University of Technology, Jamaica

College of Business Management

Module: Operation Strategy (POM 4001)

Academic Year 2022-2023

Semester: 2

Assignment 2: Case Study 1

Case 1: Haagen Style

Group Members:
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Table Of Content

Page

Case Overview 2

Major Issues 3

Options 4

Evaluation of Options 5

Recommendations 9

Conclusion 12

Appendices

References 13
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Case Overview

Haagen Style was a successful direct marketing company in North America, selling kitchen

equipment, tableware, containers, small gadgets, salad bowls and so on through a network of

local representatives. They sold door-to-door or at places of work, community centers, clubs etc.

and consolidated their orders on a weekly basis. Most of their products were 'value' items of

reasonable quality with standard design.

Haagen Style's two distribution centers used the same processes, perfected over many years.

Orders were keyed into the company's information system and fed down to the warehouse where

each representative's order was packed. The packing process was standardized and automatic,

with boxes automatically loaded on a moving belt conveyor and automatic dispensers depositing

items in the box. Those boxes which needed additional items packing were routed on to a manual

line. At the end of the packing lines were loading bays where boxes were loaded onto trucks for

their journey to the representatives. The packing sequence was calculated to ensure that all boxes

arrived at the correct loading bay just in time for dispatch.

Jed’s, (Vice President of Distribution) anxiety over future business was shared by all Haagen

Style management, as traditional customers were moving towards catalogs, TV shopping

channels, and discount stores. The problem was how to distribute their products through these

new channels, and what would happen to their distribution centers.

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Major Issues

● How to distribute their products through these new channels?

● Should they modify their existing fulfillment operation or subcontract the business to

specialist carriers?

● What would happen to their distribution centers if they started using new channels to

export their goods?

● Would they need to upgrade their IT systems to deal with the new distribution channels

changes?

● Financial Constraint to invest in new Distribution Channels.

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Options

Some of the possible solutions to the issues stated above are:

● Venture into the new channels with modifications to their processes.

● Discontinue their fulfillment operations and subcontract their distribution to external

companies.

● Continue providing their products through direct marketing with their current sales force

to help mitigate additional cost.

● Invest in new technology which would help with the new channel and its processes.
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Evaluation of Options

● Venture into the new channels with modifications to their processes.

In a world today which is fast paced and changing rapidly individuals and businesses are forced

to adapt to new norms. Especially, in the business world where there is a growing demand for

technological advancement and convenience many businesses have come to terms with the

demands and expectations of operating a business in modern society. As it relates to Haagen

Styles who have come to realize that the market for direct selling is on a steady decline due to its

old fashioned structure, venturing into new channels may prove to be very innovative for the

company. Of course, modifications will have to be made to the key processes and operations of

the business in order to facilitate these changes which may prove to be difficult since the

company has gotten used to carrying out their operations in a specific manner which has worked

marvelously for them over the years. Certainly, in depth research must be carried out to gather

sufficient information as to which channels are the best to venture in which can be costly.

However, venturing into new channels has its benefits as Haagen Styles will have the

opportunity to extend their reach by tapping into new markets as well as to position themselves

to become more competitive within their industry. Therefore, venturing into new channels and

modifying their processes in order to meet the demands of modern society may prove to be

beneficial over time but sufficient research has to be carried out first.
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● Discontinue their fulfillment operations and subcontract their distribution to external

companies.

Seeing that lack of experience and cost is a problem when considering investing in new

distribution operations. Haagen Styles could subcontract their distribution operations to external

companies who specialize in distribution such as Fedex and UPS. This option comes with

numerous benefits such as: adapting to economic cycles, maintaining low overhead and labor

costs, little to no capital investments, gaining access to specialized labor outside of their core

business and being able to focus on and improve their core strengths. Choosing the right

company to hand over distribution responsibilities to is also very important as Haagen Styles

should try to select a company who is in alignment with their core values and competencies

which will promote synergy and a conducive environment to conduct business. On the other

hand, subcontracting also has a few downsides which must be taken into consideration such as:

the cost of subcontracting in comparison to employing someone, lack of control over the quality

of subcontractors’ work, resentment from employees and a lack of in-house skills amongst

employees. Therefore, Haagen must weigh the possible pros and cons associated with this option

in order to determine its effectiveness. Discontinuing their fulfillment operations and

subcontracting to external companies is considerably a very good option for Hagen if done

properly may be very beneficial for the company.

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● Continue providing their products through direct marketing with their current sales force

to help mitigate additional cost.

Direct marketing, specifically door-to-door selling, is still a viable marketing channel in today's

society as a way of targeting the right customers, getting to know them on a personal level and

gathering almost immediate feedback about products and services. D2D selling helps

salespersons to build meaningful relationships with customers that last and they benefit from the

fact that this channel is less crowded so there is limited competition, also you can easily get your

product or service in front of potential customers. According to Spotio, about 2% of all

door-to-door knocks will generate a sale. However, due to technological advancements among

other factors such as convenience it is within no doubt that this channel is not very favorable in

modern society considering the many other options available to sell products and services which

may reap better sales turnover and require less time, effort and resources. Currently, Haagen

Styles has observed that the direct sales market is on a slow but steady decline, therefore, plans

must be set in place to prepare the company for the possibility that this marketing channel

becomes completely ineffective in order to limit its impact on the business. Finding

representatives to sell their products may also prove to be difficult in the future because not

many persons will be willing to part-take in door-to-door selling seeing that there are many other

easier and convenient options. Therefore, this option may continue to work for some time but

will prove to be ineffective in the long run given all the factors to consider. The company risks

putting themselves in a position where they cannot compete with other innovative firms and miss

out on expanding their reach to potential customers.

