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Barilla SpA (A) – Case Solution

Barilla SpA is an Italian manufacturer that sells its products through retailers and third-party distributors. Sometime in the '80s, the demand patterns are not constant and Barilla SpA saw the need to address this problem. The company seeks to execute a replenishment program where it is the company that determines shipment quantities to the distributors. This case study discusses the advantages and disadvantages of the proposed program.

​Janice H. Hammond Harvard Business Review ( 694046-PDF-ENG ) May 17, 1994

Case questions answered:

Case study questions answered in the first solution:

• Provide a concise case background.
• What is the problem that the JITD program was created to solve? Diagnose the underlying causes of this problem. What are the impacts of this problem on the supply chain?
• What do you think of Vitale’s JITD proposal as a mechanism to mitigate the problem?
• What internal conflicts or barriers at Barilla SpA might the JITD program create? What causes these conflicts? If you were Giorgio Magglia, how would you deal with these?
• In the environment in which Barilla SpA operated, do you believe JITD would be feasible and effective? If so, which customers would you target? How would you convince them that the JITD program was worth trying? If not, what alternatives would you suggest to combat some of the difficulties that Barilla’s operating system faces?

Case study questions answered in the second solution:

• Should they do JITD?
• What underlying problem is JITD trying to solve? And what are the causes of that problem?
• Are there internal barriers to JITD that would need to be dismantled?
• As a direct customer of Barilla, what would your response to JITD be?
• Does JITD address the entire supply chain (internal or external) or just manufacturing and distribution at Barilla?
• Is JITD the solution to Barillas SpA’s problem(s), or is there a better way to solve the problem(s) you identified?

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Barilla SpA (A) Case Answers

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Introduction – Barilla SpA

Barilla SpA is an Italian manufacturer of pasta founded in 1875. It started as a small company but grew into a large enterprise operating a network of plants all over Italy.

The company has built a reliable brand name and image through its innovations and differentiation of high-quality products.

However, Barilla has been experiencing high variations in product demand since the 1980s. Giorgio Maggiali, the logistics director for Barilla SpA, is concerned about the company’s reluctance to utilize the Just-in-time distribution technique (JITD) to reduce the fluctuations and improve the efficiency of the distribution system.

Key Problem(s) and the Causes

The primary problem for Barilla involves increasing fluctuations in demand that have strained manufacturing and logistics operations.

One secondary problem includes internal resistance to the JITD program by Barilla’s sales and marketing organizations.

Another problem is reduced profits for both manufacturers and retailers due to high distribution costs. Also, customers were unwilling to allow Barilla to place orders on their behalf.

Some of the causes of demand variations are:

There are lead time issues due to delays in shipping and manufacturing. The case states that it takes ten days for Barilla SpA to deliver orders to distributors. There are also delays in production due to specific steps followed to produce a particular type of pasta, thus increasing lead time.

The distributors place orders weekly, thus creating variations in demand. As mentioned in the case, large distributors order five truckloads in a week to take advantage of transportation economies, such as full truckload quantities, and small distributors place orders in small amounts per week. This may result in unexpected high or low orders.

There are inaccurate forecasts due to the use of a periodic review inventory system or manually counting inventory. The case notes that retailers review the list for a specific product every Tuesday, and if inventory is low, then an order is placed. This makes it challenging to know the optimum level of inventory and leads to errors in stock replenishment and forecasts.

Barilla offers promotional and large-volume discounts to increase demand for its products. Consumers take advantage of these discounts provided during a short period, resulting in irregular production and disturbing regular buying patterns.

Barilla sometimes overreacts or underreacts to demand expectations, producing too much or less inventory. The case highlighted that Barilla faced unexpectedly high demand for special types of pasta while their quantities were low.

Also, Barilla’s manufacturing and logistics personnel often ask distributors to carry more of their inventory for fear of lockouts.

Finally, there is limited coordination and communication between the sales personnel and the Grand distributors’ warehouse, unlike the Organized distributors.

So, salespeople may not supply information regarding the current market conditions and consumer requirements, leading to inappropriate levels of inventory.

With the continuous shifts in demand, there is no doubt that Barilla’s supply chain has been negatively affected.

Some of the effects of demand variations are:

There are excess or insufficient inventories. Barilla SpA’s distributors and retailers are forced to carry too much inventory, taking up their storage spaces. Lack of enough inventory results in unfulfilled orders, causing customer dissatisfaction.

There are increased inventory holding costs. The case states that supermarkets carried an average of 4,800 dry-product SKUs and held the products for 10-12 days.

Keeping inventory for a long time leads to the obsolescence of stock, and distributors or retailers may be forced to offer deep discounts to clear up space, leading to lost revenues.

Poor product planning and scheduling also occur. It is hard for Barilla to fulfill different orders efficiently without interruptions or delays in manufacturing.

Mr. Giorgio must make a critical analysis of both the traditional system of distribution and Vitale’s Just in Time distribution proposal to provide a long-lasting solution.

a) Remain with the traditional system of distribution.

The advantages of this system are…

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Barilla SpA A Case Study solution

Introduction.

The current case solution is published by 247caseanalysis and focuses on Barilla SpA A. The case presents an overview of the strategic and managerial issues that the Barilla SpA A faces in the growth and development of the business. The case solution focuses on understanding the central issue(s) in the case. The case study solution then uses strategic tools and models to solve the case and makes strategic recommendations for the Barilla SpA A (Abratt & Bendixen, 2018; Iacobucci, 2021).

The case study and the case solution for the Barilla SpA A are intended to give a comprehensive and holistic perspective regarding real-world business situations and challenges to the reader. Like all HBS case studies, it is important for the reader to first read the case for the Barilla SpA A. The proposed case study solution for the Barilla SpA A has encompassed the needs of all stakeholders while addressing the central challenge effectively (Deepak & Jeyakumar, 2019).

External environment analysis

The Barilla SpA A cannot directly influence the external environment. The Barilla SpA A must ensure to assess and continually review the external environment to identify potential challenges and opportunities (Abratt & Bendixen, 2018). This is needed because:

The external environment is dynamic and keeps changing.

External environment factors and dynamics, directly and indirectly, influence Barilla SpA A operations (Anthony, 2021).

PESTEL Analysis

The Barilla SpA A needs political stability to maintain business development and growth globally.

The Barilla SpA A must also pay heed to local and global taxation implications for operations carried on site, as well as in other countries.

The Barilla SpA A is directly impacted by the policies and regulations devised by the governments in its host as well as home countries (Chernev, 2018).

Lower interest rates facilitate the Barilla SpA A as it leads to increased instances of borrowing.

Lower interest rates also lead to increased consumer power, and increased demand for products of Barilla SpA A (Deepak & Jeyakumar, 2019).

The operations and demand for Barilla SpA A are directly influenced by the GDP and economic growth in the countries where it operates and exports (Buchanan & Huczynski, 2019).

Increased focus on education and higher literacy rates have allowed the Barilla SpA A to benefit from a more skilled and talented labor pool.

The higher portion of the youth has also benefitted the Barilla SpA A in creating a high demand for its products and services (Iacobucci, 2021).

Assessment of the population and consumer trends have allowed the Barilla SpA A to refine its segmentation and targeting strategies – leading to improved positioning of its portfolio offering (De Mooij, 2019).

Technological

Barilla SpA A has high internal innovation capabilities.

Barilla SpA A invests in research and development for improved creativity and technological progress.

The Barilla SpA A makes use of innovative and advanced technology to make its internal processes more efficient and work towards achieving economies of scale.

Barilla SpA A also benefits from knowledge sharing through global operations and transfers technology internally (Baines, Fill, & Rosengren, 2017).

Environmental

The Barilla SpA A follows and abides by environmental regulations imposed in various countries.

Consumers for Barilla SpA A have rapidly adopted green lifestyles and green consumption.

Incorporating environmentalism into its strategic goals and direction has enabled the Barilla SpA A to become more efficient in this resource allocation (Stead & Stead, 2014).

The Barilla SpA A ensures to follow the equal employment and equal opportunity law.

Through the equal opportunity act and regulations, the Barilla SpA A ensures that it does not discriminate against different groups in its HUMAN RESOURCE MANAGEMENT practices.

The Barilla SpA A also ensures to abide by the health and safety regulations.

The Barilla SpA A makes sure to follow regulations regarding employment contracts and employer responsibilities to ensure fair policy-making and high performance (Lasserre, 2017).

Porter Five Forces

Industry rivalry.

There is high competitiveness and rivalry in the industry.

The market is highly fragmented, which leads to increased competition for Barilla SpA A.

The Barilla SpA A faces industry rivals of various sizes and operations.

The competition for Barilla SpA A is local as well as global in nature.

The increased rivalry in the industry ensures that all players, including Barilla SpA A, offer high-quality products and services to consumers at competitive prices (Varadarajan, 2015).

The threat of new entrants

The threat of new entrants is moderate.

There are entry barriers such as government regulations and financial capital needed for setting up operations.

This ensures that only powerful players with high financial muscle enter the market where Barilla SpA A is operating.

