. On the other hand, the bankruptcy means that the company chose the wrong way of development in the past and the current managers do not cope with their obligations. The disadvantage of acquisition includes damaging the brand name. Also, the suppliers may not have an opportunity to provide their services to new locations. Hence, the relative advantages and disadvantages of bankruptcy and acquisition consist of the benefits that one may see in them and use it or only challenges and difficulties that they cause.
Based on the analysis, Interstate Bakeries should revise its inner policy. The company has many opportunities, which may help to become a leader in the market. Nevertheless, currently there is the downfall of a large industry. Interstate Bakeries should revise its managerial strategies and leadership style. The change aspect also includes the relations between the company and employees. The entity should also pay special attention to its Internet expense. Currently, the company allocates extensive resources to Internet exposure, but it receives little revenue from net sales. Interstate Bakeries has a good brand image, but the company does not capitalize on it to full extend. In addition, some acquisitions may damage the reputation; hence, the company should carefully choose the acquisitions that in order to avoid disadvantages and increase benefits. Finally, the company should enlarge its market and invest in western and central regions. The new market opportunities will help to overcome financial difficulties and promote the brand across the country, not only in the Eastern states.
Industry Innovations in Logistics
Computerized Inventory Control
Production and Distribution
Closing of Additional Plants