Helooperational Changes At Kudler Find Foods

Running Head: OPERATIONAL CHANGES AT KUDLER FINE FOODS

Operational Changes at Kudler Find Foods

Submitted to

...

By

Brian Anderson

In partial fulfillment of the requirement for the

Masters of Business Administration

...

May 5, 2008

Operational Changes at Kudler Find Foods

The Kudler culture is aimed at providing the best shopping experience and total customer satisfaction. One way to satisfy customers is to offer a changing selection of products since customers always appear to be demanding something new. Kudler's latest strategy is to offer a whole new selection of locally grown organic products.

As demand for organic foods continues to increase, high volume sales through mass outlets such as supermarkets are rapidly replacing the direct farmer connection. According to AgMRC (2007) site, “American shoppers spent more than $51 billion on natural and organic products in 2005” (Ð'¶ 2). Considering rapid growth of organic food trends in recent years, Kudler management excepts to achieve higher profit margin by selling organic products supplied by local growers. “As of today organic food accounts for 1-2% of food sales worldwide. Future growth is expected to range from 10-50% annually depending on the country” (Organic Food, 2008, Ð'¶ 3). Organic produce is grown without bug killer, fertilizer, hormones, or antibiotics. People buy organic food because they believe that it is healthier for them. Soil Association (2008) site list 10 reasons to eat organic food that is shown in Table 1.

Customer Preference Identification

The new strategy would affect Kudler's current business process in many ways. The idea is to apply a systematic, well-planned approach to managing the entire flow of organic produce from local growers through Kudler stores to the end customers (Illustration 1). Evaluation of consumer preference for organic products can help shape the new plan and determine how it should be executed. The main question would be, “Is there a market potential for organic products in San Diego metropolitan?”

Kudler can determine what its potential customers desire by study and analysis of local population culture. Organic market forecasting can help Kudler management decide whether the new strategy is the right move for them or not. As a result, Kudler's marketing research department has a new task ahead of them and that is to gather data from other competitive organic food stores as well as analyzing organic market trends to identify the most efficient approach to achieve Kudler's new goal.

Product Selection

Many companies are achieving significant competitive advantage by the way they configure and manage their supply chain operations. The first step in implementing the new supply chain begins with researching on the types of organic produce offered by local growers that meet specific demand of targeted customers. There is a wide range of organic produce offered by local growers, but not all of them meet the USDA standards. “The U.S. organic market is officially, relatively new, with the USDA only adopting national standards for organics in October 2002. The USDA National Organic Standards regulates all organic agriculture in the United States” (AgMRC, 2007, Ð'¶ 3). Considering the fact that Kudler stores are committed to providing their customers with the finest selection of products, the merchandise selection team is responsible to establish a research unit to find the best local organic produce grower candidates with products matching Kudler's quality standards. This approach would ensure reliability and stability of the initial phase of the new supply chain.

Pricing

Organic food prices are relatively higher because organic produce is produced on a smaller scale. Introduction of new organic products with relatively higher prices may have a negative impact on Kudler's customer affordability; therefore, Kathy and her staff must figure out a technique to resolve that particular issue. Consumer unwillingness to pay a higher premium for organic produce can be mitigated by slowly increasing product prices from normal conventional prices to higher competitive organic prices over long periods of time, so customers would feel less pressured adopting to new organic prices.

By providing a well-balanced supply of both organic and conventional products available to customers, Kudler can ensure short-term customer satisfaction in anticipation for steady growth of its organic section in the long run. Based on industry findings, customer's desire toward purchasing a relatively higher priced product would grow over time when both options are presented at the same time. In this situation equal amount of both organic and conventional products available in store shelves would eventually shift consumer's preferences more toward the higher quality organic products, and that means more profit margin for Kudler.

Structural Changes

Organic fruits and vegetables usually spoil faster compared to conventional produce because they are not treated with waxes or preservatives. Implementation of the new supply chain requires faster shipment and delivery systems in place to ensure contentious supply of organic produce available in all three Kudler locations with finest and freshest quality possible. Since some organic produce should never get frozen, they may require certain preservative treatments from the moment they are gathered from local growers until they are delivered to store shelves; therefore, Kudler shipment trucks must be equipped with appropriate systems to be able to handle new loads.

In addition to modifying delivery systems, Kudler store structure must be modified as well. For example, Kudler can build a small village prototype in the center area of their stores, designed to promote an organic feel and texture, so customers can easily find and purchase their desired organic products. It would also provide a fun and educational experience for their targeted customers. This organic-friendly atmosphere can also be used as a window of opportunity for local growers to showcase their products,