New entrants ensure that the Barilla SpA A maintains its focus on competitiveness and high quality (Wunder, 2019; Abratt & Bendixen, 2018).

Threat of substitutes

The threat of substitutes is moderate to high.

There is direct well as indirect substitutes available for Barilla SpA A offerings.

The high number of players and market fragmentation has led to the increased availability of substitutes for Barilla SpA A products.

There are low switching costs for consumers between substitutes (Sahaf, 2019; Kotabe & Helsen, 2020).

Bargaining power of buyers

Barilla SpA A operational a highly fragmented industry.

The bargaining power of the buyers is high.

Players, including Barilla SpA A, do not have a retail setup (Phillips & Moutinho, 2018; Chernev, 2018).

Bargaining power of sellers

The bargaining power of suppliers is high in the industry where Barilla SpA A operates.

There're numerous players in the industry, and suppliers have contracted with most of them.

The raw materials provided by suppliers are restricted, and limited owing to quality needs and benchmarks (Kotabe & Helsen, 2020; Joyce, 2022).

Internal environment analysis

The internal analysis allows an insight into the factors that Barilla SpA A can directly influence. These factors and capabilities are used by the Barilla SpA A to ensure that:

It is able to capitalize on the opportunities from the external environment.

It is able to mitigate risks and manage challenges and threats appropriately.

The Barilla SpA A is able to set the right strategic direction and use internal capacities towards its attainment (Stead & Stead, 2014; Deepak & Jeyakumar, 2019).

The Barilla SpA A has a strong brand image and a positive consumer perception in the market.

The Barilla SpA A invests in research and development, which helps the company focus its new product development as well as marketing capabilities (Phillips & Moutinho, 2018).

The company has a strong financial revenue earning ability and enjoys high profits.

The Barilla SpA A has a global distribution network, which is strong and has allowed it to enjoy high business growth.

International expansion has allowed the Barilla SpA A to understand diverse cultures and their knees – and engage in the localization of its product portfolio (DuBrin, 2013).

The Barilla SpA A is criticized for high prices for its product portfolio.

The company has suffered negative PR owing to the recall of some of its products which were faulty.

Despite engagement with advanced technology, Barilla SpA A continues to use manual systems internally, which leads to time ineffectiveness (Abratt & Bendixen, 2018).

The Barilla SpA A has an organizational culture that is resistant to change and, as a result, exhibits slow adaptation to new trends.

The product design for the Barilla SpA A’s offerings is imitative.

The Barilla SpA A has undifferentiated products in its portfolio with respect to the competition (Phillips & Moutinho, 2018; Baines, Fill, & Rosengren, 2017).

Opportunities

The Barilla SpA A has the opportunity to expand to developing and emerging economies.

The Barilla SpA A can develop outsourcing partnerships to further maintain cost-effectiveness.

The Barilla SpA A can also engage in green production and work towards environmental sustainability (Stead & Stead, 2014; Lasserre, 2017).

The Barilla SpA A can also develop strategic partnerships and alliances to facilitate business growth and development.

Target niche markets, and develop new products.

The Barilla SpA A can benefit from the evolving media trends for marketing purposes – including using social media content creation to target new consumer groups (Varadarajan, 2015; Wilson, 2018).

The Barilla SpA A is facing high competition.

The Barilla SpA A is also experiencing high imitation of its products.

The Barilla SpA A faces threats from the increased price volatility of raw materials as well.

The unstable government and government policies are also a threat to the operations of the Barilla SpA A- especially internationally.

Slow change adaptation may lead the Barilla SpA A to become an industry laggard (Anthony, 2021; Abratt & Bendixen, 2018).

Marketing mix

The product offerings by the Barilla SpA A maintain consistently high quality.

The Barilla SpA A engages in brand-building activities to ensure that its product and service offerings are well received by the target audience (Chernev, 2018).

Brand-building activities build positive associations for Barilla SpA A and lead to repeat purchases as well as high consumer loyalty.

Barilla SpA A ensures that its products are available in different SKU sizes to cater to the needs of different groups within its target audience.

The Barilla SpA A also offers a warranty for its products (Khan, 2014).

The Barilla SpA A ensures competitive pricing in the industry among the high number of market players.

For new products, the Barilla SpA A maintains an introductory pricing strategy to encourage trials and purchases (Kareh, 2018).

For its star products, the company maintains penetrative pricing strategies to allow maximum trial.

For mature products, the Barilla SpA A engages in aggressive and competitive pricing.

The Barilla SpA A offers regular discounts to appeal to consumers, clear stocks, as well as for increasing footfall (Išoraitė, 2016).

Barilla SpA A ensures that all its product offerings are highly accessible.

The Barilla SpA A places products in physical retail setups like supermarkets and hypermarkets.

The Barilla SpA A also places products with e-tailers such as amazon so consumers can easily access the products (Iacobucci, 2021).

The Barilla SpA A also has an online system on its website for managing orders placed directly with the company.

The Barilla SpA A has a strong distribution network, as well as competent and quick consumer service. (Kareh, 2018; Abratt & Bendixen, 2018).

The Barilla SpA A uses traditional promotional platforms of television to reach the masses with its product portfolio.

The Barilla SpA A also engages in radio and print promotional activities and advertisements (Deepak & Jeyakumar, 2019).

The Barilla SpA A also uses social media to reach out to its audiences and influence them.

The Barilla SpA A has developed expertise in interesting and relevant content creation, which attracts its primary as well as secondary target consumer groups (De Mooij, 2019).

The Barilla SpA A frequently uses influencers to create a positive buzz and hype regarding its products, as well as to ensure high reach.

All promotional content is integrated and uses emotional appeals to create a lasting relationship with the consumers (Chernev, 2018).

The Barilla SpA A has a strong global presence and strong business development capabilities.

The Barilla SpA A focuses on research and development internally to identify market gaps and demands.

The Barilla SpA A makes use of AI in its production operations and marketing functions to increase cost efficiency as well as affectivity (Dimitrieska, Stankovska, & Efremova, 2018).

The Barilla SpA A engages and invests in acquiring advanced and progressive technology for operational efficiency. (Joyce, 2022).

The Barilla SpA A has a strong retail setup and a strong distribution network across the globe (Gillespie & Swan, 2021; Chernev, 2018).

The Barilla SpA A has access to unique raw materials, which helps it maintain high quality as well as differentiation in its product offerings.

The Barilla SpA A holds special patents and licenses for manufacturing processes, as well as for being able to manufacture off-site in other countries (Grewal & Levy, 2021).

The Barilla SpA A undertakes and participates in sustainable and eco-friendly manufacturing processes.

The Barilla SpA A has also developed a green packaging solution for its product offerings and portfolio (Gillespie & Swan, 2021).

The leadership within the Barilla SpA A is visionary and charismatic.

The organizational culture within Barilla SpA A is robust, innovative and creative.

The organizational culture is based on the unique values, and implementation of the same – including transparency, honesty, and commitment (Groucutt & Hopkins, 2015).

The human resource management policies within the Barilla SpA A support employee development and engagement – leading to high employee satisfaction and high employee morale (Machado, 2019; Anthony, 2021).

The compensation framework within the Barilla SpA A is advanced and focuses on extrinsic as well as intrinsic drivers for employee performance.

The Barilla SpA A enjoys high brand equity based on consistently high deliverance of product quality (Hitt, Miller, Colella, & Triana, 2017; Grewal & Levy, 2021).

The technical infrastructure within the Barilla SpA A comprises new and advanced technology as well as network development to support its operations (Griffin, 2021)

The Barilla SpA A has access to advanced physical infrastructure as well which helps support its technical advancements, as well as its manufacturing and related operations (Valeri, 2021)

The international exposure that the Barilla SpA A has received owing to its expansions has allowed it to develop and apply innovation as well as new knowledge for improving existing processes and schedules within the company (Hitt, Miller, Colella, & Triana, 2017; Abratt & Bendixen, 2018; Valeri, 2021).

Value chain

The core capabilities and strengths of the Barilla SpA A have enabled it to overcome obstacles and challenges and achieve its strategic goals and targets.

The core strengths and competencies of Barilla SpA A form an important part of the company’s value chain (Chernev, 2018; Anthony, 2021).

Primary activities

Barilla SpA A works directly and owns part of its operations in the value chain.

The Barilla SpA A also works through different third parties as well as contracts with other parties for managing operations in other countries (Anthony, 2021).

For inbound logistics, the Barilla SpA A ensures that all raw materials are transferred to warehouses and manufacturing sites in a timely fashion using company-owned transportation.

The Barilla SpA A manages its operations directly as well as through third parties.

The operations of the Barilla SpA A are spanned in its hometown as well as conducted overseas at other locations (Deepak & Jeyakumar, 2019).

In offshore countries, the Barilla SpA A manages operations through partners and agents – who look after distribution and marketing activities for the Barilla SpA A.

The Barilla SpA A engages in invested marketing activities – based on consumer and market research (Dimitrieska, Stankovska, & Efremova, 2018; Chernev, 2018).

