Understanding Enterprise

Entrepreneurship and Small Business, fourth edition

by Simon Bridge and Ken O'Neill

Case study: chapter 12

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Many would argue that the motivation and ability of a firm to grow rests with the owner and his or her management team. From the following case study, identify and describe how the different aspects of management facilitated business growth
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Nathan is the owner-manager of Sushi Co a company that produces take-away sushi products for established high street cafes and eateries. After enjoying great success for the first six months trading, including a quite complimentary write up in the local newspaper, takings had plummeted and the business was on the brink of closure. Costs of producing the meals were going through the roof and many of the outlets that had stocked the product were no longer ordering as they had not been able to move the stock previously purchased. Having the utmost confidence in his product, Nathan was astounded that Sushi Co was not the runaway success that his market research had assured him it would be. At the time of constructing the business plan, he had spent hours talking to the patrons of one of the cafes where his product was being sold and each time he asked whether or not sushi on the go at the suggested price would appeal to them, interviewees would give him a resounding 'yes'. On reflection he began to consider the potentially flawed methodology employed to gain feedback. The cafe that he had conducted his research was in quite an affluent part of town and while they were willing to pay the asking price that did not necessarily go for the rest of the market.

Concerned that by the time he would carry out fresh market research the business would be bust, Nathan took the decision to broaden the size of the potential market to which he would be appealing by cutting the cost of the product and attempting to reposition it in the market as a healthy lunchtime alternative to sandwiches and fast food. Margins were already wafer thin and while he had developed the system of producing and packaging the food himself, he knew it was not his area of expertise and with the remains of his business reserves, took the bold step of hiring Clare, a semi retired operation manager who had previously worked for a number of large food producing companies and Dan, a marketing expert with experience in product development. After being shown the production line set in place, Clare was dismayed. The packaging that was being used had to be individually made and aside from the time that this took up, it was also costing nearly twice as much as her previous employers spent. Clare immediately began the process of changing the expensive packaging and while she sourced alternative suppliers, Dan began work on rebranding the product.

Having previously worked in the food industry, Dan was more than aware of the importance of getting the branding just right and with the current demand for healthy food being in their favour, he was eager to capitalize on the excitement surrounding the Olympics by coinciding the rebranding of the business and launch of new product lines with the opening ceremony. His connections in the local paper got the company an article in the business section announcing the launch of the new healthy range fished in a dolphin friendly manner. In addition to this Sushi Co also launched the 'Not so Sushi' range for vegetarians and the 'Olympic Specials' that would be a different flavour each week representing the various nations competing at the games. Dan had particularly high hopes for the vegetarian range that had traditionally struggled to find a half-decent selection of options for lunch - other than sandwiches.

After just one month of the appointment of Clare and Dan things had started to turn around significantly. Some of the savings that had been a result of the packaging change were being passed onto customers in the hope that by reducing the retail price of the product, Sushi Co would have a wider appeal and could be seen as an affordable lunchtime option for people on the go. This had indeed contributed towards increased sales and the re-orders that they had experienced over the past few weeks but it was not the only factor. Dan had convinced Nathan that in order to maximise his potential sales it would be important to look for locations with high foot traffic and offices and schools in close proximity. Nathan had agreed and after a walk around town, managed to identify a number of highly desirable locations in the city centre that would be ideal outlets for his product range. He had then approached the purchaser for one of the major newsagents in the country who had agreed to trial Sushi Co products in a number of stores in the city.

One year had passed and Sushi Co had been transformed from a one-man operation to a business that had evolved into a chain of small eateries operating nation-wide. The business was now employing 15 people and was in the process of developing a franchise network that would allow it access to larger markets in the UK and would also raise their ever-growing profile.

From the case study, identify and describe how the different aspects of management facilitated business growth.

Suggested solution

Market positioning

  • Once he had accepted the flaw in his market research, Nathan was determined to find exactly where his product fitted in the market and as a result broadened the scope of potential customers he would target.
  • As a result of hiring Clare, the costs to produce the product had come down significantly and rather than try to retain the savings, Nathan passed them on to the customer in order to generate more sales.
  • Due to Clare's contribution, the detailed luxury packaging was done away with and replaced with a fresh and less expensive container. Although the impact of this change may be insignificant in terms of appealing more to customers, the knock-on effect was to reduce the overall cost of the product with the savings being passed on to customers.
  • The outlets for the sushi were also changed to newsagents and corner shops with greater human traffic and other low-cost alternative meals.
  • In addition to reducing the price, a marketing campaign was organised and co-ordinated with the launch of the Olympics in order to emphasize the health benefits of the product.
  • The overall result of this was the product had shifted from a luxury product targeting a small section of the market with a greater amount of disposable income to a product that had mass appeal and was seen as a healthy alternative for people on the go

New products

  • The introduction of 'Not-so-sushi' for vegetarians opened up another section of the market which, according to Dan's expertise in the market, has traditionally had difficulty in finding healthy lunch options on the go
  • The test launch of seasonal options and the Olympic specials may well have had little to do with the growth of the business in terms of sales and market share - although it could be argued that they kept the product in the public eye which certainly would not have had a detrimental effect
  • The 'dolphin friendly,' sustainable-fishing range would have also introduced a characteristic of the product that would have appealed to more ethically-minded consumers

Management recruitment

  • The introduction of Clare to the business made a lot of the changes, in terms of market positioning and product development, possible. These were areas outside the expertise of Nathan and although a notoriously difficult step to take for entrepreneurs, he managed to swallow his pride and relinquish control on an operational level
  • The fact that Dan had so much experience in branding and product development unquestionably contributed to the growth of the business. He assisted in identifying what should be the target market and oversaw a rebranding exercise that gave the enterprise maximum exposure in the local press.