Case analysis: Calveta Dining Services, Inc.: A Recipe for Growth?

This is an interesting case which depicts how the existing culture of an

organization can impede its growth endeavors. This case is a decision dilemma about
how Calveta Dining Services can have a sustainable growth strategy which would be
complimentary to its business model and help double its revenues.

Calveta Dining Services is a focused differentiator in the dining service industry.

The profit pool of the target market is attractive mainly because 75% of the market is
still untapped. Moreover, with the aging population of the Baby Boomer segment, the
elderly population is going to increase by 7.2% in the next 21 years. This offers good
growth opportunities. Such growth opportunities would definitely attract new entrants
but Calveta's resources and capabilities can well insulate the company from this threat.
The increasing competition would definitely increase the bargaining power of the
customers. However, Calveta with its high quality, fresh food and customized services
can always demand a premium for its value added services. With the increase in its
scale of services (by venturing into a new business which is complimentary to its current
business model) in the industry would further increase its buying power from suppliers
(economy of scales). The brand equity that Calveta has created would help it further
expand its customer base.

Calveta offers the value proposition of 'passion for food' and 'traditional family
values' both to its customers and its employees. The culture of the organization fosters
organizational learning, tightly integrate various departments and promotes 'systems
thinking'. The culture is closely based on the Deming's principles which gives the
employees a sense of ownership for tasks they do and helps in maintaining the
communication channels. This is due to low barriers between management and
employees. The Goals framed by Antonio helped the company to build sustaining
strategies and outpace the industry average for growing revenues (52% growth in
revenues in past 3 years alone). The intensive training programs and human resource
culture deeply instilled the organizational values in the employees. Employee retention
rate was 40% higher than the industry average. This was because of it the excellent
employee growth opportunity, competitive salary and performance bonuses provided by

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 Calveta which made the employees highly satisfied with their job (Exhibit 3). The growth
of the company and its vertical organizational structure made it difficult for the
management to be in close contact with their customers and front end employees.

The high quality food, customized services, culture of treating guests like family,
brand image and equity and highly loyal and committed work force gave Calveta a
competitive advantage. These resources and capabilities enabled Calveta to create a
unique customer value and be a differentiator. Competitors or new entrants could never
copy this culture. Moreover, the resources and capabilities are competitively superior
(treatment of guests like family memebers), difficult to imitate (path dependency and
unique culture) and specific. Along with differentiation, cost efficiency was achieved by
its 'cost control model'. For example in-house manufacturing of pizza dough saved a
dollar per pizza.

The case points out a major flaw of Calveta's culture which was causing them to
lose their customers. The changing management (managers and cooks) due to the
company culture of promoting the employees frequently caused the quality to slip when
management changed. This was primarily because the new manager took time to get
accustomed to the new department and develop relationship with the SLF and its
customers. This issue could be avoided by training the new manager prior to his/her
appointment and making him a familiar face at the SLF where he/she would be serving.
This would preserve the customer-management relationship.

The major challenge faced by Frank was to achieve the goal of doubling the
revenue in 5 years. He had to select an appropriate growth opportunity which would fit
well into the current business model. Two years had passed by which left only three
years on hand to achieve this goal. Venturing into a completely new market would
require Calveta to develop new resources and capabilities which is time consuming.
Hence, entering into colleges to serve is not a viable option as they don't have that
infrastructure or capabilities or market research data to be successful and achieve a
sustainable cash flow. Adding a custodial service like cleaning serve is also not a viable
option due to low profit margins and complete divergence from its current business
model. Acquisition of GSD would not be a wise choice as it doesn't align with the

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 company's culture of 'no debt'. Moreover, it has been observed that due to increase in
the workforce Calveta is facing problems with instilling the organizational values in the
new recruits. An acquisition at this point would double the problems as not only the
lower management but also the top management of GSD would require training to learn
and get accustomed to Calveta's unique culture. Looking at the profitability of GSD, it
was not that profitable however, had the potential to be profitable if managed well. This
was risky given that the training of the acquired firm was a mammoth task and capital
intensive. Of all the options, entering into the hospital market seemed to be most
attractive and a strategic fit to their current business model and core competencies. The
customer base was similar. Hence, they could leverage their current capabilities and
resources to establish a foot print in this market. Moreover, though it had a limited
growth rate at present but had a promising future when the economy would be on track
again. With the declining economy, hospitals were struggling with their budget.
However, Calveta's cost control model would give them a competitive edge.

To sum up, Calveta should not venture into new markets or adopt an aggressive
growth strategy to attain its goal. Doing so can damage its culture. It is a family
business hence, the deadline of the goal could be extended in order to implement a
sustainable growth strategy.

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