The Barilla SpA A also makes use of AI for its marketing and promotional activities.

The Barilla SpA A regularly trains its employees to develop skills regarding consumer service.

The Barilla SpA A has maintained strict policies regarding consumer service as well as ensuring high quality and increased customer satisfaction (Joyce, 2022).

Secondary activities

The Barilla SpA A has a strong human resource management department, regulated by modern policies and practices.

The human resource management department at the Barilla SpA A supports the organizational culture and the leadership through its various functions – such as hiring, training and compensation management (DuBrin, 2013).

The Barilla SpA A makes use of advanced technology to support its operations and achieve strategic goals and targets (DuBrin, 2013; Joyce, 2022).

The advanced technology is acquired internationally (Iacobucci, 2021).

The Barilla SpA A engages in regulated procurement with selected suppliers.

The Barilla SpA A ensures its contracted suppliers provide consistently high-quality raw materials to maintain high quality for end consumers (Gillespie & Swan, 2021).

The Barilla SpA A is used to resolve its managerial and strategic challenges using one of the following strategies.

The strategies recommended will allow the Barilla SpA A to expand and develop, as well as manage its risks and challenges effectively.

Using these strategies, the Barilla SpA A will also be able to remain competitive in the market.

Market development strategies

The Barilla SpA A can engage in informative and emotional marketing to appeal to the target audience in the market and increase brand awareness.

The Barilla SpA A can devise and run educational campaigns to help understand the importance of the product, and its need (Išoraitė, 2016).

The Barilla SpA A can work with influencers and celebrities to help spread the message through social media as well as conventional media.

The Barilla SpA A can use a team on the ground to interact with the target audience, brief them about the product and its benefits, and influence them positively towards purchase decisions. (Baines, Fill, & Rosengren, 2017).

Market penetration strategies

The Barilla SpA A can increase its marketing spending and use emotional appeals to influence the target audience.

The marketing strategies should be focused on maximizing the reach of the brand's message and promise (Iacobucci, 2021).

The Barilla SpA A is recommended to make its products accessible through an increased number of supermarkets and hypermarkets.

The Barilla SpA A can also open its own retail setups to increase footfall and reach across different regions (Sahaf, 2019).

Product development strategies

The Barilla SpA A is recommended to and can engage in market and consumer research for product development.

Encouraging innovation and discussion of new ideas within the Barilla SpA A can also lead to rapid new product development (Varadarajan, 2015).

The Barilla SpA A can also optimize the development of new products by making its manufacturing and testing processes more effective.

The Barilla SpA A can also create innovation labs and labs for new product development and testing (Sahaf, 2019; Abratt & Bendixen, 2018).

Diversification strategies

The Barilla SpA A can expand horizontally and add new product lines.

The Barilla SpA A can also expand vertically and add new products to the existing product line

The diversification will allow the Barilla SpA A to attract new consumer groups (De Mooij, 2019).

The diversification will also allow the Barilla SpA A to increase its penetration and reach amongst existing consumers.

The Barilla SpA A will be able to increase brand awareness through diversification as well (Iacobucci, 2021; Abratt & Bendixen, 2018).

The Barilla SpA A needs to strategically align its resources for optimization and to achieve its strategic goals and targets. The Barilla SpA A should continue to use its internal capabilities to realize new opportunities and for mitigating risks and weaknesses. In addition, the Barilla SpA A should also make use of other strategic models to understand the managerial challenges that the organization faces and devise suitable strategies and actions for overcoming them. The leadership of the Barilla SpA A will play a critical role in ensuring that the organization overcomes the challenges by focusing on the organizational culture and values, which will then impact the operations and performance at large.

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Anthony, H. (2021). Understanding strategic management. New York: Oxford University Press.

Baines, P., Fill, C., & Rosengren, S. (2017). Marketing. New York, United States: Oxford University Press.

Buchanan, D., & Huczynski, A. (2019). Organizational behaviour. London: Pearson UK.

Chernev, A. (2018). Strategic marketing management. Berlin/Heidelberg, Germany: Cerebellum Press.

De Mooij, M. (2019). Consumer behavior and culture: Consequences for global marketing and advertising. Thousand Oaks, California: Sage.

Deepak, R., & Jeyakumar, S. (2019). Marketing management. New Delhi, India: Educreation Publishing.

Dimitrieska, S., Stankovska, A., & Efremova, T. (2018). Artificial intelligence and marketing. Entrepreneurship, 6(2), 298-304.

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Gillespie, K., & Swan, K. (2021). Global marketing. New York, United States: Routledge.

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Kareh, A. (2018). Evolution of the four Ps: Revisiting the marketing mix. Retrieved June 2022, from Forbes: https://www.forbes.com/sites/forbesagencycouncil/2018/01/03/evolution-of-the-four-ps-revisiting-the-marketing-mix/

Khan, M. (2014). The concept of ‘marketing mix’and its elements. International journal of information, business and management, 6(2), 95-107.

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Barilla spa (a) description.

Barilla SpA, an Italian manufacturer that sells to its retailers largely through third-party distributors, experienced widely fluctuating demand patterns from its distributors during the late 1980s. This case describes a proposal to address the problem by implementing a continuous replenishment program, under which the responsibility for determining shipment quantities to the distributors would shift from the distributors to Barilla. Describes support and resistance within Barilla's different functional areas and within the distributors Barilla approached with the proposal.

Case Description Barilla SpA (A)

Strategic managment tools used in case study analysis of barilla spa (a), step 1. problem identification in barilla spa (a) case study, step 2. external environment analysis - pestel / pest / step analysis of barilla spa (a) case study, step 3. industry specific / porter five forces analysis of barilla spa (a) case study, step 4. evaluating alternatives / swot analysis of barilla spa (a) case study, step 5. porter value chain analysis / vrio / vrin analysis barilla spa (a) case study, step 6. recommendations barilla spa (a) case study, step 7. basis of recommendations for barilla spa (a) case study, quality & on time delivery.

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Case Analysis of Barilla SpA (A)

Barilla SpA (A) is a Harvard Business (HBR) Case Study on Technology & Operations , Texas Business School provides HBR case study assignment help for just $9. Texas Business School(TBS) case study solution is based on HBR Case Study Method framework, TBS expertise & global insights. Barilla SpA (A) is designed and drafted in a manner to allow the HBR case study reader to analyze a real-world problem by putting reader into the position of the decision maker. Barilla SpA (A) case study will help professionals, MBA, EMBA, and leaders to develop a broad and clear understanding of casecategory challenges. Barilla SpA (A) will also provide insight into areas such as – wordlist , strategy, leadership, sales and marketing, and negotiations.

Case Study Solutions Background Work

Barilla SpA (A) case study solution is focused on solving the strategic and operational challenges the protagonist of the case is facing. The challenges involve – evaluation of strategic options, key role of Technology & Operations, leadership qualities of the protagonist, and dynamics of the external environment. The challenge in front of the protagonist, of Barilla SpA (A), is to not only build a competitive position of the organization but also to sustain it over a period of time.

Strategic Management Tools Used in Case Study Solution

The Barilla SpA (A) case study solution requires the MBA, EMBA, executive, professional to have a deep understanding of various strategic management tools such as SWOT Analysis, PESTEL Analysis / PEST Analysis / STEP Analysis, Porter Five Forces Analysis, Go To Market Strategy, BCG Matrix Analysis, Porter Value Chain Analysis, Ansoff Matrix Analysis, VRIO / VRIN and Marketing Mix Analysis.

Texas Business School Approach to Technology & Operations Solutions

In the Texas Business School, Barilla SpA (A) case study solution – following strategic tools are used - SWOT Analysis, PESTEL Analysis / PEST Analysis / STEP Analysis, Porter Five Forces Analysis, Go To Market Strategy, BCG Matrix Analysis, Porter Value Chain Analysis, Ansoff Matrix Analysis, VRIO / VRIN and Marketing Mix Analysis. We have additionally used the concept of supply chain management and leadership framework to build a comprehensive case study solution for the case – Barilla SpA (A)

Step 1 – Problem Identification of Barilla SpA (A) - Harvard Business School Case Study

The first step to solve HBR Barilla SpA (A) case study solution is to identify the problem present in the case. The problem statement of the case is provided in the beginning of the case where the protagonist is contemplating various options in the face of numerous challenges that Barilla Distributors is facing right now. Even though the problem statement is essentially – “Technology & Operations” challenge but it has impacted by others factors such as communication in the organization, uncertainty in the external environment, leadership in Barilla Distributors, style of leadership and organization structure, marketing and sales, organizational behavior, strategy, internal politics, stakeholders priorities and more.

Step 2 – External Environment Analysis

Texas Business School approach of case study analysis – Conclusion, Reasons, Evidences - provides a framework to analyze every HBR case study. It requires conducting robust external environmental analysis to decipher evidences for the reasons presented in the Barilla SpA (A). The external environment analysis of Barilla SpA (A) will ensure that we are keeping a tab on the macro-environment factors that are directly and indirectly impacting the business of the firm.

