Calveta Dining Services was founded by Antonio Calveta rooted in his passion for food and traditional family values. The company enters into contracts with senior living facilities (SLFs) for the latter's food service management. For three decades, Antonio managed the company and has seen into its growth before retiring. Frank Calveta, Antonio's eldest son, was then named CEO. Frank is now tasked to see to it that his father's goals of raising revenues in the next years are achieved without compromising the values of the company with a humanistic and emphatically pro-employee company culture.
James L. Heskett; Patricia Girardi
Harvard Business Review (4261-PDF-ENG)
March 04, 2011
Case questions answered:
- Analyze the advantages of Calveta Dining Services, Inc., and examine how it has built its successes.
- Describe the decisions Frank should make for Calveta's future growth, including the following points: Should he change the organizational structure? Should he accept the offer from GSD?
- Meeting the 5-year target of revenue growth while maintaining the culture of ‘The Antonio Way’ throughout the organization.
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Calveta Dining Services, Inc.: A Recipe for Growth? Case Answers
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1. Analyze the advantages of Calveta Dining Services, Inc., and examine how it has built its successes.
Calveta Dining Services has a lot of advantages because it is focused more on the dining service industry in the SLF ( Senior Living Facilities) in the United States.
First, the market is highly attractive because 75% of it is still untapped. It means this decision to start a company can gain a lot of profit.
Second, the aging population in the US is also getting higher. It forecasted to increase by 7.2% in the coming years. Thinking about this, this is a big opportunity. Although this may attract potential competitors and new entrants, Calveta has useful resources, and they are ready to face these threats in this market.
Third, because of the increasing competition, bargaining power also increased when it comes to acquiring customers, but Calveta found some ways to compete and be the winner.
How did Calveta Dining Services, Inc. build its success?
- They use high quality, fresh foods.
- They customized the services, and because of this, we’re able to demand a for value-added services.
- They venture into a new business that is aligned with their current business model. This move helped them increase the buying power from suppliers and help them expand their client-base. To explain further, Calveta’s value proposition is the “passion for food” combined with “traditional family values”. They offer this to their customers and teach to their employees.
What is Calveta’s culture?
One of the reasons Calveta Dining Services, Inc. was successful was because of the culture in the Organization. Calveta’s culture was about developing organizational learning, create a close relationship with various departments, promotes group thinking. It is a culture that gives employees and a sense of ownership for the tasks that they are assigned to do while maintaining open communication channels.
Also, the goals framed by Antonio helped a lot to build strategies that sustained the company and increase its profit. The employees were given intensive training programs, and the organizational culture was instilled in the employee’s minds. They were able to retain most of the employees because of the competitive salary, incentives, bonuses, opportunity to grow. The retention rate was 40%, even higher than the industry average.
Overall, I guess the success of Calveta Dining Services, Inc. was built through the high-quality food, treating guests like family culture, employees’ dedication, customized services for their customers. These are Calveta’s competitive advantage.
2. Describe the decisions Frank should make for Calveta’s future growth, including the following points: Should he change the organizational structure? Should he accept the offer from GSD? Should he change the organizational structure?
The first point, I guess Frank’s framework gave the employees high satisfaction on their jobs and the customers on the service that they’re getting. However, the company’s vertical organizational structure made it difficult for management to have close and direct contact with their customers and frontline employees.
This situation points out a big issue for Calveta’s culture, which became the leading cause of losing customers. The constant changing of employees because of promotion and growth made customers unhappy. The frequent changes caused the quality slip. Naturally, it will take time for the new manager to get accustomed to the further tasks and to develop a close relationship with the SLF and its customers.
Calveta Dining Services, Inc. does not need to change its organizational structure because growth is essential, and promotions, bonuses make employees happy. However, they can make some enhancements. For example, they should not change the manager abruptly. They can train a new manager before his appointment and make him be a familiar face at the SLF he would be assigned to. In this way, customers will have the time to get to know him and see him before he takes over the position.
Should he accept the offer from GSD?
