Strategic Management of Giuseppe's Sausage Company

Strategic management of Giuseppe's Sausage Company

Case Analysis

Giuseppe's Original Sausage Company is a company that formed in late 1991 by Joe Cotrone in Memphis Tennessee. Because of USDA regulation issues the company did not did not open its doors right away but the sausages did make their way to the Memphis in May festival that highlighted Italy and Italian food. Finally, Giuseppe's opened their doors in late 1992 after all the government regulations were complete. This was a gourmet sausage company that specialized in dinner sausages that consisted of ore than 80 different sausage products. In the beginning sales were slow but by late 1997 sales were over $250,000 due to expanding clientele. This case analysis will analyze Giuseppe's external and internal environments as well as recommend strategic actions to maintain a competitive advantage.

1. Describe the Dominant Economic Characteristics of the Industry.

The Dominant Economic Characteristics of the Specialty Sausage Industry

Growth and Position in Life Cycle:

The specialty sausage industry was in the growth phase of the industry's lifecycle. In 1997 the industry had a growth rate of 18.3% with the market in Memphis growth at 15.4% from the prior year. Also, the regional segment expanded to $2 million.

Number of rivals:

The market was competitive and the number of rivals consisted of 25 to 30 regional and national brands that were sold in the Memphis market with about 5 being major competitors including Bryan, Jimmy Dean and Johnsonville.

Buyer needs and requirements:

In 1992 the NPD consulting group's crest service indicated that more Americans were eating ethnic specialty foods and 84% of the people surveyed at Italian foods beside pizza.

Production Capacity:

Giuseppe has the capacity to produce more sausages. Since the company is not producing more sausages with this capability the prices of the sausages are higher than necessary.

Technological Changes:

Technological change isn't a big factor in the specialized sausage industry because it's not too hard to make sausages though technology would help reduce costs to make the sausages.

Vertical Integration

Currently Giuseppe handles all the distribution channels but the company should hire a broker to serve the retail market and the food service market.

Product Innovation:

Product Innovation was high because of all this interest and Giuseppe made These customers were looking for unique sausages and the dinner sausage specialty had an opportunity to fit into a unique high quality market and sell these sausages at premium prices. The specialty sausage market consisted of two segments for the dinner sausage: The first was retail which included Piggly Wiggly, Kroger, Seessel's, Megamarket and Jitney Premier and the second was food service which was made up of restaurants, educational and company cafeterias and casinos. The food service market segment was a bit harder to keep up with compared to restaurant market segment because high end restaurants were willing to pay far the specialty sausage for their clientele but institutions like hospitals and cafeterias were average sausages at low prices. In the retail market segment, the market for dinner sausage continued to grow though new entrants were expected to enter the market. It wouldn't take long for a company to enter the industry but the USDA regulations made it difficult to enter in a rapid amount of time. There was a threat if a company was already in the meat business and decided to enter into the sausage industry.

Scope of Competitive Rivalry:

The areas where the companies compete are in the region of Memphis, Tennessee.

Economies of Scale:

The specialized sausage industry did not have an economy of scale in the Memphis market. Giuseppe's founders Joe Cotrone sold sausages from a cooler out of his car before he decided to sell sausages on a commercial scale.

Giuseppe's was able to differentiate their products without being an economy of scale because larger companies had difficulty competing with the specialty dinner sausage. This is because it was price effective for the larger companies to offer fewer varieties in a larger volume. The smaller companies could produce a wider variety of sausages of specialty dinner sausages in smaller volumes though the smaller companies lacked the larger production desired by their customers. If a company were to try to become an economy of scale it would have to make sausages more cheaply at larger volumes than smaller volumes. The company would also have to be able to reduce costs like R & D over the bigger sales volume.

Experience and learning curve effects:

The experience and learning-curve effects involve the cost of making the sausages which decline over time as the learning and experience of the employees at these specialty sausage companies increases. Giuseppe's costs are low to produce these specialty sausages and it can charge a premium priced, this allows the company to reap a higher profit margin.

2. Describe the major Driving Forces of the Industry.

The major Driving Forces

The specialty sausage industry is growing as more people in the mid-south try the dinner sausages. The times were changing and now the sausages weren't just for breakfast anymore.

Communities grew larger around Memphis and the establishments in Tunica Mississippi had an incredible impact with the establishment of casinos. The growth in the Tunica caused big changes in the local economies with the big increase of the tourist industry.

Giuseppe's product line consisted of more than 80 different sausage-like products. It was able to do this because as per the NAPD Crest survey the interest in Italian foods increased by 84%.

Health and Nutrition issues became a factor when the government required that the nutrition values were to be placed on the packaging. Companies began to enter the low-fat market niche and produced products with low-fat ranges between 1.5 and 5 grams. Giuseppe produced the turkey and hot turkey Italian sausage that met these requirements.

Not all of the sausage industry competitors would be considered a competitor if it became