Kem Chicks Case Study

I. Time Context:
1985
II. Viewpoint:

Bob Sadino, owner of Kem Group of business
III. Major Policy Statement
Kem Chicks is the best gourmet lifestyle supermarket in the Kemang area that serves upper and middle cosmopolitan customers delighting the customers through better product quality, delightful ambiance and display with depth of knowledge of specialty foods and products.
IV. Statement of the Problem
How will the Kem Chicks expand its supermarket by its own investment while sustaining its growing operations and without putting the quality of their products into a risk? V. Statement of Objectives
Long-term
To maintain and develop a competitive position in the growing industry To formulate a strategy in order to gain economies scale for existing supermarkets. To occupy more than 1% of the supermarket space in Jakarta, Indonesia To increase the public awareness of Kems goal to be the “Meat People” To become the market leader in the national market
Short-term
To give excellent service
To improve services
To establish a good rapport with the employees
To provide goods or services that is cheap and affordable to consumers or the public To meet the needs of customers by constantly seeking and actin on their opinions regarding innovation, product quality, choice, store facilities and service VI. SWOT Analysis
Strengths (S)
Weaknesses (W)
Have valuable Human Assets
Good personnel management
Responds and caters the needs of immediate community.
Offers First quality meat products
The organization is leading
Have a harmonious relationship between employer and employees Flexibility (Bob Sadino doesn’t have any problems, because he is flexible) They lack marketing strategies
Unwillingness of Bob Sadino to know the important details of the financial information about the company Weak long-term strategic planning
Difficulty with over-the-counter communication
Lack of internal control
No particular designation of job
Opportunities (O)
Threats (T)
Acquisition of rival firms
Diversification of the business
Expansion of the business
Customers’ word of mouth
Declining price of oil
Change in customers’ preferences
Increasing in Bargaining Positions of the consumers, thus, resulting in the increased risks in capital expansion The investment risk is at high level
Increasing competition
Rising interest rates
Natural calamities
Government regulations, rules and policies
VII. Alternative Courses of Action
The Kem Chicks case study given the facts that the best altenative for them to expand is to engage in franchising. This has been thoroughly studied by groups of individuals for Kem Chicks existing problem. Therefore, the alternative courses of action will focus on the types of franchising alternatives.
1. Product distribution
2. Product licensing
3. Enter into a franchising agreement called Entire Business Format franchising VIII. Analysis of Alternatives
1. Product Distribution
It is the simplest form of franchising contractual arrangement in which Kem Chicks as the franchisor offers the franchisee the right to market Kem Chicks’ products in an essentially unchanged state within a designated market area. In return the franchisee would pay a fee to Kem Chicks Advantages
Disadvantages
Increase in sales volume of the parent company
Will not cater development of KemChicks’ internal management thus it does not support the supermarket as a whole.
2. Product Licensing Arrangement
Under this term, the franchisee would be offered almost the whole operation of the franchisor. The franchisee would have the right to manufacture or modify Kem Chicks in a certain area of distribution to maintain its standard product and service quality. Kem Chicks would exert tight control over the manufacturing and selling process and set and control specification. In return, the franchisee would pay a royalty and other fees.
Advantages
Disadvantages
Either the franchisor or franchisee or both can have more benefits Improve its quality control policies
Right to manufacture or modify Kem Chicks in a certain area of distribution No assurance of success
Will pre-empt all important positions in the organization
KemChics could lose control over the management of the business
3. Enter into a franchising agreement called Entire Business Format
franchising Under this arrangement, the franchisee would be an imitation of what the franchisor is. The franchisee would be offered the right to manufacture, to sell the product, to use the franchisor’s name of trademark and other symbols, management system, architecturedesign, and would be provided with supervision, a reporting system and management consultation. Kem Chicks would require certain initial fees, continuous fee based on sales (royalty), management fee, training and consultation fee, and a fee for design and reporting system. Advantages
Disadvantages
Kem Chicks will have full control of the business.
Possibly have a chance to develop and to promote human resources Enables the franchisee to enter the industry without know-how and experience and it can hold out to them the chance of success while minimizing risks Security in the protection of the rights and property of the company Mistake of one franchisee will bear to the image of the company
IX. Decision Statement
Considering that the industry is reaching toward the peak of its growth phase, Kem Chicks faces tough competition with a limited choice of land and location. Also, an increasing bargaining position on the part of the shopper, each element of the key success factors should therefore not be neglected. Since the profitability of the investment in a new outlet is highly dependent on the level of sales and cost, each of the success of this investment.
