An Analysis of Companies
The pandemic has presented companies not only with severe threats but also with valuable business opportunities. According to Parnell (2014), when the world undergoes rapid and sudden changes, successful companies capitalize on emerging opportunities and mitigate the negative effects. This is what many companies did in response to COVID-19. For example, Starbucks experimented with a new business model that involved selling its products at pickup-only stores prior to the pandemic (Walton, 2020). However, despite the cost and labor efficiency of this business model, Starbucks did not risk implementing this strategy widely because the company was not sure whether customers would accept mobile-only payments and the pickup-only environment (Walton, 2020). The current crisis made these concerns irrelevant and allowed the company to experiment with the new model and see how it pays off in different parts of the world.
In addition, the company began delivering its products, which was a response to competition. For example, launching delivery services helped Starbucks enhance its competitiveness compared to Luckin, the biggest Chinese coffee chain focusing on delivery, mobile, and pickup services (Walton, 2020). Starbucks’s introduction of delivery can be related to competitive benchmarking, which means comparing the company’s performance with top performers in the industry (Parnell, 2014). Starbucks was not the only company that shifted to delivery; in times of COVID-19, many companies in the food and beverage industries “recognized they had to deliver – or see sales drop further” (Biscotti, 2020, para. 8). As Parnell (2014) points out, an old strategy should be abandoned once a new one is adopted. The food and beverage companies’ response to the pandemic demonstrates this idea since the firms had to renounce their old models to remain competitive in the changing environment.
Companies in other industries have devised their own ways to cope with the crisis. However, the common feature of their reinvention strategies is digitalization. According to Parnell (2014), digitalization is one of the current trends in strategic management, which is related to the growing importance of the Internet, that allows for meeting customer demands with larger speed and precision. For example, Nike has gone digital by providing customers with online workouts and resources, streaming live workouts, and launching the initiative “The Living Room Cup” (Fioravanti, 2020). The implementation of this strategy has helped Nike to increase its stocks by 11% after it lost a portion of its sales due to the closure of its stores in response to COVID-19 (Fioravanti, 2020). Nike’s strategy allowed the company to engage with its customers and boost its direct online sales. A similar strategy was adopted by science museums, which lost over $600 in revenue during the first months of the pandemic and were forced to implement cost-cutting measures and lay off their employees (Anthes, 2021). Their reinvention strategy included transferring their business to the online realm by conducting paid virtual workshops and live streams.
Finally, developing crisis management plans is an important part of an organization’s strategy. For example, the European manufacturer, Autocraft Drivetrain Solutions has managed to withstand the COVID-19 crisis due to its crisis preparedness. The company had over 600 suppliers all over the world, which allowed it to function even when some suppliers experienced troubles due to the pandemic (Make UK, 2020). Transferring to digital manufacturing, that was initiated in 2014, has also contributed to the company’s success during the crisis (Make UK, 2020). Overall, crisis management is aimed to identify the company’s vulnerabilities and potential threats and make the company well-equipped to withstand a crisis (Parnell, 2014). Therefore, developing a crisis management plan is crucial for making the company competitive and functional in the changing business environment.
Recommendations
In this section, recommendations for the board of directors of Olive Garden will be given to help the company overcome the consequences of the pandemic. Due to the pandemic, the company’s sales for the fiscal second quarter fell by 19% as compared to the previous year (Baldwin, 2020). In response to the crisis, Olive Garden cut its costs and simplified the menu (Baldwin, 2020). However, based on the findings from the analysis, three new initiatives can be suggested for the company.
First, the company should consider adding delivery to its services. According to Parnell (2014), for change implementation, the company should recognize the need for change, inspire organizational members to adopt the change, and get the organization’s top management’s strong commitment to the change. Therefore, it is necessary for Olive Garden’s board to realize the need to introduce delivery in the current environment in order to increase its competitiveness. While the company may find establishing its own delivery service inefficient, it may partner with courier companies.
Second, Olive Garden should implement a digital initiative to follow current trends in strategic management. Customers all over the world widely use digital technologies; for example, 80% of Chinese customers use electronic payments (Walton, 2020). According to Parnell (2014), consumers expect organizations to use digital technologies in their business. Therefore, Olive Garden’s board should engage with its customers on the Internet and offer them the possibility to make orders and payments online.
Third, the board should develop a crisis management plan to mitigate the impact of a potential crisis in the future. Before the crisis, the company has to develop procedures as to how it should function during a crisis (Parnell, 2014). During the crisis, the company should stay connected with its customers, and after the crisis, it should reveal the cause of its failure to customers (Parnell, 2014). Based on this, Olive Garden should develop a plan that would explain how it can function during possible future lockdowns and what it should do in other potential crises.
References
Anthes, E. (2021). How science museums reinvented themselves to survive the pandemic. ScienceNews. Web.
Baldwin, S. (2020). How Covid derailed Olive Garden’s success. CNBC. Web.
Biscotti, L. (2020). Food and beverage companies evolve, innovate and contribute amid COVID-19 crisis. Forbes. Web.
Fioravanti, R. (2020). Nike: Just do it. Differently! Digital Innovation and Transformation. Web.
Make UK. (2020). Responding, resetting, reinventing UK manufacturing post COVID-19. Web.
Parnell, J. A. (2014). Strategic management: Theory and practice. SAGE Publications.
Walton, C. (2020). 3 ways Starbucks will emerge from covid-19 stronger than before. Forbes. Web.