Santé Au Nestel Harvard Case Solution & Analysis

Santé Au Nestel Case Study Analysis

PESTEL Analysis

Political

The political factors for the grocery store are favourable for thebusiness, with no tax binding, minimum regulations due to the small size, stable political environment of Montreal. However, the government policies regarding health could impact the business in future.

Economic

As mentioned above, the business is located in downtown Montreal, surrounded by residential professionals with high per capita income. Moreover, the economic stability in Montreal and an increase in spending on health products make the economic factors favourable for the business.

Social

Social factors include the professional residents, the universityand college students and overall Montreal society,with an increasing knowledge and trends towards healthy products; makingthe overall social factors favourable for the firm.

Technological

Technological factors donot have much impact on the business, as the business is highly dependent on natural products. However, an increase inthe health related device technologies can open up new gates for the firm for diversification.

Environmentall

The concerns of environmental communities regarding health and the firms providing health products with the health related awareness among society act as a great support in growing business of the speciality store.

Legal

Legal factors include health related laws and restrictions on product ingredients for the speciality store. However, with high concern on quality; legal factors for SAN act as a positive point. (See Appendix 4)

Porter’s Five Forces Analysis

Threat of New Entrants

The threat of new entrants in the Montreal specialty industry is high with minimum capital requirement and high industry growth. The industry seems to be moderately attractive for the new entrants with the presence of intense competition.

Threat of Substitution

Threat of substitution for the specialty store is high. The presence of large grocery chain stores and pharmacies with low prices and strong brand awareness pose a threat of market capture, for the speciality stores.

Competitive Rivalry

Competitive rivalry in the Montreal specialty industry is intense. However, SAN doesn’t face significant direct competition in the area. One of the intense competitive rivalries in the specialty industry is from the large grocery and drug stores.

Bargaining Power of Buyer

Bargaining power of buyer for the speciality industry with a brand tag on the speciality products and the presence of huge traditional grocery and pharmacy stores offering same kind of product without a brand tag is moderate.

Bargaining Power of Supplier

Bargaining power of supplier in the industry with a limited amount of purchases and low availability of suppliers providing quality materials is high. The chances of suppliers shift towards the large chain stores are higher, due to the large purchases of these stores.

Alternative Solutions

Alternative-1: Introducing Online Sales

Pros

The alternative 1 would help in increasing the company’s sales with lower operational cost. The company will be able to maintain or improve its gross margin.

Cons

The online sales would be preferable in improving their gross margin but the company most focus in customer relationship. In online sales they would fail in making a better customer relationship.

Alternative-2: Own Distribution Channel

Pros

Currently the company is outsourcing its distribution channel, which is resulting in an increased cost of the company. To reduce the cost of the company;it should start its own distribution channel. Through this the company could reduce its cost and improve its  gross margin.

Cons

Currently, the company can’t finance to start its own distribution channel. For this, the company needs to borrow an amount, which would increase its interest cost. The company has poor market knowledge and could hardly find suppliers to supply or distribute its products.

Alternative-3: New Outlets

Pros

Through new outlets; the size of the company would expand and it will be able to attract new customers. The new outlets will help the company to have an expansion in the long-term. The brand positioning will also be improved.

Cons

Huge amount of investment is required. Currently, the company can’t finance such a huge project. For this, it needs to borrow from financial institutions, which will incur huge amount interest cost to the company. It is also time consuming and is less likelyto help in short term.

Alternative-4: Opening Kiosks in Academic Organizations, Malls, etc.

Pros

Kiosks will help the company in capturing the market share and attracting the customers. The company doesn’t need huge amount of investment for opening Kiosks. Opening kiosks in malls would attract diversified customer and would help in making a new customer base line. The brand awareness and positioning will also get improved.

Cons

Kiosks are hardly manageable, due to which the customers can get dissatisfied. The brand name would be spoiled because of the higher rate of unhappy customers. They would share their bad experience with others, which would discourage the potential customers.

Decision Matrix

Recommendations

It is been recommended to the company, that alternative 1 online sale and alternative 2 own distribution channel are the most preferable for the current situation of the company. The company could eliminate their current hurdle by adopting these alternatives. They would be able to improve their customer base line and expand their market share. They won’t need to huge investment in introducing online sales strategy...............................

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