Therefore, we concluded that the best alternative solution to the problem is a to enter into a franchising type called entire business format franchising because of the following reasons: Franchisee operates exactly the same as franchisor because the entire franchise was provided by Kem Chicks. Kem Chicks will generate different types of income such as management fees, training fee, reporting system fee and other from the franchisee.
The privacy of their field of expertise or specialty will be maintained by Kem Chicks on their own because under this type of franchise, Kem Chicks is the sole provider of all information and needs of the franchisee upon proper payment. X. Implementation Program
In order to materialize the said recommendation and just like the real process in the world of franchise, Kem Chicks should: 1. The franchise relationship is founded upon a contract, which should contain all the terms agreed upon. 2. The Kem Chicks must develop first a successful business format (the system), which is identified with a brand name, be it a trademark, service mark and/or trade name Kem Chicks must initiate and set a period wherein they will train the franchisee in the operation of the system prior to the opening of the business so that the franchisee is equipped to run the business effectively and successfully.
Kem Chicks must also assist with the opening. 4. After the business has opened, the franchisor must maintain a continuing business relationship with the franchisee to provide the franchisee with support in the operation of the business. 5. The franchisee is permitted, under the control of the franchisor, to operate under the branding and the business systems developed and owned by the franchisor and to benefit from the goodwill associated therewith. 6. The franchisee must bake a significant capital investment from own resources. XI. Proposed Business Policies
Management:
Generate periodic computer reports for management information, such as reports showing the sales income, cash balance, sale of shopping vouchers and issue of the gift coupons and refunds to customers Franchisee must pay initial fee and percentage of sales
There should be a monthly regular meeting of the management and an annual regular meeting of the management with the franchisees with regards to update reports for the business Marketing:
Advertise supermarket through local newspapers, brochures/billboards/posters Advertise through local radio ad
Offer discount coupon
Can offer weekly sales discount
Operations:
Open12-hours a day from Mondays to Sundays
Tight security
Inventory Control
Acceptance of goods
To enhance accountability, the staff responsible should be required to inspect and count goods/food items upon delivery against the quantity specified in the delivery note, cross-referencing the relevant purchase orders if any, and to certify acceptance. There should be a procedure for staff to record defective or short delivered goods or food items and to follow up promptly with the supply department or the supplier direct. The types and quality of food or goods to be replenished directly by the concession counter staff should be subject to checks before sale. Random supervisory checks should be conducted on the quality and quantity of accepted food or goods, especially those of high value. Ordering and Delivering Stock
Standard requisition form, preferably in an electronic format to facilitate electronic data interchange between the operator and the supplier or sending of electronic fax, should be used to provide an audit trail. The form should show details such as the description, quantity and place of origin of the goods/food items required, the agreed price, the delivery address, the expected date of delivery, the name of the requesting person, and the approval authority as appriate.
Phone orders should be confirmed in writing afterwards. Any deviations should be approved by the appropriate authorities. Extension of the lead time should be justified and approved by senior staff Over-deliveries or short-deliveries should normally not be accepted unless justified and authorized Suppliers’ performance in stock delivery should be appraised Finance:
Conduct inventory
Generate daily and periodical sales and receipt reports
Cash Handling
To prevent manipulation, the following control measures are recommended: The guidelines on hadling of cash should set the maximum amount of cash flow per day for each store, the banking frequency, and the requirement for daily cash position reports Notes handling procedures should specify, among others, the bank notes, to be tested using a money tester by a sales assistant and notes by a store supervisor CCTV with tape recording facilities could be installed to monitor cash handling at the cashier counters if necessary Responsible staff member at the appropriate level should be designated to conduct day-end reconciliation of electronic sales records against the cash in hand and to make spot checks on other operational activities daily at random Compliance with cash collection security requirements by staff responsible should be subject to supervisory and audit checks
Handling of Credit Card information
Briefing sessions may be arranged for staff to raise their awareness of the criminality of such activities and the company’s disciplinary action if such activities are discovered. Clear instructions should be given to staff on the handling of credit card transactions, e.g. requiring the handling staff to sign on the credit card payment slips to hold them accountable for the transactions Effective security measures should be adopted to minimize the risk of information leakage, e.g. to keep the credit card payment slips in a secure place with restricted access. Staff should be informed of the channels for reporting approaches by criminal syndicates and incidents of suspected corrupt practices
Internal Audit
Sales and accounting operations should be subject to internal audit. Human Resources
Employees work in 2 shifting schedules
Conduct training for employees
Bereavement Leave
An excused paid absence of up to 3 days for missed work time will be granted for purposes of arranging, attending and resolving personal matters with regard to a death in your immediate family. Your immediate family is defined as spouse, parents, grandparents, sons, daughters, sisters, brothers, stepparents, stepbrothers and stepsisters, mother-in-law and father-in-law. The company will also pay employees for time lost from work for up to one day for relatives beyond the definition of immediate family. The company may allow an unpaid leave of absence for up to two weeks to be taken in connection with the death of a relative or close friend. Such absences must have the prior approval of the employee’s supervisor and management
Dress Code
Proper attire is expected for all employees
Employees who do not meet the standards for appropriate business atture should be counselled by their supervisors and may be sent home to change. It is the supervisor’s responsibility to ensure that his or her staff presents a professional appearance.