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● Invest in new technology which would help with the new channel and its processes.

Investing in new technology would certainly help Haagen Style with new channels and

processes, however, this may prove to be very expensive. Firstly, in depth and thorough research

would need to be carried out in order to decide on what kind of technology is needed, how it can

be implemented, how exactly will it improve the current fulfillment operations and key

processes, and how will it impact the way Haagen conducts business. Once all that is taken care

of, the next step would be to weigh the potential benefits and risks of incorporating this new

technology within the current business operations. The information gathered will help to foster

the decision as to which new channels would be best for the company based on its structure.

Consequently, this option will prove to be very expensive and Hagen may not have adequate

capital to foot the expenses associated with such extensive research and they also lack the

necessary experience needed. Also if the new technology does not serve its intended purpose the

company would suffer a huge loss. Therefore, this option may be not suitable for hagen given the

circumstances.
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Recommendations

After careful analysis of the options and the subsequent evaluations of the options it can be

deduced that the two best options for Haagen Style would be to either venture into more channels

with modifications to their processes or discontinue their fulfillment operations and subcontract

their distribution to external companies. According to Haagen Styles "Traditional customers

were moving towards using catalogs, TV shopping channels or just buying from supermarkets

and discount stores, most of which now stocked the type of products in which Hagen Style

specialized." Additionally, Hagen Style, bowing to the inevitable, had started selling a limited

range of its products through selected discount stores and was planning to sell through a catalog

operation. It reckoned that it could maintain, or even improve, its product margins selling

through these channels. So with the evaluation of options and the statements made by Haagen

style it can be recommended that they discontinue their fulfillment operations and subcontract

their distribution to external companies. The firm has already taken steps to distribute their

products through discount stores and they also projected that 35% of their current business would

be distributed through discount stores within the next 5 years so it would be best for them to

focus heavily on discontinuing their fulfillment operations and subcontract their distribution to

external companies who specializes in handling a variety of volume at scale. The rationale

behind this is due to the other options only just temporarily solving the core problem at hand and

would eventually lead to the firm having to implement the recommended option of

discontinuation and subcontracting or the cost for the products themselves would increase due to

the heavy cost associated with the investing in new technology and venturing into new channels.

Consequently, they may also prove to be very time consuming and if it takes too long then they
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will be at risk of insolvency and bankruptcy. So discontinuing the fulfillment and subcontracting

the distribution is the most feasible, proven, timely and cost efficient solution. The nature of the

firm has also been taken into consideration as it more so changed from a strong manufacturing

firm to an even stronger direct marketing firm that manufactures so with the recommended

solution the firm can focus on their core capabilities and this solution can free up capital for the

firm which can be used to add differentiation to the products as well as innovation to compete

with the competition on a high level.

An outside option would be for Haagen Style to adjust their operation resources by doing away

with the old supply network and reconfiguring it to fit a more integrative cost

leadership/differentiation strategic management approach and this can be done through Business

Process Reengineering. The integrated cost leadership/differentiation strategy is one that

businesses can use to produce products more efficiently at low or lower prices while also having

some degree of differentiation. Techniques like Total Quality Management and Flexible

Manufacturing Systems fall within the mentioned strategy. FMS allows for increased flexibility

with human resources, physical resources and information resources in order to produce

differentiated products at a low cost and TQM is more of a strong focus on continuous and non

stop improvement of every process. Based on the specific issue that Haagen Style faces this

approach could prove to be beneficial as the firm has a unique competitive advantage whereas

they have a more direct and personalized relationship with their customers across the locations

they serve and this was created due to their door to door tactics. What this does is open up the

firm to more growth by implementing an integrated cost leadership/differentiation strategy as

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their products are already of a reasonable quality and of value so the only thing left is to increase

innovation in design to create a level of differentiation to take advantage of this opportunity and

Business Process Reengineering can help to overhaul and better implement the strategy.
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Conclusion

The issues faced by Haagen Style is one that many organizations face, it is a case of

advancement and trying to catch up to the changes in the environment in the most efficient way

possible.

Based on our evaluation of options, the optimal option for Haagen Styles is to discontinue their

fulfillment operations and subcontract their distribution to external companies. Venturing into the

new channels with modifications to their processes and investing in new technology which

would help with the new channel and its process are options that would prove to be costly as well

as time consuming to implement while the continuation of providing their products through

direct marketing with their current sales force to help mitigate additional cost would not solve

the problem in regards to the changes in the environment and industry they operate in.

Discontinuing their fulfillment and subcontracting the distribution to external companies and

adjusting their operation resources by doing away with the old supply network and reconfiguring

it to fit a more integrative cost leadership/differentiation strategic management approach which

can be done through Business Process Reengineering are the two best options with the latter

being an out of the box method.

The overall decision will take deeper analysis, exhaustive research and commitment in order to

successfully implement the solutions. Haagen Style would need to set clear and outlined

objectives of what they want the firm to accomplish and where they see the firm in the distant

future in order to better structure their policies and decisions to align with it. Operations strategy

and strategic management will play a crucial role in this as well as how well resources are used.
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References

Slack, N., & Lewis, M. (2020). Improvement strategy . In Operations strategy (6th ed., pp.

243–244). essay, Pearson.

Spotio. (2023, January 20). 149 eye-opening sales stats to consider in 2023 (by category).

SPOTIO. Retrieved March 5, 2023, from https://spotio.com/blog/sales-statistics/

Using contractors and subcontractors. Advantages and disadvantages of using a contractor or

subcontractor. (n.d.). Retrieved March 5, 2023, from

https://www.nibusinessinfo.co.uk/content/advantages-and-disadvantages-using-contractor-or-sub

contractor