I think the primary problem now that Frank is facing is how to double the revenue in 5 years. Its already been two years and he has three years more to reach his goal. The offer from GSD was promising, but I think accepting their offer is not a good idea. First, GSD’s culture does not align with Calveta’s. The increase of Calveta’s workforce alone made it difficult for the human resource to instill the values to the recruits.
Merging or acquisition would double this kind of problem. Calveta Dining Services, Inc. has a unique culture, and it would take some time not just for lower management but also for top management to get accustomed to it. Plus, GSD having a bad reputation on their debt is not suitable for Calveta Dining Services, Inc.
Of all the options I can think of, I guess entering into the hospital or healthcare clinics market is attractive. First, it is aligned with their values and core competencies. It also fits their current business model, and their employees are already trained to cater to this kind of market. Furthermore, the hospital market and the healthcare clinics market have promising future economic-wise.
I believe Calveta Dining Services, Inc. should stick to the current market, which fits their current business model and the service it provides. Venturing into new markets that has an aggressive growth strategy may not be right for them, and it could also ruin their culture.
Meeting the 5-year target of revenue growth while maintaining the culture of ‘The Antonio Way’ throughout the organization of Calveta Dining Services, Inc.
A table that maps out the effects and sensitivities of various factors, a cause-effect analysis is done on all direct processes/activities mentioned as per the case facts.
Most of the factors in the Cause-Effect Analysis have either low sensitivity or are saturated beyond current market expectations.
Options with revenue and growth are to be evaluated since they are highly sensitive.
1. Acquiring Great South West Dining Service or similar firms
This option will give access to new customers in the western region where Calveta Dining Services, Inc. has no presence. This alternative will also be a positive step towards Frank’s goal of doubling Calveta’s revenue.
2. Expanding operations to different industries such as Hospitals
Since hospitals cater to a similar set of customers (patients) and Calveta specializes in providing to customers in such a market, so this is a feasible option.
3. Concentrating on untapped 75% of the SLF segment
Since 75% of the SLFs still do not outsource their food catering requirement to outside vendors, there is an immense potential to expand within the current market.
4. Organizational Restructuring
From the customer and internal employee feedbacks, it has come to light that the management is not able to maintain the same level of personal contact with the customers. The main reason for this is the ever-growing customer base and the organizational structure not aligning with the changing needs. So, restructuring could help realign the Organization to the ‘Antonio’s Way.’
Criteria for Evaluation:
1. Core Competencies- It is an attribute that firms require to compete in the marketplace. The firm’s core competencies are “High-Quality Food,” “Personalised Service,” and “High Employee Satisfaction.”
If the alternative is matching the core capabilities and the resources of the firm, it is given a high rating. Otherwise, a low score is given.
2. Impact on ‘Antonio’s Way’- Innovate constantly for developing new service features, to provide value to the customer by offering services in a reasonable budget, to establish Calveta employees to their full potential, and to grow profitably.
If the alternative is having a positive impact on Antonio’s ways, it is given a high rating. Otherwise, a low score is given.
3. Entering new market segments – Does the alternative provide a possibility to expand Calveta’s business into a new market segment. Entering the hospital segment can leverage current business’ competencies to excel in that industry which could help to achieve the 5-
year target by increasing revenues.
4. Financial Implication – Calveta Dining Services, Inc. has remained a debt-free company in the past, a position Frank’s father always cherished. Whether the chosen alternative will lead to long-term debt is an important consideration. If the benefits outweigh the extrinsic and intrinsic costs incurred from debt, the alternative might be worth exploring.
If the financial implication is high, the criteria are given a ‘LOW’ rating.
Short Term – Considering the above analysis, our final recommendation is to concentrate on 75% of the untapped market of SLFs, as it satisfies the majority of the evaluation criteria, including growth (plus revenue) and culture.
To cater to the changing market demand, changes in organizational structure is needed. Better knowledge transfers among employees need to be there when they are transferred.
Long Term – After efforts toward the untapped segment start returning results, we can then consider inorganic methods of expansion by acquiring competitive firms by raising additional funds from the market.