ACC3602 Managerial Planning and Control Systems
Aloha
1. What should be Aloha's competitive strategy?
Low cost?
It is difficult for Aloha to compete with the industry giants like Nestle, P&G and Phillips Morris on low cost. The reason is simple - volume. These industry giants have much higher volume than Aloha and enjoy a tremendous advantage in economies of scale. It is probably suicidal for Aloha to try to adopt a low cost strategy. It will probably be crushed like an ant, unless the giants play “oligopolists” and charge high prices to maximize profits.
Differentiation; i.e., selling gourmet coffee a la. Starbuck?
It is probably easier for Aloha to position itself as a gourmet coffee maker, catering to the yuppie type and charging a premium price for a coffee experience different from that offered by “regular” brands. Differentiation seems to be the choice strategy for small companies in that its success does not rely on size or volume; anyone with little resources but a great idea can be the David that slays the industry Goliaths. Examples abound: Ben & Jerry in ice cream and Paul Newman in spaghetti source. In fact, while the case tells us little in this regard, I suspect that Aloha has been able to survive in this competitive industry for all these years and seems to be thriving entirely because it started out occupying a special market niche and positioning its coffee as a gourmet brand.
2. How should the roasting plants, and marketing and purchasing departments be evaluated?
Roasting Plants
Given the differentiation strategy, the roasting plants should be treated as a profit center, as it is already now. That is because the differentiation strategy can be successfully implemented only if the quality of the coffee lives up to its image as a gourmet brand, and evaluating plant managers on profit, rather on cost alone, motivates the managers to constantly improve the quality of the coffee and maintain