What is PESTEL Analysis? Briefly Explained

PESTEL stands for political, economic, social, technological, environmental and legal factors that impact the external environment of firm in Barilla SpA (A) case study. PESTEL analysis of " Barilla SpA (A)" can help us understand why the organization is performing badly, what are the factors in the external environment that are impacting the performance of the organization, and how the organization can either manage or mitigate the impact of these external factors.

How to do PESTEL / PEST / STEP Analysis? What are the components of PESTEL Analysis?

As mentioned above PESTEL Analysis has six elements – political, economic, social, technological, environmental, and legal. All the six elements are explained in context with Barilla SpA (A) macro-environment and how it impacts the businesses of the firm.

How to do PESTEL Analysis for Barilla SpA (A)

To do comprehensive PESTEL analysis of case study – Barilla SpA (A) , we have researched numerous components under the six factors of PESTEL analysis.

Political Factors that Impact Barilla SpA (A)

Political factors impact seven key decision making areas – economic environment, socio-cultural environment, rate of innovation & investment in research & development, environmental laws, legal requirements, and acceptance of new technologies.

Government policies have significant impact on the business environment of any country. The firm in “ Barilla SpA (A) ” needs to navigate these policy decisions to create either an edge for itself or reduce the negative impact of the policy as far as possible.

Data safety laws – The countries in which Barilla Distributors is operating, firms are required to store customer data within the premises of the country. Barilla Distributors needs to restructure its IT policies to accommodate these changes. In the EU countries, firms are required to make special provision for privacy issues and other laws.

Competition Regulations – Numerous countries have strong competition laws both regarding the monopoly conditions and day to day fair business practices. Barilla SpA (A) has numerous instances where the competition regulations aspects can be scrutinized.

Import restrictions on products – Before entering the new market, Barilla Distributors in case study Barilla SpA (A)" should look into the import restrictions that may be present in the prospective market.

Export restrictions on products – Apart from direct product export restrictions in field of technology and agriculture, a number of countries also have capital controls. Barilla Distributors in case study “ Barilla SpA (A) ” should look into these export restrictions policies.

Foreign Direct Investment Policies – Government policies favors local companies over international policies, Barilla Distributors in case study “ Barilla SpA (A) ” should understand in minute details regarding the Foreign Direct Investment policies of the prospective market.

Corporate Taxes – The rate of taxes is often used by governments to lure foreign direct investments or increase domestic investment in a certain sector. Corporate taxation can be divided into two categories – taxes on profits and taxes on operations. Taxes on profits number is important for companies that already have a sustainable business model, while taxes on operations is far more significant for companies that are looking to set up new plants or operations.

Tariffs – Chekout how much tariffs the firm needs to pay in the “ Barilla SpA (A) ” case study. The level of tariffs will determine the viability of the business model that the firm is contemplating. If the tariffs are high then it will be extremely difficult to compete with the local competitors. But if the tariffs are between 5-10% then Barilla Distributors can compete against other competitors.

Research and Development Subsidies and Policies – Governments often provide tax breaks and other incentives for companies to innovate in various sectors of priority. Managers at Barilla SpA (A) case study have to assess whether their business can benefit from such government assistance and subsidies.

Consumer protection – Different countries have different consumer protection laws. Managers need to clarify not only the consumer protection laws in advance but also legal implications if the firm fails to meet any of them.

Political System and Its Implications – Different political systems have different approach to free market and entrepreneurship. Managers need to assess these factors even before entering the market.

Freedom of Press is critical for fair trade and transparency. Countries where freedom of press is not prevalent there are high chances of both political and commercial corruption.

Corruption level – Barilla Distributors needs to assess the level of corruptions both at the official level and at the market level, even before entering a new market. To tackle the menace of corruption – a firm should have a clear SOP that provides managers at each level what to do when they encounter instances of either systematic corruption or bureaucrats looking to take bribes from the firm.

Independence of judiciary – It is critical for fair business practices. If a country doesn’t have independent judiciary then there is no point entry into such a country for business.

Government attitude towards trade unions – Different political systems and government have different attitude towards trade unions and collective bargaining. The firm needs to assess – its comfort dealing with the unions and regulations regarding unions in a given market or industry. If both are on the same page then it makes sense to enter, otherwise it doesn’t.

Economic Factors that Impact Barilla SpA (A)

Social factors that impact barilla spa (a), technological factors that impact barilla spa (a), environmental factors that impact barilla spa (a), legal factors that impact barilla spa (a), step 3 – industry specific analysis, what is porter five forces analysis, step 4 – swot analysis / internal environment analysis, step 5 – porter value chain / vrio / vrin analysis, step 6 – evaluating alternatives & recommendations, step 7 – basis for recommendations, references :: barilla spa (a) case study solution.

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Barilla Spa Case Analysis

Barilla SpA (A) Case Analysis Teona Omiadze, Nino Tskhvariashvili, Mari Zaridze School of Economics, Business and Administration of the University of Georgia Instructor: Natia Zedgenidze Tbilisi 2011 Table of Contents Executive Summary………………………………………………………………. 3 Introduction……………………………………………………………………….

. 4 Problem Description………………………………………………………………. 5 External and Internal Resistances to JITD program………………………………. 9 Solution…………………………………………………………………………..

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.. 11 Recommendations to the solution …. ……. ………………………………………12 Other recommendations…………………………………………………………..

. 5 Customer response to the solution…………………………………………………16 Conclusion…………………………………………………………………………. 21 Executive Summary Barilla SpA, an Italian pasta manufacturer is experiencing problems in manufacturing and distribution systems caused by fluctuations in demand.

To eliminate these difficulties Giorgio Maggiali, the Chief of Barilla’s Logistics Department, has been trying to implement the Just-In-Time-Distribution, further referred as JITD, system proposed by his predecessor Brando Vitali. JITD can be called a remake of popular “Just-In-Time” manufacturing concept.Although Maggiali has been trying to convince his consumers that the JITD would definitely work, he has not made much progress. The program was met with significant resistance by the distributors and Barilla’s own Sales and Marketing organizations. Now Maggiali is looking for possible solutions of the problem.

In the following analysis we will provide recommendations, which will help Barilla to successfully implement the JITD system and thus decrease its costs, increase efficiencies and its profits. Introduction Barilla SpA was founded in 1975 by Pietro Barilla.From a small shop in Palma, Italy, it became a large, vertically integrated corporation with mills, plants and factories located throughout the Italy. Barilla’s success highly depended on its’ quality of product and innovative marketing programs, which created strong brand name. The company was sold to Grace Inc. in 1971, because the building of a huge plant in Perdignano drove the owners “deeply into debt”.

Grace brought additional capital investment and professional management practice into the company. In 1979, Grace sold the plant back to Pietro Barilla.During the 80s Barilla had an annual growth rate of over 21%. In 1990 Barilla was making 35% of all pasta sold in Italy and 22% sold in Europe. It held significant shares in pasta and bakery-products markets in northern and southern Italy. By this period Barilla distributed dry products including pasta and some of the bakery products, such as cookies, biscuits, etc.

and fresh products including fresh pasta and bread. Barilla had a carefully chosen production schedule that minimized the changeover costs and maximized the quality of the product.Barilla’s plants were also specialized by the type of pasta they produced according to the composition of the pasta. Barilla distributed its product though three types of retail outlets: small independent shops, supermarket chains and independent supermarkets. Small independent shops were serviced by Barilla-run depots which stored approximately 35% of dry products. The rest 65% was shipped to Barilla’s Central Distribution Centers (CDCs) from which 90% was shipped to Grande Distribuzione serving Chain Supermarkets and Distribucione Organizzata serving Independent Supermarkets.

The rest 10% was shipped to Barilla-run depots. Barilla-run depots also provided less than truck-load quantities to Chain and Independent Supermarkets. Barilla used trade promotions to push the products thought the supply chain. It divided each year into 10 to 12 “canvass” periods, with price discounts ranging from 1. 4% to 10%; volume discounts consisted of carton discounts and the transportation discounts consisted of free shipping to the distributors.

The company also designed special promotional programs, which meant that Barilla’s distributor could “buy as much product as it desired”.Barilla also offered various volume discounts. Most distributors checked their inventory and ordered on a weekly basis. Nearly all of them had computer-supported systems, but few enjoyed the benefits of sophisticated forecasting systems or analytical tools. Barilla’s Sales Representatives spent about 90% of their time working at the store level at the Distribucione Organizzata, whereas Grande Distribuzione was rarely visited.

Sales Representatives also received incentives, which were based on achiving sales targets set for each “canvass” period.So their incentives depended highly on the quantity ordered by the distributor. Problem Description As it was already mentioned, in 1988, the Barilla’s Logistics Director, Brando Vitalli addressed the company’s problems in manufacturing and distributions systems and proposed an idea that would fix all the problems caused by fluctuating demand and radically changed the process of ordering and delivering. This idea was later supported by Giorgio Maggiali, the Chief of Barilla’s Logistics Department, who was trying to implement the Just-in-Time-Distribution (JITD), taken from ‘Just-in-Time’ manufacturing concept.The purpose of JITD system was reaching operating efficiency.