Equal Employment Opportunity
It is the policy of Employer Name to provide equal opportunity in employment to qualified individuals regardless of race, color, reigion, age, sex, marital status, national origin, ancestry, physical or mental disability, sexual orientation, genetic information, or any other legally protected class in accordance with all applicable laws.
Inclement Weather
The company maintains the policy of remaining open during bad weather, unless the severity of conditions and/or municipal or state government rulings close the office. If operations are canceled after a shift has started, hourly employees will be paid for the time worked, or two hours minimum, whichever is greater
Moonlighting
Outside employement must not be engaged in during the employee’s regularly scheduled working hours. The use of the company’s supplies, equipment, telephone, materials, and personnel is prohibited.
Open Door Policy
The management recognize the accumulation of unspoken, unanswered problems, complaints and questions. It is everyone’s advantage to bring these matters out in the open.
Overtime
It may be necessary at times to ask the employees to work beyond their regularly scheduled hours. Overtime will be paid at the rate of time and one-half the hourly rate for all hours worked in excess of 40 hours in any one week. With the exception of holiday pay, hours paid but not worked, such as personal itme, jury duty, bereavement pay, etc., will not be considered timeworked for the basis of computing overtime. The management will make every effort to distribute overtime fairly and equitably.
The selection of who is to work is based primarily on the job experience and ability to handle the work that needs to be done, and on seniority, one’s productivity and job performance. There is no guarantee of overtime work, and employee are cautioned to not become financially dependent upon it. Anyone working unauthorized overtime will be subject to discipline.
Workplace Threas and Violence
Any person who makes threats, exhibits threatening behaviour, or engages in violent acts on company property shall be removed from the premises as quickly as safety permits, and shall remain off company premises pending the outcome of an investigation. XII.
Management Lessons Learned from the case
In every company established, growth must be sought after. Big things come from small beginnings. Just like Kem Chicks, they may have earned income initially and started good yet Bob has never stopped expanding his business. We shall see not only what’s inside our company but also what’s happening outside. Almost all businesses have competitors; competitors whom we need to compete with. Jakarta has a growing population which meant more demand. We can’t just let our competitors benefit from them while we stay like the old times, watching our opponents beginning to climb and then eventually stay at the same level we are in. Who can miss the need for a bookkeeper?
Money, as one of the essentials in a business shall be handled properly. Accountants play a crucial role in today’s establishments. It’s possible that a company may gain success even we have poor systems (as we have observed from Kem Chicks itself), yet we know that we cannot stay like that forever. Every organization shall be organized—that’s why it’s called an organization. There shall be positions filled with the right personnel, with the right ability. Employees potential shall be carefully studied and continually improved. People who work for us are indispensable. Without them, we may be limited.
We shall care for them, the same way they care for us; just like how Bob valued his relationship with his workers and how he took care of them. Of course, the group has also learned about franchising and investment risks. It’s not just the expansion that we care for but also what it may do for our company. We are reminded to take care of our product. Company name may be copied over multiplied outlets, but if the product quality and employee morale are not retained, this could destroy a company’s reputation and may start its ruins.
We cannot say that we love our company if we don’t love every bit of it. When we love something, we care for its growth, we care for how it is being managed and we consider the hazards it may go through. Life is not a matter of chances, it’s a matter of choice.

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