Summary
A case study was specifically written as part of the final exam for this course. It was created for pedagogical purposes only. The full context of the case is not available due to the copyright protection from the professor.
Panleiou is a fictional business entity operating in Greece as the largest supermarket with over 30 large branded Panleiou names and logos. The deliverables for the individual project are to present a six-part proposal using the AFI framework.
1. Vision, Mission, Core Values
2. Strategic Analysis: Core Competencies, VRIO Framework, Five Forces
3. Business and Corporate Strategy
4. Global Strategy
5. Corporate Governance and Business Ethics
6. Organizational Design: Structure, Culture, and Control
PART 1: Vision, Mission, Core Values
Vision Statement:
To be Greece’s leader in the shopping experience for all our guests.
Mission Statement:
By diversifying our resources in produce & meat products, Pharma-service, community engagement, events and activities, highlighting a welcoming environment, and providing superior Greek hospitality service.
Core Values:
1. We are rooted in the power of guest experience - To be successful, we practice our highest competence in serving the needs of our guests beyond expectations.
2. We are empowered to the employee experience - We invest and retain talents through meticulous training, job performance, and advocacy in building long-term employee value and competency.
3. We are committed to a holistic ecosystem - Creating a sustainable and safe environment and establishing partnerships with local and regional vendors enable us to build a strong community for long-term growth.
4. We are driven to exemplary business ethics - Striving to work towards shared responsibility, inclusivity, fairness, equality, empathy, integrity, and respect, are the core principles to maintaining our highest achievable ethics for all guests and stakeholders.
We will execute a series of events to address the new initiative for Panleiou’s vision, mission, and core values and initiate a top-down approach with top executives and management to address the formation of the new statements. This is a 2-day workshop focusing on the future of Panleiou. The workshop will be facilitated by a highly experienced corporate strategist. Firstly, orientation will discuss how we can best achieve results for our new vision, mission, and core values in reflection on the future of Panleiou. Secondly, an opportunity for executives and management to foster team spirit through a series of activities based on the core values of Panleiou like guest and employee experience, building a safer and better community, and leveraging business ethics through shared responsibility. The workshop ends with teams presenting their ideas in the most creative and visual way. We will also acknowledge the policy board to review the new statements.
We will invite managers and employees to participate in a one-day program. This program is a celebration of the “Future of Panleiou” and will include orientation, team-building activities, and competition. All employees will team up to encourage inclusivity and unity. The competition is comprised of panels of judges (including Sophia and top execs), and voters (managers & employees). The winners are chosen based on creative execution and understanding the best achievable practices through the vision, mission, and core values.
PART 2: Core Competencies, VRIO Framework, and Five Forces
Core Competencies:
1. Fresh, local, and unique regional products
2. Largest supermarket chain in Greece
3. Superior proprietary inventory management system
4. Only Greek chain to offer store credit card
VRIO Framework is a valuable tool to evaluate Panleiou’s resource characteristics and identify the types of resources. The company’s resources must be valuable, rare, and costly to imitate, and the firm must be organized to capture the value. First, Panleiou's resources/capabilities enable the company to increase its economic value creation due to its product offerings. This has a strong value to consumers who look for products with lower prices than “mom-and-pop” stores. Second, competitive parity is rare because only Panleiou offers regional products throughout Greece providing accessibility to customers without traveling from one region to another. Third, given its strong ties with vendors, it will be costly for competitors to imitate due to the lack of partnerships and access to regional vendors. Last, there is a structure and coordinated system that allows Panleiou to create this value. Its HQ in Athens has the strongest management team and stores across all industries in Greece. It has strong ties with vendors collaborating on creating unique products sometimes specialized by region. It has a coordinated system to create efficient store operations and its proprietary inventory management system creates a coordinated process to ensure deliveries are scheduled automatically.
Though the VRIO Framework creates a foundation of Panleiou’s competitive advantage, a few conditions that potentially leverage Panleiou to be more challenging for competitors to replicate the resources, capabilities, and core competencies include higher expectations of the future value of resources. Creating more diversified offerings and unique regional products and IP protection like its proprietary inventory management system increases Panleiou’s competitive advantage in the long-term growth.
To understand the profit potential of Panleiou, we examine the five forces framework.
Threat of Entry is low. Two ways to look less attractive to competitors are reducing the overall profit potential by lowering the cost of some of its products and by spending more to satisfy the needs of customers. Panleiou already offers lower prices by purchasing more volume in every category than the next four largest competitors combined.