The main idea of JITD was that instead of letting the distributors determine the quantity and delivery schedules, Barilla’s own logistics would be responsible for doing this. Barilla would look at all the distributor’s shipment data and send only that quantity what was needed at the store. JITD would look at the shipping decisions made by distributors every day, as well as the current stock level for each Barilla SKU and combine this information to make stock replenishment decision based on Barilla’s own forecasts.It took Maggiali 2 years of attempt, meeting with significant resistance both internally and externally, which will be discussed later. The idea of JITD was originated in response to the whole range of problems that Barilla SpA faced aiming to finding solutions to them. The main problem that Barilla faced as said above was the fluctuating demand.

And this is attributable to the following causes: One of the core causes of the fluctuating demand might be the possible excessive use of trade promotions, Barilla used to push product into the grocery distribution network.Barilla offered various incentives and discounts to distributors during 10-12 trade promotion periods, that Barilla divided each year. The buyers expected frequent trade promotions and filled up the inventory during this promotion periods to benefit from the discount price. Sales representatives also pushed more products during the promotional period to get bonus, as their compensation was tied to the amount of products sold to distributors and they were not selling as much during non-promotional periods. As a result the demand would go up when the discount price was offered and down when this period expired.What’s more, distributors’ power to order different quantities as they considered needed caused more fluctuations.

Thus, wide variation in demand made demand forecasting very difficult. Poor forecasting systems and inefficient analytical tools also worsened the condition. Bad forecasting was caused and at the same time resulted from the demand fluctuation. Barilla could not make forecasts because majority of distributors did not have forecasting systems to determine order quantities and this resulted in inaccurate forecasts and thus, problems with order scheduling.Since orders could not be scheduled accurately it resulted in high level of stockouts for Barilla and for distributors. Poor communication between the supply chain members also contributed to this problem.

The parties were unable to react quickly to peaks in demand as they did not know what the demand would be and as a result higher level of inventory was maintained. Besides poor communication, large number of SKUs can also be named as Supply Chain management problem.Barilla’s dry products were offered in 800 different packaged stock keeping units (SKUs) which causes complexity as it is difficult to handle with so much lines. The core cause of bad forecasting is not having accurate sales information, Barilla does not have an information which products are more demanded by end-consumers to keep producing that particular ones and reduce costs caused by product diversity. Barilla’s manufacturing and logistics operations also suffered by fluctuating demand and bad forecasting, as Barilla had specific sequence of pasta production and specifications that kept costs low and product quality high.

So, if particular pasta had been sold out due to the unexpected demand, it would be hard for Barilla to quickly produce that type of pasta owing to the inflexible manufacturing system. Thus, when Barilla’s manufacturing system was not able to switch quickly between production of pasta to satisfy the unstable demand, it had to keep its inventory higher. Long lead times (10 days on average) is another problem that makes it difficult to meet demand fluctuations, thus causing some delays in deliveries and low replenishment rate. Because company cannot schedule orders ahead and since demand cannot be met, this results in poor service quality.Demand fluctuations, poor scheduling, poor supply chain management, inflexible manufacturing, long lead times, low replenishment rate and need for reducing stockouts resulted in keeping additional inventory to satisfy the fluctuating demand. High inventory level in its turn resulted in high inventory holding costs for both sides.

As a result of demand fluctuation, Barilla’s production costs increased due to inflexible manufacturing that made it difficult to make switching in pasta production when particular type of past was out of stock.Since it was difficult for Barilla to make order schedules, it might have been difficult to schedule its own resources like labor, machinery that is tied to production so internal cost might have been another cost for the company. And it might have had high transportation costs in peak demands, as it had to transport more goods in promotion periods. Here is the fish bone depicting actual problem: Methods: Poor Forecasting Poor order scheduling Production method SKUs Manpower: Sales Reps Machinery: Inflexible manufacturing System Materials: All this would definitely provide a wide range of benefits.First of all JITD would help to forecast demand accurately and thus reduce both, manufacturer’s and distributor’s inventory levels as well as avoid stockouts.

Secondly, JITD would reduce Barilla’s own distribution and manufacturing costs and provide better planning for their manufacturing system due to improved scheduling. Thirdly, it would provide the forecasting systems and analytical tools, which the distributors seem to lack. JITD would also strengthen the relationship and guarantee communication and mutual commitment between the supply chain participants.In addition to these, JITD would be even more beneficial to distributors as they are offered an additional service with no extra cost. Even though JITD was viewed as solution to all these problems and given the advantages above, it faced external and internal resistances, that slowed down the implementation of JITD and little progress has been made since the idea was presented.

External and Internal Resistances to JITD program First of all, it seems that JITD program does not provide enough benefits for the distributors for them to give up their authority to place orders and run their business as they wish.Maggiali talks about the distributor’s reaction: “They weren’t even interested in talking about it” and as he says, the manager of one of Barilla’s distributors summed up a lot of responses in just few words, saying: “Managing stock is my job; I don’t need you to see my warehouse or my figures. ” These words point to another problem created by JITD, that is, JITD program would provide Barilla with the detailed sales and shipment data about the distributors, which in its turn would make the distributors too dependent on Barilla and diminish all the secrecy of the corporate information.In addition to this, the JITD would also make it hard to run trade promotions. As the quantity of the shipment would be determined by Barilla and would be independent from the buyer, the distributors would probably get volume discounts less often than they did.

The distributors would also be unable to buy as much product as they want during the trade promotion periods. Trade promotion periods also provided incentives for Barilla’s sales representatives working with distributor. Due to the new program they would also lose their incentives, which were provided based on achieving sales targets set for each canvas period.This is one of the issues of internal resistance among other that Vitalli faced while introducing the idea of JITD. Now we continue with discussing the internal conflicts raised by the implementation of JITD system. To start with, Barilla’s marketing and sales department were not happy about the fact that their responsibilities, as sales representatives would be diminished.

They also considered the program as very risky and not beneficial for the company. They feared to lose their functions and become less important for the company. After implementing JITD system sales representatives would not e responsible for selling products to the distributors and would lose all their incentives provided during the canvass periods. Moreover, marketing department argued that sales levels would flatten and there was a risk of not being able to adjust their shipments sufficiently quickly to changes in selling patterns or increased promotions and that the pasta industry distributors were not ready for a complicated process of information sharing. In addition to that, some of the marketing personnel provided quite convincing arguments against the program.

For example, one of the staff members says that in case space is freed up in the distributor’s warehouse, while Barilla’s inventories decrease, there is a risk that the distributors would fill this space up with competitor’s product. This is particularly true, because if space is freed and Barilla’s forecasts do not fill up this space and plus their inventory is low, the distributor will order some other product instead of waiting for Barilla to fill the stock and eventually Barilla’s sales might decrease.More arguments included possible stock out in case of disruption of supply process and finally Barillas sales and marketing representatives were not sure of cost benefits. We consider that the main causes of such high resistance from Barilla’s Sales and Marketing department was due to the possible job cuts in case of implementation of JITD, Sales representatives losing the significant portion of their incentives and finally, the fear that their jobs would not be needed any more.Finally, the JITD program will also require the distributor and the manufacture to communicate every day and this cannot be achieved without considerable investment in technology given the old-fashioned structure of distribution channel and the fact that most of the grocers are not equipped with the technology necessary to provide needed information every day. Solution We consider JITD system will work as it will provide a lot of benefits to the entire supply chain and it’s quite feasible in the environment in which Barilla operated in 1990.

The JITD will provide the distributors and Barilla with reliable forecasts, which in its turn will reduce costs associated with inventory, transportation and manufacturing and none of them will be forced to have excessive inventory levels or stockouts. Recommendations to the solution After stating our solution, we present some of the recommendations that can help overcome the difficulties created by the fluctuating demand and poor visibility through the supply chain.First of all, the most important thing for Barilla is to convince its own Sales and Marketing Department and other opponents of JITD system inside the company that the program will be successful. Without full support from the whole company, Maggiali can be sure that he cannot convince his consumers. We propose that Barilla shall focus on several ideas presented below: As it had already been mentioned, sales representatives feared that their responsibilities would be diminished and they will lose their jobs.Maggiali must offer them to participate in all stages of the JITD program.

This way they will feel that the company still needs them and their opinion and jobs are important to Barilla. The company should assure the sales representatives that they will not lose their jobs. Despite the fact that they will not be doing exactly the same work as they did while following the traditional system, they can still contribute to the company doing some other jobs assigned to them by Logistics or Marketing department and help out in forecasting.In addition to this Barilla will still need them to keep close relationships with the distributors and there will always be a need for someone to work at the store level. Sales representatives also opposed JITD, because of them losing their incentives provided by trade promotion system. As with the JITD implementation, this kind of trade promotion cannot be held, Barilla should introduce a new incentive and motivation system.

