Aloha Case
National University of Singapore
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
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