Kudler Fine Foods: Differentiating Between Market Structures

Differentiating Between Market Structures
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Differentiating Between Market Structures
Today’s firms operate within various environments that economists refer to as market structures. These market structures forge each firm’s operational foundation, which essentially lays the groundwork to facilitate competitive marketing strategies. The factors that bolster a firm’s marketing tactics are vital is sustaining profitability as well as solidifying longevity within a particular industry. To comprehend these factors effectively, this paper will analyze Kudler Fine Foods through the eyes of a consultant and (a) evaluate Kudler’s strategic plan, (b) identify the Kudler’s market structure, and (c) assess how the market
structure positively or negatively affects Kudler’s long-term profitability.
Kudler’s Strategic Plan Kudler Fine Foods currently possess a competitive edge in the specialty or gourmet foods market as a result of their prime location and customer base; however, there is much room for improvement to sustain its operational capacity. Kudler’s strategic plan vividly highlights key areas for improvement as well as potential risks that could hinder long- and short-term strategic objectives. In each of Kudler’s three locations, potential competitors exist that could easily hi-jack their customer base in the long-run if changes are not made to address some weaknesses.
Strengths and Weaknesses
Although the strategic plan highlights known weaknesses, it also illustrates strengths that equally benefit the establishment. In particular, no direct competition gives Kudler the capability to increase revenue and pursue expansion opportunities (strength). Currently, Kudler is optimally competing in the market, which is primarily because
of its La Jolla location. The customer base in that location possess the financial resources (median income) to purchase gourmet food items with elevated prices whereas the Del Mar and Encinitas locations are made-up of patrons from a lower income class, which has negative effects on gross sales. Although the Del Mar location is not performing well in terms of revenue, its inventory is extensive in size and costs (weakness). Minimizing the size of this location’s inventory by transferring high cost products to sister locations may facilitate a faster inventory turnover and increase cash flows. Kudler maintains an optimal relationship with its suppliers and financial institutions, which will prove beneficial in further expansion projects that involve plant assets as well as product additions to the current inventory (strength). The strategic plan contains a detailed risk assessment that illustrates some factors that potentially can hinder operations. Particularly, the founder (Kathy Kudler) is the linchpin of the operation and can single-handedly halt short- and long-term objectives in the event she falls ill. Kudler seems to have all of their eggs in one basket regarding Kathy’s involvement and oversight in all aspects of the business; therefore, it would be in Kudler’s best interest to create a vice president position in the administration. Furthermore, this move will allow Kathy to focus on growth and other aspects of the business.
Market Surveys
After reviewing the customer surveys for both 2011 and 2012, the areas requiring attention revolves around merchandise satisfaction, value for the money, selection, and customer courtesy.
The survey did not identify any significant change between the two years; however, the areas of concern remain consistent throughout both survey periods. The 2007 Sales Plan introduces some ideas that will be paramount in addressing the highlighted weak areas captured through the surveys. For example, the frequent shopper program will present incentives that will minimize price and increase customer satisfaction. Additionally, the “Increase behind the Scenes Efficiency” and “Cost Containment” initiative will reduce operational costs and minimize the amount of food requiring storage, while also having a zero stock out policy. These initiatives alone will be essential in increasing merchandise selection and providing a good value to the
customer.
Positive and Negative Effects of Monopolistic Competition
Based on Kudler’s marketing overview, the firm is operating in a monopolistic competitive market structure, which is a market structure in which there are many firms selling differentiated products and few barriers to entry (Colander, 2010). One of the primary merits of monopolistic competition is the lack of barriers to entry. This allows firms to enter and exit the market easily and ensures no one firm will garner a monopoly because of the frequency of new firms entering the market (Infobarrel, 2013). Additionally, the ability to differentiate from rival firms to gain consumer sovereignty boosts competitiveness within a particular market. Regarding differentiating, Kudler emphasizes superior food quality and an extensive wine and spirit inventory, which is not readily available by its rivals. A drawback of a monopolistic competition is that as a result of firms having some market power, they can extenuate a mark-up on the marginal cost of revenue (Infobarrel, 2013). Kudler is well-aware of this drawback; however, it is almost inevitable to reduce price because of high marginal costs associated with acquiring organic food items from suppliers. Kudler’s management is cognizant of the voids in its operations, which they illustrate in their strategic plan. Therefore, the development of competitive strategies is vital to solidifying long-term profitability. For example, the decision to close the Del Mar location and stand-up the Carlsbad store will pay dividends in the long-run because of Carlsbad’s larger population. A monopolistic competitive market is indicative of an open playing field. Therefore, Kudler is implementing strategies that include frequent shopper programs, expanding product selection, and undertakings to increase efficiency are imperative in a monopolistic competitive market structure to sustain long-term profitability.
Conclusion
After reviewing Kudler’s strategic plan, customer surveys, sales plan, and accounting records, formulating a competitive strategy is not a major undertaking because the management is proactive in laying the ground work to enhance customer satisfaction and lowering cost. Although Kudler is exploring the benefits of a frequent shopper program, they need to consider partnering with a petroleum firm where customers can earn gas rewards that are redeemable for discounts at the pump. For example, Safeway has partnered with Chevron to maximize values and saving for both firms as well as the customer (KITV, 2013). Additionally, institute online advertisements. For starters, constructing a Facebook and Twitter page are effective methods because these sites provide a low-cost alternative of advertising, which should also exponentially decrease the advertising expense. Last, they should incorporate events that feature a monthly or weekly product. Comparatively, Atlanta Foods International advertises culinary products of the day (ex. Kabobs Tuscan Ratatouille Tart) and “this month’s spotlight” (ex. High Road Craft Ice Cream & Sorbet) (Atlanta Foods International, 2013). Incorporating these suggestions in concert with the strategic plan will not only solidify profitability and customer base, but also boost competitive efforts to overshadow noteworthy competition.

References
Colander, D.C. (2010). Economics (8th ed.). Retrieved from The University of Phoenix eBook Collection database.
InfoBarrel. (2012). Advantages and Disadvantages of Monopolistic Competition . Retrieved from http://www.infobarrel.com/Advantages_And_Disadvantages_Of_Monopolistic_ Competition KITV.com. (2013). Safeway, Chevron announce joint gas rewards program. Retrieved from http://www.kitv.com/news/money/Safeway-Chevron-announce-joint-gas-rewards-program/-/8905154/19552578/-/vta9ui/-/index.html
Atlanta Foods International. (2013). Promos/events. Retrieved from http://gfifoods.com/