We offer Barilla to introduce a profit-sharing system.Profit-sharing is a system that provides some portion of any profits for distribution to other employees. In this way, the incentives of the sales representatives will be dependent on the welfare of the whole company and not just their own accomplishments. And plus this will strengthen their motivation to work in the best interests of the organization as well as their own. Secondly, Barilla should convince their customers to be as much collaborative as possible.

This will be for the welfare of everyone.It will cancel out the difficulties in communication between the supply chain members and provide the environment of mutual trust and commitment needed for long-term partnerships in the supply chain. To do this Barilla must run experiments with JITD in its own depots which supply the small independent shops and some of the supermarkets as well. In case of success, Barilla and the customers will save a lot of money due to the decreased inventory levels and effectively managed demand. This, in its turn, will provide significant profits for the entire supply chain.

Barilla can show these numbers to its customers and convince them that the system will work for them too. The next customers Barilla should target can be the distributors in and outside the Italy. Barilla has a 22% market share in Europe. As Maggali has already tried to convince the distributors in Italy, he might try to do the same with the foreigners. Perhaps they could be more understanding and willing to participate in JITD program. To gain more trust from its customers, Barilla should be more close to them.

Their relationship must be as open and transparent as possible, just like as if they were one company, not just a supplier and buyer working together. If Barilla tells the distributors everything of its plans about the JITD, shows them their forecasts and involves the management of the distributors in the JITD system planning and implementation, the customers will have more trust in what their supplier is doing and that Barilla is acting not only for its own wellbeing, but for their too. To convince the distributors, Barilla can also show the distributors that the traditional method of the distribution is no more effective.The company can prove this by presenting the numbers provided in exhibit 13 showing the significant stockouts or excessive inventory levels. Here are some of the numbers from the exhibit: * In week 1 the inventory level at Cortese DC was approximately 1150 quintals, while the sales were lower than 350 quintals. This shows that Cortese DC was holding excessive inventory at the additional cost.

* In week 31 the inventory level at Cortese DC was approximately 200 quintals, while the sales were above 300. This shows that Cortese DC experienced a significant stockout during this week.Despite all the promises to the distributors, that Barilla’s representatives may make, the distributors also need to be convinced in legal terms. We offer that Barilla signs a contract with distributors, including the points about the non-divulgence of the corporate information. In case of breaking these points, Barilla will have to pay a significant penalty to the distributor.

In this way, Barilla will convince the customers that they should not fear showing their numbers to Barilla’s forecasting department and gain more rust from their side. Barilla should also show the customers that they won’t lose their incentives. Instead of trade promotions held during the canvas periods, Barilla can determine the quantities of the products above which, the buyer can enjoy free shipments, volume discounts and other incentives. These margins, of course, should be agreed with the distributors in the first place. Barilla might also consider it efficient to increase the incentives for the buyers. For example, instead of 1.

% discount for semiolina pasta, it can offer a 2%; instead of offering 2% to 3% discount for shipments in full truck-load quantities, it can offer 2% to 4%. Thirdly, Barilla should try to influence its own demand by various marketing programs and advertising. In this way, it’ll be a lot easier to run explicit and reliable forecasts. Barilla must also improve its forecasting techniques and show the distributors that their forecasting department is equipped with all the modern, sophisticated technology as well as highly trained professionals. Failure in this case means the failure of the whole JITD.

Fourthly, Barilla should invest in improving retailers’ technology, which will provide the point-of-sale data to the distributors, who in their turn will give Barilla reliable information about the demand and help to forecast it efficiently. Barilla shall also address the problem of large SKUs. Based on the sales information provided from the improved technology, Barilla shall decide on most demanded product and reduce its product assortment, maybe dispose some SKUs and have more concentrated selection. This way production costs will decrease, Barilla will get better managed lines and inventory and it will be easier to deal with orders.Reduced complexity in terms of product variety will enable better Supply Chain Management. Other recommendations In addition to our recommendations, we propose that Barilla does the following: * One possible opportunity of reducing the bullwhip effect in the supply chain is to use Drop Shipping technique.

Drop shipping means shipping directly from the supplier to the end customer rather than from the seller. In this case we consider retailer as the end customer. Using this technique Barilla can delivery some portion of its products directly to the retailers’ warehouses.According to the exhibit 5, Barilla has 25 plants located throughout the Italy. Barilla can ship to the retailers located near these plants instead of first placing the product in the Central Distribution Centre and then reshipping it to the buyer. For example, Barilla has 6 plants producing pasta.

On the exhibit 5 these plants are numbered as 1, 2, 3, 4, 5 and 7. If Barilla could try to ship some of its products directly from, for example, plant 2 to the nearby located stores, this would save the transportation costs, reduce lead times and inventory levels and costs for holding the product. Barilla may also consider it useful to open new warehouses near those distributors who serve the biggest supermarkets. In this way Barilla will ship directly from its warehouse to the distributor, not placing its product first in the CDC. This will reduce the shipping costs and inventory holding costs. Customer Response to the solution Until now, we were analyzing the situation from the supplier point of view.

Now, it’s time to place ourselves in the role of the customers and determine what our response would be to JITD from the customer point of view. Apart from the other issues mentioned above, the JITD treats customers as an input.Since exactly the customers are the cause of the problem Barilla faces, and at the same time a solution to the problem. Lack of customer demand information can be listed as a problem cause, which results in stockouts or over supplied goods, i. e.

large number of supplies in-stock. Customer’s dissatisfaction in terms of the service provided by Barilla, even though Barilla does not provide service directly and it is the distributor who serves individual customers under the Barilla’s name customers refer to Barilla in terms of their dissatisfaction and it is exactly the Barilla’s disadvantage as being unable to manage customer demand.Since Barilla’s lead time for delivering orders, taking 10 calendar days on average, is quite long time resulting in low order fulfillment rate and needs a head planning which puts Barilla in another problem due to their bad demand forecasting which hampers product delivery on time and thus customer dissatisfaction due to Barilla’s poor service quality level goes to the end-consumer not buying the product of their choice.Suppose, they wanted to buy Barilla Macaroni, as they buy it usually in the supermarket where they usually shop, Barilla Macaroni is out of stock. In this case the end-customer is dissatisfied, has to make a decision between other alternatives, and finally chooses the competitor’s product or not buying it at all. Next time this end-customer will think twice whether to enter this supermarket or decide it straight away to not to enter that supermarket and go in another one and do all his shopping there.

To say it shortly, supermarket looses a customer and the lost customer is everything, the same as a dissatisfied customer who might tell a friend that that shop did not have the product he/she was looking for and that another customer will decide to shop elsewhere preferring to make all the purchases at one place. As a solution, customer is the source of information which is the most valuable point in JITD system and for Barilla itself, as the latter is what Barilla fails in.Actually, the focus of Barilla’s new system is on customer demand rather than distribution orders. Once we have discussed Barilla’s customers as both as a cause and a solutions now we can respond the stated question. As one of the Barilla’s customers we would say YES and accept the JITD program.

For the following reasons: * Retailers like distributors face the problem of carrying too much inventory. They do not have enough room in their stores or warehouses.This fact is due to the fact that Barilla cannot schedule orders as it does not know the demand information and to avoid stockouts put pressure on retailers to carry this much inventory in stock. * They also have the shelf-space problem, each company usually offers huge variety of product assortment, take Barilla – it offers 800 different SKUs and retailers shall fit them in, which actually is impossible; * Stockouts due to problems with order scheduling; Dissatisfaction due to poor service quality, low order replenishment rate, not on-time deliveries leading to end-consumer dissatisfaction and outcomes said above and thus lost end-consumers; * High inventory holding costs , that affects negatively on profitability; * Lower retailer margins; * Long lead times, which drives to not on-time deliveries that is in turn attributable to demand fluctuations about which Company is unaware and bad planning causing late deliveries. * Unmet demands; Chart #1 illustrates the reasons as a chain reaction. Chart #1 Poor service delivery = customer dissatisfactionLooking at the chart, we can see the baseline for all the problem cause appears to be the lack of information, so JITD drives its stakeholders for information centralization to manage its supply chain and we, as a customer realize that all the members of the supply chain will benefit from information sharing agree to exchange our sales information and receive all the benefits: * Barilla offers providing exactly the quantity that is needed based on the sales information no more no less thus this will avoid holding too much inventory; * Since stock will be delivered upon the customer demand, inventory levels will be reduced and warehouse space will be freed; * Lower inventory decreases holding costs; * Bullwhip Effect will be smoothened as demand forecasting will be improved, inventories will be positioned better and cost will be reduced throughout the supply chain; * Order replenishments will be improved for the higher rate; * No stockouts; * Demand will be met by demand forecasting; * Service will be improved by quick responses; Chart #2 illustrates the chain reaction that follows the improvement of information sharing.

Chart #2 All in all, information sharing makes all parties better off.Since Barilla operates efficiently and its service improves, we as customers will benefit from the good service and we will have efficiency in our operations, no delays and good service to our own customers, plus no lost customers, low costs and profits. Conclusion We consider that by following the recommendations provided above Barilla can implement the JITD system successfully. Barilla’s demand will become more steady and the visibility though the supply chain will be improved. As a result Barilla distribution costs, inventory levels and manufacturing costs will be reduced too.