Power of Suppliers is high because it is more focused on Panleiou offering products that are highly differentiated. There are no readily available substitutes for the products to offer and suppliers do not depend heavily on the industry. Two reasons why the power of suppliers reduced Panleiou's ability to obtain superior performance include raising the cost of production of its regional products by demanding higher COGS for their inputs and reduction of the industry’s profit potential by taking part in creating economic value. Panleiou needs a wide variety of suppliers to lower the power of suppliers.
Power of Buyers is low because Panleiou already offers consumers much lower prices than any of its competitors, the product offerings are not standardized or undifferentiated and customers do not purchase enormous quantities.
Threat of Substitutes is low because delivery in Greece is more challenging particularly outside the large cities than in the US or other European Union countries and other delivery services are considered insufficient and unreliable. Because of this factor, only 4% of all online shopping occurred in Greece in 2020 with less than one-tenth or 0.1% of grocery shopping occurring online. It is expected that Greece's online grocery shopping will increase by 8% in 2030.
Rivalry Among Existing Competitors is low because Panleiou has lower prices and better selections than mom-and-pop stores. Additionally, one neighborhood can only support one superstore. If there is a Panleiou store in an area, the regional chains do not expand the area, and vice versa.
Panleiou must have an in-depth understanding of its internal capabilities, resources, and core competencies and they must be analyzed thru the VRIO Framework and the five forces model to sustain competitive advantage.
PART 3: Horizontal Integration, Diversification, Cost-Leadership, Build-Borrow-Buy
There are plenty of benefits for Panleiou to proceed with horizontal integration. These benefits include a decrease in a competitive market, lower costs, and an increase in differentiation. Panleiou must analyze if the target company has more value creation than a continued standalone company. Three main reasons Panleiou may want to acquire regional competitors are direct access to new markets and distribution channels, access to new capability, resource, or competency, and strategic preemption. I would not recommend acquisition due to the inflated cost of spending billions of Euros. Panleiou still needs to consider the rebranding marketing initiative for an additional cost. Internal factors need to be considered like corporate structure and synergies of companies.
The second potential strategy of growth focuses on diversification. I would recommend choosing a related diversification strategy to leverage competencies across different business lines. Doing so will benefit Panleiou from its economies of scope by increasing its value and economies of scale by reducing costs. The core competence market matrix is a valuable tool to analyze combinations of new core competencies and existing markets. Though this may create a sustainable competitive advantage by reducing the competitors, a few disadvantages need to be considered such as the complexity of the process and economic risks.
The third potential strategy growth for Panleiou is a cost-leadership strategy. This strategy creates similar value for its customers by delivering products while lowering the costs of other competitors. Four cost drivers Panleiou needs to comprehend to keep the costs down are the cost of input factors which include capital, labor, and raw materials: the economies of scale by creating fixed or lower costs over a larger volume, taking advantage of physical properties, and adding specialized system such as Panleiou’s proprietary inventory management system. If Panleiou can negotiate with vendors who are willing to drop shipments to remote areas, I would recommend a cost-leadership strategy to gain and sustain a competitive advantage over the smaller competitors.
The fourth potential strategy for growth is a build-borrow-buy framework. This approach determines four key questions to ask relevancy, traceability, closeness, and integration. The framework corresponds to the CRIO model by broadly defining Panleiou’s resources to include capabilities and competencies. Tapping into e-commerce and building a national “last-mile” delivery service is highly relevant if Panleiou wants to expand and compete in other regional areas with unmet needs. Panleiou can create long-term strategic partnerships with mom-and-pop stores to borrow resources such as drop shipments. This external option is also high due to the limited offerings of mom-and-pop stores. By partnering with our smaller competitors, the closeness of our external resource partner is high which means we are easily able to obtain the requirements filling in the strategy gap through strategic alliances. Lastly, the integration is high due to the same cultural similarities. I would recommend this strategy growth based on the high degree of conditions met in finding the best course to take.
Extra Credit: Another potential strategy growth I would recommend is a partnership through strategic alliances with small competitors, particularly the mom-and-pop stores. We can build a license and franchising deal with these mom-and-pop stores to commercialize the Panleiou inventory management system and offer local and regional goods with our brand name. By doing so, we can maintain our brand equity throughout other cities with further reach. This would allow Panleiou to gain more customers and sustain a competitive advantage for long-term growth.
