Reference no: EM133331261

Case Study: You have just been hired as the CEO of a mid sized company called Delicious Kitchens that is operating in a new and exciting industry. Delicious Kitchens sets up full service kitchens in distressed properties, in run down sections of large cities and near universities for the sole purpose of leasing these kitchens to entrepreneurial Chef's that want to cater to the food delivery market. The food delivery market is growing at 20 to 30% per annum and this growth is projected to continue for the next 3 to 5 years. These kitchens are sometimes referred to as Ghost Kitchens.

The industry is fast growing with a number of competitors such as Cloud Kitchens and United Kitchens and in fact Amazon has recently made a substantial investment in Deliveroo which operates some of these Ghost Kitchens in Europe. And Google is a part owner of United Kitchens.

Delicious Kitchens typically has five to seven kitchen units per site that you lease to interested Chefs. The Chefs design, source and produce their own food concepts/brands for the ordering consumers. DK takes care of everything else for one monthly lease payment. The lease payments they make to DK covers use of the kitchens, use of the Web sites you set up for them, the use of accounting and payment services/point of sales software and the cost of the delivery services you contract out usually to Doordash or another delivery app at 25% of the consumer's cost of the food. In addition for a 10% increase of the monthly lease fee you will design and provide a comprehensive digital marketing plan for their Kitchen operators uniques brands. It's been shown that building and maintaining solid brands is critical to the success of the food delivery business. Typically the chefs will pay away 45% of their sales to cover the cost of the lease and other services contracted from DK and roughly 25 to 30% of sales goes to the cost of food and containers and other kitchen equipment needed (i.e, knives cutting boards etc)

The organization you've inherited is functionally organized and you have 8 direct reports, i.e., one for each function. The functions are as follows:

1- Site locations and services (select the building sights and contract with the owners)

2- Operations (Kitchen buildout and maintenance)

3- Sales, Marketing and leasing (selling to Chefs and arranging contracts for leasing of the Kitchens)

4-Web Services (helping Chefs to set up their websites, process payments etc)

5- Digital Marketing and Brand Management (design, develop and execute a custom digital marketing plan for the Chefs and their brands)

6-Human Capital or Human Resources (hire, train and manage human resources/employees of DK, the chefs staff their own kitchens)

7- Delivery management- contracting with delivery services on behalf of the Chefs.

8-Business Management (helping the Chefs to manage Quick Books and other Financial related matters).

The business plan you inherited from your predecessor calls for opening 20 new Delicious Kitchen sites each year for the next three years across the United States in or near large major metropolitan centers/cities where demand for food delivery is expected to continue to grow. DK already owns and operates 10 Ghost Kitchens/sites with each Kitchen having 5 to 7 operating Ghost Kitchens inside. These existing Kitchens each generate overall sales per annum of roughly $600,000 of which DK takes a 45% cut for lease payments and other services provided (including food delivery). This means that each of DK's sites generate 5x $ 600,000 or $3.0mil per annum of which DK earns $1.35 mil in revenue and more if DK provides a digital marketing plan. In order to accommodate your projected growth you will need to scale up some departments which means adding another 20 plus people per annum to the DK team.

Questions: After the first few weeks on the job (your honeymoon period) you are set to make a presentation to the board regarding your plans for the company. They are expecting answers to the following questions:

1- Is your organizational architecture appropriate for the next couple of years as you scale up or do you want to recommend changes that you will implement in the first year? If you want to make changes please explain the changes and why you think it's important to make them.

2- Your current generic strategy is a broad low cost strategy- will that continue to work as you grow or is the industry changing in a way that may force a shift to a new generic strategy? Keep in mind that the Chefs solely determine what food items/menus they want to offer. If you want to change your strategy over time what changes would you make and how will you implement them?

3- Are there other opportunities to improve your profitability? For example, does it make sense to vertically integrate across your value chain? If so, in what way or ways and why or why not?

4- The board is also looking for a comprehensive analysis of the changing industry using Porter's competitive forces model.

5- In addition they will want to hear about how your plans for growth line up with the broader economic conditions and the consumer trends expected over the next couple of years i.e., a PESTAL analysis might be helpful.