JITD will also benefit the distributors and reduce their inventory levels as well as increase their profits.

Related posts:

• Barilla supply chain Case Study
• Barilla Case Analysis
• Barilla SOOT Analysis Case Study
• Barilla Spa – Case Study
• Barilla Spa Case Report
• Barilla Spa (a) Case Study
• Barilla Manufacturing Case Study

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Home — Essay Samples — Economics — Supply and Demand — The Issues and Solutions to the Supply and Demand of Barilla Spa

The Issues and Solutions to The Supply and Demand of Barilla Spa

• Categories: Company Supply and Demand

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Introduction, problem identification, recommendations.

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Barilla SpA A Case Analysis and Case Solution

Posted by Peter Williams on Aug-09-2018

Introduction of Barilla SpA A Case Solution

The Barilla SpA A case study is a Harvard Business Review case study, which presents a simulated practical experience to the reader allowing them to learn about real life problems in the business world. The Barilla SpA A case consisted of a central issue to the organization, which had to be identified, analysed and creative solutions had to be drawn to tackle the issue. This paper presents the solved Barilla SpA A case analysis and case solution. The method through which the analysis is done is mentioned, followed by the relevant tools used in finding the solution.

The case solution first identifies the central issue to the Barilla SpA A case study, and the relevant stakeholders affected by this issue. This is known as the problem identification stage. After this, the relevant tools and models are used, which help in the case study analysis and case study solution. The tools used in identifying the solution consist of the SWOT Analysis, Porter Five Forces Analysis, PESTEL Analysis, VRIO analysis, Value Chain Analysis, BCG Matrix analysis, Ansoff Matrix analysis, and the Marketing Mix analysis. The solution consists of recommended strategies to overcome this central issue. It is a good idea to also propose alternative case study solutions, because if the main solution is not found feasible, then the alternative solutions could be implemented. Lastly, a good case study solution also includes an implementation plan for the recommendation strategies. This shows how through a step-by-step procedure as to how the central issue can be resolved.

Problem Identification of Barilla SpA A Case Solution

Harvard Business Review cases involve a central problem that is being faced by the organization and these problems affect a number of stakeholders. In the problem identification stage, the problem faced by Barilla SpA A is identified through reading of the case. This could be mentioned at the start of the reading, the middle or the end. At times in a case analysis, the problem may be clearly evident in the reading of the HBR case. At other times, finding the issue is the job of the person analysing the case. It is also important to understand what stakeholders are affected by the problem and how. The goals of the stakeholders and are the organization are also identified to ensure that the case study analysis are consistent with these.

Analysis of the Barilla SpA A HBR Case Study

The objective of the case should be focused on. This is doing the Barilla SpA A Case Solution. This analysis can be proceeded in a step-by-step procedure to ensure that effective solutions are found.

• In the first step, a growth path of the company can be formulated that lays down its vision, mission and strategic aims. These can usually be developed using the company history is provided in the case. Company history is helpful in a Business Case study as it helps one understand what the scope of the solutions will be for the case study.
• The next step is of understanding the company; its people, their priorities and the overall culture. This can be done by using company history. It can also be done by looking at anecdotal instances of managers or employees that are usually included in an HBR case study description to give the reader a real feel of the situation.
• Lastly, a timeline of the issues and events in the case needs to be made. Arranging events in a timeline allows one to predict the next few events that are likely to take place. It also helps one in developing the case study solutions. The timeline also helps in understanding the continuous challenges that are being faced by the organisation.

SWOT analysis of Barilla SpA A

An important tool that helps in addressing the central issue of the case and coming up with Barilla SpA A HBR case solution is the SWOT analysis.

• The SWOT analysis is a strategic management tool that lists down in the form of a matrix, an organisation's internal strengths and weaknesses, and external opportunities and threats. It helps in the strategic analysis of Barilla SpA A.
• Once this listing has been done, a clearer picture can be developed in regards to how strategies will be formed to address the main problem. For example, strengths will be used as an advantage in solving the issue.

Therefore, the SWOT analysis is a helpful tool in coming up with the Barilla SpA A Case Study answers. One does not need to remain restricted to using the traditional SWOT analysis, but the advanced TOWS matrix or weighted average SWOT analysis can also be used.

Porter Five Forces Analysis for Barilla SpA A

Another helpful tool in finding the case solutions is of Porter's Five Forces analysis. This is also a strategic tool that is used to analyse the competitive environment of the industry in which Barilla SpA A operates in. Analysis of the industry is important as businesses do not work in isolation in real life, but are affected by the business environment of the industry that they operate in. Harvard Business case studies represent real-life situations, and therefore, an analysis of the industry's competitive environment needs to be carried out to come up with more holistic case study solutions. In Porter's Five Forces analysis, the industry is analysed along 5 dimensions.

• These are the threats that the industry faces due to new entrants.
• It includes the threat of substitute products.
• It includes the bargaining power of buyers in the industry.
• It includes the bargaining power of suppliers in an industry.
• Lastly, the overall rivalry or competition within the industry is analysed.

This tool helps one understand the relative powers of the major players in the industry and its overall competitive dynamics. Actionable and practical solutions can then be developed by keeping these factors into perspective.

PESTEL Analysis of Barilla SpA A

Another helpful tool that should be used in finding the case study solutions is the PESTEL analysis. This also looks at the external business environment of the organisation helps in finding case study Analysis to real-life business issues as in HBR cases.

• The PESTEL analysis particularly looks at the macro environmental factors that affect the industry. These are the political, environmental, social, technological, environmental and legal (regulatory) factors affecting the industry.
• Factors within each of these 6 should be listed down, and analysis should be made as to how these affect the organisation under question.
• These factors are also responsible for the future growth and challenges within the industry. Hence, they should be taken into consideration when coming up with the Barilla SpA A case solution.

VRIO Analysis of Barilla SpA A

This is an analysis carried out to know about the internal strengths and capabilities of Barilla SpA A. Under the VRIO analysis, the following steps are carried out:

• The internal resources of Barilla SpA A are listed down.
• Each of these resources are assessed in terms of the value it brings to the organization.
• Each resource is assessed in terms of how rare it is. A rare resource is one that is not commonly used by competitors.
• Each resource is assessed whether it could be imitated by competition easily or not.
• Lastly, each resource is assessed in terms of whether the organization can use it to an advantage or not.

The analysis done on the 4 dimensions; Value, Rareness, Imitability, and Organization. If a resource is high on all of these 4, then it brings long-term competitive advantage. If a resource is high on Value, Rareness, and Imitability, then it brings an unused competitive advantage. If a resource is high on Value and Rareness, then it only brings temporary competitive advantage. If a resource is only valuable, then it’s a competitive parity. If it’s none, then it can be regarded as a competitive disadvantage.

Value Chain Analysis of Barilla SpA A

The Value chain analysis of Barilla SpA A helps in identifying the activities of an organization, and how these add value in terms of cost reduction and differentiation. This tool is used in the case study analysis as follows:

• The firm’s primary and support activities are listed down.
• Identifying the importance of these activities in the cost of the product and the differentiation they produce.
• Lastly, differentiation or cost reduction strategies are to be used for each of these activities to increase the overall value provided by these activities.

Recognizing value creating activities and enhancing the value that they create allow Barilla SpA A to increase its competitive advantage.

BCG Matrix of Barilla SpA A

The BCG Matrix is an important tool in deciding whether an organization should invest or divest in its strategic business units. The matrix involves placing the strategic business units of a business in one of four categories; question marks, stars, dogs and cash cows. The placement in these categories depends on the relative market share of the organization and the market growth of these strategic business units. The steps to be followed in this analysis is as follows:

• Identify the relative market share of each strategic business unit.
• Identify the market growth of each strategic business unit.
• Place these strategic business units in one of four categories. Question Marks are those strategic business units with high market share and low market growth rate. Stars are those strategic business units with high market share and high market growth rate. Cash Cows are those strategic business units with high market share and low market growth rate. Dogs are those strategic business units with low market share and low growth rate.
• Relevant strategies should be implemented for each strategic business unit depending on its position in the matrix.

The strategies identified from the Barilla SpA A BCG matrix and included in the case pdf. These are either to further develop the product, penetrate the market, develop the market, diversification, investing or divesting.

Ansoff Matrix of Barilla SpA A

Ansoff Matrix is an important strategic tool to come up with future strategies for Barilla SpA A in the case solution. It helps decide whether an organization should pursue future expansion in new markets and products or should it focus on existing markets and products.

• The organization can penetrate into existing markets with its existing products. This is known as market penetration strategy.
• The organization can develop new products for the existing market. This is known as product development strategy.
• The organization can enter new markets with its existing products. This is known as market development strategy.
• The organization can enter into new markets with new products. This is known as a diversification strategy.

The choice of strategy depends on the analysis of the previous tools used and the level of risk the organization is willing to take.