PART 4: Advantages and Disadvantages of Going Global (Acquirer POV)
The UK firm is in pursuit of international expansion with a multi-domestic strategy to increase economic value and leverage competitive advantage. The following advantages make sense for the acquirer due to potential advantages like gaining direct access to a larger consumer market. The UK firm sees an opportunity to Greece by means of investing and controlling the largest supermarket through acquisition. Multinational enterprises based their competitive advantage on a low-cost leadership strategy and are attracted to expand internationally to gain access to low-cost input factors. Panleiou is an attractive firm to acquire due to its unique offerings and low-cost leadership in the Greece market. Another advantage is developing new competencies. Panleiou has a strong VRIO framework creating a solid foundation for the UK firm. By acquiring Panleiou, the UK-based discount supermarket can quickly develop new competencies.
Companies looking to expand internationally should also be cautious to weigh the benefits and cost of expansion with the disadvantage of liability of foreignness including the cost of doing business with unfamiliar cultures and economic environments, and the factors affecting the geographical distances. Another disadvantage for the acquirer is the loss of reputation. If the UK-based discount supermarket has a powerful reputation in innovation and customer service back in the UK market, going into an uncharted region like Greece may not be seen the same due to several factors such as cultural and economic disparity. Another disadvantage is the loss of IP because of the higher risk of IP expropriation. The company’s IP is vulnerable to reverse engineering from external sources.
To expand internationally, the UK firm must explore the CAGE distance framework. If the acquirer were to proceed, it should keep the Panleiou brand to have the highest possible local responsiveness. Panleiou’s high market share is the biggest factor it can bring to the deal.
PART 5: Compensation and Incentives by Organization Level
To motivate employees from the top-down, strategic control and reward systems with codified input and output controls must be implemented. As an example, Compensation for the c-level position must be determined by the maximized performance. The c-level position should have a non-fixed annual salary with variable compensation like stocks, bonuses, and vacation pay as positive incentives to reflect a superior performance while negative incentives should also be included for undervalued or poor performance.
Compensation for a business-level position like the regional operations manager must be determined by a specialized field in hospitality, customer service, or business management, years of experience, and expertise in performing the job. An annual salary with an annual increase is determined by milestones with variable components like bonuses, commission, health insurance, and accrued vacation pay as positive incentives while negative incentives could include low to no bonus or commission, taking courses or training to reinforce shift from low to high performance.
For front-line employees, compensation and incentives should be determined by the capabilities of accomplishing specific daily tasks. This level in the organization is compensated by the hour. To maximize performance, additional incentives may include basic medical insurance for full-time employees and overtime pay. Negative incentives are given to poor-performing employees thru retraining sessions to reinforce shifts in performance and cut their work hours.
PART 6: Implementation of Structure, Culture, and Control
Three key levels Panleiou can implement are its structure, culture, and control. Panleiou must focus on a mechanistic organization due to the high degree of its business specialization. Its strategy and structure are interrelated as they impact the performance of the firm.
Functional structure is best suited for Panleiou because of its correlation to a cost-leadership strategy with a high degree of command and control, creates process innovation to drive down cost, and a large focus on economies of scale. One drawback is the lack of effective communication channels across departments. However, the lack of cross-departmental collaboration can be fixed by implementing cross-functional teams. Another critical drawback is the lack of an elevated level of diversification. Panleiou can leverage this stage to evolve and adapt into a multidivisional structure to further its growth.
Panleiou’s culture is the second building block for sustaining competitive advantage. Panleiou must set standard norms and values building a unique culture to comprehend how things get done. Panleiou’s culture can be its valuable asset and worst liability, therefore, fine-tuning and upgrading to sustain growth is more imperative than relying too much on core competencies.
The final building block is creating an internal governance mechanism aligning the incentives of shareholders and employees. Strategic control and reward systems must be implemented allowing management to set goals, assess progress, and create performance feedback. Panleiou must incentivize all employees with input and output controls. With input controls, management can set these mechanisms for consideration before an employee makes a business decision. With output controls, management determines the internal factors correlating to the effort and expected performance of an employee.
Formulating exceptional strategies is important but insufficient for gaining and sustaining competitive advantage. Panleiou must effectively execute these strategies to succeed. To maintain a competitive advantage, Panleiou must adapt and restructure as business needs accelerate.
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