Marketing Mix of Barilla SpA A

Barilla SpA A needs to bring out certain responses from the market that it targets. To do so, it will need to use the marketing mix, which serves as a tool in helping bring out responses from the market. The 4 elements of the marketing mix are Product, Price, Place and Promotions. The following steps are required to carry out a marketing mix analysis and include this in the case study analysis.

• Analyse the company’s products and devise strategies to improve the product offering of the company.
• Analyse the company’s price points and devise strategies that could be based on competition, value or cost.
• Analyse the company’s promotion mix. This includes the advertisement, public relations, personal selling, sales promotion, and direct marketing. Strategies will be devised which makes use of a few or all of these elements.
• Analyse the company’s distribution and reach. Strategies can be devised to improve the availability of the company’s products.

Barilla SpA A Blue Ocean Strategy

The strategies devised and included in the Barilla SpA A case memo should have a blue ocean strategy. A blue ocean strategy is a strategy that involves firms seeking uncontested market spaces, which makes the competition of the company irrelevant. It involves coming up with new and unique products or ideas through innovation. This gives the organization a competitive advantage over other firms, unlike a red ocean strategy.

Competitors analysis of Barilla SpA A

The PESTEL analysis discussed previously looked at the macro environmental factors affecting business, but not the microenvironmental factors. One of the microenvironmental factors are competitors, which are addressed by a competitor analysis. The Competitors analysis of Barilla SpA A looks at the direct and indirect competitors within the industry that it operates in.

• This involves a detailed analysis of their actions and how these would affect the future strategies of Barilla SpA A.
• It involves looking at the current market share of the company and its competitors.
• It should compare the marketing mix elements of competitors, their supply chain, human resources, financial strength etc.
• It also should look at the potential opportunities and threats that these competitors pose on the company.

Organisation of the Analysis into Barilla SpA A Case Study Solution

Once various tools have been used to analyse the case, the findings of this analysis need to be incorporated into practical and actionable solutions. These solutions will also be the Barilla SpA A case answers. These are usually in the form of strategies that the organisation can adopt. The following step-by-step procedure can be used to organise the Harvard Business case solution and recommendations:

• The first step of the solution is to come up with a corporate level strategy for the organisation. This part consists of solutions that address issues faced by the organisation on a strategic level. This could include suggestions, changes or recommendations to the company's vision, mission and its strategic objectives. It can include recommendations on how the organisation can work towards achieving these strategic objectives. Furthermore, it needs to be explained how the stated recommendations will help in solving the main issue mentioned in the case and where the company will stand in the future as a result of these.
• The second step of the solution is to come up with a business level strategy. The HBR case studies may present issues faced by a part of the organisation. For example, the issues may be stated for marketing and the role of a marketing manager needs to be assumed. So, recommendations and suggestions need to address the strategy of the marketing department in this case. Therefore, the strategic objectives of this business unit (Marketing) will be laid down in the solutions and recommendations will be made as to how to achieve these objectives. Similar would be the case for any other business unit or department such as human resources, finance, IT etc. The important thing to note here is that the business level strategy needs to be aligned with the overall corporate strategy of the organisation. For example, if one suggests the organisation to focus on differentiation for competitive advantage as a corporate level strategy, then it can't be recommended for the Barilla SpA A Case Study Solution that the business unit should focus on costs.
• The third step is not compulsory but depends from case to case. In some HBR case studies, one may be required to analyse an issue at a department. This issue may be analysed for a manager or employee as well. In these cases, recommendations need to be made for these people. The solution may state that objectives that these people need to achieve and how these objectives would be achieved.

The case study analysis and solution, and Barilla SpA A case answers should be written down in the Barilla SpA A case memo, clearly identifying which part shows what. The Barilla SpA A case should be in a professional format, presenting points clearly that are well understood by the reader.

Alternate solution to the Barilla SpA A HBR case study

It is important to have more than one solution to the case study. This is the alternate solution that would be implemented if the original proposed solution is found infeasible or impossible due to a change in circumstances. The alternate solution for Barilla SpA A is presented in the same way as the original solution, where it consists of a corporate level strategy, business level strategy and other recommendations.

Implementation of Barilla SpA A Case Solution

The case study does not end at just providing recommendations to the issues at hand. One is also required to provide how these recommendations would be implemented. This is shown through a proper implementation framework. A detailed implementation framework helps in distinguishing between an average and an above average case study answer. A good implementation framework shows the proposed plan and how the organisations' resources would be used to achieve the objectives. It also lays down the changes needed to be made as well as the assumptions in the process.

• A proper implementation framework shows that one has clearly understood the case study and the main issue within it.
• It shows that one has been clarified with the HBR fundamentals on the topic.
• It shows that the details provided in the case have been properly analysed.
• It shows that one has developed an ability to prioritise recommendations and how these could be successfully implemented.
• The implementation framework also helps by removing out any recommendations that are not practical or actionable as these could not be implemented. Therefore, the implementation framework ensures that the solution to the Barilla SpA A Harvard case is complete and properly answered.

Recommendations and Action Plan for Barilla SpA A case analysis

For Barilla SpA A, based on the SWOT Analysis, Porter Five Forces Analysis, PESTEL Analysis, VRIO analysis, Value Chain Analysis, BCG Matrix analysis, Ansoff Matrix analysis, and the Marketing Mix analysis, the recommendations and action plan are as follows:

• Barilla SpA A should focus on making use of its strengths identified from the VRIO analysis to make the most of the opportunities identified from the PESTEL.
• Barilla SpA A should enhance the value creating activities within its value chain.
• Barilla SpA A should invest in its stars and cash cows, while getting rid of the dogs identified from the BCG Matrix analysis.
• To achieve its overall corporate and business level objectives, it should make use of the marketing mix tools to obtain desired results from its target market.

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BARILLA SPA Harvard Case Solution & Analysis

Home >> Harvard Case Study Analysis Solutions >> BARILLA SPA

The bullwhip effect is basically the fluctuation or distortion in the information that is supplied within a supply chain. In the case of Barilla, the demand for Barilla’s products was fluctuating and the demand variation was very high from the side of the customers. Apart from that, the promotional activities of Barilla and the changing prices of its products also caused the bullwhip effects along the supply chain. The lead times were very high.

barilla spa case solution

Apart from that, the compensation that was being provided to the sales representatives was based on the number of products they sold to the distributors. Therefore, during the peak promotional periods, these sales personnel pushed the stock towards the distributors to increase their revenue. , the manufacturing costs of Barilla increased dramatically to meet the fluctuating demand and to cope up with it, the maintenance and labor costs were increasing due to problems in managing the company’s resources and the most important this all increased the transportation costs for the company. The company had to supply the products through more trucks and at a short period of time. The accumulation of all these problems resulted in high levels of finished goods inventory being held by the company. It was calculated that in a single week there were stock outs of around 5.5% or even more than this. This all resulted in bullwhip effect which led to customer dissatisfaction, low fulfillment rate and poor service level.

The JITD approach has many advantages and will cater many benefits to Barilla by improving its performance. The collaborative planning between the distributors and the company in the form of a team will help them to resolve the bull whip effects in the whole supply chain. Barilla will have to forecast the demand of its consumers under this system. It could make use of market surveys or interact with customers on a one-on-one basis. This would reduce the uncertainty regarding the variations in demand of the product. The company will then forecast the demand of all of its distributors and aggregate that demand. In this way the company can better manage and meet the needs of its all distributors and customer. The production planning of the company will be improved and the company can leverage on process improvements to increase its profit margins also. The level of inventory held by the company will be reduced which in turn would reduce the overall carrying cost of the company and also reduce the risks related to product perish ability. Apart from this the current demand system of the company is push-based which will be transformed to a pull-based system after the JITD system is introduced. Ultimately the stock outs and the backorders would be reduced, thus increasing the customer service level and satisfaction.

The demand for the company’s products had been growing and there was significant variation in the demand for the company’s products. The distributors were unable to predict the right sizes, they simply wanted to avail the discounts by buying bulk quantities to fill up their shelf spaces. Apart from that, the management of Barilla also faced difficulties to produce goods when they received immediate orders and this also resulted in higher transportation costs for them because the goods had to be delivered quickly. Currently the distributors are ordering the goods themselves, however, they are not demanding according to predicted demands which led to stock outs. The company cannot teach them that how to forecast demand, because if they do so, they will lose control over the ordering function. Apart from that, the company will have detailed information regarding its customers and it would be better off in forecasting the right customer demand.

The demand variability is very high in this industry and if the continuous replenishment program is implemented the business could face the situation of stock outs which would increase the costs of the business. Therefore, it is very risky to go for this partnership. However, on the other hand the company can motivate and energize its distributors to sell the company’s products to its customers by providing them different benefits and incentives. Barilla needs to work on its part to forecast the right quantities so that the risk of stock outs is minimized. LEGO has always emphasized on the desired benefits and attributes of its customers. It had formed a strong bond with LEGO. The departments of LEGO are all centralized and these all departments interact directly with the end consumers. LEGO had also segmented its customers into different groups based on their different needs. The business strategy of LEGO focuses on maintaining long term relationships with customers and this led it to build a trusted partnership with its customers................

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